Research by the Public Investment Corporation (PIC), one of Africa’s largest fund managers, done in partnership with the University of Oxford, says SA can create 250,000 jobs in the next five years and R100bn in economic uplift if it doubles down on re-industrialisation efforts.
The study puts agro-processing, mining beneficiation and the motor sector at the heart of SA’s industrialisation.
“In SA alone, we calculate that doubling industrialisation investment by 2030 can add R100bn in real output and create more than 250,000 jobs from current levels of about R2-trillion in real output, which presently sustains 1.3-million formal jobs,” the research paper says.
“SA’s industrialisation is not speculative — it is an execution challenge with clear upside. Institutional investors have the opportunity to achieve sustainable financial returns while driving transformative economic and social impact.
“By aligning priorities, deploying innovative financing structures and leveraging existing reforms, SA can transition from incremental progress to sustained industrial growth.”
The research was done as part of SA’s G20 presidency, which will culminate in the bloc’s summit next month in Joburg.
By aligning priorities, deploying innovative financing structures and leveraging existing reforms, SA can transition from incremental progress to sustained industrial growth.
— PIC study
While beneficiation and downstream value add have been key to the country’s agenda for many years, little progress has been achieved in this regard, with various sectoral master plans falling short of achieving industrial development goals.
SA has seen a rapid de-industrialisation in recent decades, with the industrial sector’s contribution to GDP falling from 28% in 1993 to 18% last year, threatening the country’s long-held status as Africa’s most industrialised economy.
The PIC, which marshals about R3-trillion in assets on behalf of government workers, is the largest investor on the JSE, Africa’s largest stock exchange.
The study carves an actionable roadmap for investors looking to scale investment in SA’s industrial sector.
It says authorities should put on the table predictable incentives, reliable power, efficient logistics and blended finance vehicles to unlock investments.
Beneficiation benefits
It also says beneficiation of minerals such as manganese, chrome and platinum can reduce earnings volatility and align with global demand for green products.
The ANC’s 10-point economic action plan adopted by its national executive committee (NEC) earlier this month aims to arrest the de-industrialisation of SA’s metals sectors, particularly chrome and manganese, while embedding state support across energy, trade, procurement, infrastructure, beneficiation and financing.
The blueprint pushes for preferential electricity tariffs, export controls and infrastructure investment for SA’s chrome and manganese industries, in a move aimed at stopping factories from shutting and heeding long-standing industry warnings of creeping beneficiation decline.
SA’s ability to beneficiate chrome ore into ferrochrome — an indispensable metal in the production of stainless steel — has all but come to a halt, costing the fiscus billions of rand in lost revenue, with thousands of jobs.
This is despite SA having more than 70% of the world’s chrome reserves, having surrendered the beneficiation of the metal to China, whose electricity is 50% cheaper than domestic producers.
SA’s industrial story is not a leap of faith — it is an execution challenge with a clear upside.
— PIC study
The cost of electricity in SA has risen more than 800% since 2007.
“SA’s industrial story is not a leap of faith — it is an execution challenge with a clear upside. Neither is it a bet on ‘new’ sectors; it is an extension of momentum in industries like automotive manufacturing, agro-processing, and mining/steel beneficiation, where reforms and investable pipelines are already in motion,” said the PIC study.
“For investors, the implication is clear: the gap between current and potential output is vast, and closing even part of it represents a multitrillion-rand opportunity with measurable employment and supply-chain impact.”
The PIC and Oxford study is the second of its kind this week highlighting SA’s vast but untapped economic potential.
The “Where to Invest in Africa” report, produced by corporate finance major Rand Merchant Bank (RMB), finds that SA has the largest untapped export potential of any country in Africa, which, if exploited, could add as much as $75bn (R1.3-trillion) in annual exports in the next five years.
The study, which analysed 31 African countries representing 90% of the continent’s GDP, finds SA’s untapped export potential is larger than the next three countries combined: Egypt, Morocco and the Democratic Republic of Congo.
SA’s logistics sector is undertaking the most fundamental reforms in decades, led by transport minister Barbara Creecy. Most of the government’s reform efforts are geared at increasing Transnet’s freight numbers to 250-million tonnes by 2030, from 160-million tonnes now.
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