The Republic of South Africa held a cabinet meeting in August at the Union Buildings in Pretoria. The Government outlined its National Economic Development and Labour Council (NEDLAC) commitments.
As part of the country’s democratic transition 25 years ago, NEDLAC was founded to alleviate social development and economic growth issues. The nation is characterised by severe inequality in incomes, skills, economic power and ownership, which has exacerbated society issues over time. It is the aim of NEDLAC to improve South Africa’s policies on public finance, labour market, trade and industry and development.
Specifically, NEDLAC has identified three defining challenges: sustainable economic growth, to facilitate wealth creation as a means of financing social programs and attracting investment; greater social equity, both at the workplace and in communities, to ensure that large-scale inequalities are adequately addressed and that society provides at least for all the basic needs of its people; and increased participation, by all major stakeholders in economic decision-making at all levels to foster cooperation in the production of wealth and its equitable distribution.
Virgil Seafield, Overall Convenor – Government, reported in the NEDLAC annual report 2016-17 that the organisation has been faced with a broader challenge in developing cooperative approaches to addressing socio-economic challenges “in the context of a discourse that is highly polarised and ideological”.
He explained even though effective national tripartite engagement has been weakened by an increase in community-based conflict, inter union rivalry and intra union divisions along with challenges within the business constituency, NEDLAC at the time emerged as a champion of social dialogue in the policy formulation arena.
“Over the last year the organisation facilitated ground breaking agreements on the labour relations front,” he said. “Central to the agreement on a National Minimum Wage is not the level of the agreed wage but an honest and sincere attempt by all social partners to engage on the issue of growing inequality and addressing, in a constructive manner, the levels of poverty in our country. The agreements reached on labour stability for government are not only about the detail but how this would contribute towards creating an investor friendly economic environment.”
Overall Convenor – Labour, Bheki Ntshalintshali, however, was more critical of South Africa’s economic status in 2017 calling it a “junk state” as a result of slow post–Global Financial Crisis recovery and falling into a recession that year.
Despite the unemployment crisis, reaching 37 per cent, equating to 9.3 million unemployed people, Ntshalintshali was adamant that NEDLAC stood up again under the leadership of then Deputy President Ramaphosa to tackle wage inequality and that positive indicators boosted confidence for NEDLAC’s cause.
Currently, high levels of unemployment and low economic growth is a concern for the Cabinet. Quarterly Labour Force Survey results for Q2 2019 released by Statistics South Africa show that the official unemployment rate increased 1.4 percentage points to 29 per cent compared with Q1 2019.
The Cabinet also remains committed to addressing structural challenges that continue to affect the performance of South Africa’s economy and its ability to respond to developmental challenges.
A rapid response agreement signed by all NEDLAC parties commits to meet the stakeholders on a monthly basis to track the 77 Job Summit commitments to be chaired by President, Cyril Ramaphosa, as of September 2019.
The Government said in a statement that the commitments by all stakeholders – which include government, labour, business, civil-society organisations – target programs to create jobs, mechanisms to unblock barriers to effect implementation, as well as agreements on job retention and ways to prevent job losses. Also included in the commitments are specific sector targeting initiatives to grow the economy.
South Africa’s Cabinet also reported its participation in the 18th African Growth and Opportunity Act (AGOA) Forum which was held in Côte d’Ivoire. AGOA is reported to be a unilateral US trade preference program that provides duty-free quota-free treatment for over 6,400 tariff lines from 40 AGOA-eligible sub-Saharan African countries, including South Africa, into the US market.
“South Africa’s constructive and positive discussions with the US Trade Representative provides potential access to the US market and American investment in our economy, which are important ways of addressing job creation and the elimination of poverty,” the Cabinet said.
Following a visit to South Africa in June, the International Monetary Fund (IMF) was optimistic that South Africa’s subdued economic growth could be reignited if the pace of structural reform implementation is accelerated. It reported that robust actions are needed to reduce fiscal deficit and reverse the increase in public debt. The IMF claim that the South African Government also has a renewed opportunity to press ahead with policies to further strengthen governance, encourage competition, increase labour market flexibility and reduce the cost of doing business.
“A focus on policy actions to remove long-standing structural constraints to growth and accelerate job creation is a must,” the IMF said in a statement. “Acting decisively on tackling structural impediments to growth would help complement the authorities’ efforts to conduct sound macroeconomic policies, thus restoring policy certainty and boosting investor confidence. An improved business environment resulting from reform implementation would attract much-needed private investment, and, in turn, lead to a virtuous cycle of growth, job creation, and social inclusion.”
Minerals Council South Africa confirms that the country’s Bushveld Complex, found in the northern provinces, hosts approximately 80 per cent of platinum group metals–bearing ore – more than half of the world’s platinum, chromium, vanadium and refractory minerals.
The mining industry directly contributes more than 300 billion ZAR (€17.5 billion) to South Africa’s Gross Domestic Product (GDP), and is said to be the economic anchor of many communities around the country, employing more than 450,000 people, according to a report published by management consulting company, McKinsey & Company.
Putting the shine back into South African mining: A path to competitiveness and growth, released February 2019, highlights that global trends, including the transition to clean energy and a shift to China’s economic focus away from infrastructure developments to new technologies, could dampen demand for South African commodities in the years ahead. In the medium and long term, however, opportunities to rekindle growth and job-creation including localising the value chain from mining operations, expanding downstream processing for key commodities and unlocking the potential of the country’s rich ore bodies could accelerate growth in South Africa’s broader economy.
