Aug 03, 2012
Thirdly|Africa|Education|Industrial|Africa|Europe|China|South Africa|Building|Manufacturing|Products|Rob Davies
© Reuse this
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
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
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.
This Week's Magazine
The World Bank, the European Union, the African Development Bank (AfDB) and the government of Sweden have agreed to provide Zimbabwe and Zambia with $294-million for the repair of structural deformations on the Kariba dam wall and avert the possible collapse of the...
Executive chairperson of the Global Electricity Initiative (GEI) Philippe Joubert says energy utilities globally, together with the business community more generally, have come to terms with the science of climate change, particularly as extreme weather events begin...
JSE-listed Emira Property Fund reported distribution growth per participatory interest (PI) of 9% for the six months ended December 31, 2014.
Sub-Saharan Africa is still faced with the challenge of providing citizens access to electricity and an additional $450-billion will need to be invested to ensure that people in urban areas have access to electricity by 2040.
Consulting Engineers South Africa (Cesa) last month said it was dismayed that the Department of Water and Sanitation (DWS) was seconding 35 Cuban engineers on a two-year contract to share their expertise with South African engineers in the water sector.