66
1 2010/11 – 2012/13 Industrial Policy Action Plan (IPAP) Economic Sectors and Employment Cluster Portfolio Committee 23 February 2010
1
2010/11 – 2012/13 Industrial Policy Action
Plan (IPAP)
Economic Sectors and Employment Cluster
Portfolio Committee
23 February 2010
2
The National Industrial Policy Framework
The NIPF adopted by Cabinet in 2007 sets out the broad approach to Industrial Policy as;
• Long term industrialisation• Facilitate diversification beyond traditional commodities• Increased value addition in tradable goods and services• Promotion of labour absorbing economic development• Industrialisation that ensures increased participation (B-
BBBEE) and marginalised regions• Contributes to building industrial development on African
continent
33
Progress• Flowing from NIPF, Cabinet approved the 2007/8 IPAP in which
significant progress has been made:– Strengthening of competition legislation and practice– Revised auto programme for 2013-2020: Automotive Production and
Development Programme (APDP)– Development of new architecture for Clothing / Textiles: Clothing Textiles
Competitiveness Programme (CTCP)– Removal / lowering of tariffs on key input industries such as on primary
chemicals, aluminium, and machinery and textiles not produced in SA– Significant investment and job creation in Business Process Services
(Outsourcing)– Strengthened energy efficiency standards in the light of the electricity crisis
• 2007/8 IPAP reflected chiefly ‘easy-to-do’ actions / low-hanging fruit versus ‘need-to-do’ actions to achieve structural change
• 2010/11 – 12/13 IPAP is a product of the Economic Sectors and Employment Cluster. Responds to the demand of the new administration for strategic higher impact industrial policy interventions. Movement to three year rolling IPAP with iterative scaling up and continuous improvement
4
Problem statement
• Prior to global crisis SA achieved relatively high growth rates but this masks key structural problems
• SA growth rates lower than peers• Growth driven by unsustainable increases in credit extension
and consumption (financial intermediation, insurance, real estate, transport, storage, communication, wholesale and retail, catering, accommodation) grew 7.7% annually,
• Production sectors, (agriculture, mining, manufacturing, electricity, water and construction) only grew 2,9% annually.
• Contributed to range of imbalances in economy including current account deficit
• Employment has remained unacceptably high – never below 22.8%
55
-
100,000
200,000
300,000
400,000
500,000
600,000
R'm
(200
0)
Agriculture, forestry and fishing Mining and quarrying Manufacturing
Electricity, gas and water Construction (contractors) Wholesale and retail trade, catering and accommodation
Transport, storage and communication Financial intermediation, insurance, real estate and business services
An unsustainable consumption-driven growth pathDivergence of GDP by production and consumption-driven sectors, 1994-2008 (R’2000)
Source: SARB
Problem Statement
Even at its peak growth was lower than peers and did not lead to unemployment falling below 22.8%
66
Problem Statement
-3
-2
-1
0
1
2
3
4
5
6
South Africa HIC MIC LIC
Pe
rce
nta
ge
1967-71 1972-76 1977-81 1982-86 1987-91 1992-96 1997-01 2002-06
Source: CSID (WDI), 2008
Growth lower than peer countriesSouth African growth relative to peer country groups
Recent unemployment has not fallen below 22.8%
7
Problem Statement
0
5
10
15
20
25
30
35
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
GFCF/GDP Gross Saving / GDP Finance/GDP (RHS)
Gross Fixed Capital Formation and Savings to GDP versus share of the Finance sector in GDP, 1970-2008 (%)
Source: SARB
8
Key Constraints and Opportunities
• First-order cross-cutting constraints– Currency overvaluation and volatility– High cost of capital relative to key competitors– Failure to adequately leverage public capital and other large
‘fleet’ procurement expenditure– Monopolistic pricing of key intermediate inputs / purchasing of
outputs– Unreliable and expensive rail and ports systems– A skills system weakly responsive to industry requirements
• Sector specific opportunities – Detailed Key Action Plans for each sector with clear
actions, responsibilities and milestones
9
85
90
95
100
105
110
115
120
Jan2
003
Apr20
03
Jul20
03
Oct200
3
Jan2
004
Apr20
04
Jul20
04
Oct200
4
Jan2
005
Apr20
05
Jul20
05
