South African coatings industry urged to heed warnings

The South African coatings industry is forecasted to grow just under 1% in 2019. As a result the industry will remain under pressure and considering the Department of Trade & Industry’s lack of protection for the sector in the past, the future remains as dire.

Sanjeev Bahtt, managing director, from Synthetic Polymers says, “Of much greater concern is that the local industry is not working together to stand up for its rights, needs and wants.”

It appears as if the local manufacturer that is outside the top tier of manufacturing companies are not working hard enough to keep abreast of what is happening in the local industry.

The remaining 40% of the market outside of this top tier is almost turning a blind eye – and this is not a unique scenario to the coatings industry, but this is happening in all sectors. “The manufacturer and raw material supplier need to realise we are all part of the global village – our borders are open!” says Bahtt.

According to Bahtt, South Africans have always been resilient and believed that things will come right. But the warnings from the Subcontinent and Far East are not being taken seriously. Growth in the Far East is exceeding 6%, and the volumes in the subcontinent and Far East are allowing the industries to keep going. “The reality is that the world does not worry about South Africa, Bahtt reports.

“Our local Government is not making the most of our advantages and not incentivising local business to become a much bigger player in the global village” – Sanjeev Bahtt

The threat to South Africa’s local manufacturing sector has already started and international investors considering South Africa are raising concerns over:

• Labour problems

• Utility and electricity problems

• Water scarcity

• Cost of doing business in South Africa

To further alienate investors, the manufacturing base has been eroded. The textile industry is an example of the damage done, and the coatings industry will follow suit. “We will become the Dubai of Africa,” he explains. Bahtt is referring to the country becoming merely a hub to process paperwork without a manufacturing base – similar to what Dubai is to the Middle East region.

South Africa is also competing against rock bottom fuel and labour costs in Egypt, the Middle East and the Subcontinent with our local Government believing the establishment of 10% duties on paint is enough to protect the local industry. The reality is that 10% is too little.

“We need to stand together and fight for what is required for our industry to survive,” he says, adding, “On acrylic resin there is no duty and we had to apply for a duty to protect us. The duty is in place now, but we had to act!”

It is clear that the industry needs help. But for the government to assist, local manufacturers and suppliers need to stand together and engage with Government to make them listen to the issues affecting the industry. In turn the industry needs a commitment from the Government that it wants to help local manufacturing.

And Bahtt says we have fallen behind our neighbours, so action is vital. South Africa has the longest coastline in Africa, but Mauritius is busy building a port to become the transhipment hub between the Far East and Africa – what Hong Kong and Singapore is to the Far East.

“Our local Government is not making the most of our advantages and not incentivising local business to become a much bigger player in the global village,” concludes Bahtt.

WHAT ARE OTHER COUNTRIES DOING TO PROMOTE LOCAL MANUFACTURING?

The Egyptian Petrochemicals Holding Company (ECHEM) was established in January 2002 to manage and develop the Petrochemicals industry in Egypt through new promising areas of investment.

ECHEM priority is to enhance the growth of Petrochemical industry through implementing The National Petrochemicals Master Plan with the target of realising the optimum utilisation of natural gas in value added products. The Plan covers 14 complexes including 24 projects and 50 production units during the coming 20 years.

SOURCE: www.echem-eg.com

From ECHEM’s website the Government of Egypt offers a number of investment incentives and has set up laws related to tax reduction, tariff exemptions and granting numerous guarantees.

The Egyptian Government also offers the following advantages:

• Enterprises could be wholly owned by foreigners

• Guarantees against nationalisation or expropriation of project

• Output of the project is not subject to price control

• Projects are allowed to repatriate their capital and profits

• Foreign experts’ salaries are exempted from income tax if their stay in Egypt is shorter than one year.

There are many other exemptions depending on where the projects are located as well as exemptions on contracts aimed at establishing Egypt as a chemical manufacturing hub.

WHY SHOULD INVESTORS CHOOSE EGYPT? To establish Egypt as an attractive investment destination in the MENA region, the government has clarified the tax code and cut corporate taxes from 42% to 20% and personal tax from 32% to 20%. The country offers investors and export subsidy programme, with over 2 000 companies benefiting already and export subsidies in the region of EGP 2.6bn in 2014.

Exports account for roughly a quarter for the country’s GDP, with oil and other minerals at 32% of total exports, but chemical products representing 12% of total exports. (Source: tradingeconomics.com/ egypt/exports)

The value of Egyptian exports in October 2018 was set at USD 2424m.

SOURCE: www.echem-eg.com