5 things South Africa can do to raise GDP by $1 trillion & create 3.4 million jobs: McKinsey Global Institute (Infographics & Report)


Table of Contents

  • Executive summary
    Unlock five big opportunities — and create over three million jobs
  • Advanced manufacturing: Creating a global hub
    Harness South African know-how to double overall manufacturing exports
  • Infrastructure: Partnering for productivity
    Build smart partnerships to boost the impact of infrastructure spend
  • Natural gas: Powering South Africa’s future
    Use gas to diversify power generation and ramp up economic growth
  • Service exports: Riding the wave of Africa’s growth
    Turn South Africa’s vibrant services sector into an export champion
  • Agriculture: Unlocking the full value chain
    Boost production and processing to transform the rural economy
  • Equipping South Africans for the jobs of the future
    Reconfigure the education-to-employment journey

Read the executive summary & full report below.

Introduction

In the two decades since South Africans worked together to transform their political landscape and usher in a new democracy, the country has made remarkable progress. In particular, GDP has nearly doubled in real terms, lifting millions of people out of poverty and into the middle class and greatly expanding access to services. Yet since 2008, average annual GDP growth has slowed to just 1.8 percent, while unemployment has stubbornly remained at 25 percent. Given the country’s vibrant public life and dynamic business sector, South Africa has no shortage of ideas, but a tone of pessimism is growing as many worry that the economy is stuck in a low-growth trap.

Recommended: Nigeria’s renewal – Delivering inclusive growth in Africa’s largest economy: McKinsey Global Institute (Report)

A new McKinsey Global Institute report, South Africa’s big five: Bold priorities for inclusive growth, recommends reigniting the country’s economic progress by focusing on five opportunities: advanced manufacturing, infrastructure, natural gas, service exports, and the agricultural value chain. If government and businesses prioritize them, these five initiatives alone could by 2030 increase GDP growth by a total of 1.1 percentage points per year, adding 1 trillion rand ($87 billion) to annual GDP and creating 3.4 million new jobs.

Recommended: The growth opportunity in Africa – Ngozi Okonjo-Iweala, Nigeria’s Minister of Finance: McKinsey Global Institute (Videos & Report)

Here are the “big five” opportunities we’ve identified — and why:

  • Advanced manufacturing. South Africa can draw on its skilled labor to grow into a globally competitive manufacturing hub focused on high-value-added categories such as automotive, industrial machinery and equipment, and chemicals. To realize this opportunity, South African manufacturers will have to pursue new markets and step up innovation and productivity.
  • Infrastructure productivity. While the country is investing heavily in infrastructure, big gaps remain in electricity, water, and sanitation. A true partnership between the public and private sectors could make infrastructure spending up to 40 percent more productive by maximizing the use of existing assets and increasing maintenance, prioritizing projects with greatest impact, and strengthening management practices to streamline delivery.
  • Natural gas. South Africa’s electricity shortage has constrained growth, and, despite new capacity, another shortfall is projected between 2025 and 2030. Natural-gas plants—which are fast to build, entail low capital costs, and have a small carbon footprint—can provide an alternative to diversify the power supply. With the necessary regulatory certainty, we estimate that South Africa could install up to 20 gigawatts of gas-fired base-load power-generation capacity by 2030. Gas can be provided through imports, local shale-gas resources (if proven), or both.
  • Service exports. South Africa has highly developed service industries, yet it currently captures only 2 percent of the rest of sub-Saharan Africa’s market for service imports, which is worth nearly half a trillion rand ($38 billion). With the right investments, service businesses could ramp up exports to the region; and government can help by promoting regional trade deals. In construction, the opportunity ranges from design to construction management to maintenance services. In financial services, promising growth areas include wholesale and retail banking, as well as insurance.
  • Raw and processed agricultural exports. With consumption rising in markets throughout sub-Saharan Africa and Asia, South Africa could triple its agricultural exports by 2030. This could be a key driver of rural growth, benefiting the nearly one in ten South Africans who depend on subsistence or smallholder farming. Capturing this potential will require a bold national agriculture plan to ramp up production, productivity, and agroprocessing.

Recommended: Brighter Africa: The growth potential of Sub-Saharan Africa’s electricity sector – McKinsey (Report)

Successfully delivering on these priorities will move South Africa closer to realizing its long-held vision of a “rainbow nation” characterized by shared prosperity for all. But first, the country will need to embrace some fundamental changes to become more globally competitive; not least, it will have to address a serious skills shortage through a dramatic expansion of vocational training. Tackling such foundational issues will require business and government to come together in a new partnership characterized by shared vision, collaboration, and trust.

South Africa’s bold priorities for inclusive growth (Executive Summary): McKinsey Global Institute
Unable to view the “South Africa’s bold priorities for inclusive growth: McKinsey Global Institute” report below? Download it here.
South Africa’s bold priorities for inclusive growth: McKinsey Global Institute

View more analytics from African Business Central.

Source: South Africa’s bold priorities for inclusive growth | McKinsey & Company

Recommended