South Africa’s manufacturing sector is navigating complex challenges such as underinvestment, rising costs and logistics disruptions, although these could be addressed through localisation and attracting new investments through implementation of conducive policy and taxation policies, said analysts from PwC in a new report yesterday.
Manufacturing contributes 13% to South Africa’s gross domestic product (GDP) and analysts at PwC said the sector will continue to play a significant role in the economy.
PwC’s South Africa Manufacturing Analysis 2024 report noted that the manufacturing sector’s nominal GDP was forecast to grow by an average rate of 5.7% per year over the next 10 years.
However, “the South African manufacturing sector is navigating a complex landscape of challenges and opportunities” that include “under-investment, escalating production costs and logistics disruptions” although it was showing some form of resilience.
This resilience was being fuelled by future growth opportunities available through localisation and workforce upskilling that is expected to boost South Africa’s competitive advantages and attract new investment.
The overall manufacturing sector market capitalisation has risen by 0.57%, from R546.9 billion to R550bn, mainly as a result of robust increases in the paper and wood, which rose to R21.9bn, speciality pharmaceuticals which firmed up to R25.9bn, and packaged foods, which amounted to R17bn.
According to Pieter Theron, a director for PwC South Africa, the food and beverage sector had seen an increase in profits. The sub-sector was “one of those shining beacons at the moment” on the South African landscape.
The manufacturing sector was also a big employer, with South African manufacturing workers earning R614bn in salaries and wages last year.
“It’s a major employer in South Africa with more than 1.6 million jobs and obviously all the families that are related to that,” said Theron.
Christie Viljoen, an economist with PwC emphasised that South Africa had a “relatively competitive manufacturing industry” with the reach of jobs in the industry spread out across the country and beyond.
“So for me, as sort of the primary and why manufacturing is important, it is for us a creator of jobs, of income, of exports and taxes. Manufacturing could be for us as South Africa a bedrock of long-term economic development,” said Viljoen.
But despite its large manufacturing sector and ability to export manufactured goods, South Africa remains dependent on imports for a range of factory-produced items, with machinery and complex manufactured products accounting for a third of total goods imports in 2023.
“To reduce import dependence and alleviate ongoing global supply chain disruptions impacting service delivery, South Africa was is striving for industrialisation and localisation,” noted the PwC report.
Still, SA’s manufacturing companies have to deal with the country’s current economic conditions centred on infrastructure challenge on water, electricity, roads and transportation.
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