Manufacturing output improved for the month of September, based on data released by Stats SA today, showing manufacturing production increasing slightly by 0.9% but the industry still faces a number of challenges, according to Modise Makhene, principal at Odgers Berndtson Sub-Saharan Africa.
“The manufacturing sector in South Africa is at a crossroads and it is time for the country to reassess its strategy and take advantage of the opportunities available. For years, the industry has been in a state of decline, facing challenges around productivity, costs, labour issues, skills shortages, efficiency and new technology,” says Makhene.
While petroleum, chemical products, rubber and plastic products and food and beverages were the largest positive contributions for September 2015, South Africa’s manufacturing purchasing managers’ index has averaged 49.7 in the first 10 months of 2015, indicative of a struggling economy as any reading below 50 reflects contraction.
To bolster GDP contribution from the sector, currently on 14%, leaders need to overcome some fundamental challenges. These include low productivity, compared to international competitors, such as 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 and most pressingly, a shortage of skills at all levels in the manufacturing industry.
“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,” explains Makhene.
“These new models require skill sets which are in short supply in the manufacturing sector. Technological transformation is where industry leaders can overcome the hurdles they currently face and work towards becoming a manufacturing hub on the continent.”
In order to meet the National Development Plan targets by 2030, South Africa needs to increase the training of artisans by producing 30 000 artisans a year. At present, the country produces 13 000 artisans a year across all trades, and 72% of these are trained by private institutions
“South African manufacturers also 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 the country’s geographic location, South Africa is in the ideal position to develop into a regional manufacturing hub,” says Makhene.