Research has shown that Gauteng manufacturing has declined considerably since 1994. Additional research carried by the Gauteng Growth and Development Agency (GGDA) clearly indicates that without any intervention, the sector will likely face the most job losses. It also needs to consider the massive economic contraction expected from COVID19.
The manufacturing sector is critical to economic growth. As a whole, it accounts for 13% of national GDP and in the Gauteng province, manufacturing is the fourth largest sector. It produces 14.5% of the formal sector GDP and accounts for 45% of the total manufacturing in South Africa. From an export perspective, Gauteng exports 55% of South Africa’s total exports, and for every R100 of exports out of Gauteng, R80 comes from the manufacturing sector. Additionally, for every R100 of goods imported into Gauteng, R63 accounts for goods going to the manufacturing sector.
Manufacturing is also a key driver to global trade, according to the World Trade Organisation (WTO). 80% of global trade is derived from merchandise trade or trade of goods produced in the manufacturing sector. Since 2014, 6 out of 10 Foreign Direct Investment (FDI) projects into Gauteng have been in the manufacturing sector and its subsectors.
It is clear that a decline in the manufacturing sector has very serious effects on the Gauteng and South African economy. Since 1970, local manufacturing has dropped as much as 10 percentage points in contribution to GDP. The decline in Gauteng’s manufacturing output has also impacted the sector’s ability to absorb jobs. In 1994 the sector employed approximately 600 000 people in Gauteng, translating to 17.4% of all people employed in Gauteng. However, by 2019, that dropped to 10.4% of people employed in Gauteng.
It is clear that Gauteng and the broader South African economy needs serious interventions for revival. Research shows that long-term sustained economic growth has never been achieved in the absence of a strong manufacturing sector.
With this in mind, the Department of Economic Development together with its implementation agency, the GGDA, have keenly focused on resuscitating this sector as a key driver for economic growth into this next normal. Priorities include economic growth, job creation and infrastructure investment which is supported by the province’s 2030 vision of “Growing Gauteng Together”.
The GGDA’s Group Chief Executive Officer, Mosa Tshabalala, is very clear on what the agency’s role is. In a recent live panel discussion with CNBC Africa, she confirmed that the GGDA actively enables a more conducive ecosystem to facilitate business growth, expansion and investment, whilst also promoting the ease of doing business within Gauteng.
For a revitalisation of the sector, the GGDA is cognisant of the importance of working with other government organisations to create beneficial ecosystems – one where skills development, lending and business support come together to build growth. To this end, the GGDA is fast-tracking the implementation of Special Economic Zone’s (SEZ) across the province to support manufacturers, providing them with the necessary infrastructure, policy advocacy and opportunities. The provincial government identifies Special Economic Zones (SEZs) as strategic apex programmes for accelerating and stimulating inclusive economic growth in the Gauteng City Region. To this end, through the GGDA, the expansion of the OR Tambo International Airport (ORTIA) SEZ (Ekurhuleni), establishment of the High Tech SEZ (Tshwane), the Vaal SEZ (Sedibeng), and the Tshwane Automotive SEZ form an integral part of realizing the strategic goals as set out in the GGT2030 to spatially boost manufacturing across the province.
GGDA Priorities for Economic Growth
The GGDA has set out high-impact priorities to accelerate economic growth in Gauteng in the current, and the future, economic climates:
- A focus on economic development which delivers sustainable jobs, encompassing job creation and job enablement;
- Skills development for SMMEs which will transform value chains within targeted sectors and ensure an emphasis on building the ‘skills of tomorrow, today’;
- Creating sustainable businesses that are enterprise and supplier development driven;
- Economic infrastructure development which is geared at executing capital projects which enable prioritised sectors such as Automotive, ICT, Manufacturing and Agro-Processing;
- Increasing the export of locally manufactured goods by highlighting SMME export opportunities and facilitating supply/demand based development;
- To not only increase investment into the province, but also enable a greater focus on retaining investment through the development and implementation of an investor aftercare strategy;
- Developing a holistic approach to the enablement of the Township Economy with a greater focus on young entrepreneurs and woman-owned businesses.
We need to manufacture more products locally. Localisation is a key strategy, and its efforts need to be very intentional and focused. Another key focus for the GGDA is preparing the Gauteng province to become an active participant in the Africa Free Trade Agreement, as it will bring with it many substantial opportunities for economic growth.
What About Township Economies and Women-Owned Businesses?
The GGDA has taken a very strategic approach when addressing the township, youth and women in business – it is creating pipelines with large investors, then plugging in potential SMME’s to create linkages and ultimately a successful ecosystem. The GGDA also supports these businesses in scaling their offerings by linking them to the Industrial Development Corporation (IDC), and continuously advocating for their business growth.