Visiting Mossel Bay in December was an absolute delight. The weather was fantastic, and we had family visiting, which made the experience even more enjoyable. We spent our days challenging the sand dunes in our 4x4s, where the mix of testosterone and pride led to some spectacular mishaps. The expected Discovery/Toyota/Ford banter was brought to an abrupt halt when an inexperienced rookie raced up the sand dune without missing a beat. That also took care of the discussions around the role technologies played in sand dune driving.
But, as I prepared for this newsletter, the reality of the conditions in South Africa, the disastrous policies and the mismanagement hit home. The departure of major corporations like ArcelorMittal and Total is impacting South Africa’s economy more severely than we might initially perceive. This situation is compounded by the scrutiny from influential figures such as Donald Trump and Elon Musk, who are likely to examine the South African government’s close ties with Russia. For those in government and others who may not fully grasp the intricate ways in which political dynamics can affect local businesses, there could be some significant and unsettling surprises in store.
The potential consequences of these developments could pose serious challenges to the stability and growth of the nation’s dwindling economy.
Maybe South Africa should be looking at ways to ‘Make South Africa Great Again’. The days of ‘die Boer maak ‘n plan’ and ‘an Indian has a plan’ have now been replaced by ‘let us take from the entrepreneur and give to those who cannot make a plan and do not have a plan’.
This brings us to the question: How is China able to manufacture products, put them on a ship, transport them to South Africa, pay import duties and taxes, and still be cheaper than what we can produce locally in South Africa? Some people think that China use cheap labour and that is why their products are so cheap. Others think that China manufactures junk and that is why they are so cheap.
Although these thoughts might have some merit, this does not provide a complete picture. Some of the world’s most well-known OEM products are manufactured in China. Here are some factors that contribute to China’s dominance over local manufactured products:
• Economies of scale: China has a massive manufacturing sector that benefits from economies of scale. This means that the cost per unit of production decreases as the volume of production increases. Large factories and production lines in China can produce goods in vast quantities, reducing the overall cost. If an economy shrinks, like in South Africa, the opposite is true.
• Supply chain infrastructure: China has developed an extensive and efficient supply chain infrastructure. This includes ports, roads and railways that facilitate the quick and cost-effective movement of goods. Additionally, China has a well-established network of suppliers and manufacturers that can supply raw materials and components at competitive prices.
• Government policies and incentives: The Chinese government has implemented policies that support manufacturing, such as tax incentives, subsidies and investments in infrastructure. These policies help reduce production costs and encourage businesses to establish manufacturing operations in China.
• Technological advancements: China has invested heavily in technology and automation, which can reduce production costs by increasing efficiency and reducing the need for manual labour.
This is by no means meant to be a comprehensive list of all the factors influencing the price of China’s goods, but it does give a clear picture of what is wrong in South Africa. Associate Professor William Gumede from Wits wrote on 7 February 2024, and I quote “South Africa’s debt servicing costs are growing astronomically, with the country not being able to show much for the increases. This means South Africa will spend roughly R1,06 billion per day just on servicing its debt.”
This is what Stanlib chief economist, Kevin Lings said regarding China “The government’s R1 billion per day interest bill is coming at the cost of other services, including education, health and infrastructure. If we walk around the country a bit, we’ve taken up debt enormously, but what do we have to show for it, other than stadiums? You’re going to struggle to find something to demonstrate any value for money. If you look at China, government debt was 28% of GDP in 2009, and now it’s at 80%, slightly higher than South Africa.
If you walk around China, you can see what they spent the money on. The development over that period is just phenomenal. They put themselves in a position to sustain decent growth for many years, and those assets are going to last for decades. They will reap the reward for undertaking the investment.”
There is an important lesson that South Africa still needs to embrace. Entrepreneurs are inherently risk-takers. These risks can either lead to the downfall of the entrepreneur or result in the creation of substantial wealth. When an entrepreneur succeeds in generating wealth, it benefits not only themselves, but also others in the community. If entrepreneurs are subjected to undue challenges or threatened by government policies claiming their success was built on the exploitation of the poor, they may be compelled to relocate to more business-friendly environments. A pertinent example of this is SpaceX’s decision to move from California to Texas, illustrating how a supportive environment can be crucial for entrepreneurial success and the success of the country.
Automation is not the greatest job destroyer, incompetence, greed and corruption are.
Yours in automation
Johan Maartens
| Tel: | +27 11 312 2445 |
| Email: | [email protected] |
| www: | www.saimc.co.za |
| Articles: | More information and articles about SAIMC |
© Technews Publishing (Pty) Ltd | All Rights Reserved
printer friendly version