SA identifies key growth sectors

6 August 2007

South Africa’s industrial policy has identified four key economic sectors whose growth potential will be used to promote the government’s objectives of shared economic growth and job creation.

Addressing the launch of the national industrial policy framework, Trade and Industry Minster Mandisi Mphahlwa said the policy assessed the country’s economic performance in various sectors.

The South African government has identified several sectors to achieve its Accelerated and Shared Growth Initiative (Asgi-SA), which aims for 6% economic growth by 2010 and to halve poverty and unemployment by 2014.

Four key sectors
As per the framework, the Department of Trade and Industry (DTI) will give special attention to the capital, transport equipment and metals fabrication sector; the automotives and components sector, the chemicals, plastic fabrication and pharmaceuticals sector, and the forestry, pulp and paper and furniture sectors.

According to DTI chief director of trade policy, Nimrod Zalk, the capital, transport, equipment and metals sector has the potential to position itself as the major future exporter to the African continent and beyond.

The country’s capital goods, metal fabrication and transport equipment sectors contributed to 2% of the gross domestic product (GDP) and accounted for 18% of manufacturing jobs, which stood at 216 263 in 2005.

However, Zalk said the that sector faced challenges that including low expenditure on public infrastructure, uncompetitive pricing of raw materials, lower than optimal mining investment, skills development as well as ageing foundry and tooling industries.

The framework also calls for the country to take advantage of the government’s R410-billion capital expenditure programme, by increasing local manufacturing capacity, reducing required imports for the programme from 40% to 30%.

Manufacturers are also called on to capitalise from the current global boom mining and mineral processing.

Zalk told BuaNews that the automotive and components sector contributed 8% to South Africa’s GDP, with vehicle production growing from 388 442 units in 1995 to 615 000 in 2006. During the same period, new vehicle imports grew from 15 764 to 179 869.

Ensuring transformation
Employment in the sector also rose from 277 400 in 1995 to 306 500 in 2006, and Zalk said there was an opportunity for South Africa to double its vehicle production to 1.2-million units by 2020.

He added that the sector faces challenges such as the establishment of a long-term investment environment, insufficient local component manufacturing capability and slow transformation.

“By September 2007, we will implement a three-year supplier development programme aimed at raising local content by improving manufacturing processes along the value chain,” he said.

“We will also formulate an empowerment plan by March 2008 to fast-track transformation in the sector.”

Zalk said that the chemicals, plastic fabrication and pharmaceuticals industry comprised a well-developed capital-intensive upstream industry and a more labour-intensive downstream plastics industry

“Collectively, all the three contributed 2.8% to GDP in 2006. Basic and other chemicals employed 64 285 people and plastics 39 893,” he said, adding that the pharmaceutical industry employed 10 000 people with local production worth R9.5-billion.

Zalk said the forestry sector contributed R14-billion to GDP in 2006 and employs more than 170 000 people, with “the potential to bring jobs and income to poor rural communities”.

He said the forestation of 100 000 hectares in the Eastern Cape over the next 10 years had the potential to contribute R215-million to GDP, creating 26 000 jobs at the plantation level and 1 700 at primary processing level.

Again, a similar initiative, covering at least 40 000 hectares in KwaZulu-Natal is expected to contribute R500-million to GDP over the next decade, creating 15 000 jobs in plantations and 429 jobs in primary processing level.

Source: BuaNews