Who Owns Whom

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The South African economy pulled itself out of its second recession since 1994 in the third quarter of 2018 with a quarter on quarter GDP growth of 2.2% with contributions from the following sectors;

  • Manufacturing – 7.5%
  • Agriculture  – 6.5%
  • Transport  – 5.7%
  • Trade – 3.2%
  • Finance – 2.3%
  • State – 1.5%
  • Personal Services – 0.7%

Of the 12 industries research by Who Owns Whom in December 2018 and January 2019 six where in the high performing manufacturing sector;

The Confectionery Industry

South Africa has a sweet tooth with the chocolate market valued at approximately R6.4bn and sugar confectionery at between R12.5bn and R13.5bn. However, increasing health awareness is a threat to the industry and innovation and product differentiation will be important to remain competitive to ensure brands keep up with health trends. Technology plays a vital role for manufacturers to remain innovative and competitive and the focus is usually on launching new products but sometimes ‘old favourites’ are relaunched such as Tiger Consumer Brand’s Maynard’s Apricot Halves, Frutip’s fruit pastilles and Mister Sweet relaunched Frutus. While some consumers are reducing their consumption of chocolate confectionery many are also switching to premium chocolates and an opportunity exists to train young South Africans in the art of Belgian chocolate making. Western Cape chocolatiers such as Von Geusau in the rural town of Greyton and La Chocolaterie Rococo in the coastal town of Grootbrak have found trained Belgian artisans to teach their staff.

The Manufacture of Clay and Concrete Bricks

Against the tide of the declining and troubled construction industry since 2010 major brickmakers continue to report good results due to growth in smaller construction projects, affordable housing as well as retail and townhouse developments. More than 1.5 million RDP houses will be built between now and 2020 at a cost of R30bn per annum and Industry leader Corobrik, which produces approximately 28% of total industry output has announced significant investment in expansion.

This is reinforced by the state announcement in the Medium-term Budget Policy Statement that investment in social and economic infrastructure will be a focus of economic recovery over the medium term with public sector infrastructure spend estimated at R855.2bn in this period.

In this respect it is also useful that the industry takes social investment seriously and provides employment in rural communities and actively engages in community development programmes and is a significant supporter of SMMEs. It takes 26 man-hours to produce 1,000 bricks, providing four jobs per million bricks produced.

Manufacture of General Purpose Machinery

The DTI has targeted industrialisation as a key policy driver for a long time and in the latest medium-term expenditure framework a further R18.8bn is allocated for industrialisation and manufacturing incentives over the next three years. Another industry advantage is that it is a major exporter into Africa and stands to gain from the future infrastructure build on the continent. On the downside the sector is energy-intensive and sensitive to the instability of price and supply created by the problems at Eskom. The industry is also very critical of the upcoming Carbon Tax which it feels is simply a tax on production which will further decrease manufacturing competitiveness against imports. However, research by the Council for Scientific and Industrial Research (CSIR), in conjunction with universities and industrial associations, into water treatment solutions, energy and mining technology and mining automation could give the sector a future competitive edge.

The Broadcasting Industry and Manufacture of Decoders

This industry has been disrupted by streaming services such as DStv’s Showmax, Netflix, Amazon Prime Video and Cell C’s Black and the DSTV monopoly on sport is equally under threat from this technology.
However, this also presents a significant opportunity as all these services require some sort of manufactured unit to gain access to them. The TV broadcasting switch from analogue to digital was delayed by the self-interest of the previous communications minister and her handlers.

 During phase 1 the Universal Service and Access Agency of South Africa (Usaasa) placed an order for 1.5-million set-top boxes, with 880,128 delivered to the South African Post Office (Sapo) and approximately 486,077 have been installed at the subsidised beneficiaries but there remain currently 4.3 million analogue TV households still to be converted.

The Manufacture and Wholesale of Metal Fasteners

Fasteners tend to be of a generic nature and can be manufactured anywhere in the world which makes the industry susceptible to cheap imports exacerbated by rising steel costs and the instability of electricity pricing and supply. However, the sector has a large and growing export market in SADC and is increasingly moving to specialised production to meet ‘end-users’ specifications. It has also been declared a designated industry by the DTI which means 100% of state procurement must be local although Industry role players expressed disappointment that State Owned Enterprises do not respect the designated status and are awarding tenders to foreign companies.

Manufacture and Wholesale of Pumps, Compressors, Taps and Valves

Foundries supply the industry with castings and at least 100 have closed down in South Africa since 2003 driving up imports and therefore input costs. Half of the 120 companies in the pump sector manufacture all or some of their products locally but there is pressure on local manufacturers as the industry becomes increasingly dominated by imports. The state and cities neglect of water infrastructure for the last ten years presents the industry with a major potential boom in the future as does the demand for pumps in the renewable energy sector.

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