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Business confidence in agricultural sector remains positive

SOUTH AFRICA (The Citizen) – Rainfall has had a more than expected impact on business confidence, while the land issue was a big disruptor to confidence.

Business confidence in South Africa’s agricultural industry remained positive for the second quarter of 2018, according to the Agricultural Business Chamber (Agbiz). But it’s barely hanging on to stay in positive territory, and the land policy question must be answered sooner rather than later.

“Subsequent to an up-tick to 58 index points in the first quarter, the Agbiz/Independent Development Corporation (IDC) Agribusiness Confidence Index declined to 54 in the second quarter,” said head of AgriBusiness Research at Agbiz Wandile Sihlobo.

“With the results still above the neutral 50-point mark, albeit having declined marginally, the agribusiness sector is still optimistic about business conditions in South Africa.”

The survey was conducted between June 4 and June 15 and comprised agribusinesses operating in all agricultural sub-sectors throughout the country.

Rainfall in water-scarce South Africa has had more of an impact on business confidence than one would believe, with confidence rising and falling with rainfall patterns.

“The optimism in this particular subindex was underpinned by prospects of above-normal rainfall in the Western Cape within the next three months, which in turn should support winter crops and horticulture fields, as well as favourable drier conditions for harvest activity in summer crop regions,” Sihlobo said.

“When you’re watching your crops or the farm is not doing well and your business, by virtue of that, not doing well, you will see commensurate rises and falls in the confidence index,” Sihlobo told The Citizen.

“You know there’s going to be drought during some years, but you can’t say, ‘I’m fine, I was expecting this’ – it’s just human nature.”

Meanwhile, turnover, net operating income, market share, employment, capital investment, the volume of exports, economic growth, debtor provision for bad debt and financing costs subindices were the key factors underlying the decline in confidence from the previous quarter.

The other disruptor of business confidence was, of course, the land issue.

“The bottom line is everyone is watching what happens with policy development,” Sihlobo said. “It’s a wait-and-see situation. No one is pulling stuff out and running away and no one is coming in aggressively. The story is really to wait and see what happens.”

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Johannesburg recycling initiative begins

SOUTH AFRICA (Al Jazeera) – Authorities hope separation of household waste for recycling will help solve landfill crisis in country’s largest city.

Some waste pickers in Johannesburg have told Eyewitness News, they fear the city’s efforts to make recycling compulsory for residents will impact their business.

From 1 July, people living in the suburbs, townships or in a complex will be supplied with a recycling bag once a week to dispose of items like paper, glass and cans.

But the city has assured the almost 6,000 entrepreneurs who work as waste pickers that the project will in fact make their jobs easier.

As early as 4am and waste pickers in Bryanston begin pushing trolley-loads of recyclable items to a truck owned by an independent contractor that pays for recyclable items.

Jabulani Mhlongo has been working at the Robinson Deep landfill site in Turffontein for over 22 years.

He’s worried there will be nothing left to salvage once the recycling project is in full swing.

“Our complaints as recyclers are that if government wants to take over the recycling, we’ll go hungry.”

Thirty-year-old Maxwell Zungu is also concerned that the city’s new project will have a massive impact on his livelihood.

Waste pickers can earn up to R13,000 a month.

But Pikitup’s general manager, Mzukisi Tshem, has assured waste pickers that their work will not become redundant.

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A struggling national airline is renting out its pilots and cabin crew

SOUTH AFRICA (Quartz Africa) – Pilots and cabin crew from South African Airways will be loaned to other airlines, as the debt-ridden national carrier tries to save itself.

The airline’s CEO Vuyani Jarana told news agency AFP this week that it was part of his cost-cutting scheme to save South African Airways. Jarana hopes that South Africa’s underused pilots can take advantage of the global pilot shortage, instead of having to lay off staff.

A South African pilot who has since been contracted out to Japan Air was offered a lucrative salary in US dollars and a business class flight home every three weeks. The South African Airlines pilots association, however, said it was “dismayed” that its members would have to be contracted to airlines like Emirates, Turkish Airlines and Cathay Pacific “as a result of extremely poor fiscal control and mismanagement.”

“It is unsettling to talk about job losses in a country that is battling high levels of unemployment. We would like to see a sustainable SAA,” said Werner Human, COO of the trade union Solidarity.

