Investing in manufacturing can create thousands of jobs in S Africa, study finds
Dr Iraj Abedian says local sector continues to lag emerging market counterparts
INCREASED activity and deliberate investment in manufacturing, driven by a clear localisation drive, will have a strong impact on the services, construction, trade, transport, communications and finance sectors, creating thousands of jobs in the process.
These are the findings of the study released yesterday, which was aimed at finding the impact of localisation in the South African manufacturing sector, as well as the multiplier effect, thereof, on the economy.
Proudly South African (Proudly SA), the country’s national Buy Local advocacy campaign, commissioned renowned economist Dr Iraj Abedian to survey the country’s job market, as well as opportunities for job creation in traditionally labour-intensive sectors.
Abedian yesterday said the study dissected key manufacturing sub-sectors and their skills intensity and the potential for job creation.
Abedian said the South African manufacturing sector continued to lag those of its emerging market counterparts, hence its inability to “keep up”, especially in export competitiveness.
However, Abedian said manufacturing sub-sectors such as agro-processing, which contributed 5 percent to value added in 2021, held much promise for economic growth and job creation.
The Agriculture and Agro-Processing
Master Plan, which was ratified in May, has identified areas of focus in the sub-sector to enhance inclusive growth and boost employment opportunities in rural South Africa for the agriculture sector.
“Agriculture today is the fastest user of the fourth industrial technology. Many farmers are operating from air-conditioned offices, using drones, automated machinery and others,” Abedian said.
In manufacturing, the value-add of new vehicle and automotive component exports from South Africa recorded R207.5 billion in 2021, up from R175.7bn in 2020.
Abedian said the automotive sector was a successful exporter and contributed 4.3 percent to the country’s economy, was more capital intensive than other manufacturing sub-sectors and employed more than 100 000 people.
“Many South African vehicles manufactured in our country are preferred in overseas markets due to the high quality of our goods,” he said.
The study is a third in a series of research pieces by renowned economist, Dr Iraj Abedian commissioned by Proudly SA among others.
Abedian said that even if the investment envisaged was directly into manufacturing sectors, forward and backward-linked services sectors also benefited substantially due to the multiplier effects of the circular flow.
He said their Computable General Equilibrium Ex-post calculations of actual numbers of jobs created (across
all skill levels), using best available estimates of current employment, show medium-term gains of 75 300 new jobs in manufacturing, 11 500 new jobs in mining and 10 100 new jobs in agriculture.
“We have used modelling to run simulations of the effects of shock investments to South Africa’s manufacturing sector,” Abedian said.
“On average, every well-paid South African job creates up to 2.5 other jobs including ‘informal jobs’ such as gardeners, drivers, domestic helpers and artisans.”
The study recommended, among others, transversal requirements to set
up the infrastructural platform which enables industrialisation and its sustainability over time.
Proudly SA chief executive Eustace Mashimbye said they had sought to provide factual data on the impact of localisation on job creation and the economy at large for many years.
“We are grateful to Dr Abedian and his team for providing us with facts that demonstrate the relationship between localisation and the critical imperatives, such as economic growth, job creation, as well as, of course, the various interventions required of private and public stakeholders in this regard,” Mashimbye said.