As the South African government scrambles to boost the economy in the wake of recession fears, a study has highlighted the “Big Five” growth driving opportunities to be explored.
McKinsey Global Institute has released a new study that has identified ways for South Africa to deliver on a significant gross domestic product (GDP). According to the McKinsey report, a series of tangible measures - deliverable in the short to medium term – which could provide the means to reignite South Africa’s growth could add over one trillion rand to annual GDP by 2030.
This will in turn provide opportunities to transform the wider South African society and create over 3.4 million jobs in the process.
According to McKinsey, the “Big Five" growth drivers have been identified to firstly be creating a globally competitive hub in advanced manufacturing by drawing on its skilled labour to grow into a globally competitive manufacturing hub focused on high-value added categories such as automotive, industrial machinery and equipment, and chemicals.
Secondly, making infrastructure investment more productive, to enable growth across the economy. According to the report, this can be achieved “by forging a true partnership between the public and private sectors to drive three strategies to make infrastructure spending up to 40 percent more productive: making maximum use of existing assets and increasing maintenance; prioritising the projects with greatest impact; and strengthening management practices to streamline delivery.”
Thirdly, harnessing natural gas for power generation and industrial development, “With the necessary regulatory certainty, we estimate that South Africa could install up to 20GW of gas-fired power plants to diversify base-load capacity by 2030.”
Fourthly, boosting exports of services to the rest of Africa and the world, “With the right investments, service businesses could ramp up exports to the region; and government can help by promoting regional trade deals. In construction, the opportunity ranges from design to construction management to maintenance services.”
And lastly, unlocking South Africa’s full agricultural production and processing potential, “This could be a key driver of rural growth, benefiting the nearly one in ten South Africans who depend on subsistence or smallholder farming.”
McKinsey partner, Christine Wu, gave a vote of confidence saying, “South Africa has made extraordinary progress in so many ways over the last 20 years, with a doubling of GDP, millions lifted from poverty and a fast-growing middle class.”
However, the country’s shortcomings could not be ignored. “But a growing sense of pessimism pervades and the slowing of progress – our sluggish GDP growth since 2008 compared to the rest of the African continent, high unemployment and particularly high youth unemployment.”
According to the report, South Africa does have significant strengths to build on citing that overall, South Africa has attracted foreign direct investment inflows equalling two percent of GDP, and it is the eighth-largest outward investor on the African.