ADDRESS OF THE PREMIER OF MPUMALANGA, THABANG MAKWETLA AT THE LAUNCH OF THE REBONI FURNITURE FACTORY,
KABOKWENI, 28 March 2007
Master of ceremonies
Members of the Executive Council present here today
Heads of Departments
Heads of our Parastatals
Directors of Reboni Furniture Group Mr Mike Nkuna and Ms Ria Ledwaba
All eminent dignitaries
Comrades and Friends, Compatriots, Ladies and Gentlemen
We are here to join the Reboni group in celebrating the launch of a new furniture factory in Mpumalanga . It is our understanding that the Reboni group has become one of the largest manufacturers of economically designed educational furniture, as well as affordable office furniture, including school and office furniture such as stackable chairs, desks, teachers' tables, upholstered chairs, computer tables and filing cabinets which are manufactured from solid timber, board and steel. We would like to congratulate the directors and management of the group for following the rays of the sun and making this foray into Mpumalanga .
We meet a few weeks after the state of the province address where we took stock of the performance of government over the 2006/07 financial year. We remain seized with the need to ensure drastic reductions in poverty and the creation of sustainable jobs for the people of Mpumalanga . Amongst the imbalances government identified to be confronting the goal of achieving shared growth of our economy is the fact that about one-third of the population cannot directly benefit from whatever stronger growth the country's economy achieves—those in the second economy remains largely excluded from growth except through remittances and social grants.
It is common knowledge that sustainable development is impossible without expanding the economic pie through growth. On the other hand, a society which achieves higher levels of development in the form of higher levels of education and training, health and welfare and low levels of poverty and inequality is better poised for further growth economically. The symbiosis between growth and development is such that it is difficult to propose a sequence that growth should precede development.
One of the fundamental reasons why poverty and inequality (i.e. a high concentration of wealth in few hands) cannot coexist with economic growth derives from the dual/enclave nature of the economy. This is because economic growth requires markets for goods and services and markets rely on buying power from widespread incomes and not simply on numbers. Poor people cannot drive growth. This is one of the reasons why a dual (enclave) economy such as South Africa is inimical to growth.
One of the serious areas of focus of government is the imperative for an increase in the rate at which our provincial economy absorbs labour while growing. In general, industries that tend to attract large amounts of investment funds also tend to absorb the least labour, while those that attract minimal investments tend to absorb the most labour, albeit in low skill and low paying categories of employment.
Recently we were witnesses to an investment that cost R1,67 Billion while creating only four hundred and sixty eight (468) permanent jobs (The Lion Chrome smelter project). This translates into a whooping R3,5m per job. We cannot however blame investors for such anomalies because on the one hand the anomalies reflect the inherent nature of the specific industries in our economy and investors on the other hand are in the business of pursuing the highest possible returns on investment. We are therefore particularly pleased that the furniture factory being launched today lies in the manufacturing sector where more jobs can be created per rand invested.
Manufacturing is dynamic and remains without a doubt the engine of economic growth. Manufacturing is generally regarded as the engine of growth due to its backward and forward linkages to the other key sectors and due to its internal symbiosis. Whilst primary sector outputs (mining and agriculture) get processed and refined in manufacturing, manufacturing outputs easily become inputs in other sub-sectors of manufacturing and in both primary and tertiary (services) sectors of the economy.
Even in its most basic form manufacturing is characterised by innovation through higher levels of productivity to transform inputs into better outputs . The dynamic nature of competitive advantage embodied in manufacturing generates higher value. The higher difference between input costs and the market value of products in manufacturing results in greater wealth creation since such value is in turn distributed to the factors of production (labour and capital). Historically, an exponentially large amount of wealth was created in a short period of industrialisation in the past.
A key feature of manufacturing is the fact that more value is added through the transformation of raw materials into finished goods than in primary economies that are dependent on natural endowments (mining and agriculture) alone. We look forward to witnessing this factory sourcing raw timber from the local forestry industry to transform it into higher value products. We hope that you will not rely only on low input costs as a source of advantage but that you will also train and skill your employees into a highly skilled and productive workforce that gives you further advantages. Relatively, more skill is required in manufacturing, than in agriculture and rudimentary mineral extraction. The skill input of course is generally positively correlated to value added.
In a small way, this factory will contribute to the further diversification of our provincial economy helping us not to simply over-rely on one or two sectors for employment and growth. One of the important reasons why it is necessary to diversify the economy beyond primary extraction activities is the fact that a diverse economy is better able to withstand macroeconomic shocks such as interest rate or exchange rate changes. When some sectors are affected negatively, others respond positively, thus ensuring that the overall impact is muted and balanced.
Once more I would like to congratulate the Directors and management of Reboni and wish you all the best in your endeavour.
Thank you!