South Africa Could Become ‘Manufacturing Hub on Continent’

Cape Town, 18 November 2015: The manufacturing sector in South Africa is at a crossroads. For years, the industry has been in a state of decline, facing challenges around productivity, costs, labour issues, skills shortages, efficiency and new technology. But along with these challenges, there are also huge opportunities, and if industry leaders can overcome the hurdles and seize the initiative in the arena of technological transformation, I believe South Africa could well become a manufacturing hub on the continent.

The manufacturing sector – which currently contributes only around 14% of South Africa’s gross domestic product (GDP) – continues to grapple with the following challenges:

• Low productivity, compared to international competitors, especially China and Germany
• High input costs, especially labour costs and efficiency, which render the South African manufacturing sector uncompetitive
• A lack of alignment between government and the manufacturing sector on how to promote growth in the industry
• A shortage of skills at all levels in the manufacturing industry.

However, the biggest shift that leaders in the manufacturing sector are dealing with is the move globally from traditional manufacturing practices (which were labour intensive and required low technology) to models embracing the latest technological – especially digital – advances. These new models require skill sets which are in short supply in the manufacturing sector.

In my opinion, to not only prevent further decline, but also increase the contribution of the manufacturing sector to the South African economy, industry leaders need to:

• Facilitate collaboration. Leaders should enter into agreements with educational institutions to ensure the relevant skills are produced to meet manufacturing sector needs, through sponsorship of courses, for example. Collaboration should also take place with government to facilitate greater alignment with policymakers. Sector incentives – for instance, in the procurement of advanced but expensive manufacturing equipment – should be encouraged.
• Embrace technology. Many executives in the manufacturing sector are still stuck in a traditional mindset, but the industry now requires leadership which can forge boldly ahead in especially the digital space, taking full advantage of all the opportunities it offers in terms of introducing new business models. If senior leaders are not technologically savvy, they need to surround themselves with expert teams that can assist them in leading their companies forward.
• Be globally aware. Leaders can no longer afford to be inward looking and parochial – with very stiff global competition, South African manufacturing executives need to know what is going on in their industry on a global level, and remain in tune with international manufacturing trends and best practice.

South African manufacturers need to take full advantage of the opportunities available to them on the rest of the continent, especially in countries with relatively undeveloped manufacturing sectors, but with high demand for manufactured products.

Given our country’s geographic location, South Africa is in the ideal position to develop into a regional manufacturing hub. We need to rise to the challenge and do the necessary work to increase the required levels of skills development and training. But we need to act fast and strike while the iron is hot, before others move in and grab the opportunities right on our doorstep.