A list of industrial sectors to which trade, industry & competition minister Ebrahim Patel intends to apply his localisation policies has been, um, “found” by me.
Localisation sounds good, as I've written before. It is basically a programme of import substitution driven by the belief that if we could only make the things we import here, we would be a paradise. It means imports of products to be localised will be subject to stiff import duties.
It means local firms already in the areas now designated for localisation will be able to raise the prices of their products with no fear of import competition. It means we will pay more for thousands of ordinary items without any guarantee that, (a) we will create jobs, or (b) we will not destroy tens of thousands of jobs directly dependent on the importation of goods soon to be localised.
It means, in other words, that in the wake of years of economic decline, the coronavirus and breathtaking social upheaval, we are going to double down on a piece of ideology from 1960s Britain to set us on a path to growth and peace. It is a manifesto for losers.
Here is the list of sectors — in agro-processing: poultry, sugar, oils, grains, juice concentrates and dairy products used in the food and grocery industries; in health care: pharmaceuticals, personal protective equipment and medical equipment (for example, ventilators) used in public and private health-care facilities; basic consumer goods: clothing & footwear, home textiles, consumer electronic products & appliances (including televisions, mobile phones and white goods like fridges, stoves and washing machines), household hardware products, packaging material, furniture; capital goods: equipment and industrial inputs particularly used in infrastructure projects, mining, agriculture, the green economy and digital infrastructure; construction-driven products like cement, steel, piping (plastic and steel), engineered products and earth-moving equipment; transport rolling stock: automobile and rail assembly and component production.
Of course, taking against this is a little like telling children there’s no Father Christmas, but even little humans quickly figure that out themselves anyway. I took part in a project in 2020 to imagine the perfect SA company of the future — inclusive, dynamic, rooted, skilled and networked. Putting myself 15 years into the future, this is what I wrote:
“The perfect SA company is run by a Hungarian immigrant named Istvan, an electrical engineer who immigrated to SA in 2021 under an immigration plan that encouraged immigrants to employ South Africans in return for permanent residence and, ultimately, citizenship.
“Istvan decided to live in East London, drawn by the fact that a model of his favourite car brand, Mercedes-Benz, is manufactured there. He plays golf, has children at good public schools in the city, and within three years was employing five local staff, qualifying him for the residence programme. Now in his 10th year, Istvan employs 63 local people and supplies intricate plastic and metal alloy components used in the electronic manipulation of car rear-view mirrors both locally and abroad. He has also begun to supply his gearing technology to the defence and medical equipment field.
“Prior to emigrating from Hungary, Istvan worked at the Dacia plant outside Budapest. A mixture of populist politics and restricted opportunity in the wake of the Covid pandemic tempted him to look for other opportunities. A big SA drive to attract skilled immigrants caught his eye.
“Istvan’s company turns over R100m a year. It is not listed but, as the immigration programme insisted, his business is built around sound stakeholding principles.
“He makes a handsome profit and pays personal and corporate taxes. His board of six people includes two nominated by the biggest union in his West Bank factory near the airport. His chairman is nominated by the regional head of Standard Bank, his largest creditor. Labour representatives sit on both his audit and social and ethics board subcommittees. The latter subcommittee also nominates which medical aid(s) may be used and selects by whom the staff pension contributions will be managed.
“As part of an expansion three years earlier, Istvan added 15 new jobs. A Johannesburg investor was persuaded to invest R37m in the company for a 25% shareholding. Provided he stays with the investment for more than 10 years he will pay no capital gains tax on any profit he makes upon selling his shareholding.
“More than half a million people took advantage of the immigration programme. They came from all over the world, including other parts of Africa. Benoni has become a hub for ethnically Ethiopian entrepreneurs engaged around the export of machine components. Some migrants did not succeed and returned home, but many have stayed and become settled employers, though not all as successful as Istvan. The scheme is credited with largely staunching SA’s skills gap and creating more than 3-million new and sustainable private sector jobs.”
Just a dream, I know. The ANC would never allow a flow of skilled immigrants into SA because it is convinced we don’t need the skills. But at least I did no-one any harm. Localisation is going to cost jobs in almost every sector mentioned in this column. Let’s count the jobs now and let’s count them again in 15 years.
• Bruce is a former editor of Business Day and the Financial Mail.
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