Key sectors

South Africa's chemicals industry

South Africa's chemicals industry, including fuel and plastics fabrication as well as pharmaceuticals, is the largest of its kind in Africa, and has been identified by the government as a key driver of economic growth.

It dominates manufacturing in South Africa, adding more value to the economy than any other sector and accounting for over half the jobs created by manufacturing as a whole.

While the industry remains dominated by local companies, a number of multinationals have local distribution points and several have become involved in local manufacture.

Subsectors

The industry is dominated by the basic chemicals subsector, whose liquid fuels, olefins, organic solvents and industrial mineral derivatives together account for around 31% of chemicals production in the country.

The 10 other subsectors are plastic products (around 20% of production), pharmaceuticals (8%), inorganic chemicals (8%), primary polymers and rubbers (7%), organic chemicals (6%), rubber products (5%), bulk formulated (5%) and consumer formulated chemicals (5%), and pure functional and speciality chemicals (5%).

While three of these subsectors – fuels, bulk formulated chemicals and pharmaceuticals – have a larger output than would be expected given the overall size of the economy, South Africa's chemicals industry is relatively small by global standards.

Of the roughly 80 000 types of basic or pure chemical currently manufactured on a commercial basis in the world, South Africa manufactures around 300, most of which are commodity, low-value and high-volume products.

Growth strategy

South Africa's chemicals exports have been growing at an annual average rate of around 19% since 1999, on the back of new trade agreements and improved competitiveness as a result of low manufacturing costs and plentiful mineral and organic supplies for manufacturing. Energy costs are relatively low in South Africa, and the sector benefits from efficient, cost-effective access to water and steam.

However, much more is imported than exported. The government aims to address this imbalance with its recently introduced national industrial policy framework, which aims to boost the country's value-added exports.

The local industry is biased towards an internationally competitive upstream sector, neglecting a downstream sector that has great potential for development.

Reversing this bias would help the industry to increase beneficiation (or value-addition), exports and employment. Downstream production is more labour-intensive, and pulls in a larger number of smaller firms.

Beneficiation is key to this strategy. South Africa has a natural advantage in mineral feedstock, but most of these are exported in raw form. However, there are substantial opportunities to convert these materials, using local labour and capital, into value-added inorganic chemicals for export.

The government and industry are also working together to find ways of exploiting untapped resources, such as large reserves of fluorine.

Plastics

South Africa's plastics industry is in good shape, according to a recent overview in Engineering News, with many downstream manufacturers turning out products "that can complete globally from a quality and performance point of view."

Packaging dominates, at over 50% of the local market. The industry was hard hit a few years ago with the introduction of a plastic bag levy to limit environmental pollution.

But the outlook is positive, with the government having identified plastics fabrication as a key jobs creator.

Polymer production is one potential area of expansion. South Africa exports "significant tonnages of polymers," according to the Plastics Federation of SA, but imports still greater amounts of mainly polymer intermediaries, such as polystyrene, which are not manufactured here.

Most plastic companies in South Africa are small, with over 800 companies involved in the plastics converting sector. Some are highly innovative, such as Timber Plastics, which recycles plastic waste such as soft drink bottles, moulding them into structural forms such as poles, planks and beams.

Pharmaceuticals

There are big opportunities for pharmaceutical manufacturers in South Africa, with the government planning to develop the local industry by encouraging local production of high-demand pharmaceuticals, such as the antiretroviral drugs used to treat HIV/Aids.

The government also aims to assist in the development of the scientific and technological skills necessary to support the growth of the sector.

Gas-to-liquid technologies

South Africa is a world leader in coal-based synthesis and gas-to-liquid technologies. It is among the lowest-cost producers of ethylene and propylene in the world, thanks to abundant access to low-grade coal and leading-edge process technology.

Environmental concerns

Environmental concerns are a key factor in the development of the chemicals sector. South Africa has adopted first-world standards in its environmental policies, introducing regulations to promote co-operative environmental management and providing guidelines for the disposal of hazardous waste.

Article last updated: May 2008

SAinfo reporter. Sources:



	South Africa's chemicals industry has been identified as a key driver of economic growth (Images: Labotec, Sasol, Merck South Africa, PackTech Plastics Machinery)