Alignment between government and local manufacturing businesses, paired with a competitive exchange rate and the import of skilled industry people, could see this powerful, albeit beleaguered sector, rise to its former glory and change economic prospects within months, an industry lobby group said on Thursday.

Manufacturing Circle chairperson Stewart Jennings said that the group would use information gathered in its inaugural quarterly bulletin, released in Johannesburg on Thursday, to actively engage with government on high-level national economic policy issues.

The bulletin showed that the country’s manufacturing sector had declined, from contributing 25% to South Africa’s gross domestic product during its heydays in the 1960s, to only about 15% currently.

Jennings said that certain policy directions recently taken by government such as the implementation of the Industrial Policy Action Plan (Ipap2) and its New Growth Path were positive, but needed additional detail and clarification.

Economist and adviser to the Manufacturing Circle Iraj Abedian agreed, saying that the plan was a step in the right direction, but that business was not homogenous and that therefore different manufacturing sectors would need to develop their own plans through individual forums, which could be used to fill in some of the detail.

“An industrial policy strategy that has already picked the ‘winners’ is putting the cart before the horse”, Abedian said, referring to those sectors, such as the automotive sector, receiving preference in the Ipap2.

Abedian also said that the global economic environment would continue to be volatile for the next ten years and that government needed to seriously consider “intra-decade” strategic intervention to stabilise the rand, which is one of the most volatile currencies in the world.

“We need an exchange rate at about R8, R8,50 to the dollar for the industry to be competitive, thrive and expand, with current exchange rates growth will be difficult.”

Abedian acknowledged that it would be very costly to intervene in currency issues, but said that the alternative, such as the additional industrial and employment opportunities that will not be created and other jobs that could be lost would be far more costly.

Finance Minister Pravin Gordhan told Reuters this week that the government would not intervene to weaken the rand, which has gained more than 30% to the dollar since the beginning of 2009.

Further, the quarterly survey showed that 70% of respondents were concerned about the dire skills shortage experienced in the country’s manufacturing sector.

Jennings said that an effective and immediate solution to the problem would be to import skilled people to impart their knowledge to the South African labour force.

The circle highlighted that South Africa’s manufacturing sector had suffered from three decades of underinvestment, which had driven deindustrialisation in a country with a once, vigorous, manufacturing industry.

Nevertheless, the Manufacturing Circle believed that the sector was resilient and could be re-energised with just a couple of “tough, but very much needed” policy decisions.

EXPORTS

Manufacturing Circle member, and Bell Equipment CEO, Gary Bell said that South Africa had a lot to offer in terms of the niche and quality of manufacturing that it could provide the rest of the world with.

Currently, South Africa exports the majority, about 40%, of its manufactured products to other African markets, and Bell emphasised that the country could further consolidate and grow this market, especially leveraging from the proximity of the country to other African markets.

Interestingly, while China is the biggest importer of South Africa’s raw minerals, it hardly featured in picking up manufactured products from the country, at 1,3%.

South Africa’s traditional trading partners, including North America and Europe, still featured strongly, together taking up just over 38% of the country’s export manufacturing market.