Tuesday, August 03, 2010

South Africa hopes to grow manufacturing sector

Mining of metals and oil comprise much of the exports from Africa. South Africa is a rare exception, as most of its exports come from manufacturing businesses. South Africa government and business leaders hope to become a worldwide manufacturing leader to not only improve their own country, but to spur economic growth through the continent.

From the New York Times, writer Matthew Saltrmarsh tells us about the positives and negatives of South Africa's economy.

A group of companies is working in sectors like clean energy, aviation, engineering, military contracting and mining, hoping to benefit from positive growth forecasts for the region.

The state hopes this will lead to job creation and other benefits, and has played its part in some cases by offering direct financing and other sweeteners. It has also backed new university research positions and is trying to promote centers of excellence.

“We are a producer and exporter,” said Naledi Pandor, the minister of science and technology. “Now we’re saying: let’s become an innovator.”

South Africa’s many hurdles — notably unemployment, crime, illegal immigration, corruption, income inequality and health problems — have not disappeared. But executives and officials believe that the environment is improving and that the country’s success as host of the recent soccer World Cup can act as a catalyst.

The democratic government that came to power in 1994 inherited an economy racked by internal conflict and external sanctions. Yet from 2004 to 2007, gross domestic product grew on average over 5 percent annually. It contracted by 1.8 percent in 2009, affected by energy shortages, slower consumption and the global recession, but it is expected to grow at 3.3 percent in 2010 and 5 percent next year, according to the Organization for Economic Cooperation and Development.

Mining accounts for almost a tenth of output, but in contrast to much of the rest of the continent, South Africa also has well-developed manufacturing, whose output accounts for over 50 percent of exports.

“South Africa’s ambition to climb the value-added chain is valid, justified and doable,” said Andreas Wörgötter, an economist at the O.E.C.D. who wrote a recent study of the country. The main challenges, he said, will be to “broaden economic activity” by creating jobs, moderating wages and improving the regulatory environment.

Unemployment remains a huge hurdle; the O.E.C.D. forecasts it at 24.5 percent this year. Industrial strikes remain a feature, the health and education systems are also troubled and social inequity runs deep. A recent study from the University of Cape Town described the country as “the most consistently unequal economy in the world.”

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