In the global economic outlook there is a persistent unease with economic activity appearing quite vulnerable the past year. Even advanced economies struggled to speed up growth. The sluggish growth in the world economy of 2.3 per cent in 2016, has largely been attributed to the slowdown in the Chinese economy, geopolitical risks and tensions on the global front. The latest Economic Report on Africa (2017) reveals that economic growth on the continent in 2016 has declined to 1.7 per cent amid these weak global conditions with South Africa at 0.6 per cent.
The latest indicators in South Africa shows no sign of improvement and the country is officially in a recession. With a contracting economy and rising unemployment (27%), the country has seen a fall in trade by 5.9 per cent and manufacturing by 3.7%. Closer to home, Port Elizabeth, the primary manufacturing centre for the automotive industry in South Africa, the region’s contribution to the national GDP slowed as a result of pressures in the automotive sector. The motor industry, as the backbone of the local economy, has seen slow growth.
A manufacturing economy is probably the strongest differential to rate a country’s competitiveness and the importance of exports in economic growth is indisputable. Exports influence the level of growth in the economy, employment and so on. South Africa is ranked 37th in the category of top exporting countries. The top manufacturing countries in the world in 2016 were China, USA, Germany and Japan.
Improved export performance will positively impact employment, economic growth and the current account deficit. In the Eastern Cape, with high unemployment figures and low economic growth, this is just what is needed. Raising exports, amongst others, is a critical element of the national strategy to accelerate inclusive economic growth. The Vision of Exporters Eastern Cape is to create an environment for members to become globally competitive exporters by facilitating networking. Exporters Eastern Cape is a non-profit making organisation for person or companies involved in exporting, either directly or indirectly, or for persons or companies with an interest in exporting. The mission is to encourage more local firms to prepare themselves to take on the challenge of exporting and to assist existing exporters to become more globally competitive.
Whilst competitiveness is the fulcrum of an export economy, innovation, creativity and invention remains rudimentary to achieving success in developed economies. Whilst these three forces can give companies a competitive edge, the life cycle of technology dictates that nothing is absolute. Change is inevitable. To remain competitive and relevant in a fast paced changing world innovation is key. The NDP also recognises the reliance of SA competiveness on innovation which must permeate business and society.
Although the manufacturing of goods has traditionally dominated an export economy, there must be other modalities such as export of services that are preeminent in a knowledge economy. Thus, whilst we rely heavily on the manufacturing sector in Port Elizabeth to drive the export economy, there are other modalities to explore.
There appears to have been much talk about making Port Elizabeth a smart city. That’s good if we develop this opportunity into an export economy so that we can harvest the benefits of improved employment, economic growth and a lower current account deficit. The role of Exporters EC is vital, but more important are the factors that determines the levels of exports. Competitiveness, as a key factor, is determined by labour unit costs, inflation, productivity and infrastructure. Other factors are the quality and value added of products, the exchange rate and the level of economic growth in other countries.
As alluded to previous, in this rapidly changing world nothing is permanent. The advanced economies of the world today may change a few years from now. The biggest economies in 2050 are predicted to change and technology will play a definitive role.
A new study by PriceWaterhouseCoopers says that China will be in first place by 2050, because emerging economies will continue to grow faster than advanced ones. India will rank second, the US will be third, and fourth place is expected to go to Indonesia. The UK could be down to 10th place by 2050, while France could be out of the top 10 and Italy out of the top 20 as they are overtaken by faster-growing emerging economies such as Mexico, Turkey and Vietnam.
The report also states that the world economy could more than double in size by 2050, far outstripping population growth, due to technology-driven productivity. This means that we must seize the opportunity and leverage technology in our economic activity to fuel growth.
To support an export economy, the Eastern Cape needs an ecosystem with internal attributes such as competiveness, innovation, skilled and efficient workforce, collaboration and leadership. The external attributes include an enabling regulatory environment, proactive and resilient industry associations, finance and investment and efficient support services. Such an ecosystem will also help transform modest, successful domestically based businesses to become globally competitive and export- based. The Exporters Eastern Cape, formed over 35 years ago, is evidence of a network of exporters with abiding vision, resilience and courage. Our province and country needs men and women of this caliber to take the field in this highly competitive game. The Nelson Mandela Business School, a forward thinking, institution, is committed to prosperity, sustainability and development. The Business School cultivates leaders for a changing world by equipping students with problems solving skills, entrepreneurship skills, innovation and creative thinking and competitive intelligence.
The importance of a strong manufacturing base as crucial for an export economy, is profoundly, yet plainly stated in the words of Former US President Barack Obama:
“We can choose a future where we export more products and outsource fewer jobs. After a decade that was defined by what we bought and borrowed, we’re getting back to basics, and doing what America has always done best: We’re making things again”.
Randall Jonas (PhD)
2017/08/04