Cape Town - The South African economy risks de-industrialisation due to the impact of the economic crisis, Trade and Industry Minister Rob Davies said on Tuesday.
De-industrialisation is a process of social and economic change caused by the reduction of industrial activity.
"The overriding risk the economy faces is that this crisis leads to de-industrialisation, with the consequential destruction of capacity to sustain and increase decent work," said Mr Davies, while tabling his department's Budget Vote in Parliament.
The economic crisis has led to many job losses both locally and globally. The minister said the impact of the crisis had been felt by the manufacturing and mining sectors in the country.
"The impact on the manufacturing and mining sectors has been particularly severe, in terms of both the extent of decline in activities and employment," he said.
Manufacturing production declined by 21.6 percent in April 2009 compared to the corresponding month in 2008, while mining production decreased by 12.8 percent in March 2009.
The crisis climate has seen a total of 23 out of 39 industrial sub sectors contract in the first quarter of 2009. Unemployment increased from 21.9 percent in the last quarter of 2008 to 23.5 percent in 2009.
"The economic outlook for the next few quarters points to continuing sluggish performance across most sectors of the economy.
"De-industrialisation is therefore the central challenge we must address frontally and arrest," the minister said.
He said performance will be measured by the extent to which the country succeeds in preventing the further erosion of the economy's strategic productive capacity in key industries and sectors.
In order to do this, he said, the response needs to involve a strategic reprioritisation of resources that have already been allocated.
He said the country needed to lay the basis for up scaling its interventions to lay "a basis for higher levels of employment generating growth."
The crisis not only affects the developed world, but "it has now become in fact a deep real economy and jobs crisis that threatens to severely damage economies in both the developing and developed world," the minister said.