The government is failing to implement policies to reindustrialise the SA economy, to the disadvantage of aspirant black industrialists, Aspen strategic trade development head Stavros Nicolaou says.
“An area that is exceedingly disappointing is leveraging local procurement to reindustrialise the economy,” said Nicolaou.
“The president is driving regional manufacturing on the continent, yet the decisions taken, very often by the government, favour imports. There are obviously price considerations, which I understand, but we are not even applying our minds as a country on how we get around that because there is no bigger boost to an economy than industrial activity, as you get a multiplier effect.
“We need a proper implementation and execution of localisation and local procurement,” he said.
Nicolaou was speaking to Business Day days after the fifth SA Investment Conference was held in Africa’s richest square mile, Sandton, at which investors made commitments for significant investments in data and telecommunications infrastructure, mining, manufacturing, energy, property, logistics and the food and beverage sectors.
While Aspen did not make any commitments in this round, the group has previously pledged R4bn in previous editions of President Cyril Ramaphosa’s investment drive.
The localisation strategy, the heart of his Economic Reconstruction and Recovery project, is about building local industrial capacity for the domestic market and for export markets. It has been part of the government’s rhetoric since 2014 and is touted as a mechanism to get SA away from exporting raw materials and towards processing and manufacturing.
But local manufacturers in many sectors, including cement and poultry, still battle to stave off the effects of imports flooding the local market.
Nicolaou said while the department of trade, industry and competition had laid out the foundation for a localisation programme to boost local manufacturing, the problem is that the mandate is not enforced throughout the system and ministries outside the economic cluster are not readily buying into the programme.
Moreover, because the department is not in charge of procurement in other departments — and ministries are having their budgets reduced — driving industrial policy is often reduced to a secondary priority.
The solution, according to Nicolaou, is to have a threshold set in all departments, agencies and municipalities for the procurement of local products.
“You should be ring-fencing an amount per department that is going to be used to procure locally produced goods but which keeps you fiscally sound,” he said, adding that there is no reason why buying local and each ministry’s mandate should clash.
However, he warned that in aligning procurement processes, the state needs to galvanise and support investment in black entrepreneurs, the pipeline of which has slowed in recent years.
“We are falling off the map when it comes to entrepreneurs,” Nicolaou said. “I am not seeing that pipeline of entrepreneurs and industrialists that we saw about 1994-2000 emerging anymore. The 10 golden years postdemocracy where you had the establishing of a black middle class — that has started to shrink,” he said.
He cautioned that the environment is not conducive for black industrialists to access capital. “For a black entrepreneur to access capital is very difficult so you are actually stifling entrepreneurship in that way, and those are the people that create the jobs.”
After building a world-class factory and pivoting to become Africa’s first vaccine-producing plant in the coastal town of Gqeberha, the Aspen group produced the initial Johnson & Johnson Covid-19 vaccines. But the R83bn JSE-listed pharmaceutical giant hit a snag when it received very few orders for Aspen-produced vaccines.
The group later got some reprieve when it announced a deal with the Serum Institute of India to make and sell four Aspen-branded vaccines for Africa, in a bid to shore up the use of its near-idle Covid-19 vaccine production lines.
In December, Aspen secured funding of $30m from the Gates Foundation and the Coalition for Epidemic Preparedness Innovations to help make affordable vaccines for Africa.
Nicolaou said after the bottlenecks encountered with the Covid-19 vaccine, the company has now diversified into making paediatric routine vaccines at the plant as well as vaccines for meningitis, rotor virus, pneumococcal and others.
Aspen’s shares closed 1.45% lower at R183.31 on Monday, having climbed more than 35% since the start of the year.
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