Is the manufacturing sector an engine of growth in South Africa? an analysis of the Eastern Cape

Abstract

In this thesis the manufacturing sector is assumed to be an engine of growth in South Africa, specifically in the Eastern Cape. The nature of the study is set out in Chapter 1. lts importance in the future economic growth and development of South Africa and the Eastern Cape is stressed by the various theories that are discussed in Chapter 2. Chapters 3 and 4 survey general evidence on the manufacturing industry in South Africa and the Eas1ern Cape. The manufacturing industry in South Africa and the Eastern Cape is at present passing through a difficult period of reorientation and reassessment. lts very success in industrial expansion has created problems. Chapter 5 analyses the problems encountered by the manufacturing industry, both in South Africa and the Eastern Cape. Finally, a summary of the main findings and recommendations on the study are outlined in Chapter 6. The manufacturing industry in South Africa began with the production of certain products for the mining industry. Furthermore, consumer goods were produced for the small and protected home market. The manufacturing sector has been performing below its potential since the early 1990s. This has inhibited growth, employment and development. Since the late 1990s, the manufacturing industry has been on the road to recovery. It is universally acknowledged that the manufacturing industry bas to face international competition in order to strengthen its role as the leading sector. South Africa and the Eastern Cape have to achieve a satisfactory growth rate in total output and employment. This is mainly due to the pressure of a rapidly growing population, a large part of which has a relatively low standard of living. The manufacturing industry, however, is regarded as the key to growth in an economy. This is mainly because of the limited development opportunities in agriculture and mining, and the unsustainable nature of service sector. In fact, the manufacturing industry is closely integrated with the primary sector and the service sector. Employment is one of the indicators of the size and importance of manufacturing. The declining share of employment in manufacturing is a world-wide problem. This problem cannot be easily solved. The service sector has not solved the employment problem. Empirical evidence shows that economies which can generate wealth from manufacturing and have innovative manufacturing activities, increase their chances of creating more employment opportunities. Hence, the manufacturing sector is estimated to be an engine of growth even in South Africa and the Eastern Cape.