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The manufacturing industry in the Sub-Saharan region:
potential for partnership between South Africa and Italy
Paolo Olivero
Country Leader South Africa, CLN-MA Group and
spokesperson of the South Africa – Italy Summit Think Tank
Cape Town - October 2, 2014
Document based on the Position Paper prepared by The European House – Ambrosetti’s Think Tank

2. 2
2014 - South Africa-Italy Summit
Key messages of the Position Paper
 Manufacturing industry is a strategic driver for the development of
Sub-Saharan Africa
 South Africa and Italy have complementary value chains
 There is a great potential for partnerships in manufacturing between
South Africa and Italy

3. 3
2014 - South Africa-Italy Summit
Manufacturing is a key-sector for development in Sub-Saharan Africa
Impacts on SSA economy:
 Fostering the transformation
of the current informal,
labour-intensive and low
value added models (greater
diversification of production)
 Stimulating significant
employment opportunities
(improved working conditions and
better wage levels)
 Reducing poverty and social
inequality (raising per capita
wealth)
Source: TEH-A on ILO and World Bank data, 2014
Manufacturing value added in SSA and
BRICS countries (% of GDP, 2012)
12.1% 10.0%
31.8%
14.8% 14.1% 13.0%
South
Africa
Sub-Saharan
Africa
China
Russian
Federation
India
Brazil

4. 4
2014 - South Africa-Italy Summit
Source: TEH-A on Euromonitor Africa Consumer Spending data, 2013
Southern Hub
(SADC)
Eastern Hub
(EAC & COMESA)
Western Hub
(ECOWAS)
Consumer spending 2020 in SSA (US$ bn)
It is further
expected to
double by
2030
SSA is also a booming consumer market
315
938
23 18 16 15 15 47 44
38 30 29 18
167 29 16 12 9 7
91
South
Africa
Zambia
Angola
Congo
Dem.
Mozambique
Namibia
Other
Ethiopia
Kenya
Uganda
Tanzania
Other
Nigeria
Ghana
Senegal
Burkina
Faso
Mali
Niger
Other
Total

5. 5
2014 - South Africa-Italy Summit
To seize SSA’s opportunities some critical issues have to be addressed
 Lack of infrastructures – road, rail and telecommunications networks – that
impacts on freight transport times and costs for companies (current gap in
transportation infrastructures in SSA worth US$ 20 bn/year)
 Access to financing to purchase land and equipment and to build plants
 High cost and limited access to electrical energy (inadequate generation and
distribution infrastructures; excluding South Africa, ~24% of the population with access
to electricity among other SAPP* members)
 Employment regulations (labour rigidity; +7.9% increase in wages in 2013 in S.A.)
 Skill shortage (need of investments in training and promotion of a new process of
entrepreneurship)
 Complexity of customs trade and regulations that hinders exports
(*) SAPP = Southern Africa Power Pool

6. 6
2014 - South Africa-Italy Summit
South Africa and Italy have several complementary industries
South Africa – Italy: key manufacturing sectors
Food & beverages
Chemicals & plastics Metals
Automotive Clothing & textiles
Metalworking Machinery & equipment
Food & beverages Automotive
Clothing & textiles
Chemicals & plastics
Furniture

7. 7
2014 - South Africa-Italy Summit
South Africa is integrated into four Global Value Chains
Global Value
Chain (GVC)
Position of South Africa in the GCV
Level of
integration
in the GVC
Automotive /
General industry
Assembly hub for Africa (with large international
component manufacturers, e.g. automotive, railway sector)
Agriculture Production and processing (with food products and
beverages premium brands)
Mining Mining* and services (with major local exporters of
mining services** and equipment***)
Finance Sub Saharan regional financial center (with the
top-5 African banking groups)
(*) World’s largest reserves of manganese and platinum; among the largest reserves of gold,
diamonds, chromite ore and vanadium; (**) Geological services, prospecting, shaft sinking, turnkey
solutions to the mining and mineral processing industries, operation services; (***) Accounts for
8.5% of total exports
= Max integration
= Min integration

8. 8
2014 - South Africa-Italy Summit
Italy is EU 2nd manufacturing country with competitive SMEs
Manufacturing Gross Value Added
(selected European countries, € Bn)
Source: TEH-A on Eurostat and StatSA Africa data, 2014
Manufacturing companies in the EU Big 5
(by class of employment)
<20 persons
employed
20 - 49
persons
employed
50 - 249
persons
employed
≥250
persons
employed
GERMANY 173,697 15,570 16,150 3,953
SPAIN 171,410 11,821 4,688 824
FRANCE 194,200 10,477 5,987 1,531
ITALY 395,490 21,159 8,821 1,308
UK 106,914 9,445 6,305 1,374
4.4 mln employees (18% of
total economy), x2 than those
of UK and France
535.2
216.5
187.3
172.0
125.9
69.0
54.7
42.6
Germany
Italy
France
UK
Spain
Netherlands
Sweden
Belgium
These companies can partner with South
African SME’s (which account approx. for 50%
of South Africa’s GDP)

9. 9
2014 - South Africa-Italy Summit
Several Italian products are world-class excellences and they can meet
South Africa’s demand
 Packaging
 Electrical
conductors
 Packaging
equipment
parts
 Footwear
 Tiles
 Leather bags
 Sunglasses
 Pasta
 Leather
 Boats and yachts
 Taps and valves
 Gas turbines parts
 Tractors
 Bottling equipment
 Products in aluminum
 Ethylene polymers
Source: TEH-A on UNCTAD/WTO data, 2014
Italy’s global
position
N° of
products
Turnover
(€Bn)
Market leader 235 63
2nd place 390 74
3rd place 321 45
 Wooden furniture
 Cruise ships
 Roasted coffee
 Chandeliers
 Granite
 Still & sparkling wines

10. 10
2014 - South Africa-Italy Summit
South Africa and Italy can take advantage of SSA’s emerging
opportunities
 Companies looking for partners to grow
abroad and need to establish
themselves and accelerate their entry
into the African continent
 Good reputation enjoyed by the high-
quality Italian products
 Complementarity of the Italian industrial
system in terms of products, company
size (SMEs) and technological
specialization
 A platform for products with improved
standards and industrialization
 An ideal logistics and distribution hub
for accessing many Sub-Saharan
markets*
 A preferred economic partner
potentially capable of offering good-
quality products at prices in line with
local purchasing power
Italy
South Africa
(*) Currently, SADC represents 86% of South African exports to Africa and 24% of total South
African exports

11. 11
2014 - South Africa-Italy Summit
The potential for partnership: Italian-South African SEZs and JVs
 Special Italian-South African Zones for Economic/Industrial
Cooperation for joint projects designed to attract the investments
of multinationals and SMEs
 Local production of semi-finished and finished products for both
the internal market and emerging markets in SSA
(automotive/component industry/railway sector,
textiles/apparel and furnishing)
B. Joint ventures for
installing equipment
and systems to
support
industrialization in
other countries in the
SSA region
A. Launch of joint Italy
- South Africa
clusters to produce in
South Africa and enter
into SSA markets
 Creation of forms of collaboration between South Africa and Italy
in Sub-Saharan African markets in:
□ Design and engineering services to create large-scale,
highly-complex industrial and infrastructure projects
□ Production of industrial machinery (machinery and
components for road transport, agriculture, food processing,
textiles/apparel, etc.)
 Training and professional development activities for young
graduates (technicians and engineers)