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South Africa’s industrial future cannot be built solely on domestic demand, deputy trade, industry & competition minister John Steenhuisen says. He argues that regional and continental markets represent one of the country’s best opportunities for growth, making it imperative to ensure South Africa’s ports and rail infrastructure are fit for purpose to support exports.The government must therefore provide a coherent framework to reverse de-industrialisation, deepen localisation, raise investment and place the country on a stronger industrial growth path, Steenhuisen told the annual manufacturing indaba in Joburg on Tuesday.South Africa’s manufacturing sector has been in decline for years, with its contribution to GDP shrinking from about 23% at the advent of democracy to about 13% now, weighed down by a combination of weak local demand, ageing infrastructure and suboptimal energy, logistics and transport services.A revised industrial development strategy unveiled last month acknowledges the need to urgently secure an affordable, reliable energy supply and address bottlenecks in its ports, rail and telecommunications networks to halt the economy’s de-industrialisation.The plan identifies decarbonisation, digitalisation and diversification as the key pillars to drive industrial growth and transformation. Steenhuisen said that despite the decline, the sector is still key to the economy, accounting for more than 1.6-million direct jobs and supporting more indirect ones across mining, agriculture, logistics, business services and the wider value chain.“Therefore, South Africa cannot afford not to support the manufacturing sector. We need to recognise both the opportunities and challenges facing our industrial economy and then trim the sails of our policies and approaches accordingly,” he said.“The government’s role must be to provide a coherent framework to reverse de-industrialisation, deepen localisation, raise investment and place South Africa on a stronger industrial growth path.”He stressed the need to expand trade with South Africa’s regional neighbours and the rest of the continent, saying domestic demand alone cannot sustain the industry.“The African Continental Free Trade Area (AfCFTA) offers a historic opportunity to industrialise the continent through increased intra-African trade, investment and manufacturing co-operation,” Steenhuisen said.“Africa should increasingly trade in value-added products rather than exporting raw materials and importing finished goods. The strategic vision for the continent is clear: Africa must transition from being merely the source of raw materials to becoming the manufacturing powerhouse for the global green economy.” The continent has yet to unlock the potential envisaged under the AfCFTA to increase intratrade in a market that boasts more than 1.2-billion people, Sharon Modiba, chief economist of the International Trade Administration Commission of South Africa, told the conference.The AfCFTA is “meant to stitch together” $3.4-trillion in combined GDP of the market for the 55 countries on the continent and one of the largest free-trade areas worldwide, Modiba said.“But in reality, the story is a little bit more sobering. Our own African intratrade currently sits at around 14%-16% [of the continent’s whole trade], and in terms of Africa’s share of global trade, we are sitting at roughly 3%. So the agreement is there, the ambition exists [but] the trade itself, particularly for manufactured goods, is still an exception rather than the norm or the rule.”Intratrade within the continent significantly lags other global regions — the figure is around 60% for Europe and Asia — mainly because African countries have historically exported raw materials and commodities to the rest of the world while importing most of their finished goods. “About 60% of what we manufacture in South Africa gets to be exported to Africa in the form of manufactured products. In other words, when African manufacturers sell to each other, we sell value-added goods, just not raw commodities,” Modiba said.“That tells us something very important. The appetite for ‘made in Africa’ [products] is there on the continent, and the question is why it is that so little of our production actually reaches the continent itself in the form of intratrade.”Business Day
