Session 7: Mining Communities and Migrancy

Session 7: Mining Communities and Migrancy

Session 8: Minerals Beneficiation 

Session 9: Energy Utilisation

The TIPS Annual Forum 2016 was held in partnership with the Centre for Competition, Regulation and Economic Development and the SARChI Chair in Industrial Development at the University of Johannesburg, and the United Nations University World Institute for Development Economics Research (UNU-WIDER), and in association with the Departments of Trade and Industry and Performance Monitoring and Evaluation.

Aim of conference

The conference aims to deepen understanding of regional industrialisation, the role of South Africa in that context, the value chains operating across the region, and the links between regional industrialisation and regional integration.  

Context for conference

The new millennium saw a significant turnaround in Africa’s growth prospects. During the period 2000 to 2010, Africa’s economic output tripled, increasing from US$587 billion to US$1.7 trillion. Poverty rates have dropped over the last 20 years from 60 percent to 38 percent. Going forward, seven of the ten projected fastest growing economies in the world over the next five years are located in Africa. Sub-Sahara Africa is expected to grow at an average of 5.4 percent per annum over the next five years. Yet commodities and the commodity boom are still key to growth in Africa. While there has been a significant increase in the manufacturing sector, in almost all African economies it still remains relatively small.

The linkage between industrial productive capacity, economic growth and level of development is an important consideration especially for the Southern African Development Community (SADC), as the region has low levels of industrialisation and ranks among the poorest in the world. Collectively, SADC is one of the least developed regions of the world in terms of industrialisation. In only one of the 15 Member States has the ratio of manufacturing value added to GDP risen above 20 percent. In more than half of member countries, the manufacturing sector’s contribution to GDP is less than 10 percent and in some cases lower than 5 percent. Furthermore, South Africa’s GDP per capita is five to seven times that of the rest of SADC, which is unusually large for a regional centre. 

Industrial development in the Southern African region therefore requires an approach that looks at the role of the lead economy and the opportunities for the smaller economies to increase their productive capacity and exports to South Africa. To further the regional development agenda it is important to understand the development of key industrial sectors and how regional value chains work in those sectors.    

Regional industrial development is tied into regional integration, which also covers market integration and infrastructure development. Regional integration can been seen as a useful tool towards stimulating economic development, supporting integration into the broader world economy as well as encouraging trade and securing economies of scale among the participating countries. In spite of the tariff liberalisation in Africa and all the advances in forming regional trade areas, however, there seems to be very little growth in intra-African trade, particularly in the Southern African region. 

For more information go to www.developmentdialogue.co.za

See Annual Forum papers

Main bulletin: The Real Economy Bulletin - First Quarter 2016

In this edition:

Production and sales: The first quarter of 2016 was marked by a contraction in GDP, with the economy reported as shrinking by 0,3%, or 1,2% on an annualised basis. The immediate cause of the downturn was a 4,9% quarterly decline (equal to 18% in annualised terms) in mining and a 1,7% fall (or 6,5% at an annual rate) in agriculture. These contractions had a particularly sharp impact on overall growth because of a longer-term slowdown in growth in manufacturing and, to a lesser extent, the rest of the economy, which dates back to around 2013. Read more.

Employment:  In year-on-year terms, employment in the real economy contracted by 2,6%. In agriculture it reportedly shrunk by 1,7% and in manufacturing by 7,9%, while construction saw an increase of 3%. In the rest of the economy, employment expanded by 3%. In mining, using the employer survey (which is considered more reliable for this sector), employment fell by 5.9% from the last quarter of 2014 to the last quarter of 2015. Read more.

Trends in trade: The year to the first quarter of 2016 saw a continued contraction in exports for both manufacturing and mining in dollar terms. In contrast, in constant rand both sectors saw growth, with manufacturing expanding by 4,6% and mining by 0,9%. Despite the drought, agriculture witnessed only a relatively mild dollar contraction of 6,5% and strong rand-denominated growth of 19%. Read more.

Profitability and investment: Profitability among all sectors of the economy declined in the final quarter of 2015. The mining sector continued to post losses, as it did throughout 2015, with fourth quarter losses almost doubling over the previous quarter. While manufacturing remained profitable overall, its profits also continued to decline, following a negative path that began in 2011. For the economy as a whole, the investment rate dropped sharply, but it rose slightly in manufacturing. Read more.

Behind the trends: A number of long-term factors continued to act as a drag on the South Africa economy, key among them being the depressed global economy, weak commodity prices, and the impact of the drought. These factors have been aggravated by pro-cyclical fiscal and monetary policies. Read more.

Fiscal pressure on industrial policy programmes: The 2016/17-2018/19 Medium Term Expenditure Framework (MTEF) is the product of a difficult economic climate. As a slowing global economy and depressed commodity prices put pressure on the budget, key government departments will have to grapple with the dual challenge of constrained fiscal conditions and the ever more pressing need to boost economic growth. One result is a cut in the Department of Trade and Industry’s (the dti’s) budget in nominal terms, with a particularly sharp impact on incentives for business. Read more.

Briefing note - The crisis in the steel industry:  The crisis in the steel industry is evident through a number of measures. Steel production declined by 15% from 2010 to 2015, for a total fall of 33% from 2008. In dollar terms, steel exports fell by 32% from 2010 to 2015, and ferro-alloys dropped by 24%. Profitability in the steel value chain shrank quickly from 2010 to 2014, with basic iron and steel posting losses for most of the past five years. The losses sparked a run of closures, with the number of foundries in South Africa declining from 140 in 2009 to 95 in 2014, and key ferro-alloy producers Evraz Highveld and Samancor forced into major restructuring. Iron and steel refining shed 30 000 jobs between 2011 and 2015, with ferro-alloy producers applying for a further 3 000 retrenchments in the first quarter of 2016 alone. Read the summary note or full briefing note A strategic response to the crisis in the steel industry.

This paper argues that the dramatic changes in the trade architecture of the world during the first decade of the new millennium have created both opportunities and challenges for Africa’s development. African countries need to develop proactive strategies to harness these new changes and use them to advance the integration of the African continent.

The paper looks at the main elements of the changes in the global trade architecture in the first decade of the new millennium. It then explains how these changes impacted on the Doha Development Round. The shift to mega-regionals and mega-bilaterals by the major developed country players and the implications of these developments for Africa’s trade with the world are also briefly discussed. The paper then sets out the changes in the trade policies of the EU and the US on Africa in the new millennium and the implications of these policies for Africa’s economic development. The paper also discusses the role of China in the trade and economic development of Africa and looks at the unfolding regional integration strategy of African countries. 

See Commonwealth Trade Hope Topics Series Issue 131 The changing global trade architecture: Implications for Sub-Saharan Africa's development

Faizel Ismail is Adjunct Professor in the School of Economics, University of Cape Town and a TIPS Research Fellow

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