Manufacturing Turnaround with MAPtm
– Why Is It Critical for SA?
22 May 2018 – Achieve Manufacturing Turnaround with MAPtm
Industrialised countries across the world have been realising that a vibrant manufacturing sector is an essential part of their economy and the value chain creates huge amounts of wealth for the citizens. It is essential to the social fabric of the economy. Manufacturing, together with mining and agriculture, are the only industries with 10-times or greater multiplier effect on the economy. Agriculture, agri-processing and capital goods manufacturing, despite their small direct share of the total GDP, remain critically important sectors in the South African economy. The goals of the Integrated Growth and Development Plan include attaining equity and transformation, economic growth and competitiveness, as well as environmental sustainability and good governance. A modest economic growth rate of 5% is expected in 2019, compared to the average rate of less than 1.5% over the previous 5 years. The expected increase is mainly supported by the improved business confidence index, the Infrastructure Capital Investment Programme and the NDP. We cannot rely on the depreciation of the Rand to sustain these sectors however. While the weaker Rand is supporting the survival of smaller famers and producers, we need to take full advantage of all opportunities to increase productivity, stream-line efficiency and cut costs significantly (without reducing the labour force) in order to increase profitability and long-term sustainability. Parallels exist in every sector of the industrial market, and efforts need to be applied as below:
Industrialised countries across the world have been realising that a vibrant manufacturing sector is an essential part of their economy and the value chain creates huge amounts of wealth for the citizens. It is essential to the social fabric of the economy. Manufacturing, together with mining and agriculture, are the only industries with 10-times or greater multiplier effect on the economy. Agriculture, agri-processing and capital goods manufacturing, despite their small direct share of the total GDP, remain critically important sectors in the South African economy. The goals of the Integrated Growth and Development Plan include attaining equity and transformation, economic growth and competitiveness, as well as environmental sustainability and good governance. A modest economic growth rate of 5% is expected in 2019, compared to the average rate of less than 1.5% over the previous 5 years. The expected increase is mainly supported by the improved business confidence index, the Infrastructure Capital Investment Programme and the NDP. We cannot rely on the depreciation of the Rand to sustain these sectors however. While the weaker Rand is supporting the survival of smaller famers and producers, we need to take full advantage of all opportunities to increase productivity, stream-line efficiency and cut costs significantly (without reducing the labour force) in order to increase profitability and long-term sustainability. Parallels exist in every sector of the industrial market, and efforts need to be applied as below:
- Strategic Infrastructure Projects (SIP) which aim to improve investment in infrastructure to support agricultural production, processing, energy and transportation. These will assist when they take a developmental agenda, buy local first and, if it is not available locally, help an entrepreneur do it.
- National Re-Industrialisation Programme has been re-enforced to emphasise the importance of the industrial sector to building an inclusive economy. The Pan-African Report of November 2011 is a great example of its impact.
- Digitisation across the Enterprise (large and small) This is the first step on the road to fulfilling the competitiveness behind the global market participation, using the Internet of Things on the journey to Industry 4.0 and Smart Manufacturing.
- Smart Manufacturing Far from reducing jobs, it will form the basis of upskilling and promoting well-paid work in a highly skilled economy.
- Real Transformation to reflect the demographics of the country, and business process transformation to meet modern business practices. Both dimensions need to be tackled together.
- Efficiency Removal of redundant processes from any business helps the company be more resilient and reduces value-chain costs over time. Questioning “Why do we do this?” at every stage is important.
- Recapitalisation Many businesses today need additional capital to bring themselves in line with their global peers or face extinction. Protectionist measures tend to breed uncompetitive practices, so while they might put food on the table today, there are many incentives and investors willing to support a well-qualified action plan, which will breed sustainable solutions.
- Buy local and make it easier for local vendors to survive. Often this can be as simple as paying them on time, ensuring they are on an equal footing, and many will be surprised at how quickly they become more competitive. Realistic specifications could allow more products to be made locally.
