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South Africas big five bold priorities for inclusive growth

02 Sep

SOUTH AFRICA’S BIG FIVE:

BOLD PRIORITIES FOR INCLUSIVE GROWTH

South Africa has travelled a remarkable road in the two decades since its transition to democracy. Since 2008, however, average annual GDP growth has slowed to just 1.8 percent, while unemployment has stubbornly remained at 25 percent. This report identifies five bold opportunities that can reignite South Africa’s progress. If the country’s government and businesses prioritise them, the “big five” could increase GDP growth by 1.1 percentage points per year, adding one trillion rand ($87 billion) to annual GDP by 2030 and creating 3.4 million new jobs.1 These opportunities include:

  • Advanced manufacturing. South Africa can draw on its skilled labour to grow into a globally competitive manufacturing hub focussed on high-value added categories such as automotive, industrial machinery and equipment, and chemicals. To realise this opportunity, however, South African manufacturers will have to pursue new markets and step up innovation and productivity.
  • Infrastructure productivity. South Africa is investing heavily in infrastructure, but big gaps remain in electricity, water, and sanitation. By forging a true partnership, the public and private sectors can together drive three strategies to make infrastructure spending up to 40 percent more productive: making maximum use of existing assets and increasing maintenance; prioritising the projects with greatest impact; and strengthening management practices to streamline delivery.
  • Natural gas. South Africa’s electricity shortage has constrained growth, and despite new capacity, another shortfall is projected between 2025 and 2030. Natural gas plants—which are fast to build, entail low capital costs, and have a low carbon footprint—can provide an alternative to diversify the power supply. With the necessary regulatory certainty, we estimate that South Africa could install up to 20GW of gas-fired power plants to diversify base-load capacity by 2030. Gas can be provided through imports, local shale gas resources (if proven), or both.
  • Service exports. South Africa has highly developed service industries, yet it currently captures only 2 percent of the rest of sub-Saharan Africa’s market for service imports, which is worth nearly half a trillion rand ($38 billion). With the right investments, service businesses could ramp up exports to the region; and government can help by promoting regional trade deals. In construction, the opportunity ranges from design to construction management to maintenance services. In financial services, promising growth areas include wholesale and retail banking and insurance.
  • Raw and processed agricultural exports. With consumption rising in markets throughout sub- Saharan Africa and Asia, South Africa could triple its agricultural exports by 2030. This could be a key driver of rural growth, benefiting the nearly one in ten South Africans who depend on subsistence or smallholder farming. Capturing this potential will require a bold national agriculture plan to ramp up production, productivity, and agro-processing.

    Successfully delivering on these priorities will move South Africa closer to realising its long-held vision of a “rainbow nation” characterised by shared prosperity for all. But first the country will need to embrace some fundamental changes to become more globally competitive; not least, it will have to address a serious skills shortage through a dramatic expansion of vocational training. Tackling such foundational issues will require business and government to come together in a new partnership characterised by shared vision, collaboration, and trust.

Read the complete report

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Posted by on September 2, 2015 in Investments

 

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