Oct200
5
Jan2
006
Apr20
06
Jul20
06
Oct200
6
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007
Apr20
07
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07
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7
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008
Apr20
08
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08
Oct200
8
Jan2
009
Apr20
09
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09
20
00
=1
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Appreciation
Depreciation
9
Currency strength and volatilityReal effective exchange rate, January 2003 – September 2009 (2000=100)
Source: SARB
Key constraint
10
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Taiwan
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vince
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10
2. Industrial Financing
SA’s cost of capital is high relative to our top trading partnersPre-crisis real interest rates in SA and our main trading partners, 2007
Source: Bloomberg and IMF*
Note: Real interest rate calculated as bank rate less CPI
1111
Source: CSID (SARB), 2009
InvestmentsBills discounted
Installment-sale credit
Leasing finance
Mortgage advances
Other loans and advances
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
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% o
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to
th
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r
Investments Bills discounted Installment-sale creditLeasing finance Mortgage advances Other loans and advances
2. Industrial FinancingDespite massive private credit extension only a small proportion is being channelled towards fixed investment …Private sector credit extension by all monetary institutions, 1990 – 2008 (%)
1212
2. Industrial Financing
Source: CSID (Quantec), 2009
Investment is not being channelled significantly to more labour-intensive and value-adding sectors
-40,000
-20,000
0
20,000
40,000
60,000
80,000
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General government services
Business services
Finance and insurance
Other mining
Transport and storage
Communication
Wholesale and retail trade
Electricity, gas and steam
Basic chemicals
Non-metallic minerals
Medical, dental and veterinary services
Motor vehicles, parts and accessories
Building construction
Other manufacturing
Paper and paper products
Water supply
Excluding medical, dental and veterinary services
Civil engineering and other construction
Other chemicals and man-made fibers
Catering and accommodation services
Wood and wood products
Food
Machinery and equipment
Printing, publishing and recorded media
Glass and glass products
Coal mining
Other producers
Metal products excluding machinery
Agriculture, forestry and fishing
Professional and scientific equipment
Plastic products
Television, radio and communication equipment
Leather and leather products
Tobacco
Rubber products
Furniture
Footwear
Other transport equipment
Wearing apparel
Textiles
Beverages
Basic non-ferrous metals
Coke and refined petroleum products
Basic iron and steel
Gold and uranium ore mining
Fixed investment is concentrated: public sector, debt-driven consumer sectors and capital intensive mineral-energy sectorsChange in capital stock between 2000 and 2008 across all economic sectors
1313
3. Leveraging Procurement
Source: SARB
-100,000
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
120,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
R'b
n (
20
05
)
General government gross fixed investment Public corporations gross fixed investment
Trade balance: metal fabrication, machinery, transport equipment
Failure to leverage public capital expenditurePublic investment and trade balance in metal products and machinery, 1990 - 2008
1414
5. Competition
Source: MEPS, AMSA
Continued monopolistic pricing of key intermediate inputsArcelor Mittal SA hot rolled coil steel pricing relative to other markets
Graph from Bianca
300
400
500
600
700
800
900
1000
1100
1200
1300
Mar
-05
May
-05
Jul-0
5
Sep-0
5
Nov-0
5
Jan-
06
Mar
-06
May
-06
July-
06
Sep-0
6
Nov-0
6
Jan-
07
Mar
-07
May
-07
July-
07
Sep-07
Nov-0
7
Jan-
08
Mar
-08
May
-08
July-
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Sep-0
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Nov-08
Jan-
09
Mar
-09
May
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July-
