All sectors of South Africa’s economy are expected to grow by only 1.7 percent on average year on year. Photo: AP

CAPE TOWN – All sectors of South Africa’s economy are expected to grow by only 1.7 percent on average year on year and manufacturing, the country’s fourth largest sector, is expected to fair even worse by 2023.

This is according to Econometrix’s economist Jeffrey Dinham, speaking at the Western Cape leg of the Manufacturing Indaba hosted at the Century City Conference Centre yesterday.

Speaking on manufacturing and the fourth industrial revolution, Dinham, setting the scene on where the sector is at the moment and what challenges lies ahead, said the sector is facing headwinds.

He said the sector’s R570 billion contribution in this year’s second quarter equates to about 13 percent of the total domestic gross domestic product (GDP), which puts the sector as the fourth largest sector in South Africa’s economy.

“In 2010, it dropped from third when it made way for retail trade and this R570bn represents a growth, year-on-year of unfortunately just 0.15 percent, in other words going from Q2 2017 to Q2 2018, the manufacturing sector in real terms did not see any real growth. Employment kind of follows the same middle of the road trend,1.7 million jobs, definitely not inconsequential but then again the fourth largest sector when it comes to total employment,” said Dinham.

He said that in terms of exports the sector contributed R680bn last year, equating to 57 percent of total domestic exports, overshadowed by R970bn worth of imports, resulting in a deficit.

However he said in the Western Cape, the sector painted a slightly better picture, with a  15.6 percent contribution of total manufacturing GDP and 15.3 percent provincial GDP while employment contributed 29.7percent, which equates to 17 percent of total manufacturing employment, both figures higher than the national average.

“The current headwinds facing manufacturing are nothing new. If we take a longer term picture of where this sector has been and where it is going, it’s quite clear that manufacturing is going or South Africa as a country is going through a pattern of de-industrialisation,” said Dinham.

He said the sector made up about 21.5 percent of total domestic GDP in 1993 and according to Econometrix’s own forecast the sector will contribute just 12.6 percent by 2021 and the same trend is evident in employment.

He said in 2001 15 percent of all jobs in the country were created in the manufacturing sector and by 2023 just 10.5 percent of jobs are expected to be created.

“If we look at growth trends, we can see the same pattern, 2011- 2021, our forecasts are that all sectors of the economy will grow by 1.7 percent on average year-on-year. Unfortunately manufacturing can hope to achieve only half of that, 1.8 percent year-on-year, this unfortunate, and I guess the real question is why?” said Dinham.