The main goal of any localization move should be to ensure job growth and also to ensure that input prices are not disproportionately high to harm consumers. Finding this balance is the challenge facing decision-makers, said Khaya Sithole.
This week, two companies saw a noticeable increase in their share prices following a government note regarding its cement sourcing practices. PPC and Sephaku – both listed on the JSE – are companies directly involved in the cement industry. Under normal conditions, they had to compete with imported cement, which made the operational ground quite difficult for them.
As a result, their propensity to invest in additional capacity – and hopefully more jobs – has been crippled by market conditions. This week’s announcement by the National Treasury that all government procurement spending on cement would come from local companies – like PPC and Sephaku – is a revival of the old debate over location. The various industries decimated by increased imports – manufacturing, steel, chickens and cement – have been pushing for state aid for years. Points of tension, however, loom over what kind of assistance can legitimately be offered by the state and what compromises should be considered.
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