A.T. Kearney's Africa MD elaborates on South Africa's manufacturing sector

21 June 2018 Authored by Consultancy.co.za

The share of the manufacturing sector in the South African GDP has fallen from 20% to 12% over the last two decades. Theo Sibiya, Managing Director for Africa at management consultancy firm A.T. Kearney elaborates on the challenges facing the sector, and the way forward. 

A low degree of diversification in the economy – among other shortfalls – has cost South Africa in recent years. The country is particularly dependent on the mining sector, which suffered a substantial dip in revenues when the price of precious metals plummeted across the world, while the country’s banking sector was reported this year to be at its lowest point since the financial crisis.

A strong manufacturing sector is the hallmark of a stable economy, and developing countries across the world are engaged in targeted efforts to increase domestic production. India’s ‘Make in India’ campaign is one example of this, designed with the objective of ramping up production in 25 sectors across the economy.

In South Africa, the manufacturing sector has been progressing in the wrong direction, having dropped from contributing a fifth of the country’s GDP to just over 10% now. According to Theo Sibiya, the drop in the share of manufacturing has not only destabilised the economy, but has also hindered the overall economic growth and quality of life in the country.

What caused the drop? Sibiya’s answer is simple: South Africa simply fell behind in terms of innovative capabilities. As the economy globalized over the last two decades, international competitors flooded the South African markets with state-of-the-art innovative capabilities, and domestic manufacturers have struggled to keep pace.

Theo Sibiya, Managing Director Africa - AT Kearney

Innovation has emerged as the battle cry in all sectors of the South African economy recently, as the country continues joins the rest of the world in welcoming the industry 4.0 paradigm, which has now extended beyond large corporations to small and medium enterprises. Sibiya advocates a focus on innovation and a shift of attitude from adequacy to excellence.

What lies ahead? 

In light of the imminent arrival of industry 4.0, A.T. Kearney conducted an industry assessment of the level of preparedness in countries across the world. According to Sibiya, the manufacturing infrastructure in South Africa is robust and sophisticated, but the overall outlook for the sector looks bleak in its current form, primarily because it significantly lags behind other countries in terms of certain key indicators.

The first of these factors that Sibiya highlights is skill development – another issue that has increasingly come to the fore in South Africa lately. A recent report from strategy consultancy Accenture highlighted how the advent of artificial intelligence and robotics might put nearly 6 million people out of a job – a scenario that can be avoided if workers in South Africa developed the skills required to work in collaboration with machines.

Sibiya reinforces this claim, and cites the regulatory environment as the second barrier to the successful implementation of industry 4.0 in the country. Over the next few years, he recommends a focus on tackling these specific challenges to create the right business environment in the country.

His comments came in an interview at the Manufacturing Indaba conference in the Sandton Convention Centre in South Africa, where industry 4.0 was analysed by all stakeholders in the country’s manufacturing sector.

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