Dr Rob Davies MP, Minister of Trade and Industry launches the Industrial Policy Action Plan: IPAP 2012/13-2014/15
2 Apr 2012
South Africa's first Industrial Policy Action Plan (IPAP) was launched in the 2007/08 financial year. Each year since we develop and launch a revised three-year rolling IPAP with a ten year outlook in a context of rapid economic change and significant global uncertainty. This has proved to be a robust formula which allows us to continually scale up our interventions but also sufficient flexibility to respond to change. Implementation of successive versions of IPAP has resulted in significant achievements and ongoing scaling up our interventions to retain, grow and diversify South Africa's industrial base.
Our experience in the implementation of the Industrial Policy Action Plan demonstrates that industrial policy works: provided it is well designed, adequately resourced and informed by robust and constructive stakeholder dialogue and partnerships. This has been demonstrated in a number of sectors.
In Automotives the technical work for the completion of the transition from the Motor Industry Development Programme (MIDP) to the Automotive Production and Development Programme (APDP) in 2013 has largely been completed. The sector has demonstrated an unequivocal vote of confidence in South African capabilities and policy in the form of over R15 bn in recent investment commitments from both assemblers and component suppliers, much of which is already underway. This has been accompanied by large increases in vehicle assembly volumes and localisation of componentry. Even as policy is being finalised to broaden our interventions into the Medium and Heavy Commercial vehicle segments, significant investment interest and commitments have already been attracted including a recent $100m commitment in a joint truck and car assembly facility.
In Clothing, Textiles, Leather and Footwear we recognised that the Duty Credit Certificate Programme was not working and moved decisively to replace it with an industry upgrading incentive in 2009: the Clothing Textile Competitiveness Programme (CTCP). The CTCP has resulted in significant competitiveness improvements and brought manufacturers and retailers closer together to take advantage of the proximity, quality and flexibility that domestic manufacturers now offer. Despite the fact that implementation of the CTCP overlapped with the global economic crisis the programme managed to arrest employment losses in the sector by 2010, with a modest increase in employment seen in 2011.
There has also been significant progress in a range of other sectors including Business Process Services andPharmaceuticals. Although it has taken longer than originally anticipated, the implementation of IPAP has now resulted in a number of critical platforms being put in place which will be used as the basis for further scaling up of key sectors.
A major achievement has been the conclusion of intradepartmental work to amend the Regulations of thePreferential Procurement Policy Framework Act (PPPFA). This enables the Department of Trade and Industry (the dti) to designate industries for local procurement including procurement by State Owned Enterprises (SOEs). The first round of sectors designated in December 2011 were: Buses, Rolling Stock, Power pylons, Canned Vegetables, Clothing Textiles, Leather and Footwear, and Set Top Boxes. This will be followed by further designations during the 2012/13 financial year and beyond.
Trade policy is now more strategically aligned with industrial policy objectives. Recent standards development work has also enabled the growth of a range of new sectors, particularly related to green industries and industrial energy efficiency. Tariff setting is significantly more sophisticated, informed by sectoral analysis and priorities. Campaigns to tackle customs fraud and illegal imports are being scaled up together with interventions aimed at products which do not meet mandatory standards and specifications in close collaboration with the Customs Division of SARS.
The new Manufacturing Competitiveness Enhancement Programme (MCEP) is set out in the IPAP for the first time. The Minister of Finance has indicated that a sum of R5.8 billion will be made available over the three year MTEF period for this programme. The MCEP seeks to generate much greater confidence amongst manufacturers to invest now to see out the current period of significant economic uncertainty and emerge much more competitively out of it.The MCEP will be deployed towards upgrading the competitiveness of relatively labour-intensive and value-adding manufacturing sectors impacted by the currency, the global economic crisis and electricity cost escalations. The lessons flowing from a review of the clothing and textiles and automotives sector incentives has been decisive in shaping the programme. The MCEP will be sufficiently flexible to support the specific competitiveness upgrading measures jointly identified in our sector strategies as being required. It will work in conjunction with and leverage off other industrial financing packages available via the Industrial Development Corporation.
The IPAP contains a new section on Special Economic Zones (SEZs). Draft legislation for SEZs sets the basis for a broader range of industrial parks and economic infrastructure provision for effective clustering of value-adding and employment enhancing manufacturers.
A new section on Regional Integration contains a range of programmes which give effect to government's commitment to support regional economic development and integration in the Southern African region and beyond.
The deployment of industrial policy levers such as procurement and new industrial finance packages have laid a strong foundation for scaling up of our interventions across sectors which display significant domestic and export market growth opportunities. Special emphasis will be given to three sectors as follows:
In Agro-processing attention will be paid to expediting regulatory and support mechanisms to establish a large scale Biofuels industry. The identification and promotion of export market opportunities to net food-importing countries and product development and standards support will provide further impetus to this sector.
In the Green industries sector the manufacturing of component inputs into our 17.8GW renewable energy generation programme is a major opportunity. Solar water heating manufacture and other significant industrial opportunities arise from requirements for higher energy efficiency in the economy will also be vigorously pursued.
In the Metal Fabrication, Capital and Transport Equipment sector significant opportunities arise from our large-scale and long-term rail and electricity infrastructure investment programme. With respect to mining capital equipment, investment opportunities and the potential for the expansion of existing production capacity for the domestic and continental market will be pursued.
The implementation of IPAP has been carried out in the face of severe global and domestic headwinds. It has coincided with two overlapping external economic shocks and one internal shock. The Global Crisis and ensuing Great Recession have - since 2008 - slowed the world economy generally and export demand in two of our key traditional markets in particular: Europe and the United States. This has coincided with ongoing currency overvaluation and volatility which pre-dated the crisis but exacerbated its impact on the tradable sectors of the South African economy. Domestically producers have been subject to large and rapid electricity price increases over the last three years, cumulatively of the order of between 75% and 140%. Port charges - amongst the highest in the world - remain a significant constraint.
The range of announcements contained in President Zuma's State of the Nation Address and the Minister of Finance's budget speech setting out a series of measures to significantly boost public infrastructure expenditure and mitigate high and escalating electricity and port charges are critical and much needed interventions to support the production and especially manufacturing sectors of the economy. We therefore welcome NERSA's electricity tariff determination of a 16% rather than 25% increase as an important step in the right direction. We also particularly welcome the National Ports Regulator's announcement of port tariff rebates for manufacturers.
Government has deployed a range of complementary and integrated measures to grow the economy and create jobs. IPAP 2012/13 is one of key pillars of this broader approach. Practical experience and achievements have demonstrated what is possible in a range of sectors. Critical enabling platforms have been created and strengthened in areas such as industrial financing and procurement.Constructive and ambitious partnerships with industry and labour must continue to underpin our collective efforts. For its part the Department of Trade and Industry will continue to build a professional management and programme implementation capacity including across its various Sector Units. Integration of industrial development initiatives with other dti functions such as investment and export promotion programmes and Broad-Based Black Economic Empowerment interventions will receive priority attention.
The road ahead is a difficult one but a strong foundation has been laid. This makes it possible to arrest the threat of deindustrialisation and grow value addition and jobs in the manufacturing sectors of the economy, thereby underpinning economic growth and employment creation in the rest of the economy. On behalf of Government I wish to express my deepest gratitude to all those who have contributed to the achievements thus far secured and urge everyone concerned to redouble their efforts in the fight for economic development and the battle to rid our society of the scourge of poverty and unemployment.
The Industrial Development Plan (PDF)
Statement issued by Sidwell Medupe, Department of Trade and Industry spokesperson, April 2 2012
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