The manufacturing sector is the fourth largest industry in South Africa – one of the key contributors to GDP growth and a core driver of direct employment. A robust manufacturing industry stimulates growth, which creates demand for employment in other market sectors, such as the service industry, empowering communities and allowing the country to grow and develop. That is an important distinction: while the manufacturing sector leads growth and employment, employment in other sectors follows GDP growth.
Although South Africa’s manufacturing sectors are varied and diverse, their common link is that they are all extremely labour-centric and thus rely heavily on a large workforce. There are four main sectors in the industry:
Several divisions fall into this industry, including: food and beverages; textiles, clothing, leather and footwear; and wood and wood products, paper, publishing and printing. Of these, the food and beverages division is the largest contributor to the manufacturing industry – in fact, it’s the largest contributor of any manufacturing division overall.
The chemicals industry, which includes fuel, rubber, plastic and pharmaceuticals, is the second largest manufacturing industry in South Africa. The fuel sector, which includes petrol, diesel, jet fuel, illuminating paraffin, fuel oil, bitumen and liquefied petroleum gas, contributes about 8.5% to South Africa’s GDP and supplies around 18% of the country’s primary energy.
The third largest manufacturing industry in South Africa is the metals industry. It comprises basic iron ore and steel, basic non-ferrous metals and metal products. The iron and steel basic industries manufacture primary iron and steel products from smelting to semi-finished stages. The largest industry within the SA metals industry is the primary steel industry, which is a significant contributor to the economy and earns considerable amounts of valuable foreign exchange.
The automotive industry is one of South Africa’s most important sectors; several international vehicle manufacturing companies have production plants in South Africa and many component manufacturers have established production bases in the country.
All sectors have faced various challenges over the past few years including rising input costs, competition from international powerhouses of industry such as China, an unreliable power grid and frequent load shedding, the recent civil unrest and the devastating impact of the Covid-19 pandemic.
Investing in growth
Investment can offer solutions to create employment and increase output, and there are long-term plans being developed in various sectors. One such sector is the automotive industry. According to an article published in Business Tech* earlier this year, the automotive industry has put a plan in place that it is hoped will allow vehicle production to grow from 600 000 to 1.4 million vehicles a year and local content in South African-assembled vehicles to increase to about 60% by 2035 (from 37% in 2015). The key to this is localisation, a process that will lead to an increased percentage of the parts and costs of a motor vehicle being either assembled or manufactured in South Africa, rather than imported. Not only would this grow the sector locally and internationally and create further employment opportunities, but it is also a way to future-proof the industry and remain competitive globally.
Supply of labour is a local strength
Despite many challenges, one of South Africa’s strengths is its supply of labour. Obviously large manufacturing operations cannot function without the required numbers of workers, but it goes much deeper than that. The overall productivity and efficiency of the workforce in the manufacturing sector has a massive impact on how the different industries within the sectors operate, how competitive they are and what roles they play within the economy.
While labour productivity, which measures how efficiently a business uses human inputs to produce outputs (how many units can be produced in a certain number of hours) is important, labour efficiency (producing something without wasting materials, time or energy) is just as crucial.
Finding the right combination of productivity and efficiency optimises output and minimises losses, so it’s important to strike a balance between the two. Investments in human capital are therefore critical for labour productivity and companies should be encouraged to provide the necessary skills training in order to improve the quality of their workforce.
So, it’s a mutually beneficial relationship – businesses and labour need one another in order to keep the finely-tuned machine of the economy operating optimally. Adcorp’s role, then, is a significant one for both sides: ensuring that the sector has access to the required skilled employees and providing these workers with access to the available jobs.