The small s in BRICS

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To Build or not to Build

[Editor’s comment: for visitors from countries outside BRICS the wiki article found here is fairly detailed and outlines the BRIC or now BRICS strategy (as coined by Jim O’Neill, Goldman Sachs]

An article in the Time magazine inspired me to write this: Obama wanting to get more manufacturing in the USA, not only for the financial reward but more innovation. I agree with this. I live in RSA (republic of South Africa) a country where free enterprise is stifled by unions and the labour act. Oh yes, and millions of lazy people. Where we do have some form of manufacturer it’s normally along the lines of some state subsidised endeavour, not always but quite often.With Cape Town’s Vision 2040 I ask myself what happened to Stellenbosch, our own little village of intellectuals and Silicon Valley Wannabes. I don’t care for BEEE and neither do the thousands of black south african intellects. I often hear about Cell C CEO Alan Knott-Craig (ex-Vodacom) being an opportunist but the joke is on the joker, his sentiments are heard – my money is always on the doer and not the speaker. I’d vote him into Telkom (the local government backed telecomm’s giant) and let him do the necessary, cull the top dogs, improve efficiency (which should not be too difficult considering that they run at about 1%) and start showing some innovation. Yes, my DSL line was down for two weeks – try this trick with any ‘proper’ privately owned company relying on services to generate revenues. Without a proper telecommunications backbone we are back in the dark ages, with Dark Fiber Africa or not.

Brazil’s President Dilma Rousseff, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh, Chinese President Hu Jintao and South African President Jacob Zuma hold copies of the BRICS report at the summit in New Delhi yesterday (Photo: Reuters, article here.)

I don’t think we are wholly swimming against the current – after the brain drain from the 70’s to the 90’s we have had some returns and fresh blood intent on staying – let’s educate the youth, our schooling sucks – why some ludicrous subject called maths literacy, why not plumbing, electrical, carpentry (not woodwork – I’m talking shop fitting, cabinet making etc). Not everyone is going to end up like Bill gates, actually the chances are you and 7 billion others will not end up like Bill Gates, Steve Jobs or Michael Dell. Quite punting computers and start punting electronics, proper maths and science.

The Time article states that with manufacturing comes innovation – oh, so true. The Japanese and Koreans are testament to this. What happened to Dutch juggernaut Philips? Sony? Years back these two companies owned more workers than the entire civil service of a small country. Sadly, this is no longer the case – people think Samsung, LG, Kia and Hyundai before Philips, Sony, National (Panasonic), Sanyo and Hitachi.

Below is a table reflecting top ITC companies in the world, Revenues and profits in U$M – Sony and Philips, not that long ago remaining near the top – Sony posting huge losses 2010/2011 – 6 years back they were 47th in the Forbes top 500 listing. Samsung in 2005 stood in 39th place. Take heed, moving up 17 slots to number 22 is no mean feat – Samsung is on a crusade.

Top performing ITC companies world wide are shown below. Asian culture and work ethic dominate that of the west, causing the (our) slide to oblivion. In ten years time don’t be surprised to see a lot more Asian companies dominating this list unless the West wakes up and pulls finger. Hon Hai Precision (Foxconn) moved up 60 slots from 2010. (371st in 2005). Foxconn is a contract manufacturer and was only founded in 1974. As the subject line says “To Build or not to Build” look no further than their 25 000 patents world wide (and counting).

Rank	Company	Revenues	Profits
22	Samsung Electronics	133,781	13,669
28	Hewlett-Packard	126,033	8,761
30	AT&T	124,629	19,864
31	Nippon Telegraph & Telephone	120,316	5,950
40	Hitachi	108,766	2,789
41	Verizon Communications	106,565	2,549
47	Siemens	102,657	5,268
50	Panasonic	101,491	864
60	Hon Hai Precision Industry	95,191	2,450
73	Sony	83,845	-3,031
75	Deutsche Telekom	82,674	2,245
78	Telefónica	80,444	13,466
87	China Mobile Communications	76,673	9,733
89	Toshiba	74,706	1,609
92	Vodafone	71,344	12,389
111	Apple	65,225	14,013
120	Microsoft	62,484	18,760
121	France Télécom	61,965	6,463
124	Dell	61,494	2,635
125	Mitsubishi	60,793	5,408
158	Fujitsu	52,871	643
171	LG Electronics	48,236	1,062
195	Intel	43,623	11,464
203	Mitsubishi Electric	42,561	1,454
204	Canon	42,246	2,810
215	Cisco Systems	40,040	7,767
247	Quanta Computer	35,721	591
277	Royal Philips Electronics	33,667	1,915
280	Honeywell International	33,370	2,022
334	Flextronics International	28,680	596
339	L.M. Ericsson	28,226	1,547
340	Compal Electronics	28,171	739
352	Huawei Technologies	27,356	3,509
374	Schneider Electric	25,933	2,278
386	Raytheon	25,183	1,840
408	China Electronics	23,761	134
409	Sumitomo Electric Industries	23,746	825
440	LG Display	22,072	1,000
443	Emerson Electric	21,866	2,164
450	Lenovo Group	21,594	273
487	Acer	19,979	480
500	Wistron	19,538	382

It is my belief that although Samsung is currently the biggest electronics company, China and Taiwan will dominate this list in the next five years. Although South Africa may be a member of BRICS we have little to brag about – we sit with an unemployment figure of over 25% (9% in 1980), powerful unions, boast a 1st class constitution which although serves as a reminder to our past has little or no positive impact on our GDP – South Africa is quite obviously not an investors first choice. One doesn’t need to be a Harvard graduate to realise that to stimulate the economy we need to look at where we went wrong, starting at union interference in the clothing, textile and steel industries, corrupt government officials, company bosses and the poor work ethic of the workers. The western cape esp. Cape Town relies too much on the hospitality sector and too little on other industries. Cape Town is renowned for being a rip-off city to tourists and locals alike. With a population sitting on 3.5 million people its become a time-bomb. Government need to start learning from our Asian friends and focus on what is important – back to basics. Rome wasn’t built in a day, neither was Sony or Samsung.

With the very successful motor export program followed by the motor industry in PE it cannot be said that it can’t be done – the build to export market amounts to almost 10% of our GDP but little or no significance has been given to the semiconductor, wind and solar industries which China leads. Too much emphasis on mineral wealth and too little on human capital. South Africans are an innovative bunch but are behind Australia by eons. I have just read that the manufacture of the Joule, SA’s first electric car has been moth-balled.

South Africa should not be seen as a significant lower case ‘s’ on BRIC, a goodwill gesture but as a country it once was – a proud and industrious nation. Look at Fortune 500’s top companies and you’ll be overwhelmed by the amount of South African companies listed. This should tell us that more needs to be done.

Download the Department of Trade and Industry’s Provincial Economic Overview (1.8 MB) here.