There is a direct correlation between the tepid economic growth that has characterised the local economy to the waning fortunes of the South African manufacturing sector. Question is, how to stimulate growth, so manufacturing becomes a key enabler of job creation?

Against the backdrop of challenges, government’s interventions in kick-starting stalling growth are laudable. However, the successes achieved thus far have largely been offset by the onset of de-industrialisation. Curiously, this phenomenon is not unique or characteristic to SA but applies to the rest of the continent.

The caveat – more so in the SA context is that it’s becoming increasingly evident that this tepid economic growth won’t suffice. Against the backdrop of addressing the triple challenges of unemployment, poverty and inequality, we need to aggressively ramp-up investment in manufacturing so it can have a positive knock-on effect on economic growth.

More significantly, our growth and expansion trajectory must be unequivocally development-oriented and inclusive, employment-generating and, considering our country’s historical legacies, it must be transformational.

Against this background, this prognosis begs fundamental questions to stakeholders attending the 2024 Manufacturing Indaba. Manufacturing is critical to SA. The sector is a key contributor to the economy and employment accounting for 14.4 % (2023) of the country’s GDP. In the second quarter of 2024, it accounted for 1.6 million jobs underscoring its importance to the local economy.

The sector has strong linkages with a variety of supplier and supporting industries, particularly mining and agriculture, as well as service providers. Yet, despite its significance to the local economy, it has shed nearly 500 000 jobs over the past decade. We could blame this on the advent and rapid adoption of large-scale industrial automation, which has somewhat contributed to the failure of locally manufactured products to compete against cheap imports. Added to this are a host of other factors, including the rising production input costs - particularly the widely documented erratic energy supply – that have hindered local manufacturing from finding a growth path.

IDC support to local manufacturing

The question is, can local manufacturing re-discover its growth path? The IDC is optimistic about the sector’s fortunes. However, this bullish view is grounded in the reality that we ought to be accelerating the adoption of game-changing interventions that aim to strengthen this sector. The unintended consequence of the emergence of automation and artificial intelligence-driven manufacturing has led to job losses, with less-skilled employees quickly becoming redundant in this sector.

The advent and impact of industrial automation and artificial intelligence should be embraced as catalysts for change. Besides up-skilling our workforce as a means of preventing redundancy, it is almost impossible to entirely dispense with a human element in any manufacturing set up - there is adequate room for co-existence between humans and machines in the workplace.

Thus, adopting novel technologies and investing in modern plant, equipment and machinery will certainly help to drive down production costs in the process boost SA’s competitive advantage.

As we address our challenges, it’s also important to take a leaf from countries that have successfully made the transition from low-income to upper-middle and high-income status – notably China - and learn just how they have reconfigured manufacturing, so it becomes the main driver of growth. The IDC’s commitment to manufacturing is best reflected in the R82.2 billion approved to various sub-sectors over the past 10 years.

In specific manufacturing industries, the Corporation has been called upon to assist existing businesses in countering the adverse effects of fiercely competitive factors at play in both regional and global markets. The textiles and clothing industries are two good examples. Launched in 2012, the Manufacturing Competitiveness Program (MCEP) was established to support existing manufacturing enterprises through interventions to improve competitiveness in manufacturing as well as encouraging manufacturers to upgrade their production facilities, and in the process, helping to sustain employment. Although much still needs to be done, MCEP has, to an extent, succeeded in stabilising industry perfomance, helping to retain productive capacity while safeguarding jobs. Simultaneously the IDC has been promoting and contributing to the localisation of components of manufacturing in support of the country’s drive to beneficiate its natural resources. Beneficiation or value addition is key to creating employment opportunities as well as strengthening the country’s industrial capacity.

In a bid to further augment growth, the Corporation has adopted several bold and ambitious developmental targets that include increased funding for value chains with the highest potential for sustainable job-rich industrial development. To this end, it has earmarked R21 billion for investment into the sector over the next three years. The IDC considers this sector as one of the keys to unlocking SA’s economic potential. That said, the 2024 Manufacturing Indaba presents stakeholders with yet another opportunity to interrogate the challenges and offer solutions on how best we can use this sector to galvanise growth and create employment opportunities.

https://www.idc.co.za/light-manufacturing/