Green stimulus

17th May 2024

By: Terence Creamer

Creamer Media Editor

     

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South Africa’s manufacturing sector is in dire need of stimulus.

In its recently released ‘Industrial Policy & Strategy Review’, the Department of Trade, Industry and Competition (dtic) confirmed that the sharp fall in the share of manufacturing in the country’s GDP and employment has posed a challenge to industrial policy.

Having peaked at higher than 20% of GDP during apartheid, manufacturing’s share initially slumped sharply during the early years of democracy as the cold winds of globalisation battered previously insulated industries, before stabilising at about 12%.

Correctly, the review concludes that the key structural constraints of loadshedding, logistics bottlenecks and market concentration all have to be tackeled and overcome if there is to be any chance of either industrial expansion or economic growth.

Rightly or wrongly, it also argues that masterplans should continue to serve as the coordinating structure for sector-led development plans, notwithstanding the mixed outcomes to date, with the automotive sector’s successes not widely replicated.

Nevertheless, the review is also correct in its assessment that green industrialisation represents a serious manufacturing opportunity, and much store is being placed on the South African Renewable Energy Masterplan, which the report says is close to finalisation; a statement that has also been confirmed by the Department of Mineral Resources and Energy.

But while government obviously recognises green industrialisation to be strategic, it’s not clear it understands quite how strategic, particularly when viewed through the lens of our muddled energy policy.

Other countries are certainly more aware of this reality, largely because they have grasped that green industries are poised to displace oil as a key geopolitical consideration, along with AI and the key AI enablers such as microchips.

As South Africans, we have an immediate window onto this emerging reality, owing to our proximity to BHP’s bid for Anglo American. The Melbourne-based mining major’s offer for those parts of Anglo American that are “future facing”, notably Anglo’s copper assets, is a corporate response to this mega-trend.

The International Energy Agency’s recently published ‘Advancing Clean Technology Manufacturing’ report offers yet another window. It states that “booming investment in the manufacturing of clean energy technologies, especially solar PV and batteries, is becoming a powerful economic driver globally, creating new industrial and employment opportunities”.

Then there is the latest tracking data on the green- economy-linked, albeit with protectionist elements, Inflation Reduction Act. Published by E2 in the US, a group of business leaders, investors and professionals that seeks to influence what it describes as “smart policies”, the tracker states that more than 100 000 manufacturing jobs have been announced by companies since the Act was signed into law, on the back of 305 projects worth a combined $123-billion.

Naturally, South Africa’s fiscal resources cannot match those of countries such as the US. Our natural resources, however, are more than a match. What is needed now is political foresight and policy direction to truly unlock these for growth, development and jobs and to drive our reindustrialisation.

Edited by Terence Creamer
Creamer Media Editor

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