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Sep-0
9
Nov-0
9
US
$/T
on
Average EU Average Asia
Average North America World Average
MITTAL Price List Price (Less 2.5% Settlement discount) DTI Estimated IPP
15
Key constraint
Source: AIDC Port Benchmarking Study, 2007
$0.00
$100,000.00
$200,000.00
$300,000.00
$400,000.00
$500,000.00
$600,000.00
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Terminal Handling Charge Cargo Dues Sea Side Costs
Port charges amongst the highest in the worldAverage Cost per vessel call
16
IPAP advances a number of economic objectives
• Rural development through e.g. agro-processing, bio-fuels, forestry, cultural industries, aquaculture, tourism
• Advanced technological capabilities through e.g. nuclear, advanced materials, aerospace, ICT
• Imperatives and opportunities in Green Economy• Downstream mineral beneficiation• Strengthened linkages between Tourism and Cultural industries• Stronger integration between sector strategies and skills
development plans• Macro-economic stability:
– Improved trade balance – Increased supply lower inflationary pressures– Increase in net revenue base– Diversification of production and risk
• Significant contribution to employment, both direct and indirect
17
IPAP: an engine of the new growth path
Agriculture
Mining
Food Textiles
Wearing apparel
Leather & leather products
Wood & wood products
Motor vehicles, parts & accessories
Other manufacturing
Wholesale & retail trade Transport & storage
Financial services Government services
Paper & paper products
Basic chemicals
Basic iron & steel Basic non-ferrous metals
EGW Business services
Excl. medical, dental & vet
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
0 7 14
Employment multipliers
To
tal
Bac
kwar
d l
inka
ges
Low employment multipliers & strong backward linkages
Low employment multipliers & weak backward linkages
High employment multipliers & strong backward linkages
High employment multipliers & weak backward linkages
1. Other chemicals & man-made fibers 2. Furniture3. Plastic products4. TV, radio and comm equip5. Electrical machinery and apparatus6. Paper and paper products7. Rubber products8. Non-metallic minerals9. Beverages10. Glass & glass products11. Professional & scientific equip12. Metal products excl. machinery 13. Machinery & equipment14. Footwear
1
2 34
5
6
7
8 9111
1 13
14
IPAP: value-added sectors with high employment and growth multipliers
Source: CSID
1818
New Growth PathA process is required to further elaborate other economic policies and integrate inter-related policies and key departments and agencies into the New Growth Path – led by EDD: – Framework Response to the International Economic Crisis – Stable pro-employment macroeconomic environment– Public sector – Labour market policies – Industrial policy and action plans – Knowledge economy– Green economy – Rural economic development– Tourism development – Enterprise development – Informal economy– Social economy– Work on skills for the economy – Provision of economic infrastructure which excludes bulk
infrastructure – Regional integration
1919
A Comprehensive and Integrated policy response is required to scale-up Industrial Policy
1. Stronger coherence between macro- and micro- economic policies in relation to exchange and interest rates; inflation and trade balance imperatives
2. Industrial financing channelled to more labour-intensive and value-adding sectors
3. Leveraging procurement to raise domestic production and employment in a range of sectors
4. Developmental trade policies such as tariffs and standards deployed in a selective and strategic manner
5. Competition policies: competitive input costs for productive investments and affordable goods and services for poor and working-class households
6. Skills, technology and innovation policies better aligned to sectoral priorities
7. Deploying these policies in general and in relation to more ambitious sector strategies, as set out in detailed Cross-cutting and Sector KAPs
2020
1. Strengthen coherence between macro- and micro- economic policies
• Macro-policies which are more supportive of IPAP and other production sectors:– Competitive and stable exchange rate regime– A competitive real interest rate regime relative to key
trading partners• Micro-economic interventions supportive of key macro-
economic objectives– Lower inflation: critical industrial inputs and goods /
