The national branches of multinational companies in South Africa and around the world are under pressure as US President Donald Trump’s tariffs and cheap state-subsidised Chinese manufacturing products force them to compete against each other for survival.
This competition among the subsidiaries of global companies means they often have no choice but to close or drastically reduce the size of unprofitable national branches. For example, Goodyear and Ford have either closed or downsized their local operations.
Trump’s tariffs have increased the costs of many companies, making their products expensive and unprofitable. Some multinationals — such as Ford, Glencore and ArcelorMittal South Africa — have announced plans to cut thousands of jobs in South Africa, dealing a further blow to an already struggling economy.
The ANC has for years pursued anti-US foreign policies in the face of repeated warnings they would eventually backfire
In this tough new environment, South Africa is vulnerable, uncompetitive and unprepared compared with other emerging markets.
For the domestic branches of global companies to be competitive, the countries in which they are based must create an enabling environment for them — and that means cheap power, affordable labour and fewer regulatory burdens.
Unlike other national administrations, the South African government does not help local firms by negotiating pragmatically. Instead, its approach is invariably ideological.
Furthermore, South Africa has in recent decades experienced rapid deindustrialisation owing to state, state-owned enterprise (SOE) and infrastructure failures stemming from the widespread appointment of corrupt and incompetent cadres, as well as the adoption of anti-growth policies.
The ANC also appears hell-bent on facilitating the entry of Chinese companies to the country, on the basis of misplaced anti-Western sentiment and misguided “South-South” solidarity. What is more, the ANC has for years pursued anti-US foreign policies in the face of repeated warnings they would eventually backfire.
Before the Trump tariffs, about 70,000 companies had been liquidated and 2.8-million jobs lost since 2000. South Africa’s industrial base was built during apartheid, thanks to cheap power; extensive rail, road and port networks; and world-class state and private companies. The country’s industrial base has since declined and now threatens to implode.
South Africa’s water systems, power plants, rail networks, ports and public transport facilities are all close to collapsing. Public administration is dire, red tape proliferates, and corruption is rife. The majority of South Africa’s municipalities are corrupt and cannot provide basic services.
The rule of law has collapsed in many parts of the country, and it is now common for mafias to extort money from companies. ANC mafias also often extort money from businesses, demanding that ANC officials be appointed to boards, given contracts or paid off for licences.
South Africa’s collective bargaining arrangements are now outdated in an economy that has in the last 30 years informalised. We need new labour regulations aligned to a more rudimentary economy.
Many of the government’s economic policies are ideological, fundamentalist, populist and unpragmatic — stifling growth, investment and entrepreneurship.
South Africa’s education system has collapsed. The country has a dismal 30% matric subject pass rate, and about 500 state schools now have no maths teaching, offering only maths literacy instead. But in an AI economy, maths skills make countries competitive, and multinationals in South Africa struggle to find the skills they need for their operations.
Meanwhile, the country’s blue-collar labour is expensive compared with that of other markets. To make matters worse, firing ineffective employees is nearly impossible. One solution has been for companies to mechanise more, but firms cannot overcome all the other obstacles to growth.
The country’s biggest party must abandon its outdated policies, as South Africa needs a pragmatic response to Trump’s tariffs and cheap Chinese imports. The government must partner with business and civil society to devise new industrial policies, as well as negotiate with the US to reduce tariffs and find new trading markets.
The ANC must get serious about making South Africa competitive for business. It must ensure the rule of law, cut corruption, end cadre deployment and make merit-based appointments, introduce alternatives to BEE that focus on skills development, and provide young people with a world-class education. It must also support small and medium-sized businesses to maximise job creation, as well as partner with business and civil society in tackling state and infrastructure failures.
• Gumede established the Democracy Works Foundation and is the author of Restless Nation: Making Sense of Troubled Times (Tafelberg)
For opinion and analysis consideration, e-mail Opinions@timeslive.co.za
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