Market-responsive businesses poised for growth in SA’s established economic sectors

South Australian businesses in sectors ranging from agriculture to services are poised to leverage the spillover benefits of growth in the mining and defence industries, a panel of business leaders has told a CEDA forum.

However, businesses and policy makers would need to focus on how they use increasingly scarce resources such as water, energy, labour and capital, and how they adapt to rapidly accelerating change in labour, products and capital markets if they are to be successful.

Four key themes emerged from the Beyond Mining and Defence meeting convened in Adelaide on July 27, 2011 to provide insight into key drivers of the South Australian economy over the next 5-10 years:

1. Successful businesses would need to be forward-thinking and adaptable to overcome difficulties such as labour and capital shortages, infrastructure bottlenecks and higher energy prices.

2. SA must do more to commercialise research and development (R&D) and to promote education in engineering.

3. Indirect benefits from an expanding higher education sector and knowledge spillovers associated with the mining and defence sectors would be key drivers of growth in SA.

4. Export opportunities will grow rapidly for businesses in SA's 'established' sectors such as agriculture, education, services and manufacturing to meet the demands of rapidly expanding middle classes in emerging economies.

The panel comprised Prescott Securities' chief economist, Darryl Gobbett, Coopers Brewery Managing Director, Dr Tim Cooper, University of Adelaide Vice President, Services and Resources, Paul Duldig, Ernst & Young Managing Partner, Mark Butcher and Playford Capital Chief Executive, Amanda Heyworth.

Mark Butcher told CEDA members that the mining and defence sectors have the potential to underpin the South Australian economy but the state needed to learn from the experiences of the Western Australian mining boom to deal with skills, infrastructure and capital shortages.

For example, he said sectors such as the public sector which struggle to match the high mining sector wages could start forward planning to access and retain talent.

It was also raised that strategies would be required to deal with infrastructure bottlenecks in rail and ports, water and electricity. For example smaller players might club together to fund large infrastructure projects. In addition, SA would need to manage access to capital to ensure that projects did not cannibalize each other.

According to Mark Butcher and Amanda Heyworth, a healthy culture of entrepreneurship in South Australia would be a key ingredient in the state's future success.

In particular, Ms Heyworth said South Australia needed more entrepreneurs to grow their businesses and penetrate global R&D chains.

"We need to encourage our kids and our grandchildren to start those (innovative) companies and not just look at a career in professional services," she said.

More efforts were also needed to promote engineering education and to commercialise R&D in South Australia, she said.

The panel noted that manufacturing companies could still enjoy strong growth in South Australia, provided they adapted to increasing costs in the cost of utilities and could meet changing demand.

Coopers Brewery for example, has developed alternative water and energy sources which have mitigated increasing costs and it has implemented new technologies to reduce its environmental footprint. This would help insulate the company from the effects of new environmental taxes.

Dr Cooper said the company had also capitalised on South Australia's high quality grain production to increase sales in malt and malting barley to complement its sales in beer and home brewing kits.

Equally, while the South Australian higher education sector is also predicting steady growth with global demand predicted to increase to 3.72 million students in Australia by 2025, universities would need to be creative in the way they provided educational services.

"The nature of education will change - we might see a move away from an investment in bricks and mortar to provide other educational services," Paul Duldig said.

For example, the audience heard that the University of Adelaide School of Dentistry had licensed its curriculum to a Middle East university and a couple of SA universities had developed campuses overseas.

The panel discussed that the education sector would benefit from strong local growth as the quotas on university places are removed in 2012 and from Commonwealth government programs to promote a 20 per cent growth in students from low socio-economic backgrounds.

Continued growth in this sector would have important indirect economic benefits by promoting connections with key institutions overseas and by attracting the best and brightest to develop their ideas in Australia.

Darryl Gobbett said growing demand for western food would provide opportunities for South Australian agriculture and fast food industries in particular, as well as for companies dealing with associated health risks, such as diabetes and obesity.

He said metals demand, particularly for aluminium would continue to rise and SA tourism could also capitalise on this new spending power with appropriate planning and greater investment in appropriate language education and service development.

The panel also discussed that SA businesses must be quick to adopt new technology in order to mitigate against slow labour force growth and to meet the demands of an ageing population.

This should include developing new consumer products for the ageing. Businesses should also be ready to capitalise on R&D spinoffs from the mining and defence sectors.

"We need to ask ourselves, 'can we do things differently,'" Mr Gobbett said.