services consumed by poor and working-class households
• Competition and regulation policies• Promotion of new entrants to increase competition
– Improvement of trade balance
21
• A critical determinant of profitability and investment is the cost and availability of capital on terms comparable to competitors
• SA’s cost of capital is almost the highest of our trading partners
• Recent improvements in investment rates have been driven by public investment. Private investment has been concentrated in debt-driven consumption sectors and capital-intensive mineral-energy sectors
• Development banks have played a critical role in channelling finance to productive activities in countries that have industrialised rapidly, in the context of a large-scale industrial policy e.g. Korea’s KDB and Brazil’s BNDES
• These development banks source concessional funding in order to drive rapid growth in investment
• Therefore, IPAP focuses on:– Securing and channelling concessional DFI funding– Strengthening the conditionalities and impact associated with on-
budget incentives
21
2. Industrial Financing
22
2. Industrial Financing A tale of two Development Banks
Sources: BNDES, IDC and Bloomberg, 2007/8
IDC funding sources and structure
Source of loan IDC financing– Commercial Bank loans– Commercial DFI loans
Basic Structure of IDC loan financing1. Long Term Interest Rate (8.8%)1
2. Basic spread (1%)3. Credit Risk Levy 0-4% (Ave approx 1.7%)
Average IDC lending rate:
11.50%SA real bank rate (2007)
4.92%Real IDC rate
6.58%
BNDES funding sources and structure
Source of loan BNDES financing– FAT (Worker’s Assistance Fund)*
• Legislatively mandated flow of large portion of FAT (+/- 40%)
• BNDES only pays ‘back’ interest not capital
– Treasury bonds on attractive terms
Basic Structure of BNDES loan financing1. TJLP = Long Term Interest Rate (6.25%)2. Basic spread 0-3% (Ave approx 1.09%)3. Credit Risk Levy 0.46-3.57% (Ave approx 1%)
Average BNDES lending rate: 8.34%Brazil real bank rate (2007) 7.61%Real BNDES rate 0.73%
Brazil: Banco Nacional De Desenvolvimento Econômico E Social (BNDES)
South Africa: Industrial Development Corporation (IDC)
2323
Industrial Financing
Brazil’s investment growth: 2.5 times faster than GDP
Source: BNDES, 2008
2424
Industrial Financing
Share of Brazil’s development bank (BNDES) in credit extension and GDP, 2000 - 2008
Source: BNDES, 2008
2525
2. Industrial Financing
KEY ACTION PLANS
IDC funding source1. Review IDC business model to free up capital for IPAP, other
value-adding and more labour-intensive sectors2. Intra-governmental process to identify and create long-term
ongoing source of concessional funding for IDC
Strengthen impact: incentives and support measures3. Strengthen conditionalities in relation to:
- Employment intensity- Market behaviour- Localisation of supply chains- Much stronger scrutiny and conditionalities for further ‘mega-
projects’
2626
3. Leveraging Procurement
• Large public procurement is currently conducted more on an ‘ad-hoc’ than ‘strategic’ basis– No medium- and long-term procurement plans– Little or no price advantage– Limited leveraging of domestic production
• Many sectors in the IPAP will depend on leveraging public expenditure
• Strengthen procurement to deliver greater industrial development and net economic benefits
• Overhaul procurement policy, legislation and practice to:– Identify 8-10 large strategic ‘fleet’ procurements for the
development of long-term procurement plans that set out what will be manufactured domestically
– Incentivise local production and B-BBEE on routine purchases, while ensuring value-for-money for the state
27
3. Leveraging Procurement
KEY ACTION PLANS
1. Identification of 8-10 strategic procurement ‘fleets’ for the explicit development of long-term procurement plans that incorporate local production and supplier development requirements:
– Locomotives / wagons / coaches for freight and commuter rail– Key elements of the coal-fired electricity build programme– Key elements of the nuclear electricity build programme– Buses procured by Metros– Components / materials in relation to SAA / Defence Aerospace procurement– Appropriate sequencing of inclusion of pharmaceuticals especially ARVs– Set-top-boxes produced for digital migration process
