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Out of Africa: Value Adding is Critical for Radical Transformation!

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Well, that’s what they’re saying down at one of Cape Town’s longest established and most reputable business newspapers, the Cape Business News. And we couldn’t agree with them more!

See, this is what happened…

All the bigwigs from the South African iron ore industry got together last year for their annual pow-wow held by the Portfolio Committee on Trade and Industry. The discussion normally centers around how everyone’s going with turning a buck when faced with increasing pressure from global competitors. One of the highlights from last year’s conference was a workshop discussing competitive challenges given an unreliable electricity supply. And this is where things started getting.. well actually kinda radical.

See, the guys from the plastics industry who had snuck in past security so they could rock out at the open bar. Of course, once they were nicely lickered up they couldn’t help but wander over to the workshop and soon thereafter broke into the discussion. Before long they were holding centre stage, venting their rage about how hard it is to make their products when the electricity keeps cutting out. ‘OK fair point, that’s gotta be a bummer‘, a few of the steel guys murmured amongst themselves. ‘Damn right it’s a bummer’! the plastics guys trumpeted back. ‘How are we manufacturers meant to be able to compete globally if we don’t even have the most fundamental resources required to keep a factory going?!’ This is the point wen things started getting hot under the collar…

But the plastics guys had a point. Increasing taxes on finished goods at the ports of developing countries have been increasing steadily over the past decade, creating a disincentive to the export of value-added in the country of origin. In fact, port tariff structures have been encouraging the export of raw materials which also receive lower import taxes in developing taxes. It all spells the end to value-adding activities worldwide. And not only the plastics guys were mad, but now the steel heavyweights were too!!

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What really gets Moyee’s goat (excuse the pun -coffee geeks will know what I mean) is the lack of long-term contracts between manufacturers and exporters. This factor alone has significantly contributed to unemployment in South Africa when companies that are unsure of their own futures are unable to make long term investment decisions about taking on new staff. And so the beat goes on, all adding up to a miserable story of continued reliance on development aid for African nations.

And as Cape Business News reporter Kristy Jooste points out, ‘value adding in South Africa goes beyond steel; it includes raw materials such as agricultural products and recyclable materials such as scrap metal’. Value-adding activities in these areas are much more reliant on human labour rather than electricity anyway, which means South Africa’s large labour force stands a real chance to become globally competitive if only value-adding industries were given a chance to rise above the taxes that are currently holding them back.

Hmm… now imagine if there was an agricultural product that could be used to push for more radical change.

Coffee, anyone?

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Source: Cape Business News