South Africa: Large Potential for Growth in Manufacturing and Exports

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South Africa is poised to tumble into recession next quarter, after the economy contracted by 1.3% in the second quarter of 2015. South Africa is in a battle to become more innovative and proactive, with regards to being less dependent on extractive industries, and creating new ways to become more valuable to the world economy. A recent report from a global consulting firm suggests five priority sectors where the country should focus their economic growth efforts. The combined effort in the areas of advanced manufacturing, infrastructure, natural gas, service exports and raw and processed agricultural exports has the potential to create 3.4 million new jobs for the growing labor pool.

The labor pool in South Africa is large, but also largely unskilled, yet quite productive. South Africa’s manufacturing labor rates continue to increase at a higher rate than their global peers, however without a significant increase in productivity. Funding in the amount of R23-billion (approximately $US1.65-billion) has been allocated to facilitate manufacturing job growth in South Africa, which has a long history in the basic manufacturing and mining industries. Mining job losses continue, due in part to loss of business confidence in the region, based on the harsh working conditions, falling metal prices and input cost increases.

South Africa’s political climate impedes most of its efforts to further job growth. This has resulted in a large number of unemployed workers; about 25% of the workforce has remained unemployed over the past few years. This sustained unemployment rate is contributing to low wages throughout the country, with many young, unskilled, female and male workers in the job pool. This has prompting efforts by the Competition Commission to bring more small businesses into the retail sector and promote hiring. Generally, South Africa has more flexible labor laws but requires a dedicated and closely managed strategy for a contingent worker program to be successful in the region.

In this somewhat stagnant employment environment, a well thought out hiring strategy, which promotes skills development and proper training, could yield a skilled and highly productive workforce. Younger job seekers are keen to advance through positions quickly and acquire the skills needed to increase their value as employees. This is especially true of the more highly skilled workers, working in the larger metro areas, where competition for skilled trade and technology sector jobs can be fierce.