Manufacturers 'must become part of global value chain'

23 September 2021

South Africa must integrate its manufacturing efforts with global supply chains if it is to avoid losing its industrial base, finance minister Enoch Godongwana has warned. 

Speaking at a virtual launch for the book Structural transformation in South Africa, Godongwana said manufacturing’s contribution to the country’s GDP was gradually shrinking. 

He added that the government was aware that “over time our manufacturing firms have been struggling to build their productive capabilities”.

Companies had also found it difficult to diversify production activities, embrace new technology and develop domestic supply chains.

“This has contributed to many of our manufacturing firms remaining uncompetitive and thus unable to be part of the global value chains,” he said.

Government spending should complement and enable production in the private sector, rather than substitute it, Godongwana stated.

Becoming an integral part of global value chains is key to an effective economy, he added.

“The pace and scale of infrastructure rollout – which is an outcome of the effectiveness of the use of fiscal resources – has a significant impact on the competitiveness of local firms and the ability of their products to access global value and supply chains,” the minister said.

Godongwana said the government was “intervening decisively to drive strategic localisation, repurpose South Africa’s manufacturing, as well as strengthen regional and global trade”.

“Ultimately our goal is to significantly increase South Africa’s manufacturing output, reduce the proportion of imported intermediary and finished goods, and expand the capacity of local suppliers,” he added.

The book looks at how the South African economy can recover following the Covid-19 pandemic, which led to GDP shrinking to 2017 levels.

It calls on government intervention to build, upgrade and diversify local manufacturing capabilities.

And it said any attempt to move towards a more strategic manufacturing base was doomed to fail without a strong state and key stakeholders uniting behind a common vision.

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