The union has approached the courts to compel the government to place SAA under business rescue, which could force the company to restructure and undertake any other means to save it from its current financial distress. The union also wants parliament to stop bailing SAA out.

South Africa’s labor laws are often seen as advantaging workers, but has sided with South African Airways in previous retrenchment suits. Earlier this month, the carrier decided to lay off catering staff, but have yet to decide how many workers to let go of. The effort by the state-owned company to avoid layoffs could be political, with South Africa heading to an election year in an environment with already high unemployment.`

The airline received a 3 billion rand (nearly $217 million) bailout in September last year to prevent a default and asked for an additional five billion rand (more than $360 million) this year. Jarana took over SAA in November last year and launched a three-year rescue plan that also includes reducing routes and the axing of its CFO and CEO.

South Africa isn’t ready to give up on its flag carrier just yet, especially not in an environment that has seen Ethiopian Airlines thrive and Kenyan Airways cautiously raise its ambitions as South African Airways loses ground.

“The African travel market is increasing despite the challenges of SAA so if there’s growth in the market, it says that there’s an opportunity for all of us to participate,” Jarana told a South African radio station. “I think if we fix ourselves internally SAA will have a chance to participate.”

The national carrier is just one of South Africa’s embattled state-owned enterprises.

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South Africa hopes Barberton mountains will be added to list of UN World Heritage Sites

SOUTH AFRICA (Times Live) – South Africa hopes the Barberton mountains will be added to the global list of UN World Heritage Sites this weekend.

The 42nd session of the World Heritage Committee will decide on 31 applications for sites to be given heritage status on Friday and Saturday.

The annual conference of the committee is being held in Bahrain‚ where Minister of Arts and Culture Nathi Mthethwa is representing South Africa.

There are 1‚037 World Heritage sites around the world and South Africa already has nine‚ including Robben Island‚ the Cape Floral Kingdom (fynbos) and the Cradle of Humankind.

Sites that are deemed World Heritage Sites are recognised as having global historical or environmental significance‚ may signify a phenomenal achievement of humanity‚ or reveal ancient civilisations. The recognition allows the country to access funds for conservation from the World Heritage Fund and may increase tourism to the area.

The mountains in Mpumalanga‚ also known as the Makhonjwa Mountains‚ are thought to be one of the oldest sites on Earth‚ with its volcanic rocks estimated to be between 3.2 and 3.6 billion years old.

The mountains are also believed to contain the oldest signs of life‚ with a micro fossil of bacteria discovered there that is estimated to be 3.1 billion years old.

A committee of people from 21 countries will this weekend vote on which sites make the cut.

To be accepted onto the list‚ a country must meet stringent criteria and show how the site will be conserved‚ while allowing the world a say in how the site is run.

Mthwetha chaired a meeting at the global event in Bahrain‚ where he asked senior African leaders to ensure the continent is better represented on the World Heritage list.

Mthethwa said: “It’s common knowledge that our African heritage is extremely rich and diverse. Africa is the ‘cradle of humankind’. It is also the only place in the world where one has the privilege to observe the Big 5 in their natural environment. Unfortunately‚ Africa has less than 9% of the sites inscribed on the World Heritage List.”

This is the breakdown of where the recognised sites come from:

  • Africa: 8.67%
  • Arab States: 7.64%
  • Asia and the Pacific: 23.58%
  • Europe and North America: 47.16%
  • Latin America and the Caribbean: 12.95%
  • Italy has the highest number of heritage sites‚ with 53.

Mthethwa called on African leaders to ensure that by 2020‚ more sites from the continent are ready to be nominated for world heritage status.

 

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South Africa’s average salary versus the world

SOUTH AFRICA (businesstech.co.za) – Stats SA this week reported that the average monthly salary for South Africans has declined, while other data shows that the average take-home pay has dropped dramatically.

According to Stats SA, average monthly earnings paid to employees in the formal non-agricultural sector decreased from R20,060 in November 2017 to R19,858 in February 2018 – though this was up 5% year on year from R18,913 in February 2017.

Expressed as an annual salary, this equates to R238,300 a year.

A separate release from BankservAfrica showed that the average take-home salary was significantly lower at R13,621 a month – or R163,450 a year.

