Research on the Performance of the Manufacturing Sector

Services and Product Market Sectors

Information and facts: Service and Product Market Sectors

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  Seda products and marketing are generally geared to stimulate entrepreneurial spirit, motivate entrepreneurs, and encouraging inspired individuals to develop and sustain small businesses.
  
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  Products and product market sectors are generally developed at national office level and implemented at Branch / Service Area level, with some consultation at Provincial and District level. Limited consultation takes place with Local Authorities and municipalities to verify identified sectors and need for product adaptation.
  
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  Seda have identified new focus sectors, including the:
  
  1. 
     Services Sector (Consultants, ICT&E & Tourism),
     
  2. 
     the Manufacturing Sector (Equipment & Tooling, Metals Fabrication,
     
  3. 
     Chemicals and Detergent Packaging) and the
     
  4. 
     Agricultural sector (Agro-processing).
     
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  It is also clear that Seda’s focus is to employ the Technology Programme and the Incubation Programme to spear-head its planned transformation of manufacturing small businesses to further strengthen these businesses and fast track job creation by targeting labour absorbent sectors.
  

Recommendations: Service and Product Market Sectors

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  Service and Product development must be flexible and directed at local or international markets.
  
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  Seda must include National, Provincial, District and Branch co-ordinators and teams into the final consultation process of finalising Service and Product Market Sectors, as many unique challenges could be face when implementing its new strategy especially in rural areas where dynamics that could hinder successful implementation vary widely.
  
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  Seda should appoint industry specialists or captains with successful credibility in the various focus sub-sectors to partner and assist with implementation. This will be widely accepted, especially with already identified projects where opportunities exist for small manufacturing business in the supply value chains of various sub-sectors.
  
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  There needs to be greater alignment and management control, supervision and accountability between the Technology and the Incubation Programmes as so much focus now lies with their successful implementation to meets Seda’s new Strategic objectives and ultimately create more jobs.
  

Recommendations: Possible Working Relationships/Partnerships

Seda’s Role

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  To clean its database and clearly segment its client base to identify active small businesses in the manufacturing sector.
  
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  Profile ALL Seda clients in the manufacturing sector and sub-sectors to identify business who qualify as Established SMMEs, thus filtering out Survivalist SMMEs and stop diluting its efforts and energy.
  
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  To approach identified Industry Associations and Regulatory Institutions with a view to understanding their commitment to the local economy and Government’s drive for all Industries to create jobs.
  
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  Set up, host, and facilitate sub-sector co-ordinating and networking forums within its regional structures to bring the business in the first and second economy closer. This is the only credible way to actively bring about Joint-Ventures and mentoring opportunities for small businesses.
  
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  Quantify and report outcomes and successes of these forums at the dti and Council of Trade and Industry Institutions (COTII), and therefore place the development of small business high on the agenda at this level with key industry stakeholders.
  
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  Set-up a steering committee chaired by the PAD to confirm the identified value chains with the various relevant sub-sector key role players to jointly identify potential gaps. This would have been viewed as a proactive and consultative approach that will have the buy-in and support from all parties.
  
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  This steering committee would also align Seda’s current product offering with the potential opportunities identified in the abovementioned gaps, and therefore directly impact on Seda’s support to small businesses with relevant and outcomes-based products.
  
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  Seda can market this approach to the first economy industries as a value-add service by eliminating and significantly reducing time and procurement qualification of potential suppliers, to strengthen their Enterprise Development contribution on their BEE scorecard, thus getting them closer to the dti’s sector charter targets.
  
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  Seda should implement a self-monitoring toolkit which must be completed by all established opportunity-driven business in the sector, to audit development, growth and the impact of Seda’s interventions on new jobs created within these businesses annually.
  
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  Seda must further strengthen and build capacity within its District offices and Surrounding Service Areas where Seda’s actual service delivery to small business are implemented, as this is where their capacity and readiness to seize opportunities will be questioned and tested by first economy businesses.
  
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  Seda’s District offices must be exposed to and understand the various medium to long term Local Government projects identified within their LED IDP’s within the various local municipalities in order to realize development and procurement opportunities for small business and create jobs especially in the outlying and rural areas.
  
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  Due to the impact of the recent global recession on some of the manufacturing sub-sectors and the operational nature of manufacturing businesses in general, coupled with high logistics and transportation costs, Seda could also, during the network forums, establish which big businesses have spare factory space that could be leased to small business Joint-Venture partners.
  

SECTION 9: CONCLUSION

This study shows the performance of the manufacturing sector in South Africa and its impact and importance for SMMEs, especially for job creation. Section 2 provides a background to the international manufacturing environment and shows the dominant position of the US, China, and to a lesser extent Japan, as the manufacturers of the World. It also shows how China increased their manufacturing output from a mere 3% in 1990 to 18.9% in 2010. Although there are practises of labour mistreatment and exploitation, lessons can be learned from this.

Section 3 discusses detailed manufacturing data for South Africa. This includes the manufacturing sector relative to other sectors, showing that the SA manufacturing sector is growing slower in comparison to other sectors and has shrunk from 19% of GDP in 1993 to 17% of GDP in 2010. Petroleum products, chemicals, rubber and plastic as well as metals, metal products, machinery and equipment and food, beverages and tobacco are the largest sectors in the economy. Other non-metal mineral products showed the slowest growth over the period 1993 to 2010 and petroleum products, chemicals, rubber and plastic the highest growth. The data in section 3 also shows investment trends, with motor vehicles and parts receiving the largest portion followed by special machinery. It further highlights sectors with high employment potential and imports and exports per sector.

Section 4 provides a review of recent government’s macroeconomic and development policies on a national, provincial and local level. The goal is this section is to identify mentioned manufacturing sectors and initiatives. This includes the NGP, IPAP2, PGDS. Key sectors identified in IPAP2 include metal fabrication, capital and transport equipment, oil and gas, ‘green’ and energy-saving industries, agro-processing (linked to food security and food pricing imperatives), boatbuilding, automotive (products and components, and medium and heavy commercial vehicles), plastics, pharmaceuticals and chemicals, clothing, textiles, footwear and leather, bio fuels, forestry, paper, pulp and furniture, cultural industries and tourism, business process servicing, nuclear, advanced materials and aerospace.

Recommendations and policy initiatives are discussed in section 8. This provides an overview of the international environment, local environment and role and initiatives for SEDA. Important aspects from this section include the increase of international competitiveness from especially China, and the need for SA to improve its productivity. This will also include finding niche markets of specialisation, as well as areas where SA has a competitive advantage. This can either be in the form of new product innovation, import substitution or supporting sectors that already show strong export capability. There is also a need of financial support for SMMEs, especially in economic recessions (where potential bankruptcy is not as a result of bad management), as well as a need to increase the profitability of the manufacturing sector to attract new investment and new talent and innovation to the sector.

There is a greater need for policy alignment, not only for industrial policy, but also, for example, targeted education for key sectors. Transport strategies and employment regulations must also be aligned to create employment and to grow the manufacturing sector.

SMMEs have the potential to create more employment opportunities, in comparison to large companies, and must be supported to create sustainable employment in SA.