City of Ekurhuleni

Ekurhuleni Press Releases

Welcoming Address by MMC Nkosindiphile Xhakaza at the start of the Manufacturing Indaba at Emperor's Palace, 27 June 2017

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Programme Director,

Minister of Trade and Industry, Dr Rob Davies

The Director-General of Trade and Industry, Mr Lionel October

The Members of the Mayoral Committee of Ekurhuleni,

Leaders of Business,

Invited Guests,

Ladies and Gentlemen,

I am greatly honoured to be here today for the start of the Manufacturing Indaba. We as the City of Ekurhuleni are greatly excited to be hosting this Manufacturing Indaba.

Our excitement is informed by our confidence that our City will benefit immensely from the insights that will be shared by you as leaders in the manufacturing sector, in government, in research and development institutions and the investor community in general.

The manufacturing sector in Ekurhuleni remains the largest contributing sector which accounts for 21.5% of the total GVA, followed by services sector at 20.7%, and finance sector at 20.5%.

The manufacturing sector in Ekurhuleni constitutes an average of 27.9% to overall Gross Value Addition in Gauteng. This accounts for 11.4% of South Africa's overall Gross Domestic Value Addition in the manufacturing sector. In this regard, it is clear that Ekurhuleni remains a manufacturing hub for both the province of Gauteng and South Africa in general.

Therefore, the manufacturing sector is a very critical pillar of Ekurhuleni's overall economic life. It has sustained the economy of our region over many decades. This sector has provided among the largest numbers of employment for the people of our region. Between 2002 and the 2008 Global Financial Crisis, the manufacturing sector provided employment to more than 150 thousand citizens of Ekurhuleni.

However, the dynamics of the global economy have had major negative effects for our domestic economy in recent times. These negative conditions escalated between 2008 and 2014 as the Global Financial Crisis intensified. Among others, the intensity of the financial crisis in the Eurozone- which is South Africa's leading trade partner- meant that there was a serious decline in demand for our manufactured goods.

Before the global crisis, Ekurhuleni had a positive growth trend in our overall exports sector. Our exports grew from R10 billion in 2003 to above R40 billion in 2008 through the metals manufacturing industry. We began to experience a sharp decline between 2008 and 2009 which has been followed by an unstable trend of growth and decline since 2009 to date.

Essentially, global uncertainty and the fall in global demand have led to low levels of investment in our export sectors and particularly in manufacturing. There has been a troubling trend of a decline in export orders which has limited and sometimes pushed back production volumes which lead to a loss of jobs. As an aggregate, the rate of employment in the manufacturing sector of Ekurhuleni has contracted by an average 13.7 % over the past 20 years.

Although overall growth has started to pick up in the manufacturing and equipment clusters, employment creation has remained very low. This has been partly due to the fact that business confidence has remained quite lower than the required rate since the 2008 financial crisis.

The recent released Manufacturing Survey by Absa shows that Business Confidence has fallen to 16 index points in the Second Quarter of 2017. This is a fall from 28 index points in the previous quarter.

Despite all of these challenges to growth in manufacturing, in our strategic development plans this sector remains an important area around which we forecast our regional growth prospects. This is an important factor since our region battles a high unemployment rate of about 34%.

In the context of that high level of unemployment, we are faced with a pressing need to invest in economic sectors with high industrial capacity and a high rate of labour-absorption.

Therefore, our regional economic imperatives are centred on strengthening our manufacturing industries as well as making strategic investments in the development of economic infrastructure such Township Industrial Estates, Township Industrial Parks, as well as reinforcing the culture of entrepreneurship by leveraging the municipality's procurement spending to crowd-in investment and support local companies.

Our focus on manufacturing is also informed by our appreciation of global trends in the performance of the manufacturing sector. Our commissioned research overtime has revealed that the global manufacturing sector is entering a dynamic phase that brings about a wide range of new market opportunities.

For instance, market trends approximate that by 2025 a new global consuming class will have emerged in particularly the developing economies. This is due to the steady growth of middle classes in numerous economies in Africa, Asia and elsewhere.

