New opportunities for business growth revealed.

The Western Cape metals and engineering cluster is well-positioned as a hub to fuel growth and attract foreign direct investment into South Africa and across the African continent. The Western Cape has the capacity to increase its current exports and supply a wide range of metals and engineering solutions to Europe, the US, as well as the relatively untapped African market.

These are some of the findings of a recent publication entitled ‘Made in Africa: Western Cape Metals and Engineering’ compiled jointly by PwC, Wesgro and the City of Cape Town. The publication focuses in particular on the metals and engineering cluster within the manufacturing sector. This cluster is characterised by a high level of innovation, specialised knowledge and niche manufacturing capabilities that supply most industries and sectors with machines, production systems, components and associated services.

Tertius van Dijk, PwC Deals Partner, says: “The Western Cape is broad and diversified in terms of manufacturing activity. The metals and engineering cluster is poised for further sustained growth and the development of both the regional and national economy of South Africa. In particular, the manufacturing sector acts as a generator of important employment opportunities.”

“The manufacturing industry plays a significant role towards the growth of the economy. It is one of the largest contributors to the Western Cape’s gross domestic product (GDP), as well as providing much needed jobs for thousands of residents in the City and throughout the Province,” said Patricia de Lille, Executive Mayor of the City of Cape Town.

The Western Cape’s manufacturing sector contributed R45 billion, or 15%, to the South African manufacturing sector output of R300 billion in 2012. Manufacturing is the second-biggest sector in the Western Cape after the financial services industry.

“We are making substantial investments in infrastructure to ensure we have the required capacity to create a conducive environment for the private sector to thrive in. The City of Cape Town is also working closely with potential domestic and international investors to further unlock development not only in the manufacturing sector but in other key sectors as well,” added de Lille.

According to the June 2013 business plan of the Western Cape metals and engineering cluster (recently formed by the Western Cape provincial government), the exact number of firms operating in the manufacturing sector is unknown, but officially at least 337 firms employ more than 25 000 people, although it is likely that more than 600 firms are active.

Last year, two world-class technology manufacturers invested in new manufacturing plants in Atlantis, namely South African technology company, Tellumat which opened a 15 000 m² television manufacturing plant, and Chinese consumer electronics company Hisense, which opened a R350 million electronics factory.

However, several other sectors, including renewable energy and the green economy, oil and gas, development of medical devices and aerospace manufacturing have also been identified as high-growth opportunities for investment in the Western Cape metals and engineering cluster.

The study provides a detailed account of the many initiatives and incentives that are currently in place and that are expected to enhance the competiveness of the metals and engineering cluster. These include, amongst others, tax incentives, special economic zones, competitive enhancement programmes and energy incentives.

“Initiatives such as the DTI’s Industrial Policy Action Plan and finance providers underpin the future growth of the innovative manufacturing sector. They provide the regulatory framework, incentives and capital for future growth and expansion in South Africa and abroad,” adds van Dijk.

More recently, the DTI published a directive that gives the International Trade Administration Commission the power to regulate the exportation of scrap metal by barring exports if the metal has not first been offered for local beneficiation at a price discount of 20% below the international spot price. The directive is expected to benefit the foundry industry.

“A strong foundry industry is important for key industries such as the automotive, capital equipment and aerospace,” said Christelle Rassou, PwC Deals Associate Director.

The study also provides a focus on South Africa’s export environment and macro-economic environment, Africa’s potential for growth, as well as the many associations in the Western Cape that support companies to grow.