The manufacturing sector in South Africa and Africa alike has suffered over the years with analysts and critics calling for an urgent intervention to save the sector. The lack of essential linkages of the manufacturing sector with major production sectors such as agriculture and mining, upstream, has led to a lot of exports of raw materials without feeding into the complete value chain has also limited job creation. Adequate investment in infrastructure to process raw materials within the manufacturing sector is by far one of the solutions to save the sector and create more jobs. The potential for job creation in the manufacturing sector is huge and well needed for a country like South Africa with an unemployment rate currently standing at 27,5%.
The country is at a crucial point where an enabling environment for infrastructure development in the manufacturing sector is required. Support from the private sector is required to provide that necessary linkage to strengthen the value chain in both the downstream and upstream industries. It is ideal that as the growth in manufacturing is enhanced, there is an equal investment in human capital through advanced skills in technology. China has managed to grow its value chain significantly, through an integrated upstream and downstream system. China has a well advanced labour market with adequate skills and digital/ IT infrastructure support. Smart technologies and digital skills will by far be the transformation key in South Africa’s manufacturing sector.
It can, however, not be ignored that the advent of a thriving Chinese industrial economy has had a major role in the fall of our local manufacturing sector. Through its well-equipped value chain and cheap labour, China has been able to manufacture at relatively lower costs, thus flooding the market with cheaper goods and making it very uncompetitive to manufacture locally. The high number of imports compared to exports leads to an unfavourable balance of trade. Engagements with the international economy are also paramount to enable African countries to access the essential skills and support (financial and technical) relevant to revive the struggling industry.
By Khethani Kanye