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Innovation key to unlock manufacturing potential

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A revitalised manufacturing sector could hold the key to growing the Gauteng economy, and significant foreign direct investment in South Africa from the Netherlands could help to unlock the potential.

The South African Netherlands Chamber of Commerce (SANEC) is partnering with the Gauteng Department of Economic Development to support re-industrialisation of the province.

As part of this initiative, manufacturing software specialist Isah International, is looking to work with local manufacturers.

Peter van Harten, director of Isah International, says Isah – which focuses in driving costs out of the manufacturing process through improved efficiency – offers customers a profit guarantee.

He points out that a recent World Economic Forum report indicates that globalisation is the biggest challenge faced by local manufacturers, both in the form of cheaper goods flooding the market and global supply chains often closed to smaller manufacturers.

He adds that among the factors that will spell the difference between success and failure for manufacturers are access to talented human capital; collaboration between policy-makers and business; and the ability to innovate and an accelerated pace.

Although still a significant contributor to the GDP, South Africa’s manufacturing sector has shrunk from about 21% of the economy in 1977 to just 14,6% today.

“We see manufacturing industry in decline – but still with a lot of potential,” says Van Harten. “Among the challenges are cheap imports, a strong rand and increasing input costs, all of which erode the competitiveness of the sector.”

The country is in danger of losing its base of small manufacturers as a result of adverse economic conditions as well as an ageing generation of entrepreneurs, with very few youngsters coming forward to replace them.

To come back as a valuable contributors to the economy, Van Harten points out that the WEF indicates the sector should grow at about 10% per year.

Among the interventions that could make this possible are a favourable exchange rate and electricity pricing, policies and skills generation.

He adds that the potential of a rekindled manufacturing sector could be huge because of the multiplier effect, which is particularly good for manufacturing.

“We can’t control the exchange rate, and there are many other conditions that we can’t influence – but, as manufacturing companies, what can we do for ourselves?” Van Harten asks.

“We believe that a roadmap to the future lies in upgrading and innovating – combining IT with innovation to become more competitive.

“Manufacturing companies need a platform that will allow them to reduce costs, and increase their decision-making capabilities.”

Isah International is represented in South Africa by Rifle-Shot Performance Holdings.