It must be noted that South Africa’s average salary data is skewed by large levels of inequality, and excludes the large informal sector. South Africa also has high levels of unemployment, which is not factored into the bigger picture here.

How SA compares versus the rest of the world

Sticking with how South Africa’s formal sector is remunerated compared to the world, we can look at the OECD, which publishes data on average annual salaries across the partner regions.

While South Africa is not included in the data set, we are able to use conversion data from IMF to see how our average salaries would fit in.

The OECD uses gross salary numbers as at the end of 2017, so the data from Stats SA for February 2018 is the closest comparison we have. The OECD figures are also reported in ‘international dollars’, which takes purchasing power parity into account.

South Africa’s average salary per year translates to $17,105 in dollar terms, but the country has a local purchasing power almost twice the value of the US$ – a fair value exchange of R6.25 to the dollar, according to the IMF (2018).

That means that the R238,300 average annual salary in South Africa is equal to $38,128 in PPP dollar terms.

This puts South Africa’s average salary around the same levels as European nations like Italy and Spain.

The graphic below outlines the highest-paying countries in the world, and where South Africa fits in.

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South Africa’s blood supply crisis averted

Durban (Daily News iol.co.za) – Following a massive public drive over the past two weeks the South African National Blood Service (SANBS) said the public had responded en mass, overturning the dire low supply of blood.

However KwaZulu-Natal remained in the red with just a 2.5 days supply in the bag, said SANBS spokesman Ivor Hobbs.

“Things are looking good at the moment. We recently commemorated World Blood Donor Day (June 14) which coincided with the #MissingType campaign (June 11 to 18), which asked organisations to remove the letters A, B and O (symbolising the “missing” blood types with the same letters) from their logos for a week, and for South Africans to temporarily delete the As, Bs and Os from their social media handles – all to raise awareness of the need for new blood donors. The campaigns were successful resulting in all blood stocks being recovered. At one point we even reached over five days supply,” he said.

As of Tuesday, the national supply was at just over three days.

“In KZN supplies are still very low sitting at 2.5 days, but we do distribute from other centres in the province,” said Hobbs.

However he said while they celebrate the gains of the last two weeks, they encouraged more to become donors. “We need 3 300 units of blood a day to meet needs. So while we thank each and every person who responded to our call, at the same time we encourage more people to donate blood,” said Hobbs.

Out of South Africa’s population of 56 million people, only about 1% donate blood regularly.

Hobbs said despite the common misperception that most of the blood donated in South Africa goes to accident victims, blood collected by the SANBS was spread much wider, including:

28% is used to treat cancer and aplastic anaemia
27% is used during childbirth
21% is used for scheduled surgery
10% is used for paediatric care
6% goes to laboratories
6% is used for orthopaedic care
4% is used for accident or trauma victims

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Four people affected by Rift Valley fever in South Africa

SOUTH AFRICA (Times Live) – A fever-causing virus transmitted by mosquitoes‚ especially in wet seasons‚ has been confirmed in four people following an isolated outbreak in sheep on a farm in the Jacobsdal area of the Free State‚ bordering the Northern Cape.

The National Institute for Communicable Diseases identified the Rift Valley Fever (RVF) outbreak in May after a total of 250 sheep deaths and abortions on the farm were documented.

Ten residents and workers who had come into contact with the affected sheep through slaughtering or handling of animal tissues were monitored by the provincial department of health and the NICD.

“Four individuals were retrospectively confirmed to have been infected with RVF virus; four individuals were shown to have probably been infected with RVFV‚ pending further tests on follow-up blood samples for confirmation; two individuals were not infected with RVFV despite handling potentially contaminated tissues‚” the NICD said this week.

Six of the eight people had experienced mild symptoms of fever‚ muscle pain or headache in the preceding month. None developed a severe disease that necessitated hospitalisation.

The NICD noted that mosquitoes collected on the affected farm tested negative for the RVF virus‚ “suggesting that active transmission had diminished due to decreased mosquito populations”.

A widespread RVF epidemic occurred in South Africa in 2010-2011‚ with more than 14‚000 animal cases recorded in eight of the nine provinces. During this period the NICD confirmed a total of 278 human cases‚ of which 25 were fatal. The previous large epidemic occurred on the interior plateau of South Africa in 1974-76.

