The Department of Trade and Industry should look at spreading the industrial development zones (IDZs) to other parts of the country if South Africa was serious about boosting its manufacturing economy, analysts at Frost & Sullivan said yesterday.
If the country’s manufacturing industry was competitive enough, it would be able to attract foreign direct investment (FDI) flows and South Africa would see fewer investors leaving for countries like China, said research analyst Tatenda Zingoni.
The manufacturing and mining sectors have both seen a significant decline in FDI inflows in recent years.
Between 1994 and 2004 manufacturing brought 28.1 percent of the country’s FDI inflows and that figure decreased to 18.7 percent between 2005 and 2010.
For the mining sector the inflows have decreased to 23.3 percent from 29.6 percent.
The only sector that had grown its contribution to FDI was the financial sector, but Zingoni said these flows were not as secure because investors quickly moved out when they felt the heat. “It is not the same as when one has built a manufacturing firm,” he added.
With the uncertainty about the issue of nationalisation of mines, “it will work to our advantage to secure investors in manufacturing”, he said.
The future of South Africa’s manufacturing economy depended on the role of industrial policy and economic development strategies.
Zingoni argued that when working on boosting a sector in the country’s economy, any government would provide facilities and incentives.
In South Africa’s case, the operation of the IDZs was possibly the best incentive the government could give the manufacturing industry.
The country’s manufacturing volumes were currently far lower than the output levels achieved in 2008.
“So if South Africa is aiming to achieve a 6 percent gross domestic product growth rate by 2015, it is important that the competitiveness of the manufacturing industry is addressed and that jobs are brought to where people are,” Zingoni said.
He said the establishment of IDZs in other parts of the country would not only boost the economy but would bring jobs to where people were and thus balance the economic growth in different regions. These goals were in line with the governments New Growth Path strategy.
The
majority of unemployed people in South Africa were at the lower level of the skills pyramid and they would be employable by the manufacturing industry. - Londiwe Buthelezi