SA's manufacturing sector must modernise

Thursday, June 21, 2018

If South Africa is to achieve its economic growth targets in future, its manufacturing sector has to be modernised, says Trade and Industry Director General Lionel October.

Speaking at the Manufacturing Indaba in Sandton on Wednesday, October said that in order to grow the economy, government - working closely with the private sector - must secure and support investments in a modernised and competitive manufacturing sector.

The Director General said government acknowledges that the manufacturing sector is indispensable.

“With the manufacturing sector shedding 320 000 jobs during the global financial crisis, government had to respond through resolute counter-cyclical industrialisation efforts that arrested the scale of job losses during this period. There was a real danger of even deeper deindustrialisation and we averted it,” said October.

South Africa is supportive of efforts to ensure that African countries in the Southern African Development Community (SADC) and beyond participate as partners in ensuring an integrated investment-led trade and industrial integration programme on the African continent.

“While the share of manufacturing to total Gross Domestic Product (GDP) declined from 15% to 13%, manufacturing value-added in real terms grew from R338 billion to R383 billion in 2016. This was led by sectors such as food and beverages, automotives, chemicals and plastics, averaging 2% annual growth,” October said.

The continent is South Africa’s main export market. October highlighted that the two preferential trade agreements that South Africa is negotiating will open new markets.

“One is called the Tripartite Free Trade Agreement, which consists of 26 countries from SADC, the East African Community (EAC), and Common Market for Eastern and Southern Africa (COMESA), which includes Egypt and we are busy with the ratification process in Parliament.

“The other one is the African Continental Free Trade Area and our legal advisers are reviewing the agreement to enable the President to sign it at the next Assembly of Heads of States of African Union,” October said.

The Director General said one of the challenges facing government is the prioritisation of intra-Africa trade.

“Global challenges such as trade wars and the increased protectionism right across the world necessitate that we should trade amongst ourselves as the region and the continent. This is our way of industrialising.”

He said the reason African countries can’t industrialise is because of small markets.

October said over the 10-year Industrial Policy Action Plan (IPAP) period, while imports have doubled, manufactured exports have grown four-fold, mainly dominated by metals, metal products, machinery and equipment, including capital equipment and mining machinery. –