SOUTH Africa needs to be better prepared for a deeper than expected recession in parts of Europe, its largest trading region, Lionel October, director-general of the Department of Trade and Industry, said on Monday.

This, he told an economic policy dialogue in Johannesburg, meant developing and sustaining an industrial base to help avoid the loss of hundreds of thousands of jobs and a decline in the local economy.

Mr October said South Africa had not been adequately prepared for the 2008 financial crisis, which led to the loss of about 1-million jobs, mainly in the manufacturing sector.

"We need to be prepared if there will be either a serious downturn or stagnation (in the euro zone)," he said. "We must have a coherent response this time so we don't suffer a knock as we did in the last round."

Parts of Europe are embroiled in high levels of indebtedness and economic uncertainty. A strong slowdown in economic activity in the euro zone could mean a fall in exports of locally manufactured goods, and thus weaker local growth.

South Africa's 2012 economic growth is already forecast to slow, to 2,8% from 3,1% in 2011.

Most of the focus in Europe is on Greece, which has just emerged from elections and was on Monday still to form a government. It is, however, expected that the new government will support bail-outs and austerity measures.

Mr October said the reason some parts of Europe were still economically sound, particularly Germany, while others such as Greece and Spain were under economic strain, lay in the differences between these countries' levels of industrialisation.

That, he said, motivated his call for an increased focus on South Africa's industrial capacity.