Engineering News - 17 April 2020 by Simone Liedtke

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Business Day - 13 April 2020 by Neva Makgetla (TIPS Senior Economist)

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Business Day - 9 April by Carol Paton

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South Africa’s economy was already weak at the start of 2020, coming from a technical recession and the forecasted low growth. The decision to lock down the country as part of the COVID-19 response to protect the health of the South African population has put further pressure on the steel industry. Depending on the length of the lockdown and the rate at which business and consumer confidence return, economic impacts could be less or more severe. This policy brief looks at the possible economic consequences of COVID-19 for South Africa’s steel industry.

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Greater regional integration would support economic diversification and industrialisation in Southern Africa by expanding markets for consumers and capital goods as well as drawing together capacities from different of countries. It would, however, require a greater degree of specialisation between nations to permit economies of scale. In this context, the concept of regional value chains proves useful in identifying opportunities for more integrated industrialisation. On the one hand, it underscores the potential for enhancing economic integration based on improved specialisation and competitiveness in the partner economies; on the other, it provides a framework for systematic analysis of factors that prevent investment and growth.

This working paper outlines the evolution of the value-chain concept as a way to understand opportunities for industrialisation. Using the value chain framework in the regional context shifts the focus away from global demand and partnerships to local and regional markets and relationships. It underscores the importance of managing the difficult trade-offs involved in deepening the regional division of labour. The second section of the paper describes the Southern African economy, which was unusually unequal and dependent on commodity exports. It also reviews existing trade in continental SADC. It evaluates the effects of freight transport as a cross-cutting constraint. A case study of copper manufacturing illustrates the utility of value chains to guide analysis. This section points to key blockages to diversification, notably the difficulty of improving coordination between national policies and challenges around reshaping the division of labour to promote regional industrialisation without excessive costs to South African producers.  

This Working Paper is a draft for a chapter in a book: Fortunato, P. ed. (Forthcoming). Productive  Transformation and Regional Value Chains in Southern Africa. UN: New York and Geneva

This policy brief aims to support the South African Presidency and Department of Trade, Industry and Competition (the dtic) in their deliberations on the impact of the COVID-19 pandemic on the South African automotive industry. It has been compiled from secondary readings, the author’s own industry knowledge, two CEO interviews (one OEM and one component manufacturer), and five written submissions from firms/industry stakeholders, which were submitted in lieu of interviews. The findings presented are consequently exploratory, although the consistency of responses from across the interviews and written submissions suggests a broad and generic set of impacts and associated consequences for the South African automotive industry.

The answers to four key questions were solicited from the interviews, written submissions and secondary readings. This policy brief follows the structure of these four questions, first exploring the manner in which the industry has been affected by the COVID-19 lockdown; then looking at industry plans for reopening, given identified challenges in domestic and export markets; followed by industry perceptions of the potential for recovery; an exploration of critical issues for potential government support for the industry during the recovery phase; and conclusions.

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Engineering News - 8 April 2020 by Simone Liedtke

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This policy brief identifies the benefits of implementing a comprehensive credit guarantee scheme that would move the needle in small business support and improve liquidity. Three possible measures that could be used are proposed: a credit card that is guaranteed by the government; a guarantee for trade credit providers; and a credit guarantee for bank SME portfolios. These are by no means the only measures needed, with multiple others required which could include grants, venture capital finance, and improving demand through general stimulus measures.

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The economic effects of Moody’s recent credit ratings downgrade have been overtaken by the whirlwind effects of the COVID-19 crisis. It is, however, also important to understand the likely effects of the downgrade, which vary for different sectors and stakeholders,  to ensure a reasoned response. This policy brief looks at the economic impacts of the decision. It also considers the policy implications. While the ratings agencies have indicated that changes in economic policies and practices could reverse the downgrade, these policy demands on South Africa are contradictory. They suggest that, to improve its credit rating, South Africa must reduce worker protections, limit land reform, and cut government spending. However, these measures would all in turn aggravate social inequalities and policy contestation, increasing investor uncertainty and risks over the long run.

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Daily Maverick - 3 April 2020 by Gaylor Montmasson-Clair (TIPS Senior Economist)

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