METALS & ENGINEERING
Government needs to support the metal & engineering sector What are the tangible solutions that the metal and engineering sector can use to tackle declining production, weak production sales and increasing unemployment? Lucio Trentini, CEO of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) gives SA BUSINESS INTEGRATOR his view. How can we to tackle declining production, weak production sales and increasing joblessness in the sector? The fortunes of the metals and engineering (M&E) sector are tied to GDP growth. Therefore, higher rates of GDP have a natural positive implication for the metals and engineering sector and the reverse is true where weak economic fundamentals persist. One important avenue to sustainably grow a country and enhance the GDP performance is increasing gross fixed capital formation or investment. For this reason, the various infrastructure investment plans that the government has put in place must be implemented. The fastest growing economies have tended to target an investment to GDP ratio of 20%-30%, however in 2021, South Africa’s investment to GDP was recorded at 12.5%. A concerted effort to increase this ratio is paramount if the fortunes of the economy, and in turn the metals and engineering sector, are going to improve. The reform of state-owned enterprises (SOEs) is also crucial. This reform should entail bringing private sector participation in the areas currently
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serviced by state owned entities. The monopolistic market structures that have manifested in the industries serviced by state owned entities have resulted in major inefficiencies, a deterioration of the service and increases to the cost of the service. Combined these outcomes have resulted in an increase to the cost of doing business and a lack of service delivery.
Highlight the critical importance of the M&E sector for social development in SA. The sector directly employs 397 586 people and working on the traditional employment multiplier of 1.6 people for most industrial sectors, the M&E sector indirectly employs a further 657 896. Further, considering South Africa’s dependency ratio of 6 to 10 people per job, considerably expands the sectors socio-economic impact.
What can be done to lower local production costs? The fundamental objective and agenda of the policy makers across the board should be how to make South African companies globally competitive. This
