The industry attractiveness of the South African footwear industry : a productivity perspective

ENGLISH ABSTRACT: South Africa has been integrated into the global economy since the abolishment of the apartheid era in 1994 through a rapid programme of trade liberalisation. Its footwear industry illustrates the effects of these policies on companies and their real output, employment and wage payments, which are among the most important channels through which the market forces (supply and demand) affect poverty in a developing economy.Exporting has been driven by trade liberalisation, but the restructuring of companies to keep up with technology and the effect of cheaper imports from the East have been the main reasons for a substantial fall in total employment, while manufacturing has stagnated. Labour productivity has increased with better production methods and some innovation, which had a positive effect on wage payments to workers in this labour-intensive industry.South Africa has not been isolated from the world recession that began in 2008, therefore manufacturing – the second biggest sector in SA – has been in free-fall this year, sliding by double digits on a year-on-year basis. The footwear industry’s attractiveness is therefore seen as moderate, but with potential once the economy starts growing again.A factor that needs to be taken into account is the exchange rate of the South African rand, which has gained more than 20 per cent to the dollar so far this year. This has been the main reason why the fall in exports has been larger than that of imports. These lower imports also highlighted weak consumer demand.