South Africa can add 1 trillion rand (about $75 billion US) to its economy and create 3.4 million jobs by 2030, and it needs to do so with a sense of urgency, according to McKinsey Global Institute, IOL reports.
The McKinsey report has a catchy title, “South Africa’s Big Five: Bold Priorities For Inclusive Growth,” and it’s presented as a kind of recipe for re-igniting South Africa’s progress.
If South Africa’s government and businesses prioritize the “big five,” they could increase GDP growth by 1.1 percent a year, adding 1 trillion rand ($75 billion) to annual GDP by 2030 and creating 3.4 million new jobs, McKinsey claims. These opportunities include:
So what is McKinsey? A U.S. management consulting firm, McKinsey conducts analysis to evaluate management decisions, and the company counsels 80 percent of the world’s largest corporations, according to one report. It is considered the most prestigious management consultancy, according to a NYTimes report. The same report also points out that Enron was a McKinsey client, and Jeffrey K. Skilling, the onetime Enron executive now in prison, had been a McKinsey partner.
South Africa needs to implement these measures right now, said Christine Wu, a partner at McKinsey in Johannesburg and leader of its African practice, according to IOL. Some are already in place, she said, but they they need to be fully implemented with a sense of urgency.
Almost one in 10 South Africans depends on subsistence or smallholder farming. With consumption increasing in sub-Saharan African and Asian markets, South Africa could triple its agricultural exports by 2030, McKinsey says. This could drive rural growth, benefiting the subsistence farmers. Capturing this potential will require a bold national agriculture plan to ramp up productivity and agro-processing.
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, according to McKinsey. But South African manufacturers will have to pursue new markets and step up innovation and productivity to make this happen.
South Africa is investing heavily in infrastructure, but electricity, water, and sanitation are lagging. Public and private-sector partnerships can make infrastructure spending up to 40 percent more productive with the following three strategies, McKinsey says: make maximum use of existing assets and increase maintenance; prioritize projects with greatest impact; and strengthen management practices to streamline delivery.
McKinsey estimates that South Africa could install up to 20 gigawatts of gas-fired power plants to diversify base-load capacity by 2030. Gas can be provided through imports, local shale gas resources (if proven), or both. South Africa’s electricity shortage has limited growth, and despite new capacity, another shortfall is projected between 2025 and 2030. Natural gas plants can be built fast with low capital costs and low carbon footprint. They can provide an alternative to diversify the power supply, McKinsey says.
South Africa could do a better job exporting services, according to McKinsey. Sub-Saharan Africa’s market for service imports is worth nearly half a trillion rand ($38 billion). South Africa has highly developed service industries, but gets only 2 percent of that business. With the right investments, service businesses could grow exports to the region; and government could help by promoting regional trade deals, McKinsey says. In financial services, promising growth areas include insurance and wholesale and retail banking. In construction, opportunities range from design to construction management to maintenance services.
The McKinsey research is one of the most forward-looking, comprehensive and detailed analyses since the release of the National Development Plan in November 2011, according to IOL.
