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Proudly SA: Coronavirus exposes market vulnerabilities but reveals opportunities

Posted on 2020-02-26 00:00:00


Proudly SA: Coronavirus exposes market vulnerabilities but reveals opportunities

Proudly SA chief executive Eustace Mashimbye on a locally produced couch in his office in Rosebank, Johannesburg. Photo: Philippa Larkin

JOHANNESBURG - Aside from the obvious health impact of the coronavirus, the spread of the pandemic has exposed market vulnerabilities as the powerful and influential Chinese economy has been all but shut down.

China is a critical cog in the mechanism of the global economy as both a consumer and producer of a vast range of commodities

In South Africa we are acutely aware of the reach of its exports, as many of our own domestic industries have suffered from the flood of mostly cheap imports from that country.

While massive and extensive business closures and the restriction of movement imposed on the Chinese have been credited with helping contain the coronavirus, the world must wake up in this era of mass mobility to the potential threat that pandemics pose.

Similarly, ecological and natural disasters which seem to occur with frightening and increasing frequency, can shut a country or parts of a country down. These include weather (blizzards, tornadoes, hurricanes etc) and non-weather-related disasters (including earthquakes and mud slides for example) where infrastructure and utilities are destroyed, stalling economies in the process.

Livestock as well as human-related pandemics can also pose food security threats around the world. Unrelated to the coronavirus, African swine fever is currently having a massive impact on pork production in China.

As a result of a world shortage of pork, consumers are turning to poultry meat to supplement the market deficit. As the third-largest producer of poultry, China would have been able to fill that gap, but the coronavirus is hampering delivery of feed to poultry farmers and slowing production down significantly.

In the pharmaceutical sector, many of the world’s generic drugs are manufactured in China, and the coronavirus therefore poses a threat to the supply of these medicines, on which many lives depend.

So how does all this relate to localisation? The local industries mentioned above, namely poultry and pharmaceuticals, face significant threats from imported goods.

And when a country relies heavily on imports from a single source, they open themselves up to being highly vulnerable to pandemics and other factors such as the natural disasters mentioned, that interrupt the supply of a commodity.

But South Africa most definitely does not need to be dependent on imports of poultry or pharmaceuticals, as our local manufacturers have the capacity to meet current import levels. South Africa imports around 30percent of the poultry it consumes, but local poultry farmers could meet 100percent of consumption and create more jobs if this market share - currently in the hands of importers - was back with local producers.

Lobby groups, including Fair Play, have been working tirelessly on behalf of local poultry farmers to support the industry to enable them to replace many lost jobs and create new ones.

Local pharmaceutical manufacturers, including member companies Aspen and Adcock Ingram (especially the former), have been very vocal in making their case to the government, which continues to by-pass them and fulfil tenders for public hospitals with imported generic drugs.

As the largest procurer of ARVs, the government still chooses to source more than three quarters of its demand from outside the country, and local pharmaceutical manufacturers are losing jobs as a result.

Now, with China's manufacturing output hamstrung by the coronavirus, South Africa has an opportunity to review what it imports and capacitate local industries to secure the supply chain of these and possibly other items in the future.

It is the responsibility of the government to ensure that its people receive the drugs they need. We often hear of public hospitals and clinics running out of some medication, but if the Department of Health were to look closer to home for its suppliers, they might not experience such shortages.

If consumers and the private sector always bought local poultry and boycotted imports, we could drive up demand for local poultry and create jobs in this and all the associated enterprises that feed into it.

While we do not in any way celebrate what has befallen China, and like the rest of the world we join in sending our sympathies and hopes for a speedy end to the infection, we have to recognise that it exposes the vulnerabilities of markets to single-supplier sources and offers opportunities to others to strengthen their own domestic capabilities.

I am going back this week to a 1980s song by Stimela, Look, Listen & Decide.

By looking at the potential threats to our security of supply in the various critical industries such as pharmaceuticals, and listening to the medical and environmental experts about the dangers posed by pandemics and natural disasters, we must then take industrialisation decisions that will help us build our internal capabilities to ensure we do not face shortfalls. And in the process we will create much-needed activity and jobs in the South African economy.

Eustace Mashimbye is the chief executive of Proudly SA.

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