2. Overhaul of Preferential Procurement Policy Framework Act (PPPFA)– Align discretionary points with B-BBEE Codes and local procurement– Eliminate ‘import fronting’– Designation of fleets and other ‘critical industries’ for domestic production– Allow price-matching by domestic producers
2828
3. Leveraging Procurement
KEY ACTION PLANS
3. Revise National Industrial Participation Programme (NIPP) and integrate Competitive Supplier Development Programme (CSDP)– More strategic pre-tender process applying to public procurements over a
particular threshold and in relation to strategic sectors– Gap analysis comparing demand requirements and domestic supply
capacity– Up-front identification in NIPP tenders of domestic production / supplier
development requirements4. Align B-BBEE and Industrial Policy
– Review B-BBEE policy with a view to strengthening the linkages between B-BBEE and industrial policy
5. Strengthen role of DFI’s in locking-in domestic and regional procurement– DFI’s to include local production conditionalities in their lending
conditions6. Revamped Proudly South Africa
– PSA with SANAS to verify local content– Higher profile campaigns
2929
4. Developmental Trade Policies
• NIPF identifies tariffs as industrial policy instruments• More strategic and focussed deployment of trade policy
instruments– Tariff-setting informed by sector strategies and properly
enforced– Standards
• Developed and Advanced Developing countries are increasingly erecting standards-based barriers to trade
• Standards in relation to climate change and energy efficiency
3030
4. Developmental Trade Policies
KEY ACTION PLANS
1. Ongoing Developmental Tariff Reform – Scope to increases tariffs on products with scope for significant
potential creation / retention of decent jobs and import replacement
– Scope for further decreases in tariffs on intermediate inputs into manufacturing
– Explore stronger conditionalities on tariff increases2. Clampdown on Customs Fraud
– Indicative reference pricing system– Dedicated capacity to deal with fraudulent and illegal imports– Dedicated ports of entry for sensitive products– Criminalisation of customs fraud and increasing fines
3. Review trade valuation methodology to align with major trading partners
3131
4. Developmental Trade Policies
KEY ACTION PLANS
4. Strengthen market standards– Pre-import enforcement of standards– Additional mandatory standards in areas such as building energy
and water efficiency, electrical products, electric motor vehicle batteries, processed meat
– Develop additional standards in areas such as solar water heaters, wind energy turbines, diesel particulate filters, motor vehicles electronics, interiors and exteriors, bio-diesel, furniture
– Accreditation of local production in conjunction with Proudly South Africa (SANAS)
3232
5. Competition
• Continued challenges with respect to monopolistic provision of strategic goods and services and low levels of effective competition.
• Returns derived not from effort and innovation but from historical position
• Existing regulation and enforcement backed up by IPAP focus on greater strategic role of competition authorities including by ensuring that strategies for those that receive state support are based on long term capacity building investment.
• Three areas of problematic activity;
– Private inputs into manufacturing and other productive processes, e.g. steel, chemicals
– Public inputs into manufacturing and other productive processes, e.g. electricity and telecommunications
– Wage goods and other products purchased largely by poor and working- class households, particularly food
3333
5. Competition
KEY ACTION PLANS
1. Focus of Competition Authorities on:– Intermediate industrial products such as Steel, Chemicals
and Cement– Infrastructure and Construction– Airfares– Food– Banking– Stronger focus on economic impacts such as:
• Follow up on anti-cartel findings• Policy advocacy with government
3434
6. Sectors
Cluster 1: Qualitatively new areas of focus– Metals fabrication, capital and transport equipment sectors: leverage
Capex programme, rebuild and position as future exporters– Green and energy saving industries: solar water heating, concentrated
solar power, wind power, energy efficiency– Agro-processing linked to food security and food pricing imperatives
Cluster 2: Scale up / broaden interventions in existing IPAP sectors– Automotives, Components, Medium and Heavy Commercial Vehicles:
