The need for a revival in South Africa's Manufacturing & Industrial sector

03 Jul 2017

The need for a revival in South Africa's Manufacturing & Industrial sector

The South African industry is still under immense pressure due to a technical recession and political instability. The economy has been adversely affected by the fallout following the cabinet reshuffle announced by the President. The full impact of the resultant sovereign rating downgrade is likely to be felt for many years. Business and consumer confidence levels have been shaken which is expected to negatively affect both investment and consumer spending going forward.

The manufacturing and industrial sectors in South Africa add immeasurable value to the economy and bolstering it should be a national imperative. Corporate giants that were once the backbone of the economy are now struggling to make profits.

South Africa is truly unique with its current circumstances. So what could the local industry learn from the unwavering Germans?

Germany has built a formidable global reputation for its advancement in and leadership of the manufacturing industry. Are there lessons these sectors in South Africa could learn from the country whose success stories include BASF, BMW, Daimler and Siemens?

Germany’s success can be attributed to its culture for long-term sustainability in the sector. This includes the importance of education through apprenticeships and the investment into innovation, research and development.

THE VALUE OF APPRENTICESHIPS

South Africa’s unemployment rate is at a staggering 27.7%. The youth unemployment rate is 38.6%‚ with 58% of unemployed people aged between 15 and 34.

Germany’s dual system might be able to present an ideal model for combining theoretical training with technical experience which ensures graduates are employable.

How it works:

Dual systems are a key element for Germany’s trade sectors and are seamlessly integrated into its universities. Approximately 60% of the country’s school graduates between the ages of 18 and 20 begin an apprenticeship, which lasts up to three and a half years. Following the apprenticeship, the student’s skills are matched to the labour market. The scheme has received high praise and is currently being adopted internationally in countries such as China, the United States and the United Kingdom.

One of South Africa’s biggest challenges in the area of unemployment is the limited number of skilled workers. Exacerbating the problem is the so-called ‘fourth industrial revolution’ which will require a digitally savvy workforce. The world of work, particularly in manufacturing, is going to shift fundamentally because of technological advances and South African policy needs to ensure vocational training receives the investment it needs for the industry to remain globally competitive.

The Mercedes-Benz success story:

In order to meet the growing sales demands of its technologically complex vehicles in the American market, Mercedes implemented a training programme based on the dual system which has since paid dividends. The now global and award-winning programme has seen over 3,000 individuals trained as technicians and parts specialists – many of whom remain in the company’s employment.

STAY ON THE PULSE OF INNOVATION

Whilst the objective of the manufacturing sector is then to build on its requirement for a digitally capable workforce, a lack of innovation and stagnant manufacturing methods can actually lead to a decline in overall productivity. Half of Germany’s revenue comes from its manufacturing industry exports. This is in part due to a German research organisation called The Fraunhofer Society.

How it works:

Fraunhofer’s key feature is its scale. The society has 69 centres across the country and its workforce comprises approximately 24,500 members – mostly engineers and scientists with an annual research budget of €2.1 billion (ZAR30 billion). Each centre partners with a nearby university and relays relevant academic insights to the group. This creates a culture of knowledge sharing within the network, resulting in an expanding ecosystem for manufacturing innovation.

Could a healthy culture of collaboration in the spaces of education and innovation be emulated in South Africa?

For the South African industry to increase its contribution to the stability of the country’s economy, a more aggressive focus is required on skill transference and developing the resources to obtain and share research across all sectors. This will be achieved through the collaboration of all stakeholders including government, educators, industry leaders and policymakers.