Coronavirus a ‘wake-up call’ for SA manufacturing

Aspen Pharmacare executive Stavros Nicolaou, who heads Business for SA’s health workgroup, says he hopes the coronavirus crisis will be “a big fat wake-up call” for the country to develop its manufacturing sector and become more self-sufficient.

SA has to compete with other stricken countries for desperately needed protective equipment, ventilators and testing kits.

“In the medical equipment sector, 90% of what we buy is imported. That’s a crisis, because if something like this breaks out, guess who gets protected first? It’s not going to be SA.”

Sourcing what the country needs globally is getting harder all the time, he says.

“This situation existed pre-Covid and it’s only getting worse now because prices have gone up globally and supply chains are more constrained. It’s a worsening picture.”

He has called on companies to repurpose and retool their operations in order to manufacture critically needed stock.

“If we in a month’s time have a massive domestic spread then we’re in for a very rough patch.” He’s calling on companies to go on a war footing.

“They say attack is the best form of defence. And one of the things we’ve got to get right up front in managing this pandemic is ensuring that our first line of defence, our health-care workers, are protected.”

Health-care workers have complained of shortages and some have refused to work until better protected. Supply is now stable for the next week or so but has to be “rationalised”.

“We don’t need to be giving surgical masks to taxi drivers and commuters, you can give them industrial-grade masks.”

Companies that can make them are expanding their capacity and 6.5-million industrial masks will be delivered in two weeks.

Local suppliers who import need to be “more aggressively trying to source products” and local companies need to ramp up production.

“This is critical.”

He says it's hard to say what’s coming until there’s been proper testing in the townships.

This has been hampered by a shortage of testing kits although a batch recently landed in SA utilising a structure his workgroup has set up to source globally.

Importing scarce medical equipment is fraught with complications, he says.

“The National Health Laboratory Services is told a million kits are being sent on Monday, and then the freight is delayed or someone else snatches up the order and a week later they’re still waiting. It’s a common problem.”

If anyone can negotiate these difficulties then that person is Nicolaou, senior executive for strategic trade at Aspen.

His health work-group has set up a sourcing, procurement, logistics and distribution operation using top local audit, legal and supply chain logistics firms which are giving their services for nothing.

Using donations from the Solidarity Fund, the Motsepe foundation, Naspers and FirstRand, he has managed to source “sizeable” quantities that local importers have not been able to get their hands on.

“They ramped up their capacity and then their demand de-escalated, so capacity is being freed up there.”

R70m worth of stock recently landed in SA and there’s an order book of a further R680m, including for ventilators.

He says one of most important developments to come out of the crisis so far has been “the diminishing of trust deficits” between the public and private sector.

“We’re even at the level of sharing information, which was unheard of previously.”

The most important lesson to be learnt from the crisis is “that we better start being more self-sufficient and true to the localisation agenda, because we talk localisation and local procurement but we do something else”.

Health minister Zweli Mkhize and Trade and Industry minister Ebrahim Patel have been leading the charge for government but now the officials need to follow their lead, says Nicolaou.

“We’ve got to turn this into an opportunity.”

Some officials in Patel’s department are “progressive and innovative” and would be at home in the private sector, he says, “but then you’ve got a different level who are still highly bureaucratic and insist on doing things like they always have”.

Public procurement needs to be more strategically driven.

“We’ve got significant local manufacturing capacity, but we’re not utilizing that.”

The result is that economies of scale necessary to drive better exports are not being achieved.

“Too many officials who do the public procurement are still stuck in the same outdated mindset, they’re still very rules-driven. You need governance but you’ve got to be strategic about it.”

What interventions can we use right now that aren’t going to cost anything, because fiscally we’ve got no wriggle room. Things like prioritising the registration of locally produced products, having preferential procurement for locally produced product. We’re not doing this.”

He says he has detected a “slight” mindset change, “but what’s absolutely palpable is that private and public sectors want to work together. How do we make that magic happen?” 

Ministers Mkhize and Patel are doing a good job, he says, their officials not so much.

He believes that after the crisis there’s going to be “a very different realisation in the public and private sector of how you’ve got to do business in this country”.

Starting with the realisation that charity begins at home.

“You’ve got to have domestic industries that can sustain you in good and bad times. We shouldn’t wait for the bad times and then say we’ve been caught with our pants down.”

While throwing everything at the immediate corona crisis we shouldn’t lose sight of the frightening economic crisis ahead, he says.

“We’re going to take immense economic pain regardless of whether we have an early spike or flattening of the curve scenario.”

Government and private sector need to be thinking right now about how and how quickly the economy can be restored.

“Let’s start repurposing right now so we get a better localisation agenda implemented, physically implemented not just spoken about.

“Now is the time we have to position ourselves for the future.”