Transmission of the virus is uncommon in colder winter months. It causes outbreaks of abortions and deaths of young livestock – predominantly sheep‚ goats and cattle.

The disease occurs throughout Africa and the Middle East Asia when exceptionally heavy rains favour the breeding of the mosquito vectors. In RVF outbreaks occurring in east or southern Africa‚ humans become infected primarily from contact with infected tissues of livestock or game animals.

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Bond Flight From South Africa Spurs Warning

SOUTH AFRICA (Bloomberg) – Foreign investors’ holdings of South African bonds have dropped to the lowest level in more than a year following a record sell-off since the beginning of May, and a senior Treasury official says there could be worse to come.

Non-residents held 38.9 percent of government debt as of June 22, down from as high as 42.8 percent in March, according to Bloomberg’s calculations based on National Treasury data through April and Johannesburg Stock Exchange data for May and June.

Capital Flight

Foreigners have reduced their holdings of South African debt

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Foreigners piled into South African debt in the first quarter on optimism new President Cyril Ramaphosa would undo the economic havoc wreaked by his predecessor, Jacob Zuma. But the flows started dwindling in April before turning into a flood of sales, reaching a net 56.5 billion rand ($4.2 billion) since the beginning of May, according to JSE data.

The outflows occurred against the backdrop of a broad sell-off in emerging-market assets sparked by a stronger dollar and rising U.S. rates, which weakened the case for high-yielding investments. They’re a concern because South Africa depends on portfolio inflows to finance its current-account deficit, which swelled to the widest in two years in the first quarter.

And while South Africa is caught in the wave of emerging-market selling, the outflows highlight the country’s vulnerability, according to Tshepiso Moahloli, chief director for liability management at the Treasury. Weak growth, high unemployment and burgeoning fiscal and current-account shortfalls make it less attractive as an investment than some of its peers.

Saving Grace
“If investors start looking at each country specifically and we are at a stage where we have low investor confidence and business confidence, the impact can be amplified,” Moahloli told reporters in London on Friday. “Currently, it’s just a broad emerging-market issue. But yes, it is a concern.”

The rand has wiped out all its gains that came with Ramaphosa’s ascent to the presidency and was 0.7 percent weaker at 13.5258 per dollar by 2:24 p.m. in Johannesburg on Monday. The yield on benchmark government 2026 bonds climbed one basis point to 8.87 percent, after retreating in the previous three trading days from a six-month high.

South Africa’s saving grace is a local investment community overseeing about 2.2 trillion rand, as well as a large banking industry looking to shore up capital. Demand from domestic investors has kept a lid on yields, Moahloli said.

Most selling of South African bonds in May was driven by “fast-money” investors cutting long positions in the debt, Morgan Stanley said in a report dated June 21. Index-tracking funds, by contrast, added to holdings, according to Morgan Stanley’s London-based fixed-income strategist Min Dai.

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South Africa cannot afford the proposed NHI

SOUTH AFRICA (The Citizen) – The Davis tax committee warned in 2017 that an NHI would not be sustainable without much faster growth, which is unlikely to happen.
The introduction of National Health Insurance (NHI) was likely to cost South Africa more than R600 billion at its start in 2026, with costs continuing to escalate thereafter, according to the South African Institute of Race Relations (SAIRR).

Reacting to the plans by Health Minister Aaron Motsoaledi to introduce the NHI, SAIRR head of policy research Anthea Jeffrey cautioned government on the “dire implications” of introducing a medical health scheme South Africa could not afford.

“No proper costing has ever been done on the NHI. The projected R256 billion in the 2025 figure provided in the 2017 white paper is a 2010 figure, which is badly outdated and entirely unrealistic.

“South Africa cannot afford it, especially now that growth is so low and public debt so high. In addition, the tax increases which were earlier mooted to fund it – a 1% point in the VAT rate, or a 4 percentage point increase in the top marginal rate of personal income tax – have already both been introduced, simply to plug the holes in the government’s revenues.

“The country has a very small and already overburdened tax base.

“In December 2017, the Davis tax committee, which had been charged with investigating the funding of the NHI, warned that it would not be sustainable without much faster growth. Such growth is most unlikely to be achieved,” warned Jeffrey.

Jeffrey said the country’s crisis-ridden public health institutions would make the NHI difficult to introduce.

