Why are SMEs in the manufacturing sector important to the South African economy?
Although manufacturing operations rely on a core of highly skilled people to develop products for the market, they usually employ significant numbers of people, with basic skills, on the factory floor and production lines. It is at this level that small manufacturing companies make a major contribution to the economy – they contribute to job creation in a country where unemployment is a major challenge. What is most exciting about manufacturing is that it creates jobs in the very area where we need them most – low to semi-skilled positions.
If manufacturing activity at all levels is not encouraged, the possibility of creating employment will not be realised.
What are some of the major barriers for manufacturing companies operating in South Africa and looking to conduct business beyond our borders?
Many are struggling at the moment. Some of the difficulties are related to currency fluctuations and the value of the rand against other major currencies. The low value of the rand against the dollar does lend some competitive advantage, relative to other economies but definitely not to Asia.
On the other hand, we need to do more with regards to marketing and sales into the continent. We are simply not taking advantage of the natural markets for our products available on the continent. We also need to educate the rest of Africa about the depth of our manufacturing expertise in South Africa. We need to emphasise our broad range of product offerings.
How is this lack of marketing impacting on perceptions about South African products?
There is generally little understanding in the rest of Africa about our country’s manufacturing capabilities. In dealings with major companies and governments, people are unaware of what our manufacturing concerns can produce.
This is especially the case in the defence sector where people are surprised at the range of high quality products we offer. But, I also think that we are not spending enough time getting to know the continent and its needs. We do not send our best and brightest into the rest of Africa.
Are smaller manufacturing companies aware of the support they can get from government to assist with growing their businesses?
There are many small businesses who do not know where, or how, to find government support. The ‘Think Big’ TV series, however, showed that where entrepreneurs have taken the time to find out what is available, they benefit greatly from initiatives from sources like the Department of Trade and Industry.
How can contact between small business and government funders be improved?
Processes can be made easier. The compilation of material required for submission to the department can be daunting. The level of detail required is obviously in place to reduce risk, but I believe that reducing the volume of material required should not necessarily result in a sharp increase in government’s risk exposure.
It appears to outsiders that small manufacturing companies are battling for their place in today’s markets. This can be attributed to the cost of materials and high levels of international competition – especially from Asia. What is your view?
There is no way of avoiding the fact that Asia is a cheaper manufacturing destination than South Africa, and that their cheaper products compete for local market share. I don’t believe that this competitive advantage will last forever – particularly in Africa.
This is mainly because many people buy goods on the basis of the cheaper prices of Asian products, rather than focusing on quality. What we could be doing better is engaging with Africa and telling potential customers exactly what they will get when they buy from a South African company.
We should focus more on supporting the industrialisation and skills development processes in the countries we trade with. Win-win relationships can only develop when we leave real capacity in the countries we partner with.
For example, if you’re in Zambia and a South African-manufactured product breaks, support is close by. If you are buying from India or China, the picture is totally different. However, the real objective is to develop the capacity in-country to undertake basic maintenance with a view to support the move further up the value chain.
We need to be clever about what we can bring to the table in our neighbourhood and market these advantages. It is our neighbourhood after all.
While the ‘Think Big’ series has concluded on TV screens, episodes can still be viewed online by visiting www.standardbank.co.za/thinkbig. For an array of additional tips and tools on how to start, manage or grow a business, visit bizconnect.standardbank.co.za.
Related: Manufacturing in South Africa