How to speed up growth
Improving skills of workers in manufacturing will drive expansion and cut inequality: World Bank
UPSKILLING workers in the manufacturing sector has the potential to address South Africa’s deeply entrenched challenges of poverty, inequality and unemployment, according to the World Bank.
The bank expects growth to accelerate to 1.4% this year from a previous estimate of 1.1%, with economic growth expected to remain below 2% in the medium term.
Despite a rebound in growth on improved confidence levels and a smooth political transition that saw the election of President Cyril Ramaphosa, South Africa is lagging behind its emerging market peers as it remains one of the most unequal countries in the world.
Emerging markets are expected to grow at 4.5% this year.
World Bank country director for South Africa Paul Noumba Um said the outlook called for policy change that focused on building a skilled labour force.
The country’s labour force dynamics, and persistent inequality, were driven by a skills deficit rather than race or gender, he said.
“[Inequality] has been driven by labour market developments that demand skills the country’s poor lack.”
World Bank senior economist Marek Hanusch said the economy was a skills-intensive economy, and that there needed to be a focus on addressing skills constraints, particularly in the manufacturing sector, to see higher growth.
The manufacturing sector had been struggling to increase global competitiveness and its weak integration into global value chains limited its opportunities to grow with the world economy, Hanusch said.
“In terms of important industries, if you create skilled jobs in the manufacturing sector, you can also create unskilled jobs. At the moment the sector is constrained by lack of skills.”
Hanusch said the Absa Purchasing Managers Index (PMI) indicated businesses were very confident.
Data from Statistics SA showed yesterday that manufacturing production had increased by 0.6% in February compared with February last year, while decreasing by 2.4% compared to January.
Since the early 1980s, manufacturing’s contribution to GDP has dropped from 24% to less than 13% last year.
Manufacturing Circle chairman Andre de Ruyter said: “If manufacturing can expand to 30% of GDP, between 80 0000 and 1.1 million direct jobs can be created, with five to eight times that in indirect jobs.”
He said the sector needed to increase domestic demand, pursue import substitution and enhance export competitiveness. Importantly, he said, this hinged on support from the government.
Circle executive director Philippa Rodseth said: “If we manage to manufacture for an increasing number of local and global markets, while managing input costs to include materials, energy and labour, there is no reason that we shouldn’t see growth in the sector.”
FNB senior economic analyst Jason Muscat said the sector, however, remained too exposed to the whims of domestic demand, which had yet to gain traction, while a strong rand had been a headwind to exporters.