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The KZN Business Summit
Kwa-Zulu Natal is in the process of shifting the national economy from traditional low-productivity, primary activities and low-value goods and services to sectors that rely on modern technologies, creating new skills, generating exports and employment.
This would have a beneficial spillover effects on other economies within the Southern African region and its institutions, said Dr Zweli Mhkize at the KZN business summit held recently.
Addressing the summit on KZN`S achievements in terms of growth, Mkhize said that in the past six years, the South African economy has maintained a constant economic growth.
"The real economic growth average of 3.4% achieved during the first ten years of democracy (1995 to 2004) has increased to an average of 4% over the upswing phase of the current economic cycle. This is a big improvement in the domestic economic performance. It is my hope that we retain such growth trajectory," Said Mhkize.
In addition, the revised GDP figures reveal a significantly stronger economic growth performance during 2006/7 compared to earlier estimations. Whilst the GDP growth decelerated to a 2 - 3% pace during 2003 due to the adverse impact of the strengthening rand exchange rate on tradable goods, production did recover in 2004, with real GDP growth re-escalating to a 5% pace during the second half of the year. Overall, the real GDP growth came in at a respectable 3.7% last year, exceeding expectations and economic forecast by some margin.
"The capacity to produce vehicles globally tends to be over supplied with the production in 2005 amounting to more 66 million units, yet more and more developing countries are still encouraging local investment in the vehicle manufacturing. Almost 68% of the production capacity is concentrated in the EU, North America and Japan. As can be expected where there is over-supply, the international vehicle market has become extremely competitive and quality and technology conscious. It is very difficult for a lone plant in a developing country to become profitable and survive if it is not linked into the international network of one of the major global operators. The issue is no longer just the capacity to produce volume, but total quality management at a relatively low cost is primary," added Mhkize. Though the South African auto industry is considered to be small by World standards, it is, however, important for our economy with approximately 200 firms employing more 50,000 people. Imports and exports through the car terminal in Durban amounted to about 213,000 in 2005, but are projected to rise to 389,000 by 2020. The net effect of these developments is that the automotive sector in South Africa and in KZN has substantially improved its competitiveness and manufacturing capability to acceptable international standards. In round figures, the SA automotive industry currently produces in excess of 450 000 vehicles per annum of which 120 000+ are exported and 330 000+ are sold on the domestic market. This sector is supported by the largest port in Africa, which provides a sound logistical platform for manufacturing operations dependent on either inbound or outbound seaborne freight. Being located close to the port greatly reduces lead times and the operational risk associated with greater levels of road congestion in more densely populated metropolitan areas.
The Maritime Vessel Construction and Repair (MVC&R) sector, also known as ship building industry, is vast and fast evolving. In recent times, Shipbuilding has changed from a "heavy industry" to become a capital and technology intensive activity. While Japanese, South Korean, Chinese and Western European yards dominate the merchant Shipbuilding market, Eastern European and Vietnamese yards are increasingly active, in particular in low and medium complex ships. Since 1994 the boat-building sub-sector has grown by more than 120% in turnover and repositioned itself as a source of affordable but well crafted leisure boats. However, local shipbuilding has declined with the closure of one of the two shipyards. Ship repair has had a mixed picture characterised by a relative boom when the Rand was at its weakest whilst many repairers have been struggling to get contracts recently due to a variety of reasons such as industry fragmentation, capacity as well as relative time and cost inefficiencies.
We are optimistic that opportunity in local & international fishing fleets; port vessels (tugs, barges, workboats, patrol boats); law enforcement, tourism, Naval Vessels for the Department of Defense; International offshore oil/gas supply & support vessels and Small Container Ships.
From the analysis of the status quo within the maritime vessel construction and repair sector the most critical substantive problems have been identified, namely Lack of co-ordination along the maritime vessel construction and repair sector value matrix, Diminishing core of relevant skills and expertise. It has become urgent to establish a cluster in this sector in order to collectively engage government in policy formulation and share strategies for increased competitiveness.
Infrastructure is crucial to the sustainable growth of the maritime industry in South Africa. Other countries are making significant investments in their ship and boat building and repair sector aimed at upgrading and developing appropriate infrastructure. A number of ship owners are sending their vessels to higher skilled, better infrastructure and lower cost repair. Clustering of the industry (focused resources and bringing the industry together.
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