Transcript Diapositiva 1 - Manufacturing Circle

Assessing the Manufacturing Sector and its
Multiplier Effects on the South African
Economy
Presentation for :
Manufacturing Circle & Media Briefing
8 December 2011
By
Dr Iraj Abedian
Pan-African Investment & Research Services(Pty) Ltd.
Outline
1. Trends in the South African manufacturing
sector
2. Comparing South Africa vs. Peer Countries in
Manufacturing Sector
3. Report on Sectoral multiplier effects
4. Impact of a sustained boost in manufacturing
5. Concluding Remarks: Policy Implications
Slide # 2
TRENDS IN THE SOUTH AFRICAN
MANUFACTURING SECTOR
Increasing manufacturing output but declining manufacturing
contribution to Gross Domestic Product
Trends in Manufacturing Production
22
(a) Contribution of manufacturing
to GDP (%)
21
20
19
18
17
16
1970
1977
1984
1991
Contribution to GDP
1998
2005
(b) Growth of manufacturing output
(%)
9
7
5
3
1
-1
-3
-5
-7
-9
-11
1970
1977
1984
1991
1998
Growth of manufacturing output
Trend
Source: SARB and PAIRS
Slide # 4
2005
Trend
COMPARING MANUFACTURING
SECTORS GLOBALLY:
South Africa vs. Peer Countries
South Africa’s manufacturing value-added is
lower than that of its emerging market peers
South Africa’s average growth lower than
that of its emerging market peers
Average GDP Growth 2000-2010
Source: IMF & Respective Statistical Bureaus
GDP Growth 2009-2010
Export growth has risen firmly amongst
emerging market peers
40
30
20
%
10
0
-10
-20
Turkey
Argentina
Vietnam
Brazil
South Africa
Philippines
Indonesia
Thailand
Source: IMF & Respective Statistical Bureaus
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
-30
Sources of South Africa’s Global
Competitiveness
Sources of
Loss of Global Competitiveness:
1. Currency volatility and sustained strength
since 2002
2. Rising cost-base, primarily due to
“administered prices
3. Insufficient and poor infrastructure
4. Shortage of skills
5. Poor long-term planning- “not planning for
growth”
Currency weakness
not confined to South Africa, but
Source: I-Net Bridge
SA Rand Foreign Exchange Volatility is
way Above Average
Source: Datastream
Slide # 12
Administered Prices and
Erosion of Global Competitiveness?
Source: Respective Statistical Bureaus
Notes: India (2000 & 2009): Fuel, Power, Light and Lubricants
Brazil: Electricity
China: Electricity
Russia: Public Utilities
South Africa: Electricity
SECTORAL MUPLTIPLIER EFFECT
Manufacturing remains a critical sector
in the South African economy
A R1 investment in manufacturing
results in a R1.13 increase in GDP
R 1.79
R 1.13
R 0.81
R 0.72
R 0.60
R 0.49
Agriculture
Manufacturing
Construction
Wholesale &
Retail
Mining
Output multiplier
Source: PAIRS
Finance
R 0.03
R 0.03
Transport &
Communication
Electricity
A R1 investment in manufacturing translates
into 3 decent and sustainable additional jobs
10.5
3.3
3
2.5
1
Agriculture
Wholesale &
Retail
Manufacturing
Construction
Finance
Employment multiplier (units)
Source: PAIRS
0.5
Mining
0.1
0.1
Transport &
Communication
Electricity
A R1 investment in manufacturing
results in a R0.13 increase in exports receipts
R 0.22
R 0.15
R 0.13
R 0.11
R 0.09
R 0.07
R 0.07
R 0.01
Agriculture
Transport & Manufacturing
Communication
Construction
Wholesale &
Retail
Exports multiplier
Source: PAIRS
Mining
Finance
Electricity
A R1 investment in manufacturing
results in a R0.35 increase in fiscal revenue
R 0.56
R 0.35
R 0.26
R 0.23
R 0.19
R 0.16
Agriculture
Manufacturing
Construction
Wholesale &
Retail
Mining
Fiscal revenue multiplier
Source: PAIRS
Finance
R 0.01
R 0.01
Transport &
Communication
Electricity
IMPACT OF A SUSTAINED BOOST IN
MANUFACTURING OUTPUT
An extended boost in manufacturing will significantly impact
on sustainable employment and other macroeconomic
variables
Research Report:
Simulation scenarios Tested
1.
