The disclosure that dairy producer Clover was planning to close the largest cheese factory in the country based in Lichtenberg, due directly to the collapse of service delivery by the municipality, will hopefully be a clarion call for the ruling party to urgently address the shambles in local government structures.
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While it is somewhat fortunate that Clover is relocating the plant to Durban, the move will still result in over 330 jobs being lost in Lichtenburg. Undoubtedly, the economic impact will be amplified by all the other businesses that participated in the value chain of the operations (raw material suppliers, support industries, etc.). Dairy farmers are already desperately seeking out alternative markets for the milk offtake that Clover was responsible for from their farms.
The issue of dysfunctional local government has tended to focus on the impact of poor service deliveries on residents and domestic services, but the effect on industry is now coming to the fore. The reality is, that though businesses may have the resources to mitigate the impact of collapsing service delivery by installing private infrastructure such as boreholes and generators, this comes at the cost of pushing up their cost of production, making them steadily uncompetitive in their markets.
Having to do this, also diverts resources away from ‘productive’ expansions in their operations, that could contribute to job creation.
President Cyril Ramaphosa recently extolled the country as ready for foreign investment, but the fact that local companies are struggling to operate, and are re-organising their operations to deal with non-performing local governments, puts a lie to his statements.
The experience of Clover in Lichtenberg is not an isolated one: Astral Foods based in Standerton has been bemoaning the performance of their local municipality for years, pointing out how it is impacted not only on their day to day operations, but also their reluctance to invest more in their operations.
To bring the issue home, I have been involved in assisting a large local business severely affected by the water interruptions by Ugu. They are currently investigating uplifting raw water and treating it on site to bring some semblance of continuity to their operations. All this will come at a cost, which in the competitive market they operate in, they will find difficult to recoup.
The reports that the Premier of Northwest Province had dispatched a task team of MECs to urgently interact with Clover is cold comfort to the hundreds of staff who will shortly join millions of their compatriots on the unemployment line.
Vijay Naidoo writes in his personal capacity as CEO of the Port Shepstone Business Forum.
The views expressed are the author’s own and do not necessarily reflect those of this publication.
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