Re-industrialising South Africa with Lean

1 October 2015

Ladies and gentlemen

Thank you very much for inviting me to participate in this important conference. I would have loved to sit through both days of the conference to learn and exchange ideas about how to save and grow our manufacturing industry – because I think that it's the backbone of our economy.

As you might have read, however, I have spent the last few months since my dismissal for objecting to the purging of political opponents inside the trade union movement, involved myself in another important initiative – working with the coalition to fight the scourge of corruption which is threatening the future of our economy. I will return to this topic including the broader challenges facing our economy and especially the working class.

I’m not an expert on Lean. I’m a unionist and activist who is passionate about manufacturing. In 2013 however, I was lucky enough to visit Eddels Shoes factory here in Pietermaritzburg. During my visit, I was given a crash course on Lean manufacturing, and how this had practically saved the factory which, like its peers, was facing collapse from cheap imports from the East especially China.

I see on the programme that you’ve already heard from someone from that amazing place – so I’m not going to repeat the lessons. However, I do need to make a few points about the observations I made during that trip.

I was most impressed about the change in mind-set that had come about as a result of the adoption of the Lean method of working. First, the stakeholders had managed to convince the retailers that local sourcing doesn’t mean poor quality. The shoes they produce are of high quality (John Drakes) and compete with the best in the world. Second, they may not be the cheapest in relation to imports from China, but they had persuaded the retailers that logistically it makes more sense to source shoes from South Africa.

In the case of factory fault it’s far more easy and convenient to lodge complaints and get these rectified than to wait for weeks for the orders from thousands of kilometres away. And third, they had significantly shortened the speed of delivery more than what China could do.

I was impressed about the collaborative manner in which shop-floor workers and management were working and the centrality of training in the success mix of the company. In a long time, I hope this is still true, I could see what looked like a genuinely happy workplace for all stakeholders. My interaction with the union shop stewards confirmed that the workforce was more than happy.

I left the place optimistic that the war against deindustrialisation is winnable; for it is important to win it first before we even talk about industrialisation or re-industrialisation; and we shouldn’t accept defeatist mentality which suggests that our future lies in high finance, and the fortunes of our extractive mineral and energy industries. Indeed, I’m not suggesting for one minute that financial services and mines aren’t important; they are – but not as important as manufacturing which is crucial to tackling poverty, inequality and unemployment.

I really hope that, if extended to other industries, the Lean way of doing things could reverse the rapid trend of deindustrialization. I argued that the model be replicated for the rest of the footwear and brother clothing and textiles. Not only here in Pietermaritzburg but for the rest of the country and continent.

Collaboration between all stakeholders in the clothing and textile have stopped the bleeding in the recent years. This we must applaud. It proves once more that actually where we collaborate to pursue common interests we can succeed.

Whilst we have succeeded to stop total decimation of the clothing, textile and footwear industry, sadly the overall picture of the manufacturing sector is appalling. Sadly, since my visit to Eddels in 2013, the plight of the working class has worsened. Our mining industry is considering shedding tens of thousands of jobs thanks in part to the falling prices of commodities. The steel industry is facing a similar crisis. Even the public sector has frozen vacancies, and is believed to be considering headcount reduction.

There is a state of panic across the broader economy. Retrenchments are occurring daily. The number of unemployed people increased by 1.8% in the three months to June 2015, according to Statistics South Africa's Quarterly Employment Survey. 161 000 people lost their jobs in the second quarter of 2015 when compared to the same period last year. We have an unemployment rate above 25%, by the narrow definition of unemployment – which jumps up to 35% when those who have given up looking for work are added.

Most shocking is that amongst those between 15-24 years more than 50% are unemployed.

Poverty now afflicts 54% of the population and Oxfam has revealed that 14 million South Africans go to bed hungry every night and we have now become the most unequal society in the whole world.

And poverty is not confined to the unemployed, as more jobs are casualised, more workers put on part-time and labour brokers continue to exploit thousands of workers.

And the future looks even more grim, given that South Africa’s economy contracted by 1,3% (seasonally adjusted and annualised) in the second quarter of 2015, according to preliminary estimates of real gross domestic product (GDP) released by Stats SA.

The quarter-on-quarter decrease in overall economic activity was characterised by five of the ten main industry groups shrinking in size, while the other five experienced some growth. That means that the prospect of any early relief for the unemployed is fading fast.

