http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.31Change: -0.07
R/$ = 10.68Change: -0.07
Au 1294.70 $/ozChange: -0.50
Pt 1478.50 $/ozChange: 1.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
Article   Comments   Other News   Research   Magazine  
 
 
Aug 03, 2012

Reindustrialisation Recipe?

Back
Thirdly|Africa|Education|Industrial|Africa|Europe|China|South Africa|Manufacturing|Products|Rob Davies
|Africa|Education|Industrial|Africa|||Products|
thirdly|africa-company|education-company|industrial|africa|europe|china|south-africa|manufacturing|products|rob-davies
© Reuse this



Few would disagree with Trade and Industry Minister Dr Rob Davies when he expresses the view that no developed economy has achieved its status without first going through a process of industrialisation. “We have taken a view that manufacturing is fundamental and integral to our economic growth. We have no doubt that we need to industrialise our country and immediately address the potential threat of deindus-trialisation,” he reminded an audience of businesspeople last week.

Even fewer would disagree, including Davies, that words and good intentions alone are entirely insufficient to kick-start South Africa’s much-needed reindustrialisation process.

Sadly, though, the country appears to be in a position currently whereby the more it speaks about building manufacturing, the less it achieves in terms of actual visible progress.

Without question, many of the problems relate to external factors outside South Africa’s direct control – not least the current crisis in the eurozone.

A graphic published in the World Bank’s recently released ‘South Africa Economic Update’ indicates just how toxic the crisis is likely to be for South African manufacturers. The graph shows a remarkably close correlation between growth in the eurozone and industrial production in South Africa. Besides a few short periods of decoupling, the lines on the graph track each other much as a heat-seeking missile would its target.

Despite its woes and the rise of China, Europe remains the largest importer of South Africa’s manufactured products and the brunt of the prevailing crisis is, thus, likely to be borne disproportionately by our factories. It should not be forgotten that, during the earlier stages of the crisis, a disproportionate number of the one-million jobs lost during the 2009 recession arose from within the manufacturing sector.

The correlation is equally worrying for the economy as a whole: for every one percentage point change in the eurozone’s gross domestic product (GDP), South Africa’s GDP adjusts by 0.8 of a percentage point.

But there are also internal factors holding back the process of rebuilding industry. The first is the protracted nature of the deindustrialisation process, which is arguably still under way. This long period of decline makes the current reindustrialisaiton aspiration much like turning the proverbial oil tanker on a tickey.

Ironically, the sensible macroeconomic choices made by South Africa over the past decade-and-a-half will also make for a difficult transition. Reindustrialisation cries out for a weaker exchange rate. But to effect such without damaging the country’s economic balances (which rely currently on portfolio flows to close the savings gap) is easier said than done. Indeed, the transition to a weaker rand would probably be very disorientating and disruptive.

Thirdly, South Africa’s poor basic education performance is not equipping the next generation of entrepreneurs with the skills needed to become the next generation of industrialists. Without a massive push to turn the tide on the country’s dismal maths and science outcomes, the raw material needed for industrialisation will simply be absent.

Lastly, the country’s current macro- and microeconomic policies are somewhat half-hearted. Either we have to make the sacrifices needed to facilitate the reindustrialisation dream, through a competitive currency and large-scale incentives for industry, or we will continue to limp down a path that is sure to result in even more deindustrialisation.

The problem is that to make such a dramatic change, we need to be certain the raw material – the entrepreneurs, the skills, policy, incentives and good governance – is truly in place. If it is not, such a policy course could do more harm than good. At present, it appears we are extremely weak in all those critical areas.

Edited by: Terence Creamer
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Editorial Insight News
Article contains comments
Cabinet will soon be called upon to make one of its most important decisions of the year now that State-owned electricity producer Eskom has handed over its ‘comprehensive sustainability plan’ to Public Enterprises Minister Lynne Brown. Eskom claims to be facing...
A new report urges African policymakers to pay closer attention to improving the balance between consumption- and investment-led growth, while suggesting that countries should target minimum investment levels of 25% of gross domestic product to sustain economic...
Finance Minister Nhlanhla Nene has warned that South Africa is struggling with a triple deficit: its stubbornly high current-account deficit, a fiscal deficit and a trust deficit. But he has also given an assurance that government is planning to do what it can to...
Article contains comments
More
 
 
Latest News
Nigeria-focused oil and gas explorer Oando Energy Resources (OER) on Wednesday announced that it had completed the acquisition of the Nigerian upstream oil and gas business of New York-listed ConocoPhillips for a total cash consideration of $1.5-billion as well as a...
The disciplinary hearing of telecommunications giant Telkom’s suspended CFO Jacques Schindehütte was set to resume next Wednesday. Telkom said it hoped the hearing would result in a definitive resolution on the matter of Schindehütte’s personal conduct after a...
While unauthorised expenditure by South Africa’s municipalities has declined year-on-year, irregular expenditure has recorded a R2-billion increase as municipalities failed to follow legislated procurement procedures, the latest Auditor-General South Africa audit...
More
 
 
Recent Research Reports
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
 
 
 
 
 
This Week's Magazine
Multinational semiconductor chipmaker corporation Intel announced its national campaign to further acquire partners to drive its She Will Connect programme, an initiative that aims to expand digital literacy skills to young women in developing countries, further into...
South Africa's MeerKAT radio telescope array programme should get back on schedule within a few months. This assurance has been given by SKA South Africa (SKA SA) associate director: science and technology Prof Justin Jonas. Early last month, Science and Technology...
The Passenger Rail Agency of South Africa’s (PRASA’s) Metrorail service will remain a subsidised service following its current multibillion-rand rolling stock, station, depot and signalling upgrade programme. PRASA group CEO Lucky Montana has allayed fears that...
GARYN RAPSON Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will open the door for court battles to determine who will be held liable for the remediation
The uncertainties around the remediation of affected areas as addressed in the Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will possibly spark litigation and disputes between landowners and businesses, contractors...
South Africa is currently the largest component of the African Development Bank’s (AfDB’s) active portfolio in Southern Africa, comprising 62.5% of the bank’s $7.9-billion exposure to the 12-country region – the second largest beneficiary is Mauritius, which...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks