The South African Economic Development Department, Department of Trade and Industry and Department of Performance Monitoring and Evaluation, in partnership with the European Union Delegation to South Africa, hosted a conference on Manufacturing Led Growth for Employment & Equality on 20 and 21 May 2014 at Emperors Palace, Kempton Park, Johannesburg.
AIM OF THE CONFERENCE
The aim of the conference was to explore the link between issues of industrialisation, equity and employment. In particular, it explored the contribution of the manufacturing sector to addressing the fundamental challenges facing South Africa in the areas of job creation and equality.
CONTEXT OF THE CONFERENCE
South Africa’s average growth rate of approximately 2.8 percent p.a. since 1994 has not been able to address its unusually high unemployment and inequality. Only around 40 percent of adults have employment, compared to the global norm of 60 percent. Moreover, at over 0.65, the Gini coefficient for South Africa is extraordinarily high by international standards.
Industrialisation has historically been seen as a key marker for development and in particular a driver of employment creation. Yet manufacturing itself is no longer a major source of employment creation internationally. Moreover, the paradigms of successful industrial policy in East Asia typically initiated their programmes in the context of low unemployment and high levels of equality. These realities pose two basic questions for South African industrialisation.
First, there is a need to analyse more carefully the full impact of manufacturing on employment creation. Manufacturing growth supports employment creation in three ways: directly, through its own employment; indirectly, through the use of inputs from other sectors as well as the provision of inputs and wage goods that improve competitiveness across the economy; and through the creation of a stable working class, with implications for both domestic demand and productivity. A critical issue for South Africa is how these effects can be maximised as manufacturing develops.
Second, the most successful instances of industrial policy leading to national development are found in East Asia. When those economies initiated their programmes, however, they were characterised by close to full employment at low levels of productivity, and by substantial equality and national cohesion. Accordingly, they could focus on raising productivity without much concern for the impact on job creation. The issue for South Africa is how to adapt industrialisation strategies to a situation of high levels of joblessness and profound inequality.
Currently, the manufacturing sector contributes just over a tenth of South Africa’s GDP; employs 1,7 million people, or 13 percent of total employment and 16% of formal employment; and accounts for over half of exports. However, a substantial share of production and exports are refined metals and coal-based chemicals, reflecting the country’s continued dependence on mining. Furthermore, while manufacturing is relatively diversified, and in many subsectors sophisticated by global standards, its share of GDP has fallen rapidly in recent years – from 19 percent in 1994 to 11 percent in 2012. The South African government has committed to reversing this trend.
The conference provided a platform to explore the link between issues of industrialisation, equity and employment; and the contribution of the manufacturing sector to addressing the fundamental challenges facing South Africa in the areas of job creation and equality.