“At present, 85% of public hospitals and clinics could not be accredited to take part in the NHI because they are unable to comply adequately with basic healthcare norms and standards, such as maintaining proper hygiene and having medicines available.

“These problems cannot be overcome without much better management, including financial management. In addition, there needs to be much stronger accountability for wrongdoing, as illustrated once again by the former Gauteng health MEC Brian Hlongwa’s story of being implicated in a R1.2 billion graft.”

She said the NHI would lead to existing medical schemes being “squeezed out of existence, leaving the middle-class dependent solely on the NHI.”

Added Jeffrey: “Many may find this unacceptable and those with the option to emigrate will have increased reason to do so.

“Such emigration would reduce an already very narrow tax base, in which about 600 000 people pay 64% of all personal income tax. Cut that number of taxpayers in quarter or in half, and the tax available to fund all other needs will be much reduced.”

Jeffrey said “porous South African border posts”, which made it easy for economic migrants to enter the country without difficulty, would also have adverse implications for the NHI.

“As long as our borders remain so porous, it will be difficult to control the number of people who come into the country and then rely on our health services. This means that the NHI may – in practice – have to cater for more than 56 million people, which will be a further challenge,” she said.

The NHI would make all South Africans dependent on a single state-run medical scheme: the NHI fund.

“This will set the fees to be charged by all health practitioners across the country. It will set the prices for all medicines and medical devices. It will decide on the healthcare protocols to be used and the new technologies to be allowed, most of which are likely to be excluded due to being too expensive.

“It will be responsible for paying every doctor, specialist, nurse, and other healthcare practitioner, and delays in payment are likely to be legion.

“The NHI fund will have to ensure that all medical equipment and facilities at hospitals/clinics are properly maintained.

“If payments are made late, suppliers will cut off their services, as already often happens in the public sector, and the public will suffer,” said Jeffrey.

She said the NHI fund would “require a huge bureaucracy, the costs of which will also be enormous.”

“It will be far less efficient than current private medical schemes. Many of the contracts for supplies it enters into may also be tainted with corruption, as the Brian Hlongwa story shows.

“Since it will have a monopoly over healthcare, people will have no choice but to rely on it, irrespective of how poorly it functions. Long waiting times for all medical treatment are sure to arise, with people having to wait months or sometimes years for their healthcare needs to be met.”

The IRR recommended that “a significant portion of the poorly-spent healthcare budget should be allocated directly to low-income households in the form of tax-funded healthcare vouchers”.

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Gold Street Is Where South Africa’s Mining History Goes to Die

SOUTH AFRICA (Bloomberg) – Miners laid off, mines closing, losses mounting—a huge headache for President Ramaphosa.

The death rattle of the industry that once symbolized South Africa can be heard in the town of Carletonville—on Gold Street.

That’s where Paseka Selemela has been guarding cars since 2010, when the scaffolding business he worked for closed. Prior to that, he was an assistant at a now-shuttered mine owned by AngloGold Ashanti Ltd. Nor has he found work in other gold mines around the town, home to the world’s deepest shafts. Many of his friends and family members also have joined the legions of the retrenched, including 8,500 people in the area last year alone.

“These people can’t find jobs, just like me,” Selemela, 34, said under the winter sun, wearing a torn, dirty Chelsea soccer club shirt and jeans that hung loosely on his thin frame. “They try at the retailers, but there is nothing available there. They are employing fewer people because people are buying less. There’s no money.”

Additional cuts are to come across mines and towns in South Africa, once the world’s biggest producer of gold. A volatile currency, uncertainty about regulations and demand, labor union tensions, harder-to-access ore, high operating costs and falling prices mean about half of gold and platinum operations are loss-making.

More than 6 million people are unemployed and looking for work, taking the jobless rate to about 28 percent, a 15-year high. This excludes 2.5 million discouraged job seekers.

It’s a gargantuan task for newly elected President Cyril Ramaphosa, who came to office in February promising to revive the sluggish economy and clamp down on corruption. He’s spearheading a drive to attract $100 billion in new investments that could absorb unemployed youth as well as former mine and factory workers and to provide opportunities for young citizens.

He has his work cut out for him: The economy shrank the most in nine years in the third quarter, led by declines in agriculture, mining and manufacturing, Statistics South Africa said June 5. Gold production fell for the seventh straight month in April, the agency said on June 14.

