Job Creation: The role of industrial policy is to unleash private investment
JOHANNESBURG – With an annual output of R5 trillion and an educated and highly-skilled workforce, South Africa remains the preferred launchpad for international investors looking to take advantage of the opportunities, which our country and the African continent has to offer.
While global and local conditions do present challenges to growth and job creation in the near term, we continue to navigate these challenges with solutions which are helping to open up new markets and improve the ease of doing business in South Africa.
South Africa attracted R71 billion in foreign direct investment in 2018, representing a 164 percent increase on the R27bn attracted the year before. This increase was significant in a year when global investment fell 13 percent, and also represented the highest inward investment in five years.
Figures from the Reserve Bank for the first half of 2019 record inward investment R38bn. Earlier this year, during his State of the Nation address following the national elections, President Cyril Ramaphosa outlined a re-imagined industrial strategy that will be one of the centrepieces of rebuilding the economy.
This re-imagined industrial strategy is the set of broad policies and measures undertaken to lift the rate of growth, stimulate specific economic activities, including through promoting technology and innovation, to achieve what economist Dani Rodrik calls “structural change”. The role of industrial policy is to unleash private investment and energise the state to boost economic growth and inclusion. This is an essential part of building investor confidence and the platform for job-creation.
Since the start of the new administration, the government has been working closely with the private-sector and organised labour on the development of a number of plans to improve industrial performance, dynamism and the competitiveness of a number of key industries. These plans have been dubbed National Sector Masterplans, and draw on the success of the Automotive Masterplan.
The automotive industry has become one of the key success stories of South African industrial policy. Today, South Africa is the No 1 manufacturer of automobiles on the African continent. Approximately 3 million cars, bakkies and trucks rolled off South African assembly lines in the last five years, with more than half of this production destined for more than 150 export markets, including the rest of the African continent. The success of South Africa’s automotive footprint has led to substantial investment and job creation in the sector, as we deepen the local supply chain and increase localisation of parts and components.
Just last month, I attended the opening of an expansion of Toyota Motors taxi manufacturing facility in eThekwini, which is expected to add half a billion rand in additional economic output to the local economy. Earlier this year, Ford Motor Company announced an expansion of production at its facility in Tshwane which will add 1 200 additional jobs, while production from the newly constructed BAIC facility at the Coega Special Economic Zone is expected to come on stream shortly. South Africa is well on its way to achieving the outcomes of doubling employment, production and localisation as laid out in the Automotive Masterplan.
National Sector Masterplans are now under development in a number of sectors, from clothing and textiles to parts of the agriculture and agro-processing value chains. With each of these developments, we are unlocking investment as new growth opportunities are pursued. And with this investment comes jobs.
Many of these masterplans are leveraging the opportunities presented by growth from, and access to, the rest of the African continent. This opportunity has been enhanced by the launch of the African Continental Free Trade Area (AfCFTA) earlier this year which will create a trading block with a potential consumer market of 1.3 billion people.
The AfCFTA will draw on the successes of other common trading areas, and lower the barriers to entry for South African goods across the continent. Already more than 250 000 direct jobs are estimated to be supported by exports to the rest of the continent.
As sub-Saharan Africa’s largest manufacturing economy, South Africa is well-positioned to take advantage of the AfCFTA. During the implementation phase, key logistics and infrastructure systems are being developed to streamline the opportunities for intra-African trade, and a shared prosperity for the continent.
With new markets come the growth opportunities that can attract investment and create jobs. Last year, Ramaphosa announced an ambitious investment target of R1.2 trillion in five years. To support this initiative, South Africa hosted its inaugural Investment Conference in October last year.
The conference, attended by more than 1 500 delegates from across South Africa and the world, showcased the country as an investment destination. An amount of R300bn was pledged towards the investment drive from both local and international investors.
A year down the line, the fruits of these pledges are already showing. Two weeks ago, the President opened Africa’s first smartphone manufacturing facility at the Dube Trade Port; a result of commitments made at the conference. Investment pledges made last year have also resulted in factory openings and expansions in a number of sectors from pharmaceuticals, food production, tyre manufacturing and feminine hygiene products.
Drawing on this success, South Africa will host the Second South Africa Investment Conference in Johannesburg from today until Thursday. The conference will again showcase South Africa as a launchpad for growth and investment, and will highlight the numerous reasons why our country remains a prime location for export to the world, and the development of new technologies for the Fourth Industrial Revolution.
South Africa is open for business and investment! And government is working with social partners to ensure that all South Africans benefit from the opportunities present.
Ebrahim Patel is South Africa’s Trade and Industry Minister.