Newcastle, the third largest city in KwaZulu-Natal, is viewed as the province’s industrial centre. Such is the nature of Newcastle’s role in the industrial sector, that the KZN Provincial Government claimed it was committed to establishing new leather and textile Special Economic Zones in the Newcastle and Ladysmith corridor, which are estimated at R600 million.
However, upon taking a closer look at the health of the local industrial area, it seems the sector is in a troubling situation.
Responding to questions from Newcastillian News on the subject, Newcastle Municipality’s Communications Unit explained, “The industrial sector in Newcastle is not doing very well, and this is the case for the whole country. Economic data in this regard reveals that this downward spiralling of SA’s industrial economy was largely impacted by the 2008 global recession which resulted in more than a million job losses throughout the entire country. Amongst other things, the job losses resulted in shrinking revenues for the industrial economy due to a decrease in demand as a result of the diminishing purchasing power from key customers.”
Taking a closer look at the situation, Newcastle’s Municipality’s Communications Unit stated several other global phenomena have greatly affected the industrial sector of Newcastle throughout the years.
These entail the USA-China Trade War which affected trade liberalisation and led to significant losses to local economic output, the recent COVID-19 pandemic which also affected global demand, the Russia-Ukraine War which destabilised energy security in Europe, thus resulting in a need to source alternative energy elsewhere, the loadshedding in South Africa, and more.
“All these geopolitical activities have not made it easy for the industrial economy to recover from the impacts of the global recession,” said the Newcastle Municipality’s Communications Unit.
Delving further into the matter, and looking at whether the local Industrial area has grown in size or declined, the Newcastle Municipality’s Communications Unit explained that one needed to look at the overall picture of the industrial sector.
“South Africa is a middle-income country whose economy is reliant on financial services and the export of manufactured goods and primary commodities (i.e. gold, platinum, chrome). As a result of the recession, the manufacturing sector’s value add declined by 12.2 per cent in the first nine months of 2009 due to a sharp year-on-year decline in the outputs of the Automotive Industry (34% decline), Furniture Industry (20 % decline), and the Textiles and Clothing Industry (14.6% decline). This decline, in turn, led to a trade deficit, thus meaning the value of goods imported by the country exceeded those that were exported. During the recession commercial and consumer demand evaporated, while export and import volumes plummeted. This forced certain industries to close, or adapt through a reconfiguration of the production systems, of which Newcastle’s industrial sector was affected,” explained the Newcastle Municipality’s Communications Unit.
With this in mind, and looking at how the landscape of business has changed in the industrial area, the Newcastle Municipality’s Communications Unit explained that in order to circumvent the increasing costs of operating within the industrial area, and other parts of South Africa, most businesses have opted to implement lean manufacturing principles within their manufacturing processes.
“This approach focuses on minimising waste within the production system, while simultaneously maximising productivity. Lean manufacturing looks at the whole value chain in order to identify areas where there are activities that lead to waste. Some of the decisions linked to lean manufacturing entail retrenchments, the employment of cheap labour, sourcing of cheap raw material, outsourcing of services, introduction of AI and automation, utilisation of renewable energy, halting of production lines that do not yield any significant profits,” elaborated the Communications Unit.
Despite this, the Communications Unit emphasised that the industrial sector plays a significant role as a sector that provides much needed employment opportunities to the inhabitants of Newcastle.
“Due to its ability to attract other similar industries, in what is termed an “agglomeration of economies,” the industrial sector enables the attraction of significant investment into Newcastle, thus contributing to our tax base, and subsequently the economic output in the form of the GDP.”
Additionally, the industrial sector is also one of the key clients of the Newcastle Local Municipality through its purchase of electricity and other basic services thus contributing to the municipality’s revenue base, explained the Communications Unit.
“This allows the municipality to have financial resources for advancing basic service delivery for the wider community of Newcastle. Through the sustainability of the industrial sector, the local SMMEs are able to participate within the upstream and the downstream value chain activities, thus leading to local economic development,” concluded the Communications Unit.
With the reality that the industrial sector of any given town or city holds an immense impact on the overall outcome of its local economy and municipality, the importance of attracting expansion and development within these areas remains pivitol.
Nevertheless, despite the local industrial sector not currently being in a healthy condition, while still playing a vital role in the Newcastle community, what are your thoughts on all of this?
Be sure to share your views in the comment section below.
2 Responses
Our Leadership team in local government lacks insight. We have unqualified people in key positions with no experience and earning huge salaries.
All of the managerial positions in our municipality should be given to the young ,vibrant youth which will come up with new and innovative ideas to exalt our economic status.
NO RESHUFFLING but EXPULSION.