Manufacturing sector can drive South Africa’s global competitiveness

Friday, October 30, 2015

By Ms Chichi Maponya: Brand South Africa Chairman

The Industrial Development Corporation this week hosted a Conference themed: “Driving South Africa’s Competitiveness through Industrial Development.”

Many interesting insights emerged from the Conference about how to strengthen South Africa’s manufacturing capacity.  However, what also emerged is that South Africa has a strong base from which to build.

In this regard, South Africa has developed an established, diversified manufacturing base that has shown its resilience and potential to compete in the global economy.  South Africa has the potential to become a manufacturing destination of choice, with its surplus labour, skills and world-class companies to make this a reality. The manufacturing sector provides a locus for stimulating the growth of other activities, such as services, and achieving specific outcomes, such as job-creation and economic empowerment, thus accelerating the country's growth and development.

The sector also enables the building of key national infrastructure such as electricity generation and municipal services, and also provides the only viable means of beneficiating natural resources in South Africa.

The sector currently employs around 1.7 million people, and continues to occupy a significant share of the South Africa economy with manufacturing output accounting for 15% of GDP. For every R1 invested in manufacturing there is R1.13 of value addition to the South African economy. In July 2015 manufacturing production increased by 5,6% year-on-year, driven mostly by a 39,6% year-on-year production rise in the automotive industry and a 17,4% year-on-year rise in the metals and machinery industry.

These statistics attest to the fact that there are significant opportunities for South African manufacturers, particularly within the African region which has seen growth rates exceeding those in the developed world – at an average of between 4 and 5% between 2002 and 2014.

African countries provide investors with abundant prospects to access the growing consumer demand. In April 2015, Manufacturing Circle executive director Coenraad Bezuidenhout pointed out that the relative ease of access to sub-Saharan Africa and beyond, and an understanding of the region, South African manufacturers can get ahead of other investors looking to Africa for new opportunities.

With an estimated 800 million people urbanising on the continent in the past decade – there are huge opportunities in terms of fast-moving and durable consumer goods for manufacturers. The current economic conditions in Africa make it the prime investment destination and present a favourable time for South African manufacturers to introduce their products to the African market, particularly fast-moving consumer goods.

We are cognisant of the major changes that need to be made to continue this progress and increase our momentum even further.  Education needs to be transformed to train people for highly skilled manufacturing jobs. The country needs to evolve from being a producer and exporter of primary products to becoming producers of value-added products. Labour laws and labour relations need to be revised – to allow for a more flexible environment that’ll contest with cheaper destinations such as Germany.

We also need to acknowledge that momentous improvements have been made in the sector with the South African government planning to spend 5.8 billion rand over the next three years to help manufacturers affected by the global economic downturn upgrade their factories, improve products and train workers.

Additionally, the South African government has instituted two key national strategies that affect the manufacturing sector at all levels of government is the New Growth Path and the Industrial Policy Action Plan II (IPAPII).  The New Growth Path is a framework that seeks to address the issues surrounding unemployment, inequality, and poverty, through strategy implementation relating to job creation and aims to create 5 million jobs by 2020 by attempting to restructure the South African economy to improve performance in relation to labour intensive and an improved growth rate. The Industrial Policy Action Plan (IPAP) on the other hand is a good step towards transforming South Africa’s manufacturing sector which aims to ensure that stronger cohesion exists between macro and micro economic policies that relate to exchange and interest rates, inflation and trade balance requirements.

South Africa’s attractiveness as an investment destination is supported by the National Development Plan, New Growth Path and the Industrial Policy Action Plan. Through the New Growth Path the mining, agriculture, tourism, infrastructure development, the green economy and manufacturing sector is being boosted.

South Africa is a dynamic and stable economy with solid economic fundamentals. The country has the most diversified economy on the continent and plays an integral role in Africa’s advancement. It is also in a great location for growing businesses in other parts of the African continent.

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