The successful expansion of a country’s manufacturing sector has proven to be a sure-fire catalyst for economic take-off. The rapid and sustained growth of the so called “Asian Tigers”, South Korea, Taiwan, Singapore and Hong Kong is evidence of this.
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In the past 50 years, China has replicated this with astounding results.
Matures
As the Chinese economy matures and the service industry begins to achieve more prominence, countries such as Vietnam, Bangladesh and Sri Lanka are benefiting greatly from the relocation of lower-end (but labour intensive) manufacturing.
As Martyn Davies and Yuwa Wong write in the Business Times of January 26, Vietnam’s employment in manufacturing increased by 24 percent between 2013 and 2015.
Claim
While in the past the possibility of African countries staking a claim to some of this migration of manufacturing from China was minimal due to geography, the huge improvements in international transport logistics has now taken this constraint out of the equation.
Indeed many of the huge port developments in Ethiopia and Kenya for example, make them primed to pounce on this opportunity.
Head start
So how are we placed in this race? In the same article, the authors highlight that while increasing average wages in China are now around $900/m from $625 in 2013, five African countries, including Ghana and Rwanda have wage rates significantly lower, giving them a head start in the race.
South Africa’s manufacturing wage rate is substantially higher.
This has got to be a significant object lesson for organised labour which continues to push up the wages and benefits of their members who make up a diminishing number of the available labour force.
How do they expect to create employment in manufacturing when the pursuit of the interests of their members essentially bars hundreds of thousands of new job opportunities?
Policies
Of course it would be foolish to ignore other potential hurdles – the electricity challenges and poor port performance being top of mind, but as Davis and Wong caution, the building of an industrial-driven economy is a generation-long process that will not happen through simply changing policies.
Indeed had this been possible, with the plethora of policy changes we have seen over the past 10-15 years (IPAP, NEPAD, NDP) we would not be mired in the economic doldrums in which we currently sit.
After matriculating, Vijay Naidoo studied Economics in the UK. Upon his return, he joined the family construction business as MD for 10 years.
He subsequently joined his sister in their furniture manufacturing business as director for quality assurance and operations. He was responsible for all quality aspects of their products, and led the project to the business achieving an ISO 9000 quality accreditation. As an export focused business, this was important for our international competitiveness.
Mr Naidoo has an abiding interest in quality management and productivity improvement, particularly in manufacturing.
More recently, he has focused a lot of his time on giving back to the community by way of mentorship of small businesses and sitting on the executive of the South Coast Chamber of Commerce. He also sits on the Board of the Ugu South Coast Development Agency.
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