Business Unity South Africa (BUSA) in conjunction with Business Leadership South Africa (BLSA) have launched an important research report into localisation policy. The report was compiled by Intellidex and seeks to contribute to policy on promoting local manufacturing in South Africa.
The problem
The research is important as government has placed localisation as a central cog in the machinery of policy to best assist SA’s economic recovery. Organised business in Nedlac has been asked to substitute 20% of non-petroleum goods imports for domestically produced goods within five years. This study assesses whether or not such a target is realistic.
Why you should care
- Businesses surveyed are supportive and eager to localise their supply chains where possible, but under the right conditions.
- However, businesses are sceptical of existing localisation policy and worry about capacity,priceand quality as well as the ‘usual’ constraints of electricity, regulations (including labour).
- Quantitative modelling shows large variation in capacity to localise and ability to do so intheshort to medium term.
- Examples from other countries show the downsides of moving too fast and too rigidly and the importance of productivity enhancements and export competitiveness to drive sustainable localisation.
The solution
The general sentiment among the 125 companies surveyed for the research is that they support attempts to improve localisation “under the right conditions”.
The survey found that goods-producing companies can undertake substitution of 12.6% of imports “right away” under the right conditions. This rose to 32.3% of imports substituted after five years.
Service-producing companies see possible substitution of 5.5% of imported inputs right away under the right conditions, rising slowly to 11.6% after five years.
Download the report below.