raise economies of scale and localisation of components– Downstream Mineral Beneficiation: based on establishing minimum
beneficiation levels– Plastics, Pharmaceuticals and Chemicals: focused on plastics and
value-adding pharmaceuticals– Clothing, Textiles, Footwear, Leather: recapture domestic market share
through competitiveness upgrading and tackling illegal imports
3535
6. Sectors
Cluster 2: Scale up / broaden interventions in existing IPAP sectors– Biofuels: establish regulatory framework and support agricultural and
refining investment– Forestry, Paper & Pulp, Furniture: unblock water licences and promote
further processing– Strengthening linkages between Cultural Industries and Tourism– Business Process Outsourcing: broaden and deepen SA’s product
offerings
Cluster 3: Sectors to develop long-term advanced capabilities– Nuclear: leveraging local production and technology transfer– Advanced Materials: feeding into new growth industries such as
aerospace, solar and nuclear– Aerospace: strengthening integration into supply chains
Detailed Sector Key Action Plans: Appendix A
3636
Impact of revised IPAP
• Employment– 825,706 direct decent jobs over ten years– 2,477,118 total (direct + indirect) decent jobs over ten years
• Trade balance– Significant improvement in trade balance– Mitigate Balance-of-Payments threat to sustainability of
public Capex programme– Diversify and grow exports in areas such as capital
equipment, automotive components, agro-processing• Industrial capabilities
– Build long term industrial capabilities and increasing returns through investment, skills development, upward movement in value chains and support for commercialisation and growth of domestic technologies
3737
Appendix AMetal Fabrication, Capital and Transport Equipment
• Most promising set of ‘sunrise industries’ which have benefited somewhat from recent public and private investment
• Complimentarity between investment and employment• However, the potential of these sectors has not been fully realised• Opportunity to resuscitate the industry domestically in the short- and
medium-term and develop into a competitive exporting industry• Key Opportunities
– Eskom and Transnet capital expenditure programmes– Mining industry capital expenditure programme– African market
• Potential to create 145,478 direct jobs over next ten years, substantially reduce trade deficit and increase long term exports
3838
Appendix AMetal Fabrication, Capital and Transport Equipment
Key Actions
1. ‘Designation’ of long-term procurement fleets- Transnet and PRASA: locomotives / coaches- Key elements of Eskom’s coal-fired power stations
2. Competitive Financing Programme for Suppliers to CAPEX Programme- Finance scheme to assist domestic suppliers to public CAPEX Programme- Administered by IDC
3. Competitiveness benchmarking and matchmaking- UNIDO SPX programme to benchmark capabilities of suppliers and matching to
Transnet’s demand requirements4. Skills Development
- Tooling and Foundry initiatives- Resuscitation of skills facilities in specific industrial clusters- Annual Skills Development Plan in conjunction with DHE&T / SETA / NSF
5. Finalise White Goods strategy and Action PlanKey departments / agencies: DTI, EDD IDC, NT, Transnet, Eskom, PRASA , DPE, DoT, UNIDO, DST, DMR, NTI, NFTN
3939
Appendix AGreen Industries and energy efficiency
• Environmental and climate change concerns have become a commercial reality
• Increasing energy costs will be a major threat to manufacturing• Increasing ‘eco-protectionism’ in advanced economies• Opportunities to develop new industries and substantially increase
energy efficiencies• Key opportunities
– Solar Water Heating– Concentrated Solar Power– Wind– Biomass– Automotives– Substantial improvements in industrial energy efficiency
• Potential to create thousands of direct jobs but requires more scoping
4040
Appendix AGreen Industries and energy efficiency
Key Actions1. Solar Water Heating
– Establish mandatory requirement that all new houses from March 2011 must have solar water heating
– Upscale domestic manufacturing– Financial model developed by DoE– Training programme for installers
2. Concentrated Solar Power– Pilot plant financed by IDC– Leverage NERSA Refit tariff– Identify domestic manufacturing opportunities– Expedite process for signing of PPAs
3. Technology– Strengthen technological drive e.g. electric car
4141
