No individual government department or set of institutions can single-handedly create the environment necessary to decisively increase South Africa’s competitiveness, and hence its growth rate and employment levels, Department of Trade and Industry (DTI) director-general Alistair Ruiters said yesterday.

Speaking at the opening of the DTI/United Nations Industrial Development Organisation Competitiveness Conference in Johannesburg, Ruiters pointed out that, to increase the country’s level of competitiveness, a set of well functioning institutions, whose policies and actions are integrated with each other, would be required.

He noted that the current phase of globalisation, as well as ten years of democracy in South Africa, indicates that there have been some fundamental changes in the nature and determinants of country and industry competitiveness.

“This, in turn, requires an adaptation of policy, which takes into account the complexities of the current global environment, on the one hand, and the changing structure of the South African economy, on the other,” Ruiters stated, adding that the implications of this are that a more sophisticated approach to competitiveness is necessary.

Such an approach, he explained, would recognise the fundamental changes that have taken place in the global economy, and would recognise the critical role of institutions in responding to these changes.

Ruiters also identified the need for competitiveness to cut across all sectors of the economy, whether labour- or capital-intensive.

The evolution of the South African economy, in general, and the manufacturing sector, in particular, over the last ten years reflects global, as well as specific domestic conditions, he said.

“Manufacturing has remained stable, at around 18% of the South African economy, over the last ten years. By contrast, the service sector has grown its significance in the South African economy.

“Manufacturing itself has undergone rapid structural change. It has become more export-intensive and more skills- and technology-intensive. The distinction between manufacturing and services has, in some cases, become blurred, as a proportion of manufacturing-related services, such as transport and logistics, have moved statistically from manufacturing to services.”

However, Ruiters commented that, notwithstanding the restructuring in manufacturing, a number of challenges still exist.

“Firstly, to find ways in which manufacturing and service sectors can generate higher levels of employment. Secondly, to upgrade these sectors in such a way as to limit vulnerability to price-based competition. Thirdly, to identify new sets of activities to reinvigorate the South African economy.”

He pointed out that much of this involves dealing with specific legacies of the country’s economy. This requires migrating people from the ‘second’ to the ‘first’ economy.

“The most obvious bridge for this migration is through skills formation. This may be the most formidable challenge. It also requires a shift in ownership to promote greater equity and entrepreneurship,” Ruiters said.

He added that it also requires dealing with efficiencies and pricing structures which are a legacy of geographic isolation. While government policy has recently shifted to a large-scale commitment to invest in transport infrastructure, pricing structures require re-examination. This includes pricing structures that are set administratively, as well as those that arise out of public sector monopolistic practices.

Ruiters also acknowledged that it is necessary to deal with South Africa’s internal economic geography, recognising the subeconomic spread of much economic activity.

“A balance needs to be struck between spreading geographic activity and ensuring that there are sufficient economies of agglomeration to justify economic support. In this regard, the role of regional and local agencies and institutions will become increasingly important,” Ruiters pointed out.

He explained that competitiveness involves building sophisticated capabilities, as the determinants of competitiveness have shifted.

“An abundant resource base and relatively low wages can no longer form the basis of competitiveness in the new era. Products and services become more knowledge- and skill-intensive.

“Trade liberalisation, and the entry of China and India, in particular, into the global trading system, has intensified competition. Consequently, it becomes increasingly necessary to develop the fundamental competences to upgrade and reinvigorate our industrial and services structure,” Ruiters added.

Competitiveness, he said, requires meeting the new rules of the global economy and also involves seeking out new economic opportunities.