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The manufacturing sector employs about 1.75 million people, and last year accounted for 55% of the national export basket.
But the sector’s contribution has declined since the 1990s, unlike other developing regions, where manufacturing’s share in overall gross domestic product (GDP) is more than double that of ours.
Last year, manufacturing accounted for 13.3% of South Africa’s GDP.
It is imperative that the downward trend in manufacturing’s contribution be arrested and reversed.
The sector’s performance has been hindered in recent years by weak demand from global markets and increased competition from imported products.
A weaker currency should lead to improved competitiveness and export performance, but with continued economic weakness in the Eurozone, demand for South African goods has remained muted. Local consumption is also under pressure.
With weak economic growth, a deteriorating consumer environment, strikes in key sectors, rising operating costs and low business confidence, by the end of last year the manufacturing sector employed nearly 360 000 fewer workers than it did at the start of 2008. Despite this, it still accounted for 11.4% of overall jobs.
It is therefore crucial for local manufacturers to expand their global reach beyond traditional export markets.
South Africa’s trade with the rest of the world remains highly concentrated, with the products of the 10 largest manufacturing sectors accounting for almost 70% of exports. Last year, the top 10 accounted for 63% of manufacturing exports, dominated by motor vehicles and basic iron and steel. Manufactured exports mainly go to the rest of Africa, the EU and the US.
According to IDC estimates, South Africa’s exports to the rest of Africa totalled about R290 billion last year, involving 241 000 direct jobs in the South African economy.
The manufacturing sector’s role in accelerating economic growth and contributing to transformation is recognised in the National Development Plan and the New Growth Path, and manufacturing enterprises are benefiting from strategic support under the National Industrial Policy Framework and its three-year rolling Industrial Policy Action Plans. – IDC