Appendix AGreen Industries and energy efficiency
Key Actions
4. Industrial energy efficiency programme– Explore fiscal incentives e.g. accelerated depreciation for energy
efficient industrial motors– Scale up Cleaner Production Centre
5. Water efficiency– SABS to develop standards for building water efficiency– Identify industrial opportunities e.g. rain-water tanks
6. Further work required around:– Wind– Biomass– Recycling
Key departments / agencies: DTI, EDD, DoE, Municipal / Provincial Government, SABS
4242
Appendix AAgro-processing
• Largest set of manufacturing sectors• Some initial scoping work has been completed but requires more dedicated
strategies for specific sub-sectors• Key opportunities
– Mariculture / Aquaculture– High-value agriculture– Organics– Small scale maize milling– Strengthen food safety controls and accreditation for domestic market
and export access• Potential to create 128,000 direct jobs, retain 216,000 jobs over next ten
years and improve trade balance
4343
Appendix AAgro-processing
Key Actions1. Implement Food Control Agency
– Strengthen consumer safety and promote recapture of domestic market
– Address increasing food safety requirements for export markets2. Aquaculture / Mariculture
– Legislative changes to improve enabling environment– Develop marine Aquaculture Zones– Establish aquaculture hatcheries– Financing and Technology support
3. Organics– Organic produce strategy and action plan– Develop organic food standards– Development of niche markets, e.g. organic cotton
4444
Appendix AAgro-processing
Key Actions4. Small scale milling
– Support small scale milling sector to create competition, support small businesses and lower bread prices
– Develop financing and technology package5. Fruit and vegetable canning industry
– Raise competitiveness for long term sustainability6. Rooibos and Honeybush Tea
– Develop domestic packaging capacity7. Skills Development plan in conjunction with DHE&T / SETA / NSF
Key departments / agencies: DTI, EDD, DoH, DAFF, DWA, DEA, Provincial / Municipal Government
4545
Appendix AAutomotives, Components, Medium and Heavy
Commercial Vehicles• Doubling of automotive production and tenfold growth in exports since 1995
with moderate employment growth• However, a number of challenges persist:
– High import penetration– Insufficient local content linked to inadequate breadth and depth of the
components sector– Medium and heavy vehicles – including buses – were excluded
• Key opportunities:– Raise economies of scale and production to 1.2m vehicles by 2020– Substantially increase local content through broadening and deepening
component sector– Commercialise SA electric car– Resuscitate Bus sector– Grow “Yellow Metals” sector
• Potential to create 160,000 direct jobs over ten years and increase exports
4646
Appendix AAutomotives, Components, Medium and Heavy
Commercial Vehicles
Key Actions
1. Raise economies of scale and production to 1.2 million vehicles by 2020- Leverage Automotive Production and Development Programme (APDP)- Ongoing increases in minimum volume threshold
2. Broaden and deepen component manufacturing– Localisation strategy
- Electrical / Electronics- Exteriors- Interiors- Body- Chassis and Drive-train
– Catalytic converters: move into Diesel Particulate Filters3. Commercialise SA electric car
- Leverage APDP and other support mechanisms
4747
Appendix AAutomotives, Components, Medium and Heavy
Commercial Vehicles
Key Actions4. Resuscitate Bus Sector
- ‘Designate’ Bus sector as long term procurement fleet- Incorporate Bus sector into APDP
5. Scale up domestic “Yellow Metal” manufacturers- (Re)incorporation into MIDP / APDP
6. Skills Development plan in conjunction with DHE&T / SETA / NSF
Key departments / agencies: DTI, DoT, DST, Provincial Government, Metros, AIDC
4848
Appendix ADownstream Mineral Beneficiation
• Minerals are a non-renewable ‘wasting asset’ which need to be leveraged during their lifespan to build a more diversified, labour-intensive and value-adding economy
Key Actions• Setting minimum beneficiation levels for key commodity chains• Identification of beneficiation offsets• Gold loan scheme
Key departments / agencies: DTI, DMR, IDC
4949
Appendix APlastics, Pharmaceuticals and Chemicals
• The upstream chemical sectors have performed well, with the more labour-intensive and value-adding plastics and pharmaceuticals sectors lagging.
