Manufacturing in terminal decline

2014-10-12 15:00

The stagnation of South Africa’s manufacturing sector over the past two decades is resulting in a spectacular, and ongoing, deindustrialisation of the economy.

Manufacturing was eclipsed as the largest contributor to GDP as far back as 1998. But since then, its weight in the economy has halved from 22% to just 11.1% this year, according to the latest figures from Stats?SA.

This was before the strike in July laid low much of the metals and engineering sector. The strike is still dragging on because of isolated lockouts by employers who rejected the wage deal.

There are strong hints the 60-year-old cornerstone of South Africa’s claim to be the most industrialised country in Africa – ArcelorMittal’s Vanderbijlpark steel works – is under scrutiny (see page 3).

That plant comprises about half the country’s steel manufacturing capacity.

OUTPUT

The fast-shrinking share of manufacturing in economic activity is due to the rest of the economy, particularly low-skilled service sectors and government services, steadily expanding while manufacturing levels are virtually where they were in 2005 and only slightly better than they were in the 1990s.

A City Press analysis shows that while manufacturing as a whole is stagnant, this includes subsectors that have collapsed, as well as others that have seen uninterrupted expansion for at least two decades.

The well-known horror story is clothing and textiles, which continues its downward spiral to insignificance after contributing more than 8% of manufacturing output in the late 1990s – more or less what motor vehicles and parts contribute today.

The heavily subsidised motor industry’s performance has been erratic, and recent production volumes are roughly equalling those in 2005.

The metals and engineering sectors, including everything from steel furnaces to machine manufacturing, is now at the same output level as in 2000.

Only two major subsectors can boast growth in the long term.

Food and beverages, as well as the petroleum and chemical industries, have seen the same slow but steady growth since the 1990s.

JOBS

The high-water mark for the manufacturing sector as an employer was in 1989, when it employed more than 1.5?million people.

Today, that has fallen to about 1.1?million, a 25% decline that almost exactly mirrors the decline in mining jobs due to the implosion of the gold sector.

The job losses in these former pillars of the labour market have been largely counteracted by government, which grew its workforce from almost 1.6?million in 1994 to about 2?million today if you include the municipalities and other state entities falling outside national or provincial departments.

Virtually all of that growth has taken place since 2007.

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