The Ekurhuleni Metro, formerly Johannesburg’s East Rand, is the largest manufacturing concentration in Southern Africa and, in industries such as metal products, plastics and machinery, it accounts for about a third of total South African output.

In addition, manufacturing activity is predominantly focused in downstream labour-intensive activities, with a high proportion of small and medium enterprises.

But the latest issue of ‘Trends’, produced by the Corporate Strategy and Industrial Development research project at Wits University, reports that these industries have not been performing well in the last decade, and suffered major contractions in 1998 and 1999. This underlies the poorer performance of Ekurhuleni relative to other metros in recent years.

“An economic development framework for Ekurhuleni must, therefore, be focused around the regeneration of the manufacturing base,” the publication stated.

In order to better understand the issues underlying production capabilities of firms and employment questions, a firm survey was conducted in mid-2003.

A total of 383 responses were received, yielding a rich statistical source for understanding the factors affecting firms’ performance.

Given the timing of the survey, coming after several years of better economic performance, it was unsurprising that almost half of the firms recorded net employment growth between 2000 and 2002, while 42% reported an annual growth in sales of more than 10% a year in 2002.

In terms of employment, the best performing firms are those of medium size, followed by small firms, with medium firms also performing best in terms of output.

It was found that the apartheid legacy is reflected in poor education, with implications for skills development and training.

In 53% of firms the average level of education is below matric. But an important finding is that the level of education is not associated with firm performance.

Rather, spending on training, and whether firms have drawn back the skills-development levy, are the key considerations.

Some 36% of firms have claimed back the skills-development levy for training and these firms are 23% more likely to have grown employment and are 46% more likely to have recorded high growth in output (above 10% a year).

The average spending on training was R3 700 an employee across all firms, of which about half was spent in-house and half was spent on external training providers.

Firms spending on training are even more likely to have better performance, being 61% more likely to have grown employment and 86% more likely to have recorded high output growth.

The main markets for firms are in Gauteng, and very few firms export more than 20% of their output.

Firms that export (even if a small proportion of output) are significantly better performing in terms of both employment and output.

But the ability to export is significantly associated with firm size – small and micro firms find it hard to penetrate export markets.

The survey asked about the use of incentives and about local economic development measures. There has been very poor take-up of incentive programmes.

The most widely used has been the Small and Medium Enterprise Development Programme (SMEDP), which was used by 7% of firms, followed by the Export Marketing and Investment Scheme.

Firms using the SMEDP were 27% more likely to have recorded employment growth and 55% more likely to have high output growth.

But, overall, larger and medium firms were more likely to have accessed incentives, pointing to the need to continue to work to make incentives accessible to smaller companies.

The survey also found that while existing capital stock is quite old, with 36% of firms recording an average age of more than 10 years, firms regarded up-to-date technology as very important for their competitiveness.

This is consistent with the emphasis on quality and delivery for firms performing better. Investment in new machinery and equipment is therefore a key issue in firms’ upgrading.

The Ekurhuleni Metro, formerly Johannesburg’s East Rand, is the largest manufacturing concentration in Southern Africa and, in industries such as metal products, plastics and machinery, it accounts for about a third of total South African output.

In addition, manufacturing activity is predominantly focused in downstream labour-intensive activities, with a high proportion of small and medium enterprises.

But the latest issue of ‘Trends’, produced by the Corporate Strategy and Industrial Development research project at Wits University, reports that these industries have not been performing well in the last decade, and suffered major contractions in 1998 and 1999. This underlies the poorer performance of Ekurhuleni relative to other metros in recent years.

“An economic development framework for Ekurhuleni must, therefore, be focused around the regeneration of the manufacturing base,” the publication stated.

In order to better understand the issues underlying production capabilities of firms and employment questions, a firm survey was conducted in mid-2003.

A total of 383 responses were received, yielding a rich statistical source for understanding the factors affecting firms’ performance.

Given the timing of the survey, coming after several years of better economic performance, it was unsurprising that almost half of the firms recorded net employment growth between 2000 and 2002, while 42% reported an annual growth in sales of more than 10% a year in 2002.

In terms of employment, the best performing firms are those of medium size, followed by small firms, with medium firms also performing best in terms of output.

It was found that the apartheid legacy is reflected in poor education, with implications for skills development and training.

In 53% of firms the average level of education is below matric. But an important finding is that the level of education is not associated with firm performance.

Rather, spending on training, and whether firms have drawn back the skills-development levy, are the key considerations.

Some 36% of firms have claimed back the skills-development levy for training and these firms are 23% more likely to have grown employment and are 46% more likely to have recorded high growth in output (above 10% a year).

The average spending on training was R3 700 an employee across all firms, of which about half was spent in-house and half was spent on external training providers.

Firms spending on training are even more likely to have better performance, being 61% more likely to have grown employment and 86% more likely to have recorded high output growth.

The main markets for firms are in Gauteng, and very few firms export more than 20% of their output.

Firms that export (even if a small proportion of output) are significantly better performing in terms of both employment and output.

But the ability to export is significantly associated with firm size – small and micro firms find it hard to penetrate export markets.

The survey asked about the use of incentives and about local economic development measures. There has been very poor take-up of incentive programmes.

The most widely used has been the Small and Medium Enterprise Development Programme (SMEDP), which was used by 7% of firms, followed by the Export Marketing and Investment Scheme.

Firms using the SMEDP were 27% more likely to have recorded employment growth and 55% more likely to have high output growth.

But, overall, larger and medium firms were more likely to have accessed incentives, pointing to the need to continue to work to make incentives accessible to smaller companies.

The survey also found that while existing capital stock is quite old, with 36% of firms recording an average age of more than 10 years, firms regarded up-to-date technology as very important for their competitiveness.

This is consistent with the emphasis on quality and delivery for firms performing better. Investment in new machinery and equipment is therefore a key issue in firms’ upgrading.