This growth in new consuming classes globally which will push demand for a variety of consumer goods. In this regard, there is greater need for product variation in the manufacturing sector- especially innovations in materials and processes in hi-tech industries.

Although in the current economic climate the manufacturing sector is still battling, there is room for strategic advances in the sector if we as policy makers and investors exploit opportunities that exist in other sectors.

For instance, despite the recent announcement that the South African economy has entered into its first technical recession since 2009 the Agricultural sector has remained resilient and it grew by 22.2% in the first Quarter. This growth trend in agricultural output is expected to continue for the remainder of the year due to bumper maize crops.

However, our local manufacturing loses potential knock-on effects from this growth in agriculture. This is because currently as a country we import agricultural inputs such as machinery, fertilizer and seeds.

The fact that we are not manufacturing these agricultural inputs means that we are failing to exploit positive developments in other local economic sectors in order build a resilient manufacturing sector.

This indaba needs to reflect on this situation and discuss possible initiatives that we can come up with together as business and government. We need to work together to turn the tide and place our manufacturing industries and overall economy on a better performance trajectory in the Third Quarter of 2017 and beyond.

As it stands we as the leadership of Ekurhuleni have focused our policy initiatives around the manufacturing sector as the catalyst for future growth; with positive spin offs for other sectors like finance, retail, tourism and the services sectors.

Our 10-point plan for regional economic development includes a strategic focus on re-industrializing our regional economy. Our Industrial strategy has a strong emphasis towards boosting manufacturing and improving our product diversity in line with the changing market structure locally and globally.

Our key flagship programmes that drive these industrialization plans include our policy strategy for the Revitalization of our Manufacturing Sector by focusing interventions in metal fabrication, rail transport equipment, and air transport.

Already the metal products, machinery and household appliances sector is on a comparatively strong path of growth against other sectors. From 2012 to date, this sector has been growing at an average annual value of R20 billion.

We as a city have committed R619 million over the next 3-year Medium Term Revenue and Expenditure Framework for bulk infrastructure rollout to support economic development. We will continue to increase our expenditure in bulk infrastructure in line with our Growth and Development Strategy (2055)

Our infrastructure investment programme is also linked to our Aerotropolis Masterplan which is our development strategy for building Ekurhuleni as an airport City that is a gateway to Africa and the world. We want to place Ekurhuleni as a strategic logistics centre for the entire South African economy; especially in providing beneficiation, storage and transportation of industrial products to external markets in the continent and the world.

We have committed ourselves to increasing public sector investment in public and economic infrastructure as part of our contribution to making the costs of business cheaper. As already mentioned, our investments in capital projects are geared towards this end but we strongly need private sector investment in order to achieve the levels of growth that will create jobs and overall economic prosperity for our people.

We therefore call on business leaders to join us in our efforts to grow our economy. The risk we face continues to be the low levels of private sector investments that have been consistent throughout the post-2008 period due to the environment of slow global economic growth.

As a city we are also working hard to improve our research development capabilities as a critical feature of facilitating productive investment in innovation and technology.

The manufacturing of more knowledge-intensive goods requires modern infrastructure (i.e. access to the internet), specialised and skilled employees, access to funding, access to new markets, advanced business acumen, advanced machinery and equipment, and a network of experts.

Our strategic efforts in this regard are going towards our campaign to have an Ekurhuleni University of Technology. A University of this nature will play an important role in skills development that serve the dynamic needs of a modernizing manufacturing sector.

We want this future University to serve as the backbone of our regional research development and innovation that help improve our global competiveness by producing a large pool of skilled labour that will support private investment in manufacturing.

Ladies and Gentlemen, I wish to once again state how important this Manufacturing Indaba is to us. As I have explained already, its discussions will; give much needed insights to improve and implement our existing policies that pursue growth for Ekurhuleni around the manufacturing sector.

I therefore wish you good luck and all the best in your deliberations.

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