SOUTH African manufacturers are looking to East Africa as economic growth grinds to a virtual standstill on
the southern tip of the continent.
More than 30 South African manufacturers are hoping to unlock opportunities later this month at the inaugural Manufacturing East Africa conference in Nairobi, where potential business partners will be connected.
“One of the challenges South African manufacturing faces is low domestic demand, which is connected to low GDP growth. Our economy is not growing to the extent that we would like to see, and as a result, demand for our manufactured product is not as strong as we would like to see,” said Liz Hart, managing director of Siyenza Management, one of the organisers of the event.
“One of the ways to mitigate this is to identify markets for export, hence one of the driving forces behind the
East Africa indaba is to identify new opportunities.”
South Africa’s economy grew by 0.3% in 2016 compared with 1.3% in 2015, and growth is set to be further
depressed by political turmoil.
A recent cabinet reshuffle by President Jacob Zuma saw the axing of finance minister Pravin Gordhan and his
deputy Mcebisi Jonas, sparking fears around policy uncertainty.
Analysts have warned that the country could experience several years of recessionary conditions after the cabinet reshuffle triggered credit downgrades by ratings agencies Standard & Poor’s and Fitch.
Moody’s has indicated that it may follow suit. East Africa, on the other hand, is booming.
Ethiopia, Kenya, Rwanda, Tanzania and Uganda are expected to grow by 5% to 8% in 2016/ 2017, according
to the International Monetary Fund (IMF).
These countries have been boosted by infrastructure investment and healthy consumer demand.
Some concerns have been raised about the sustainability of East Africa’s growth, given a lack of manufacturing, massive fiscal spending and a reliance on aid and agriculture.
But others point out that the region is ripe for industrialisation.
In a report published on its website in November, CNBC Africa compared East Africa to Korea in 1960, which invested heavily in its economy.
“Yes, Korea was running a large current account deficit during the 1960s, as it had too little domestic savings, but during their initial growth surge, deficits of around 10% of GDP were normal for all the most successful middle income countries,” the report points out.
“Investment-led growth is an ugly duckling before it matures.”
Hart said the conference was a platform to capitalise on the prevailing climate.
“The purpose of the conference is to grow manufacturers and expose them to the latest trends, innovations and opportunities whereby they can secure more business, sell more products and services and learn about Manufacturing efficiencies,” Hart said.
“It is also a gathering for senior government officials to engage with the private sector and to assist with information about incentives, policies, etc. to help them grow and develop.” – www.getbiz.co.za