First scenario:
Manufacturing output grows at 3.4% per annum (average
forecast growth rate of manufacturing output between
2010 and 2020.
2. Second scenario:
Manufacturing output grows at 10% per annum (average
estimate of the minimum sustainable GDP growth that will
restore the momentum of the sector, given that the highest
growth recorded between 1970-2010 was 9.3% in 1981.
10-year cumulative effects of the economywide impact of an increase in manufacturing
output
Output
Employment
Investment
Household
consumption
Real wages
Fiscal revenue
Exports
Imports
Exchange rate
(R/$)
Consumer inflation
Source: PAIRS
3.4% growth
over 10 years
(baseline
scenario)
R184 billion
158,000
R116 billion
10% growth
over 10 years
(sustainable
scenario)
R537 billion
454,000
R339 billion
R136 billion
R398 billion
192.65%
R61 billion
R62 billion
R52 billion
R102 billion
R177 billion
R182 billion
R151 billion
R297 billion
190.16%
193.55%
190.38%
191.18%
-1.43%
-4.08%
185.31%
-0.58%
-1.66%
186.21%
Change from baseline to
sustainable scenario
191.85%
187.34%
192.24%
Impact on Sectoral Output (R billion)
Mining
3.4% growth
over 10 years
(baseline
scenario)
94.5
(Shock amount)
8.5
10% growth
over 10 years
(sustainable
scenario)
277.8
(Shock amount)
25.0
Agriculture
2.7
8.0
196.30%
Wholesale & retail trade
14.4
42.0
191.67%
Finance
11.0
31.3
184.55%
Construction
1.3
3.7
184.62%
Transport & Communication
14
41.0
192.86%
Electricity
5.5
16.2
194.55%
Manufacturing
Source: PAIRS
Change from baseline to
sustainable scenario
193.97%
194.12%
Employment Effects (Number of jobs)
3.4% growth
over 10 years
(baseline
scenario)
10% growth
over 10 years
(sustainable
scenario)
Change from baseline to
sustainable scenario
Manufacturing
61,000
173,000
183.61%
Mining
8,700
25,300
190.80%
Agriculture
2,500
7,100
184.00%
Wholesale & retail trade
39,800
112,400
182.41%
Finance
16,600
47,500
186.14%
Construction
4,300
12,500
190.70%
Transport & Communication
2,800
8,200
192.86%
Electricity
7,400
21,800
194.59%
Source: PAIRS
Real wages effects (R billion)
3.4% growth
10% growth
over 10
over 10 years Change from baseline to
years
(sustainable
sustainable scenario
(baseline
scenario)
scenario)
Manufacturing
39.3
114.6
191.60%
Mining
1.2
3.5
191.67%
Agriculture
1.0
2.8
180.00%
Wholesale & retail trade
6.3
18.3
190.48%
Finance
5.2
15.0
188.46%
Construction
0.55
1.6
190.91%
Transport & Communication
2.9
8.6
196.55%
Electricity
1.3
3.8
192.31%
Source: PAIRS
Concluding Remarks:
1. SA Manufacturing took 50 years to build, we should take care not to
destroy it over 5 years.
2. Manufacturing worldwide has proved to be the source of sustainable
economic performance and decent jobs.
3. In South Africa, manufacturing remains a key sector within the economy:
a) It features amongst the top 3 sectors in terms of output, employment, exports
and fiscal multiplier effects.
b)
It has a significant role in promoting other sectors in the economy.
4. SA is well placed to achieve sustainable growth of 10% in its
manufacturing output with significant impacts on employment, real wages
and other macroeconomic variables. This requires:
a) An urgent and meaningful pact within the sector between Unions
and Management.
b) A serious re-examination of our macro and forex policies.
c) An urgent removal of much procrastinated infrastructural bottlenecks
in energy, water and other regulatory fields.
Thank you for your attention
Slide # 26
South Africa’s Exposure to Europe
South Africa’s Exposure to Europe