There’s a lot going in the manufacturing arena. Large companies are shutting down, and small companies are growing. What are you doing to remain competitive in your business?
Recently, CNBC Africa reported that South Africa’s manufacturing output shrank 4.1% year-on-year in April. “This means the sector is much weaker than expected. Economists polled by Reutershad forecast that local manufacturing volumes would contract by 1.6% year-on-year in April,” says CNBC Africa’s Mfuneko Toyana.
It’s challenging out there for local manufacturers, more than experts thought it would be. Amidst economic ratings downgrades and uncertainty in the political landscape, investors aren’t tapping into the potential that you have to offer. But, what are you doing to turn the situation around and make your manufacturing business boom once again?
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In May 2017, General Motors South Africa (GMSA) announced its plans to cease the manufacture of vehicles at its Port Elizabeth factory. “These decisions were not made lightly. We will manage the transition as smoothly as possible,” GMSA President and Managing Director, Ian Nicholls said.
Factors that are holding local manufacturing back
Only 1% growth in manufacturing output per year, since 2010, has been achieved on the local front. Manufacturing sector experts say that it’s ‘no real surprise’ that manufacturing's relative importance in SA's economy has declined over time.
“There are a few possible reasons for the decline that we can think of. These include lack of demand in the economy for manufactured goods in recent years due to cheaper imports being available and erratic electricity supply has also seen SA firms manufacture less due to unstable energy grids,”South African Market Insightssays.
Rising beyond the challenges
While the manufacturing sector is under pressure for various reasons, there are companies that are forging ahead amidst the challenges and ratings downgrades. One such company is PTiP (Photovoltaic Technology Intellectual Property) Innovations – run by Professor Vivian Alberts.
“South Africa is among the fastest growing renewable energy markets, placing first in Africa and fourth in the world, according to Climate Scope,” says Jeffrey Barbee atThe Daily Maverick. He adds that legal firm Baker & McKenzie count 6000 Megawatts of renewable energy already built in the country, with more to follow under the third round of the government’s procurement plan.
“South Africa is experiencing a boom in cost-competitive solar power,” adds Mike Mulcahy, CEO of Green Cape, a not-for-profit agency set up by the Western Cape and the South African government to support development of the green economy.
If you have a unique solution, funding will come
You can’t grow your company if you don’t manufacture innovative new products. If you focus on developing ‘green’ products or technologies, the Western Cape government might provide you with cash incentives through their Manufacturing Competitiveness Enhancement Programme.
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“The government wants 8.4 gigawatts of power to come from solar by 2030. Since their Renewable Energy Independent Power Producer Programme (REIPPP) started in 2011 there is now 1GW already connected, with projects in place to supply 2.2 GW more,” Barbee explains.
He says that a recent study by the Centre for Scientific and Industrial Research (CSIR) has shown that the renewable energy rollout in South Africa has saved the country approximately R4.8-billion between January 2014 to June 2015 by avoiding constant blackouts and reducing the amount of coal and diesel the country burned for power generation.
Professor Alberts secured government funding for his manufacturing growth and is now planning for construction to begin on a new industrial-scale plant to supply thin-film solar panels to the country’s rapidly growing alternative energy market. “Once we get that final plant running and churning out millions of modules that are going into local communities, then we will be very proud,” he says.
South Africa’s manufacturing sector is under pressure amidst recent economic ratings downgrades. But, local manufacturers in particular niches are doing better that others. The energy sector holds potential for manufacturers to grow revenues with a green offering, but you need to have a genuine solution to be competitive. There is government funding available for you if you are looking to manufacture green tech, and if you need added capital for equipment, Standard Bank can assist you with tailored finance solutions.