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LOCALISATION: THE PERFECT INGREDIENT FOR ECONOMIC GROWTH

LOCALISATION: THE PERFECT INGREDIENT FOR ECONOMIC GROWTH

By Eustace Mashimbye, CEO of Proudly SA

Locally manufactured products and services begin with an idea. Through that idea, a product or service is created with the aim of solving an existing issue or closing a gap for consumers or the communities in which the business operates. Finally, the supply chain comes into full-swing – sourcing raw materials or components, manufacturing, packaging, marketing, wholesale, retail, delivery, and plenty of other links that form this chain.

In its simplest term, localisation is the ability of a country to manufacture and procure its products locally in order to boost the economy and help create jobs.

Job creation and economic growth rely heavily on local procurement efforts driven by stringent localisation policies by entities both in the public and the private sector. In South Africa, localisation has many economic benefits with no limitations when exercised correctly. For many years, localisation has been a part of the economic recovery strategy because it is the main ingredient for creating a sustainable economy and eradicating unemployment.

Since its inception 21 years ago, Proudly South African has been at the forefront of promoting localisation as its core mandate. Our efforts are motivated and derived from helping the economy to grow and assisting with curbing unemployment in the country.

Over the years, localisation has been the star child needing attention. But much like an infant, localisation depends on key growth drivers to fully develop into what it can really become. Through our efforts to drive change and transformation for the livelihoods of the people of South Africa, we issued a report titled ‘Revitalising SA’s Manufacturing Sector’ that indicates the key drivers of a possible boost to the economy.

Revitalising SA’s Manufacturing Sector is an analysis of the huge impact manufacturing can provide in job creation and boosting the economy. The report conducted by top economist Dr Iraj Abedian of the Pan-African Investment and Research Services suggests that the manufacturing sector has great potential to boost job creation and economic growth.

It highlighted industries that are at the forefront of creating positive change in the country. The highlighted sub-sectors that play a massive role in driving localisation that we focused on in this study are agro-processing (including Meat products such as poultry), sugar, furniture, automotive, steel, and pharmaceuticals, which positively impact South Africa and its people.

An extract from the Revitalising SA’s Manufacturing Sector report expressed that; “against the backdrop of the evolving manufacturing environment, current elevated risks, and potential opportunities for the sector, it is of paramount importance that government policy plays a vital role in supporting South African manufacturing. One of the proposals made by the government through the NDP 2030 regarding the stimulation of the country’s manufacturing sector is “leveraging public and private procurement to promote localisation and industrial diversification”.

The manufacturing industry is labour intensive and one of the highest job creation sectors in South Africa. The sector’s contribution to the economy is significant; with a high number of jobs created across various industries. The role of manufacturing in the economy is evidently demonstrated in Dr Abedian’s findings indicating investment scenarios depicting how a mere 10% increase in investment into the manufacturing sector could lead, in the medium term, to 13% GDP growth; 8% more jobs created; 8.3% overall boost to investment across the economy, and a 9% jump in tax revenues.

“Localisation is the solution we need for our economy, country, and the people living in it”

The calculations of actual numbers of jobs created across all skill levels reveal potential medium-term gains of 75 300 new direct jobs in manufacturing, 11 500 new jobs in mining, and 10 100 new jobs in agriculture, over and above the indirect jobs that will be created.

One of the many leading organisations in the manufacturing industry is SAB. SAB has been an essential role player in adding value to the agro-processing sub-sector and the broader economy. In 2022, SAB committed R4.5-billion in investment towards the South African economy and confirmed that it contributes 1.3% towards the national GDP.

The company’s investment doesn’t only stimulate the economy, it also impacts job creation, taxes, and excise and procurement spending. SAB further demonstrated a promising tomorrow for our country through their brand logo relaunch and tagline ‘To A Future with More Cheers’. The brand’s relaunch didn’t take me by surprise. In fact, I was intrigued by it because it speaks directly to what Proudly South African has been proclaiming for years – buy local to create jobs; buy local to boost the economy; buy local to help improve the livelihoods of the people of Mzansi.

SAB’s efforts speak to how the private sector can play its part in driving transformation and localisation, both of which are important to the success of the country’s economy.

The bottom line is that localisation is more than just a stand-alone activity that can come into its full effect alone. It is an activity of change that relies on various touchpoints and elements to function fully. If the private and government sectors make localisation their number one priority, the possibilities of a transformed and revitalised nation will become endless, resulting in a positive chain reaction.

Regardless of how we view it, localisation is the stepping stone for a much more financially independent country. Localisation can ultimately help address current South African issues and social ills affecting all those living in the country. If it is not the main ingredient for critical economic strategies meant to help the country address poverty, inequality and unemployment, we run the risk of sinking further into our issues as a nation. Our beloved country faces problems far more significant than our boardroom talks as decision-makers. These ongoing problems affect us beyond what we ever imagined. Many people have become hopeless, and others are working on migration opportunities only because the future of South Africa seems bleak, to say the least. Localisation is the necessary restoration ingredient at times like these, where we can see a deepening energy crisis, unemployment, crime, and rising interest rates.

According to Statistics South Africa, the third quarter of 2022 saw a GDP expansion of 1.6%. The manufacturing sector led the growth and with localisation taking the lead in manufacturing, there is a likelihood that the economy of South Africa will continue to recover gradually, especially due to its labour-intensive nature. An increase in manufacturing as a result of an increase in aggregate demand for local produce will lead to the retention of jobs and the creation of much-needed new intensive and one of the highest job creation sectors in South Africa” job opportunities. This is the domino effect we l ook forward to seeing.

Decision-makers, especially through their procurement policies, regulations, and practices, need to be more deliberate about buying locally because its economic impact is enormous for the country. Nevertheless, localisation is the ‘reason to believe’ that many South Africans are searching for, and its successful adoption across all sectors of society can help sustain our nation for generations to come.

The implementation of a buy local campaign is not exclusive to South Africa; there are buy local campaigns for countries, regions or even towns globally, and each of these are implemented as movements that seek to heighten localisation efforts that effectively and positively impact their respective economies.

A robust localisation strategy will be the saving grace that will equip all industries in South Africa with the necessary tools and equipment to beat the odds beyond any crisis, including rising levels of imports (both legal and illegal; imports), and in turn, boost the economy and create jobs.

Localisation is the solution we need for our economy, country, and the people living in it.