The Manufacturing Circle has unveiled a "realistic" game plan to arrest South Africa's "premature deindustrialisation" and create a million jobs over the next 10 years.
"We can't afford to deindustrialise as an economy, especially with unemployment so high at 27.7%," says Philippa Rodseth, executive director at the industry body.
Half a million manufacturing jobs have been lost over the past two decades, while the sector's contribution to the economy has slipped to less than 13% - well below the norm of about 30% for countries in similar stages of development, Rodseth says.
"We decided that a stronger and concerted effort was required in order to put manufacturing on the map."
To avoid becoming an ineffective "talk shop", the plan is to set up working groups consisting of stakeholders from industry, labour and the government. Ideally, each working group will have a set of objectives and targets to work towards each year.
To co-ordinate the efforts of different departments, the Manufacturing Circle punts the creation of a "superministry" spanning several departments - as Japan has done.
The Manufacturing Circle's "Map to a Million" strategy, laid out in a 52-page document, proposes a number of demand- and supply-side initiatives, as well as structural fixes, to revive the sector.
Among the proposals to lift demand for locally manufactured goods, the document says business and the state should support the Proudly South African drive, and that certain "catalytic projects that can move the needle" be identified.
For instance, the construction of a new natural gas pipeline from Rovuma in Mozambique to South Africa would lower the cost of natural gas and could provide a shot in the arm for South Africa's steel and pipe producers.
More renewable energy
The Manufacturing Circle also wants to see more renewable energy being introduced into the grid, using locally made solar and wind generation equipment.
Supply-side interventions include the deregulation of the energy sector to increase competition, and regulating the prices of key inputs from sole suppliers to the sector. To get business and labour on the same page, and to improve transparency, labour should be represented on companies' governance structures, according to the scheme.
The Manufacturing Circle says distressed industrial areas, such as the Vaal Triangle - which is home to steel producers and petrochemicals firms - need urgent intervention.
This would involve joint commitments from the private sector and government, with business committing to investment and job creation while the state reciprocates with support measures. For instance, the 15% tax rate for special economic zones could be applied to these areas.
"We're quite far down the line; we've got a steering committee comprising the key companies in the area, plus government stakeholders. And we're working towards tying it all together early next year and then engaging in a step-by-step process," Rodseth says of the Vaal Triangle node.
Longer-term structural fixes put forward include significant private sector equity participation in state-owned enterprises and treating education as an essential service while promoting "high standards instead of high pass rates".
Rodseth says the industry needs a goal to work towards, and that the job creation targets are not far-fetched.
"We've talked about it a lot in compiling the documents and we don't think the million jobs target is unrealistic."
Concerted effort
In the second quarter of 2017, there were 90000 more manufacturing jobs than a year before, representing annual growth of 4%. If this rate of growth is sustained, the 10-year target will be achieved, she says.
"What we're saying is with the 1.8 million existing manufacturing jobs, given that we achieved that growth in spite of difficult supply and demand issues, there's no reason why we can't continue to do that if we're focused and provide more concerted effort and support."
Ian Cruickshanks, chief economist at the Institute of Race Relations, is sceptical that the erosion of South Africa's manufacturing base will be stopped anytime soon, given the "huge impediments".
These include a reluctance to invest, political uncertainty, the lack of "security of assets", social unrest, an unreliable power supply, and unpredictable input costs owing to the volatility of the rand, Cruickshanks says.
Further, wage demands are not being matched with higher productivity. With output per person being considerably lower in South Africa than in other manufacturing hubs, it is unlikely that the country will attract capital investment.
Hard-sell approach
But while it is "very difficult to be globally price competitive", Cruickshanks agrees that opportunities do still exist.
"We have to get better at selling ourselves and our products. We have to go out on a hard-sell approach, following the American example."
He adds that fixing the country's education system is critical for the manufacturing sector.
"It's not going to happen overnight, it's a process," Rodseth says. "There's no single silver bullet but we need a plan."
She says a number of the association's member companies "are achieving good results in terms of being competitive", citing the automotive sector as an example. "We need more of those pockets of success across a broader range of subsectors."
Rodseth says the Manufacturing Circle has kept the state informed of its plans from the outset. It has communicated them to the Department of Trade and Industry and also presented to Finance Minister Malusi Gigaba and his team.
Trade and Industry Minister Rob Davies said in the foreword of the Map to a Million plan: "The department supports the process to establish a structure to engage systematically and regularly with manufacturing sector CEOs on these constraints."
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.