All this adds up to a national emergency. On top of all this, we have a drought which has caused agricultural production to fall by 16.6%. This is bound to lead to higher food prices, because when there is lower food production due to the drought or any other reason the capitalist logic says that’s the time you should increase prices.

No country can survive such levels of unemployment, poverty, hunger, inequality and low growth, as well as no stable power supply. The current mining and steel sector crisis and looming jobs loss bloodbath is sadly going to worsen this at the time when the contribution of the manufacturing to the GDP has plummeted to a mere 12% from 23% before 1994.

Yet on the very day that shocking employment statistics were released, President Jacob Zuma was telling Parliament: “Our country is doing very well. The fundamentals are in place. Our institutions are strong and sound. All the arms of the state are functioning effectively: the executive, Parliament and the judiciary. This means our hard-won democracy is safe”.

This is outrageous denialism, and the same applies to the crisis of corruption and embezzlement of public funds, as I saw for myself only yesterday when I listened to the Minister in the Presidency Jeff Radebe, after he had received the memorandum of demands from Unite Against Corruption and clearly had no concept of the extent and seriousness of this scourge and its impact on the lives of all South Africans, with the workers and the poor always the hardest hit.

This corruption cancer is also making a major contribution to the economic catastrophe. The revelation this week of Hitachi’s admission of guilt fine of R167 million to the US Securities and Exchange Commission, for “inaccurately recorded improper payments” in connection with contracts to build two multi-billion rand power plants for Eskom, is a clear symptom of the link between corruption and the crisis which led to soaring costs for electricity and the debacle of load-shedding.

At the same time we see the disintegration of other SOEs - SAA, PRASA, PetroSA, etc. and chaos in important constitutional structures – the NPA, the Hawks, SAPS, SARS, SABC This list keeps growing.

The crisis is typified by the government’s outrageous response to the Public Protector’s report on Nkandla, where R246 million was squandered on a house for one individual, yet the government sees no reason for the president and his ministers to take any responsibility for this theft from the public, but prefer to look for bureaucratic scapegoats.

As I said at the time of his address: “Mr President, let us with the deepest respect beg to differ with you, Your Excellency. South Africa is not doing well.”

This year we celebrate the 60th anniversary of our Freedom Charter, adopted by the Congress of the people in Kliptown on 26 June 1955. We must never forget we what a huge moment that was in our struggle for national and social emancipation.

But the question we have to ask today, 60 years after the Charter was adopted and 21 years since its goal of ending apartheid was achieved, how far have we progressed in achieving all its other aims to create a more equal and fair society in which wealth is shared amongst all the people.

Most South Africans are extremely concerned about the state of affairs in the country. The Freedom Charter’s dream is fading daily. We were promised that education would be transformed as to “skill” workers and get our economy going, yet the reality is that half of all pupils are dropping out between grades 10 and 12.

In just those three final years, 50% of all learners leave school not having completed matric. In 2012 there were 1.1 million learners in Grade 10. Only 550 127 of these wrote their matric exams last year.

We were promised the health crisis would be dealt with and that National Health Insurance (NHI) would be introduced to put to an end to the two-tier health system. Today there is hardly anybody talking about NHI.

Yet the reality is that health systems across the country are in a state of collapse.

Shortages of essential medicines including antiretrovirals (ARVs), painkillers and medicine for diabetes and hypertension, among others, continue to plague health facilities across the country. There is a serious threat to our ARV programme.

Hospitals and clinics continue to deteriorate, with equipment that is not maintained or not replaced when broken and in some areas, critical staff shortages that result in essential services being brought to a halt.

In a country with insufficient health-care professionals, we allow those who work to do so in impossible conditions, without the support, equipment or medicine they need to do their jobs.

All these problems bring us back to the underlying source of them all – a capitalist economic system which places economic power in the hands of a small elite, dominated by huge multi-national companies whose only concern is to amass profits, regardless of the negative effects on the people, and especially the workers who actually produce the wealth that creates those profits.

The Charter said that “South Africa belongs to all who live in it” and “the national wealth of our country, the heritage of South Africans, shall be restored to the people.” Sadly that is nowhere near to the reality we face every day.

Statement issued by Zwelinzima Vavi, 1 October 2015

This address by Zwelinzima Vavi was given to the KZN Lean Conference, Pietermaritzburg, 1 October 2015