South Africa: Local Manufacturing Next Growth Frontier
Wednesday, 08 Feb 2017
South Africa's painstaking efforts to grow the manufacturing industry are steadily having a tangible impact on local job creation and the ability of the domestic economy to hold its own in the face of a trying environment.
While many developments have had a positive impact on sustaining the economy in the past year, perhaps none have been as bold and decisive as the country's renewed focus on making sure that industrialisation and manufacturing happen right here at home.
One of the many ways government has responded to the call for jobs from the communities that have been left on the margins of mainstream economic development is the revival of industrial parks.
The Department of Trade and Industry, guided by the National Development Plan (NDP), has been at the helm of driving the Revitalisation of the Industrial Parks Programme. The parks have long been seen as a beacon of hope for development in townships and rural areas.
This year, the dti has set aside R216 million for the renovation of five industrial parks. The parks, located in Limpopo, Gauteng, North West and Free State, will have their infrastructure upgraded so they can contribute to stimulating the country's industrial development, economic growth and job creation.
Last year, the dti spent more than R180 million upgrading six industrial parks spread across five provinces in the first phase of the Revitalisation of the Industrial Parks Programme.
The dti identified a need to revitalise industrial parks located in various parts of the country, mainly the former homelands, as part of efforts to promote industrialisation, manufacturing and the creation of thousands of jobs.
The potential for job creation through industrial parks is great, as the dti reported that the first four parks that were launched last year employ almost 40 000 people.
The industrial parks, however, are not the only facet of boosting manufacturing and supporting industrialisation. The dti also has the Black Industrialists Programme, which aims to increase role players in the manufacturing sector. To date, the programme has supported 22 black industrialists and created 1 500 jobs, with R1.5 billion being injected to support the industrialists.
Localisation is a big theme in South Africa's plans to grow the economy, eliminate poverty and reduce inequality, as set out in the NDP.
Government believes localisation can be a game changer in South Africa and would go a long way in reversing the country's high unemployment rate.
The dti says concerted efforts must be put into local procurement, especially in projects of national interest. The Passenger Rail Agency of South Africa is in the process of acquiring a new fleet of some 360 coaches per year over the next 10 years, which would create 6 500 direct and indirect jobs. The dti says it is focusing on the long-term procurement so that more than 65% of the material needed for the coaches can be procured locally.
Automotive sector investments
The automotive sector has demonstrated an unequivocal vote of confidence in South African capabilities and policy in the form of billions of rands in recent investment commitments from both assemblers and component suppliers. The investments have led to large increases in vehicle production volumes, deepening localisation in the sector.
According to the dti, the automotive industry is the largest manufacturing sector in the SA economy. In 2014, the wider industry contributed approximately 7.2% of gross domestic product (GDP).
Although the export-led growth model came under pressure in 2009 as a result of the global economic crisis, there has been growth in both export and domestic business in recent years and approximately 566 083 vehicles were produced in SA between 2014 and 2015.
Although South Africa enjoys success in the traditional manufacturing sector, new growth frontiers are emerging, and the country is maximising on these opportunities.
Last year, Trade and Industry Minister Rob Davies welcomed the R150 million Chinese investment at the Dube Trade Port, which will build local capacity in the manufacturing of fibre optic cables.
Chinese company Yangtze Optics Africa Cable (YOAC) announced its investment at the Dube Trade Port Industrial Development Zone in Durban.
YOAC is a R150 million investment to set up and operate a modern optical fibre cable manufacturing plant in South Africa by Yangtze Optical Fibre and Cable Joint Stock Limited Company (YOFC) from China, and Mustek Limited, a JSE listed company.
To date, YOAC has recruited 42 employees, the significant majority of which were sourced from local communities adjacent to the King Shaka International Airport. YOAC intends to create a further 80 employment opportunities in 2017.