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Downstream value addition is critical for radical transformation

Downstream value addition is critical for radical transformation

Administered prices, transport costs, import parity prices, labour market instability, skilled labour and the slow transformation of industries were highlighted on day two of the colloquium of beneficiation held by the Portfolio Committee on Trade and Industry.

These issues were highlighted by stakeholders representing the iron ore/steel and polymer value chains. This colloquium forms part of on-going oversight over the implementation of the revised Industrial Policy Action Plan (IPAP), which started in the Fourth Parliament.

In terms of administered prices, the stakeholders noted that the unreliable supply of electricity remains a challenge and this has an adverse impact on the manufacturing processes, particularly in the case of plastics. In this regard, it was noted that electricity is one of the critical inputs to value addition. Without a reliable electricity supply of electricity, manufacturers are not able to produce competitively.

Port charges have disincentivised the export of value-added goods. Instead, the port tariff structure has encouraged the export of raw materials. Administered prices are not a new issue, they have been consistently highlighted as a key constraint to manufacturing during the 4thParliament, this resulted in port charges being restructured and reduced to some extent. Furthermore, transport costs locally and regionally are purported to be higher than transporting the same product internationally. This issue requires further investigation.

Labour market instability, especially in the mining sector, adversely affects the demand for locally procured goods. In addition, a view was expressed that the lack of long term contracts has not assisted in ensuring sustainable employment, as companies are unable to make longer term investment decisions pertaining to human resources. The Committee had found that import parity pricing and high administered prices have constrained the development of the manufacturing sector.

Value addition in South Africa goes beyond minerals; it includes raw materials such as agricultural products and recyclable materials such as scrap metal. These are areas of value addition that are labour intensive and are less energy intensive than other areas. Furthermore, plastics can contribute significantly to job creation and the country’s GDP if constraints such as import parity prices, transport costs, and unreliable supply of energy are addressed.

 The Committee noted that manufacturers should position themselves more strategically to be able to compete effectively.  The Committee welcomes the proposals including those which recognise the critical role strategic skills play.


 

Issued by parliamentary communication services on behalf of the chairperson for the portfolio committee on trade and industry.

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