Regional Industrialisation
Gauteng Economic Indaba
Judith Fessehaie
Centre for Competition, Regulation and Economic Development (CCRED)
University of Johannesburg
8 June 2016
www.competition.org.za
Key starting points
•
Manufacturing sector performance in South Africa and Gauteng has been poor
Fundamental changes
1. High growth of regional economies in southern Africa (notwithstanding impact
of recent downturn in commodity prices)
• Infrastructure and extractive industries investment
• Urbanization, and rising middle class demand for consumables
• Integration of services (supermarkets/food/consumables and engineering
firms/capital equipment)
2. Region is SA’s largest market for manufactured export products
3. Gauteng is the economic hub for southern Africa
• Gauteng’s re-industrialisation objectives depend on the region
• Gauteng as a lead economy in the region needs to become a leader in
regional industrialisation agenda
Implications
South African firms are present across regional value chains as investors,
producers, exporters of services and goods but
• This growth has happened in spite of rather than because of any
regionally articulated policies and vision
• Need to ensure that industrial development has a balanced outcome
Narrow domestic industrial focus is detrimental to each country
• Countries pursue inconsistent policies, even at times favouring interests
external economies to the region over those of neighbouring countries
• Countries in the region do not design policies to bring in the capabilities
that South African companies can offer
•
•
Need to design interventions based on the understanding that industrial
development in Africa will benefit Gauteng too!
Need for trade offs across countries!
Case study on Capital Equipment
Key
Motivation
•
Low employment growth BUT in context of job losses
in manufacturing
•
Positive Net Domestic Fixed Investment – turned
negative only in 2014 – in context of declining net fixed
investment in manufacturing
•
Top exporting industry in regional market
•
Strong local Tier 2 supply chain
•
Mining-related equipment: SA’s most innovative
manufacturing sector (foreign patents)
Millions
Main exports to SADC, US$
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
2000
2001
Source: COMTRADE
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Food
Other chemicals & man-made fibres
Metal products excluding machinery
Machinery & equipment
Electrical machinery
Motor vehicles, parts & accessories
2012
2013
2014
SA market share
Average (2012-2014) US$ Bn
SA %
Botswana
1.22
67%
Madagascar
0.41
7%
Malawi
0.41
26%
Mozambique
1.79
40%
Namibia
1.48
67%
Tanzania
2.07
10%
Zambia
2.56
39%
Zimbabwe
1.31
47%
Angola
0.26
6%
DRC
0.54
48%
Source: COMTRADE
..but losing out to competition
Exports to Zambia
Product cluster
Mineral processing
equipment
Offroad special
vehicles
Conveyor systems
and others
Pumps and valves
2014
(US$ mn)
45.7
10 yr CAGR
Market share
2014 Change
from 2004
11.7%
26.7%
-33.4%
12.9%
54.3%
-18.6%
104.5
8.2
20.5%
52.3%
-5.9%
79.2
13.8%
58.1%
-14.8%
Regional linkages
• SA firms increasingly projected towards region, especially mineral
processing equipment firms (50-95% of export sales)
• Zambia as sub-regional hub for DRC and Central Africa
• But, SA firms struggle to enter the Copperbelt
• Other countries have a strategy for the Copperbelt: the Nordic
countries provide technical assistance, China….
China investment in the Chambishi MultiFacility Economic Zone
Chambishi MFEZ covers an area
of 11.58 km2 with a central service
area of 1.48 km2.
Chambishi MFEZ will be
developed into a comprehensive
zone focusing on nonferrous metal
industry with the radiating and
model effect.
Priority Sectors
Copper and Products Manufacture
Engineering Equipment Assembling
Fertilizer Manufacture
Vehicle 4S Shops
Motel
Mining &
Metallurgy
Trade &
Logistics
Processing &
Electronic
Central
service
Smelting &
Derivative
Copperbelt Regional Cooperation
Incentives for SA
firm investment
Skills
development
Regional System
of Innovation
Policy
consistency
• Support SA competitiveness, also in DRC
• Zambia wins: jobs, skills dev, potentially
sub-contracting
• Partnership on TVET bringing in SA
expertise
• Leverage SA firms
• Partnerships between WITS, UP, UJ and
CBU, UNZA
• Role of key players like Mintek
• Resolving conflicting local content policies
• See SA as a partner not only a competitor