THE University of Cape Town’s Professor David Kaplan has made a strong case for using export growth, rather than job creation, as the primary measure of South Africa’s industrial-policy success.

He argues that, while increasing manufacturing jobs should still be an objective, industry is unlikely to be in as good a position to create the jobs needed by South Africa, when compared with services sectors, such as construction, transport and retail.

Therefore, the focus should be on significantly expanding manufactured exports, as this would create the conditions for growth in the nontradeable sectors “where the really big employment numbers” reside.

Kaplan’s thesis, which was outlined at a recent event hosted by economic think-tank TIPS, is underpinned by an assessment of the structure of demand in the South African economy, which was itself shaped by deep inequalities in income distribution.

These inequalities were driving middle-class and business consumption patterns, which were typically more services-intensive than would be the case of a country where income inequality was less acute. He illustrated the point by highlighting that there were more than a million people employed in the private security sector in South Africa.

In the absence of labour-market reform, Kaplan was also not optimistic that domestic industry was likely to shift from its current labour-saving and capital-demanding manufacturing trajectory.

“If you compare us to Brazil, our manufacturing output has grown at similar rates, but every year since 1988, we have shed 1.5% of our manufacturing labour force,” he noted. Had South Africa grown its manufacturing labour force at the same rate as Brazil over the period, the country would have an additional one-million manufacturing jobs.

In light of that trajectory, as well as South Africa’s low growth outlook for the foreseeable future, expanded exports were likely to be key to expanding manufacturing output.

“The real importance of manufacturing is not the employment manufacturing generates, but that it makes it possible for a society to create jobs in the nontradeable sectors,” Kaplan averred.

“So it is wrong to think of our industrial strategy largely as an employment strategy,” he added, while also cautioning against decoupling South Africa’s manufacturing fortunes from the resources industry, which still provided the basis for much of the country’s manufacturing activities.

The ongoing deterioration of the mining investment climate and output could, he warned, further accelerate the country’s deindustrialisation.

Kaplan’s view seems to have found some resonance in the latest Industrial Policy Action Plan, which places far greater emphasis on exports than was the case in the previous five versions. It could find even deeper resonance when the National Export Strategy is released later this year.