Johannesburg - The creation of a globally competitive advanced manufacturing hub, improving infrastructure productivity, harnessing natural gas and service exports and improving processed agricultural exports.
These are just some of the measures proposed to help South Africa add R1 trillion to its economy and create 3.4 million jobs by 2030, the target year of realising the major goals of the National Development Plan (NDP).
The measures are contained in a new report by McKinsey Global Institute, called South Africa’s Big Five: Bold Priorities for Inclusive Growth.
Christine Wu, a partner at McKinsey in Johannesburg and leader of its African practice, says South Africa had little time to waste in trying to implement these measures. Although some were in place, they needed to be fully implemented with a sense of urgency, she adds.
On creating a globally competitive advanced manufacturing hub, McKinsey suggested South Africa could build on sub sectors like the automotive industry, capital equipment and machinery as well as chemicals. These needed to be grown to account for a much higher proportion of GDP than the current 13 percent, and a key factor in growing manufacturing was to search for new markets and improve innovation and productivity. McKinsey estimated that advanced manufacturing could add R540 billion to gross domestic product (GDP) and create 1.5 million jobs.
On infrastructure, the report said South Africa could form a partnership between the public and private sector and improve productivity by 40 percent. South Africa could also prioritise maintenance in order to get better value out of large assets.
Wu says part of the problem in South Africa with infrastructure planning was that projects were not spread out over time to be better served by limited skills and capital available, but rather lumped together and pursued using a stop-start approach. Infrastructure was capable of adding R260 billion to GDP and creating 660 000 jobs, the report said.
Benefiting workers?
Wu acknowledges both advanced manufacturing and infrastructure largely benefited skilled workers and risked leaving semi-skilled and unskilled workers out of the promised inclusive growth. Wu suggests those workers would need to be trained and upskilled to also benefit from this growth.
McKinsey suggests South Africa should also tap into natural gas, whether from the Karoo if the resources were proven, or imported from neighbouring Mozambique. The merits of natural gas plants were that they were cheaper, quicker to install, relatively cheap and had a lower carbon footprint.
The research company estimates that South Africa could install about 20 GW of natural gas power to supplement the national grid in time for the anticipated shortfall expected between 2025 and 2030. According to McKinsey, natural gas could add R250 billion to the GDP and create 330,000 jobs .
Export potential
Another opportunity South Africa could exploit was service exports to the rest of the continent. McKinsey said South Africa currently captured two percent of the service industry exports in sub-Saharan Africa.
Opportunities in this area ranged from construction to financial services, but this required the right kind of investment as well as government promoting regional trade deals. In June, South Africa helped launch the Tripartite Free Trade Area that brought three regional blocs together The service exports opportunity was estimated at R245 billion, with the potential to add 460 000 jobs
The last area of opportunity, according to McKinsey, was the agriculture value chain, which was estimated to have the potential to add R160 billion and create 490 000 jobs. McKinsey said South Africa had an opportunity to triple its agriculture exports to the rest of the continent and to Asia by 2030.
The research was one of the the most detailed, forward-looking and comprehensive analyses since the release of the National Development Plan in November 2011.
ANA