It is no secret that business conditions in the South African economy are fragile. The IMF reduced its GDP outlook for South Africa to 1,4% from 2% for 2015, and a tough year is forecast for 2016, with forecast growth at this stage of only 1,3%.
In an environment with slow economic growth, we need to look for new opportunities and believe that South Africa’s manufacturing sector has the potential to turn our economic fortunes around.
Research shows that the prospects of South Africa’s manufacturing economy are tied to the fortunes of the manufacturing industry and vice versa. Over the last four decades, growth of manufacturing mirrored GDP growth in South Africa, and the Purchasing Managers’ Index serves as a leading indicator of development. The direct relationship between the two indicates the opportunity for manufacturing to become an engine, rather than a mirror of growth.
Growth can be achieved by accessing opportunities for development. Manufacturing jobs can return to South Africa as costs in China rise, and global manufacturers seek to diversify supply chains. As we gain better access opportunities for cheaper energy in the coming years, we also access African markets with close to a billion people, creating new prospects for manufacturers. As Africa continues to urbanise, manufacturing opportunities arise in areas of fast-moving consumer goods, packaging, durable household goods, metal components, plastics, pipes, tubing and automotive exports.
We therefore believe that manufacturing in South Africa is a destiny waiting to be fulfilled. Manufacturing’s share of South Africa’s GDP has remained at an average of around 15% over the last two decades. This is typically lower than other countries at both much lower and higher stages of development in comparison; indicating a much greater role that manufacturing can play in our economic development.
A thriving manufacturing sector is critical in driving sustainable, job rich growth in our country. The sector currently employs more than 1,6-million people, and is among the top three multiplier sectors in terms of value addition, job creation, export earnings and revenue generation for every rand invested. Manufacturing is also the driver of tertiary education and responsible for the absorption of skilled people into a workforce that currently accounts for more than 12% of GDP.
Manufacturing companies may differ in shape and size, or have different views, but no manufacturer experiences challenges that are unique. The agenda of the Manufacturing Circle is to promote a positive change to the environment that supports resilience and addresses challenges that exist in South Africa, representing the voice of manufacturers in South Africa as a whole.
To promote a resilient, sustainable manufacturing environment, three goals have been identified by the Manufacturing Circle’s members. South African manufacturers must work to:
No industry exists that does not deal with critical challenges. What distinguishes winners from losers is not the nature of challenges, but the way challenges are anticipated, reacted to and dealt with.
As an industry, we need to stand up and be counted, and work together to understand how to best secure the long term sustainability of South Africa’s manufacturing industry, and in so doing, contribute to the economic growth of our country.