By Elton Plaatjes
VENTURES AFRICA – On 16th May 2012 I read an article with the headline, “SA Top Among Peers in Trade: World Bank”. Herein, Otaviano Canuto, World Bank vice president for poverty reduction and economic management states that, “Trade logistics is key to economic competitiveness, growth, and poverty reduction”. This is true!
Overall, according to the article, South Africa is ranked 23 out of 155 countries included in the Logistics Performance Indicators. Among the upper middle income countries, according to the article, South Africa is placed first, followed by China and then Turkey.
Maybe this relates to only one sphere of measurement, that being the Logistics Performance Indicators (LPI). However, somewhere the criteria seems to evade the fact that we are talking about South Africa that forms part of the SADC region, where approximately 40% of the SADC population lives on less that $2 per day.
In particular, South Africa is a country that is struggling with an unemployment figure of 28%, where 25% of the population lives in extreme poverty (defined as living on less than $1.50 per day), and only 10% of the population pays taxes (1 taxpayer supporting 9 people). Bearing this in mind, of what significance is the LPI when the margin between poor and rich is widening, and leaving South Africa with an additional 1million people unemployed in the last fiscal year – A safer financial sector to serve South Africa Better, 2011 publication.
Whilst I write this article, the Dti (Department of Trade) and Industry in South Africa has launched yet another program to boost manufacturing in South Africa – the Manufacturing Competitiveness Enhancement Program (MCEP). The clear indicators of how the R5.8bn will be allocated leave a fresh deficit in application strategy and prove lingering opinion that the program will again prove a challenging to reap intended results.
Let us consider the automotive industry for a moment and reflect on the affordability of vehicles to the ordinary South African. It is perceived, given the amount of applied taxes to the sales of a vehicle that, the exported product is more affordable than making the very same asset acquisition in South Africa. Applied taxation includes, import duties, ad valorem taxes and emissions taxation in addition to the standard percentage of VAT levied and all of a sudden, the income for the South African Treasury becomes much more important than systemic affordability to local markets as a result of manufacturing activity. If income for Treasury takes precedence above economic stimulation in the local economy, economic growth is thwarted due to FDI (Foreign Direct Investment) benefits.
1) What exactly does the South African Government consider to be economic growth?
2) Does this mean, number of businesses started (i.e. company registrations etc) or does it mean number of tax paying citizens and tax paying companies?
3) How intertwined are the Dti programmes to that of the Small Enterprise Development Agency (Seda)?
4) What can be regarded as the “Turnaround Time” for such programs to yield progressive economic data, as a conclusive reflection of economic growth?
5) Should ‘trade’ data not be a reflection of overall economic performance as apposed to a focal reflection on the logistics sector – that is questionable with regard to South Africa being ranked above china? In comparison, South Africa in terms of output data for products produced, including the cost per items shipped is able to out price South Africa in terms of labour cost. – Quality is not factored.
6) Do Incentive programmes for automotive manufacturers (coupled with restrictive labour legislation) indirectly hinder affordability of locally manufactured products?
7) Comparatively, is China not far more competitive than South Africa?
8 ) Each month millions of electronic payment transactions are facilitated by BankservAfrica, and over the last year the BETI represented 844 million transactions with a value of over R6.3 trillion. Evenly spread, can the South African consumer afford this?
9) What is the difference between Capitalism and Economic Sabotage?
Development Factors for Economic Ranking
- Infrastructure (also related to prospective projects)
- Employment Sustainability in strong sectors
- Resources industry employment
- Resources industry supply chain employment
- Taxation (effects of inflation)
- African competitiveness among industry players
- Development of supply chains in Africa
- Economic Strategy to deal with HIV/AIDS (as apposed to Grant Funding)
South Africa has strong growth potential stemmed from their economic position compared to other African countries. The political positioning and attacks on current legislation also has gross effects on economic activity.
Centralization of pure economic stimulation and related programmes are centralized within political realms that have a solid theoretical background to economics, fuelled by political influence that tends to retard economic messaging.
A focal review of economic activity for South Africa, specifically in the SME sector, may prove that the one employer with the ability to turn the tide on unemployment receives docile attention. Classification of South Africa in this way does not help the greater cause of economic development in South Africa. Many strategies for the SME sector, such as business incubation is driven through models of theory from once, pragmatic driven institutions. Proven economic development, developing world style, is something that can be taught to the developed world.