By Mike Schussler.
There is much that is uncertain about the world post Covid-19, but one fact that is undisputed is that South Africa will need millions of jobs to allow our citizens to get back on their feet.
For jobs we don’t merely need economic growth, we need a high rate of growth. We will have an Everest of debt and a Mponeng mine of an unemployment rate.
And while we all have a grasp of flattening the curve, South Africa has not yet woken up to the urgency of our predicament. The past weeks have had, for some people, elements of a National Geographic nature documentary: clear skies full of birdsong, empty roads and family days at home.
But things are not normal. Millions of our countrymen and -women are suffering in poverty and unemployment, unable to feed their families, unable to practice physical distancing.
South Africa entered this dreamlike disaster with 10.4 million unemployed and we now know that around 2.1 million more have joined that queue from the ranks of the employed, not counting the 600 000 or so new entrants to the job market that are expected each year.
We are borrowing over R650 billion this year, more than our education and health expenditure combined.
Yet we need growth and that means we have to learn to find ways to help get businesses back up and running. We need to find ways to get the lost jobs back and save those jobs we can.
As an example, consider the Quick Service Restaurant (QSR) industry, which employs about 200 000 people. The majority of them have very little work right now as deliveries cannot compare to the volumes generated by takeaways. As long as these outlets stay locked down, a long value chain, employing hundreds of thousands of other people, stumbles and could be derailed.
The QSR sector buys about 25percent of all the country’s chickens, a large share of all meat and potatoes, about 15percent of all bread, and so on. A bottleneck in this sector places numerous others at risk.
South Africa is a modern, integrated economy and while the chicken industry for one has to be permanently vigilant to defend itself against predatory trade and dumped product, it has always had support from the QSR sector, as well as a limited export profile. The potato industry, likewise, feeds into the QSR industry, while the milk industry has fresh milk sales that help it to survive an avalanche of subsidised powdered and long-life milk, butter and other products.
The fact is that we will have to support one another like never before, and will need an orchestrated effort to create value-added employment in South Africa. I’m all for free and fair trade, and am joined in this by the likes of the FairPlay Movement and others in believing that we need to look at the broader agricultural industry and its potential export markets as the African Free Trade Area gets underway.
Part of the solution will have to be intra-industry export drives allowing information-sharing between industries and enabling the set-up of modern value chains along logistics and marketing lines, to get great-value products into Africa and beyond.
We will need the Competition Commission to allow South African firms to work together on export markets and programmes so that, for instance, two or three sectors could share cold-storage costs in strategic markets.
We know that our farmers compete well without subsidies, and despite high interest rates, uncertainty and failing infrastructure.
The chicken industry has in various instances had to provide water and power themselves due to broken infrastructure in the towns where they operate, while the maize industry face inflated costs of logistics because the public roads that it depends on to move its product are not kept in good repair.
Considering the poultry sector as one example, the potential collaborations and the benefits for the economy are evident. This is an industry that directly employs around 110 000 people; which buys huge volumes from the maize and soya sectors as feed, and which supplies a normally booming QSR sector. The industry has a master plan in place to create more employment in South Africa, yet some neighbouring export markets are not open to us.
In this regard South Africa needs to find a common goal – to help Africa feed itself with quality, value-for-money poultry supplied by an organised value chain from crop farms all the way to cold storage and marketing. Government focus is required to open neighbouring markets and to support the poultry sector in growing the industry across Africa. Only government can deploy diplomacy to open closed markets.
Imagine the potential if Africa established protocols to support certain key food sectors across the continent, enabling industries along the entire value chain to collaborate to provide food from Cape to Cairo. Africa is a major food importer, importing over six percent of the world’s food to the tune of at least $35 billion a year.
When it comes to exporting food to other continents, African countries are often blocked by quality measures; besides being unable to compete with subsidised producers elsewhere. As a result, the only way forward is to systematically develop a African-grown food market and industry that pulls together all participants in the value chain to build volume and efficiencies of scale.
If the poultry and crop industries were part of a bigger combined plan for an African export industry this would improve the lot of stakeholders all the way from crop producers through meat producers to transport and storage providers, wholesalers, retailers, QSR operators and eventually, crucially, also consumers.
The coronavirus has resulted in a broken global supply chain, which has proved the importance of domestic food security. South Africa is well-placed to play a key role in creating a Pan-African food industry that offers quality, good value and dependability. Consider a scenario where South Africa exports chicken, pork, wine and milk, with all the sectors sharing the cold-storage costs, and the government providing the soft loans to build these facilities in the export countries. These facilities could in turn be used by industry in the host countries to store some of their produce for export to South Africa.
The landlocked nature of much of Africa would see all Africans benefit from access to good food produced elsewhere on the continent.
The Kenyan and Ethiopian produce we already see in the informal market in our urban centres, for instance, indicates real potential should legal and fiscal infrastructure be set up to formalise this. With infrastructure would come economies of scale and improved quality, and South Africa could then even coordinate broader African export programmes too.
The food industry will remain crucial no matter the scale of the Covid-19 disaster. We need to think out of the box – the whole value chain needs encouragement and support, not always only financial, to stimulate work and feed our people.
South Africa is not an island and no industry is an island either. The sooner this penny drops, the better we can all work together. Government must work with and not against industry if we hope to recover after Covid-19. The examples of successful countries – think Singapore – show the benefits of a government that openly supports business and certainly does not try to micromanage it.
What we need at this point is the unbridled creativity of a child, coupled with an adult approach to business and relationships, if South Africa is to pay off debt, create jobs and feed our people. We are teetering on the brink of a very deep hole exacerbated by Covid-19 and we cannot afford to stumble now.