After gold was discovered near what was to become the economic hub of Johannesburg in 1886, the country became the biggest producer. The metal spawned some of the world’s largest mining companies, such as Anglo American Plc. It transformed South Africa from a farming economy into the continent’s most industrialized. It provided opportunities for unskilled black males, who were restricted from many jobs because of their race under white-minority-rule, known as apartheid.

In 1980, mining vied with manufacturing as the largest contributor to gross domestic product, with each at about 21 percent. Today, mines account for 7 percent of the economy. In 1987, the sector employed 763,000 people; that’s down more than 40 percent to 447,000 now. The government, retailers and banks are now the country’s biggest employers.

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“A lot of the future of the industry is going to be based on constraining costs and a need to improve safety, but most particularly a focus on innovation and technology,” said Roger Baxter, chief executive officer of the Minerals Council of South Africa, which represents most producers. “It will continue to shrink until those initiatives start bearing good fruits.”

The newer platinum industry has its own problems. Producers are closing shafts and cutting thousands of jobs because a stronger rand and stagnating prices are squeezing profit margins. At the same time, reduced demand for diesel engines and the rise of electric cars threatens to erode the need for the metal, which is used in converters that control emissions in diesel-fueled vehicles. About 41 percent of platinum used last year was for this purpose, according to research from Johnson Matthey Plc, one of its top refiners.

“The industry is in crisis,” said Chris Griffith, CEO of Anglo American Platinum Ltd., the world’s largest producer. “It’s a chicken-and-egg situation. You need to invest yourself out of this situation by investing in growing demand.”

South Africa continues to be an important gold-mining jurisdiction worth investing in, said Bernard Swanepoel, a former CEO of Harmony Gold Mining Co. and board member of Impala Platinum Holdings Ltd., the world’s second-biggest producer.

“I really think it’s the last chapter, but the last chapter could be a good chapter,” he said. “Thirty more years of gold mining in South Africa could be a good chapter.”

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And the country’s huge mineral endowment means chrome, iron ore and manganese—of which the nation has the world’s biggest known reserves—are becoming more important for exports, said Ross Harvey, a mining analyst at the South African Institute of International Affairs.

“Minerals such as iron ore have good prospects,” he said. “It’s an irreplaceable product for the steel industry. But as mines bring in new technology, that will continue to drive down jobs absorption.”

Draft rules published June 15 by Mineral Resources Minister Gwede Mantashe could hurt new operations. The Mining Charter says nearby communities and employees’ groups should get a 5 percent interest in either the asset or the company that owns it. The Minerals Commission and its members are opposed.

Mark Bohlund, an Africa economist at Bloomberg Economics, said the government should be doing more for an industry that’s still among the country’s top export-revenue earners.

“The government could offer more tax incentives for the mining sector but the scope for this will be constrained by the need to reduce the budget deficit and stabilize public debt,” he said. “Beyond that, the government needs to improve its relationship with key mining-sector unions and persuade them to moderate their wage demands.”

South Africa has had success expanding its automotive industry, which now accounts for about 7 percent of GDP. Toyota Motor Corp., Ford Motor Co. and BMW AG all assemble vehicles locally. That can be put down to a state-incentive program that expires at the end of 2020, which both the carmakers and Trade and Industry Minister Rob Davies are eager to extend for another 15 years.

The state wants automakers to double the size of their combined workforce to about 225,000 to help to tackle the jobless rate, but the companies are reluctant to commit to specific targets. They view those as unrealistic given the global industry’s shift toward robotics and automation, said National Association of Automobile Manufacturers of South Africa Director Nico Vermeulen.

For Caldwell Nzimeni and his friends in Carletonville, working in a vehicle-assembly plant isn’t an option unless they migrate far from home and manage to acquire manufacturing skills they don’t have.

Nzimeni, 29, worked at Mponeng, the world’s deepest gold operation, for four years as an engineering assistant. He left in 2015 to complete his engineering studies but has been unsuccessfully applying for mine work for 18 months.

To make ends meet, he rents out shacks made from corrugated iron in the backyard of his home for 200 rand ($14) monthly and does plumbing and home-improvement jobs whenever he can find them. With the downturn in the town’s economy, his tenants are struggling to make their payments.