THE concern that the strong rand will further erode South Africa's industrial base is pertinent, given record declines in manufacturing.
The rand's relative strength is an important factor determining the competitiveness of exports. But of graver concern is the paucity of local and overseas investment in domestic manufacturing. We attract the wrong type of foreign capital inflows. Development Bank of South Africa's Neva Makgetla said we "depend on short-run foreign investments in equity and domestic issue bonds".
The high cost of foreign portfolio investment is illustrated by Makgetla's calculation that for every dollar earned in exports, 16c is returned abroad in interest and dividends. A dramatic shift in the mindset of local business is needed. Caution must be exercised in selling off strategic assets in get-rich-quick schemes under the guise of preserving shareholder value. We must protect ourself from free-booting corporate raiders and asset strippers who lay off workers and sell underlying assets in their quest for short-term returns.
We are haunted by the ghosts of our turbulent colonial past where we export huge quantities of minerals in return for manufactured goods . Government and business must implement longer-term growth strategies. Greenfield projects and start-ups are the best way to create jobs. Incentives must be created to persuade foreigners to build new export-oriented factories with locals .
High labour costs are a scapegoat for disinvestment. The problem is stasis in creativity and planning and management creaming off profits. In comparison, the Asian tigers operate on tighter margins. We should learn from Taiwan's 1960s pioneering export processing zone - a catalyst of its spectacular economic rise.
Greg Lishman , Morninghill