Manufacturing and the National Development Plan: which way forward?

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Notes

1. See UNIDO (2011, 112) for details on which product lines fall under this classification.

2. Using 2006 Quantec data. The NDP, however, misquotes the paper’s findings.

3. In comparison, Egypt’s was 48% and Nigeria’s was 21% (UNIDO 2011).

4. When Figure 1 is shown for South Korea, we can see how undiversified South Africa’s industrial structure is. See Memedovic and Lapadre (2009).

5. The role of the mining industry in supporting manufacturing in one way or another is also usually noted.

6. As a sector becomes more efficient it should, ceteris paribus, shrink as a percentage of GDP. This figure itself, however, provides no indication of the sector was becoming more efficient.

7. Labour’s share in output must take into account changes in the machine-to-labour ratio of production in order to provide any accurate comments on the changing share of labour in output. An increase in wages is consistent with a declining share of labour, if the number of workers is declining relative to output. Thank you to Rob Petersen for bringing this point to my attention.

8. This is the data SARB recommend researchers use. It is not available publicly through their online macro series.

9. This data is available on request. SARB data, adjusted in-house, based on Quarterly Employment Survey (QES) and StatsSA GDP figures.

10. The MEC as a core set of sectors includes mining and electricity, as well as certain manufacturing subsectors: chemicals (SIC 351-4); other non-metallic mineral products (SIC 361, 369); iron and steel (SIC 371), and non-ferrous metal basic industries (SIC 372) (Bell and Farrell 1997).

11. Manufacturing production allows for a complex international division of labour, owing to it being amenable to high degree of specialisation. This allows for significant productivity and employment growth, and increases in value-added as manufacturing evolves.

12. This argument requires further interrogation, which cannot be done here.

13. The inclusion of the word “services” is not an accident. Despite the “resource curse” being associated with primary commodities, integral to the NDP’s diversification strategy is financial services; this despite its high-skills requirement and the possibility of it draining much-needed resources away from manufacturing – a very real possibility noted by the Bank for International Settlements (Cecchetti and Kharroubi 2012). Domestically orientated services (retail, personal services, security, domestic services, office cleaning) will contribute 40% of employment growth in the NDP’s diversified scenario of expansion.

14. This is the data SARB recommend researchers use. Not available publicly through their online series.

15. This data is available from me on request to confirm this trend. SARB data, adjusted in-house, based on QES and Stats SA GDP figures.

16. Industries with greater machine intensity will have, ceteris paribus, higher rates of labour productivity.

17. Captured in a “unit labour cost” (ULC).

18. In light of the above constraints, the NDP argues that South Africa should “compete in the mid-skill manufacturing and service areas, and niche markets.”

19. See Fine (1995) for a critique of the argument that deregulation of taxation and labour standards to attract foreign capital will be beneficial for South Africa’s development.