Presentation is loading. Please wait.

Presentation is loading. Please wait.

Assessing the Manufacturing Sector and its Multiplier Effects on the South African Economy Presentation for : Manufacturing Circle & Media Briefing 8 December.

Similar presentations


Presentation on theme: "Assessing the Manufacturing Sector and its Multiplier Effects on the South African Economy Presentation for : Manufacturing Circle & Media Briefing 8 December."— Presentation transcript:

1 Assessing the Manufacturing Sector and its Multiplier Effects on the South African Economy Presentation for : Manufacturing Circle & Media Briefing 8 December 2011 By Dr Iraj Abedian Pan-African Investment & Research Services(Pty) Ltd.

2 Slide # 2 Outline 1. Trends in the South African manufacturing sector 2. Comparing South Africa vs. Peer Countries in Manufacturing Sector 3. Report on Sectoral multiplier effects 4. Impact of a sustained boost in manufacturing 5. Concluding Remarks: Policy Implications

3 TRENDS IN THE SOUTH AFRICAN MANUFACTURING SECTOR Increasing manufacturing output but declining manufacturing contribution to Gross Domestic Product

4 Slide # 4 Trends in Manufacturing Production Source: SARB and PAIRS

5 COMPARING MANUFACTURING SECTORS GLOBALLY: South Africa vs. Peer Countries

6 South Africa’s manufacturing value-added is lower than that of its emerging market peers

7 South Africa’s average growth lower than that of its emerging market peers Source: IMF & Respective Statistical Bureaus Average GDP Growth GDP Growth

8 Export growth has risen firmly amongst emerging market peers Source: IMF & Respective Statistical Bureaus

9 Sources of South Africa’s Global Competitiveness

10 Sources of Loss of Global Competitiveness: 1. Currency volatility and sustained strength since Rising cost-base, primarily due to “administered prices 3. Insufficient and poor infrastructure 4. Shortage of skills 5. Poor long-term planning- “not planning for growth”

11 Currency weakness not confined to South Africa, but Source: I-Net Bridge

12 Slide # 12 SA Rand Foreign Exchange Volatility is way Above Average Source: Datastream

13 Administered Prices and Erosion of Global Competitiveness? Source: Respective Statistical Bureaus Notes: India (2000 & 2009): Fuel, Power, Light and Lubricants Brazil: Electricity China: Electricity Russia: Public Utilities South Africa: Electricity

14 SECTORAL MUPLTIPLIER EFFECT Manufacturing remains a critical sector in the South African economy

15 A R1 investment in manufacturing results in a R1.13 increase in GDP Source: PAIRS

16 A R1 investment in manufacturing translates into 3 decent and sustainable additional jobs Source: PAIRS

17 A R1 investment in manufacturing results in a R0.13 increase in exports receipts Source: PAIRS

18 A R1 investment in manufacturing results in a R0.35 increase in fiscal revenue Source: PAIRS

19 IMPACT OF A SUSTAINED BOOST IN MANUFACTURING OUTPUT An extended boost in manufacturing will significantly impact on sustainable employment and other macroeconomic variables

20 Research Report: Simulation scenarios Tested 1. First scenario: Manufacturing output grows at 3.4% per annum (average forecast growth rate of manufacturing output between 2010 and Second scenario: Manufacturing output grows at 10% per annum (average estimate of the minimum sustainable GDP growth that will restore the momentum of the sector, given that the highest growth recorded between was 9.3% in 1981.

21 10-year cumulative effects of the economy- wide impact of an increase in manufacturing output 3.4% growth over 10 years (baseline scenario) 10% growth over 10 years (sustainable scenario) Change from baseline to sustainable scenario OutputR184 billionR537 billion % Employment158,000454, % InvestmentR116 billionR339 billion % Household consumption R136 billionR398 billion % Real wagesR61 billionR177 billion % Fiscal revenueR62 billionR182 billion % ExportsR52 billionR151 billion % ImportsR102 billionR297 billion % Exchange rate (R/$) -1.43%-4.08% % Consumer inflation-0.58%-1.66% % Source: PAIRS

22 Impact on Sectoral Output (R billion) 3.4% growth over 10 years (baseline scenario) 10% growth over 10 years (sustainable scenario) Change from baseline to sustainable scenario Manufacturing 94.5 (Shock amount) (Shock amount) % Mining % Agriculture % Wholesale & retail trade % Finance % Construction % Transport & Communication % Electricity % Source: PAIRS

23 Employment Effects (Number of jobs) 3.4% growth over 10 years (baseline scenario) 10% growth over 10 years (sustainable scenario) Change from baseline to sustainable scenario Manufacturing61,000173, % Mining8,70025, % Agriculture2,5007, % Wholesale & retail trade39,800112, % Finance16,60047, % Construction4,30012, % Transport & Communication2,8008, % Electricity7,40021, % Source: PAIRS

24 Real wages effects (R billion) 3.4% growth over 10 years (baseline scenario) 10% growth over 10 years (sustainable scenario) Change from baseline to sustainable scenario Manufacturing % Mining % Agriculture % Wholesale & retail trade % Finance % Construction % Transport & Communication % Electricity % Source: PAIRS

25 Concluding Remarks: 1. SA Manufacturing took 50 years to build, we should take care not to destroy it over 5 years. 2. Manufacturing worldwide has proved to be the source of sustainable economic performance and decent jobs. 3. In South Africa, manufacturing remains a key sector within the economy: a) It features amongst the top 3 sectors in terms of output, employment, exports and fiscal multiplier effects. b) It has a significant role in promoting other sectors in the economy. 4. SA is well placed to achieve sustainable growth of 10% in its manufacturing output with significant impacts on employment, real wages and other macroeconomic variables. This requires: a)An urgent and meaningful pact within the sector between Unions and Management. b)A serious re-examination of our macro and forex policies. c)An urgent removal of much procrastinated infrastructural bottlenecks in energy, water and other regulatory fields.

26 Slide # 26 Thank you for your attention

27 South Africa’s Exposure to Europe

28 South Africa’s Exposure to Europe


Download ppt "Assessing the Manufacturing Sector and its Multiplier Effects on the South African Economy Presentation for : Manufacturing Circle & Media Briefing 8 December."

Similar presentations


Ads by Google