Manufacturing Circle chairperson André de Ruyter
Photo by: Duane Daws
Manufacturing associations across a range of subsectors, including plastics and packaging, chemicals, agroprocessing and steel have endorsed a Manufacturing Circle-led initiative, designed to find ways of creating an additional one-million manufacturing jobs in South Africa.
Manufacturing Circle chairperson André de Ruyter, who is also Nampak CEO, said the project, dubbed the ‘Map-to-a-Million’, would focus primarily on unearthing the current constraints to manufacturing investment in the country and proposing remedies.
Economic research institute Trade and Industrial Policy Strategies (TIPS) has been appointed to conduct the study, the outcomes of which could be used to influence the future direction of the country’s industrial policy, including the country’s incentives schemes and tariff policies.
De Ruyter said the initiative would also dovetail with the lobby group’s ‘Vaal Triangle Rejuvenation Project’, which had been endorsed by Gauteng Premier David Makhura and the CEO Initiative as a way of arresting the prevailing deindustrialisation of the Gauteng region.
McKinsey & Company had agreed to offer its services on a pro bono basis to finalise the economic case for potentially designating the Vaal Triangle as a special economic zone in a bid to ensure that it did not become a ‘rust belt’.
De Ruyter believed that the McKinsey report, which should be finalised by year-end, could also offer a useful case study for other industrial regions, including those in KwaZulu-Natal and the Western Cape, currently also threatened by “premature deindustrialisaiton”.
Manufacturing Circle executive director Philippa Rodseth said the broader Map-to-a-Million research project would involve surveys and consultations with both industry and government over the coming two months, with the intention of finalising a report in time to influence the 2018/19 Industrial Policy Action Plan of the Department of Trade and Industry. However, the outcomes could also trigger more immediate actions to help improve the investment climate.
“Our first step is to identify the specific bottlenecks and constraints that need to be addressed to facilitate industry commitment to investments,” she explained.
TIPS would pay particular attention to constraints relating to skills shortages, infrastructure inadequacies, market-structure dynamics, value chains, governance and red tape, as well as international trade developments.
The study comes amid a falling contribution of manufacturing to South Africa’s gross domestic product (GDP), which has declined from 24% in the 1980s to less than 13% in 2015. Manufacturing’s contributions has also fallen well below that of its emerging-market peers, where the sector’s GDP contribution is closer to 30%. In addition, more than 500 000 jobs have been shed since 1989.
“If manufacturing were to have an appropriate share of GDP for South Africa’s developmental stage, that is between 28% and 32%, a theoretical 800 000 to 1.1-million jobs could be created,” De Ruyter enthused.
To achieve such a level it would be necessary, however, for domestic industry to break out of its current “defensive” investment patterns, where the focus was primarily on cost savings and enhanced efficiency rather than expanded capacity.
He acknowledged that there was some scepticism within industry about South Africa’s industrial policy direction, but praised the DTI for the efforts it was making to both promote industrialisation and protect vulnerable industries.
The idea, he added, was to work with a “coalition of the willing” within the manufacturing sector to reignite the reindustrialisation process in collaboration with government.
“We will embark on an engagement process with the public sector that will include discussions with the Ministers of Trade and Industry, Economic Development and Finance, as well as with the full Economic Cluster. The aim is to align the investment we in industry will make to create jobs and grow the economy, also while attending to the required unblocking of bottlenecks,” De Ruyter concluded.