South Africa Looks to Manufacturing for Growth

South Africa Manufacturing
South African electronics manufacturing plant

AFRICANGLOBE – The latest three-year roll-over of South Africa’s Industrial Policy Action Plan (IPAP) has been focused squarely on boosting the country’s manufacturing sector in order to grow jobs, exports and the production of value added goods, says Trade and Industry Minister Rob Davies.

Speaking at the launch of the IPAP 2013-16 in Johannesburg on Thursday, Davies said the action plan “focuses on value added production, with state support centred on nurturing and defending industrial development”.

Davies emphasised that for South Africa to grow its employment, it had to pay attention to the productive sectors of the economy, and move away from being consumption-driven and import-intensive, especially with respect to value-added goods.

Davies said since the launch of the first IPAP, the government had ensured that policy interventions supported localisation of state procurement in order to support local industries and job creation. “These interventions include growing our manufacturing, boosting exports, and beefing up our competition policies.”

Economic Development Minister Ibrahim Patel, also speaking at Thursday’s launch, said the IPAP was the most important jobs driver envisaged in the government’s New Growth Path (NGP) economic strategy, which has set the ambitious target of creating five-million jobs by 2020.

“It is about strengthening industrial policy,” Patel said, adding: “Industrial policy is back on the agenda globally. There is a growing appetite both in South Africa and the continent to industrialise and reclaim our domestic market and to expand our capacity to export to new markets.”

Industrialisation was central to creating sustainable jobs not only in manufacturing but also in supporting sectors such as agriculture and mining, Patel added.

The IPAP seeks to move South Africa away from a model in which modest economic growth is driven by consumption-driven sectors of the economy (finance and insurance, real estate, wholesale and retail, catering and accommodation), with the productive sectors of the economy (agriculture, mining, manufacturing, construction) playing a subordinate role.

In order to achieve this, the IPAP focuses on exploiting a number of opportunities for South African manufacturing, including re-aligning the country’s value-added exports towards rapidly developing economies in Africa, the country’s BRICS partners Brazil, Russia, India and China, and other emerging markets.

At the same time, the IPAP emphasizes the importance of increased beneficiation of South Africa’s massive mineral wealth.

“Much greater attention will have to be devoted to downstream beneficiation opportunities and the enormous potential that exists to deepen and extend the upstream value chain, with a sharp eye towards meeting the explosion of future demand associated with the African commodity boom,” the IPAP states.

Another key enabler for local manufacturing is the government’s massive infrastructure build programme.

“Manufacturing must increasingly provide machinery and other inputs for the infrastructure build programme, which is central to South Africa’s growth strategy and, more generally, into public goods, including transport, health, education and housing,” the IPAP states.

South African manufacturing, the IPAP notes, bore the brunt of the recent global recession combined with a number of domestic shocks.

“It is imperative that having weathered the storm, the domestic manufacturing sector is able to build upon its strengths, overcome its competitive weaknesses and seize new opportunities within an enabling and more strongly supportive Government policy environment.”