Contract Manufacturing To Solve Unemployment Rate

f22raptor

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Most American & European companies manufacture their goods in China because the salaries are very low. This is called contract manufacturing. Some of these companies are Apple Inc, Nike, Adidas, Heinz, Dell Computers, etc. Designed in America made in China.

China's economy is rising, salaries are increasing. Some of these companies are moving to Vietnam, Indonesia, India, etc. Surely SA can entice some of these companies.
 

Jehosefat

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Except that the minimum wage here is much higher than places like Vietnam etc. so there is no benefit to the company manufacturing here.

If labour was cheaper here then a lot of companies would already be manufacturing here.

Not to mention that with the who potential expropriation without compensation thing, very few companies are willing to invest in building factories etc.
 

Freddl

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I believe our labour force is too unstable. People in South Africa like to strike and the outside world knows it.
 

evilstebunny

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You're thinking like a capitalist, something that the majority rejects as 'too western'.
 

Johnatan56

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I had this exact same question and went and looked it up a bit.

South Africa in terms of wages matches or is slightly under what the costs on the coast of China are, where most of the manufacturing is.


What you're missing is the cost of setting up those plants, they are already paid, the work force knows their job etc. Which you'd have to transfer to SA, this is without looking at the tax incentives as well.

Then also take into account there are a lot of smart engineers etc. In China, far more than south Africa just due to sheer population. Of course you can argue that's not needed as most of the plans. Etc. Are all made in the US.


Then you need to check with whom we're competing. One giant is India, who have two tax "duties" for electronics. The first is assembly in India, and another is actual production there. So a huge tax for import assembled, medium for importing parts.

They have a cheaper workforce than us, and yet companies are still not investing there for part production. This is all due to investments in other places already, market forces, access to labor (both engineers, managers, plant workers and so forth).

Suffice to say it has to become a good deal more expensive everywhere for SA to be justified.
 

RandomGeek

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Nice concept. But capitalists don't like the idea of their factories being torched the first time there is a strike.
Can't blame them really.

At the end of the day money is colour-blind and has no borders and doesn't care where it is invested... It will find a home where is able to be invested at low risk and is able to grow.

Thats what our government does not understand - we are truly living in a global economy.
 

gamer16

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There is a very large drive for localization from many companies especially automotive and rail. This includes government rebates.

We are already producing millions of rands of work that is much more expensive than production in its place of origin.

At least one thing the government is succeeding at.
 

krieg

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South Africa unfortunately doesn't have vertical integration like China for manufacturing. Vietnam and India are next to China so they can still source out to China until they have whatever missing production facility up and running in their own country. South Africa unfortunately doesn't want to exploit its only advantage which is labour and this will keep us from ever catching up to those nations.
 

joker08

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Most American & European companies manufacture their goods in China because the salaries are very low. This is called contract manufacturing. Some of these companies are Apple Inc, Nike, Adidas, Heinz, Dell Computers, etc. Designed in America made in China.

China's economy is rising, salaries are increasing. Some of these companies are moving to Vietnam, Indonesia, India, etc. Surely SA can entice some of these companies.
Factory workers in India are paid 8000-12000 rupees a month, that converts to R1600- R2400 a month. I dont think any South African will be ready to work at that rate.
 

gamer16

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Nope

But Zimbabwean's would, and they would do a
Factory workers in India are paid 8000-12000 rupees a month, that converts to R1600- R2400 a month. I dont think any South African will be ready to work at that rate.
Nop they won't.

But Zimbabwean's will, and they would do a better job than a fully paid South African.
 

Excalibur

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I believe our labour force is too unstable. People in South Africa like to strike and the outside world knows it.
It it is "too unstable" as you claim then the likes of BMW, Mercedes, Ford etc would not be producing vehicles from this country.
 

Excalibur

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There is a very large drive for localization from many companies especially automotive and rail. This includes government rebates.

We are already producing millions of rands of work that is much more expensive than production in its place of origin.

At least one thing the government is succeeding at.
Great to hear.
 

ArtyLoop

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Most American & European companies manufacture their goods in China because the salaries are very low. This is called contract manufacturing. Some of these companies are Apple Inc, Nike, Adidas, Heinz, Dell Computers, etc. Designed in America made in China.

China's economy is rising, salaries are increasing. Some of these companies are moving to Vietnam, Indonesia, India, etc. Surely SA can entice some of these companies.
SAMSUNG had their TVs and monitors made here a while back. Although that was likely a way to dodge tax, much of the SAMSUNG products including my monitor were made at Microtronix in Randburg.
We have a number of contract manufacturers, I use one here in the Western Cape for my company's production needs.
Its cheaper to make in China but we do it here because of the risk of China copying our stuff and because it means I can nip out to the factory to check if they're getting up to no good.
 

Freddl

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It it is "too unstable" as you claim then the likes of BMW, Mercedes, Ford etc would not be producing vehicles from this country.
A car is a high value item sold at a larger profit. You can withstand a little labour unrest now and again.

However, if your profit relies on a large number (millions) of items to be manufactured and sold, then labour instability is a major problem.
 

gamer16

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It it is "too unstable" as you claim then the likes of BMW, Mercedes, Ford etc would not be producing vehicles from this country.
You should go have a look at the production figures for those manufacturers, you'll be surprised at how many cars are built here.
 
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