To restore competitiveness and growth in South African mining, McKinsey & Company recommend: unleashing a productivity revolution through the smart use of new technology and improving employee motivation, the work environment and other organisational health elements; redefine the socio-economic role of mines as catalysts of broader development in the communities in which they operate; embrace disruption in global energy markets to realise new sources of potential mining growth; and ensure conditions are in place to unlock South Africa’s high-potential mining assets, including its rich, untapped reserves of iron ore and manganese, and niche opportunities in other minerals such as vanadium and industrial metals.
Key to driving positive change in the country, especially for mining operators, is quality road transport investment. Equipment specialist, SAF-Holland, has a relatively small footprint in the South African market with a distribution facility and sales office based in Johannesburg and an additional sales office based in Durban according to Business Development Manager South Africa, Russell Vandrau.
“We have long-term goals to assemble original equipment in the next five-to-ten years in South Africa,” he said. “At present, SAF-Holland only distributes products, currently without any production capability or production facilities in South Africa.”
On trailer trends, Vandrau explained that Performance-Based Standards (PBS) or an equivalent high productivity scheme is still a new concept in the country. “PBS trailers are proving effective in reducing the number of vehicles on the road while increasing overall payload; we expect to see a positive trend in new PBS trailers over the next few years,” he said – adding that South Africa is rich in minerals and therefore the most popular freight tasks are that of transporting ore from the mines to processing facilities or to harbours for export. “The most popular trailer builds are that of tandem / tandem interlink tippers. The tandem / tandem interlink is a vehicle configuration that is native to South Africa.”
Generally, the South African trailer market has been quite volatile over the last few years, according to Vandrau, with the 2017 growth of 21 per cent levelling out to a slight negative growth in 2018.
“This is mainly due to abrupt change in political leadership and investor uncertainty,” he said. “This year looks far more positive at this stage with an 11.8 per cent increase in new trailer registrations compared to the same period in 2018. SAF-Holland South Africa is a fairly new player in the trailer market in South Africa. We are however extremely positive about our future and our market share growth in the South and Southern African regions.”
Despite SAF-Holland’s decade-long active presence in the South African market, Vandrau is seeing growth in business due to the innovative solutions that the equipment specialist is able to offer.
With a market share of more than 50 per cent, GRW is the leading trailer tank manufacturer in South Africa according to Sales Executive, Günther Heyman.
“GRW manufacture tankers for the fuel, dry bulk, animal feed and specialised tankers for chemical transport,” he says. “We also manufacture closed body trailers (both dry and refrigerated) and curtainsiders for the general freight market. The closed body trailers are SKD kits from our partner Schmitz Cargobull in Germany, which are mounted to the locally built chassis.”
GRW headquarters are in Worcester, which is approximately 120km from Cape Town in the Western Cape, and the trailer manufacturer also has a sales office in Johannesburg. There are also three service and repair branches in Johannesburg, Cape Town and Durban respectively. Heyman said that GRW is also opening a service branch in Dar es Salaam, Tanzania, soon.
Heyman confirms that the South African economy has been sluggish for the last few years.
“The manufacturing GDP has also been retracting for the last few years with a contraction of 8.8 per cent for the first quarter,” he said. “The transport GDP was also down by 4.4 per cent for the first quarter this year. Unemployment levels are also very high at 29 per cent for the second quarter of 2019 (source: www. Statssa.gove.za). These figures point to a struggling economy and to survive in such markets GRW have invested in resource and markets outside of the country’s borders. Currently GRW are exporting vehicles to Australia, Europe and other African countries.”
GRW has been a very strong player in the tanker trailer market for the past 15-20 years, according to Heyman, and it is still a core focus for the business. “We are continuing with good growth in the refrigerated market and general freight market,” he said. “The rail network has seen enormous decline over the last 20 years in South Africa and as such the freight tasks in South Africa are varied across the spectrum. Most common freight tasks are bulk material (mining and agricultural related) and containerised freight.”
Heyman said that 2018 was a busy year for GRW as it launched its tipping silo range for the European market at the IAA Commercial Vehicles Show in Hanover as well as the second generation curtainsider for local markets.
“This year GRW is focussing on the existing model range, with some minor changes for the fuel tanker range and further rollouts of variations to the second generation curtainsiders,” he said. “By the end of 2019 GRW will also install its first panel production equipment (from Schmitz Cargobull) and the first, local produced panel, vehicles should be delivered in Q1 2020.”
The South African economy is ripe with opportunity, particularly for trailer builders and other OEMs. Mining market conditions alone have the potential to significantly bolster what continues to be a volatile business portfolio. Meanwhile, government initiatives such as NEDLAC are key to driving positive social change to set the country up for future growth and industry commentators are adamant that the collection and processing of platinum group metals in the lucrative Bushveld Complex is sure to lead to a productivity revolution.
Fast Fact
UK-based economic forecaster, Economist Intelligence Unit (EIU), asserts that South Africa is categorised by investors as one of the ‘Fragile Five’, a group of emerging markets sharing characteristics that leaves the country predisposed to external shocks. This is reported to stem from a dependency on a volatile portfolio that flows to finance current-account deficits.