• Pharmaceuticals imports are 5th largest contributor to our trade deficit• There is significant scope to grow plastics and pharmaceuticals sectors
• Key opportunities– Grow plastics fabrication, in applications such as automotives, building
and packaging– Leverage public procurement to increase pharmaceutical production
and API’s– Selected opportunities for downstream beneficiation of chemicals
• Potential to create 22,754 direct jobs over next ten years and significantly reduce trade deficit
Key departments / agencies: DTI, DST, DoE, DoH, NT, IDC, CSIR
5050
Appendix APlastics, Pharmaceuticals and Chemicals
Key Actions1. Plastics
– Leverage more competitive polymers price– Key opportunities in automotive, building and packaging sectors– Grow medical and electrical applications– Skills Development plan in conjunction with DHE&T / SETA / NSF
2. Pharmaceuticals– Leverage public procurement: ARVs, reagents for AIDS / HIV diagnostics,
vaccines– Attract Active Pharmaceutical Ingredient (API) investments for key ARVs– Improve regulatory environment for pharmaceutical production and clinical
research– Subject to agreement with Department of Health
3. Chemicals– Investigate opportunities for strategic downstream beneficiation e.g. fluorspar– Investigate costs / benefits of proposed new liquid fuels projects
Key departments / agencies: DTI, DST, DoE, DoH, NT, IDC, CSIR
5151
Appendix AClothing, Textiles, Footwear, Leather
• Sectors have experienced substantial decline due to rand strength and volatility, illegal imports and insufficient competitiveness
• DCCS has not worked: only applicable to small pool of exporters and promoted imports through duty credits
• Substantial strategy work has been done and most interventions required have been identified
• Key opportunities– Recapture significant portion of domestic market through:
• Firm and value-chain competitiveness upgrading • Clamp down on illegal imports and non-compliance with
country of origin labelling– Develop / strengthen niche technology / export capabilities
• Potential to retain 100,000 jobs, possible creation of net new jobs and significantly reverse negative trade balance over the next 10 years
5252
Appendix AClothing, Textiles, Footwear, Leather
Key Actions
1. Clothing Textiles Competitiveness Programme (CTCP) and Production Incentive (PI)– Rollout CTCP– Finalise and rollout PI– Extend CTCP and PI to Footwear, parts of Leather
2. Illegal Imports and related non-compliance– SARS clampdown on illegal imports– Scale up policing of country of origin labelling
3. Skills Upgrading Programme– Finalise funding arrangements with NSF– Roll-out via CTFL SETA and related institutions
4. Audit of Textiles Capabilities– Audit Textiles capabilities– Explore industry consolidation to achieve sustainability and competitive
focus– Adapt tariff regime
5353
Appendix AClothing, Textiles, Footwear, Leather
Key Actions
5. Innovation / Technology– Identify distinct technological capabilities– Explore commercialisation opportunities
6. BB-BEE– Explore leveraging BB-BEE obligations at retail level to promote:
• Domestic manufacturing• Sustainable black ownership / management / succession planning
Key departments / agencies: DTI, DHE&T, ITAC, SARS, IDC, DHE, CTFL SETA
5454
Appendix ABiofuels
• Biofuels has substantial opportunity to generate employment and value-added across primary (farming), manufacturing (refining) and tertiary (distribution) sectors and contribute to rural development
• Impetus around Biofuels has slowed due to debates about food security and appropriate crops to include.
• Key opportunity– Fast-track regulatory processes to produce ‘quick win’ around
employment and rural development progress– Scale up biofuels to 10% of fuel supply
• Potential to create 125,000 direct jobs over next ten years, mostly in rural areas, and lower oil imports
5555
Appendix ABiofuels
Key Actions
1. Biofuels– Ensure mandatory uplift of 2% of bio-ethanol into fuel supply at
minimum price, rising to 10% over the next 10 years– IDC investment to support investment in projects (currently invested in
4 plants)– Skills development support
Key departments / agencies: DoE, DTI, EDD, DAFF, IDC, NEF
5656
Appendix AForestry, Paper & Pulp, Furniture
• Forestry has the potential to create large number of jobs in rural areas with opportunities for further processing
• The key constraint has been slowness in processes related to issuing of water licences, particularly in Eastern Cape
• Requires an expedited process / dedicated task team to work through licensing backlog
• Key opportunities– Create thousands of jobs in rural areas if regulatory processes
can be expedited– Opportunity and need to improve the quality of work through
revisiting outsourcing arrangements and stronger enforcement of labour legislation
– Downstream beneficiation possibilities in sawmilling and furniture
• Potential to create 42,941 direct jobs over next ten years, mostly in rural areas, with downstream beneficiation opportunities
5757
Appendix AForestry, Paper & Pulp, Furniture
Key Actions1. Forestry
– Establish expedited process / dedicated task team to fast-track issuing of water licences for 50,000 hectares over next ten years
– Revisit outsourcing model and strengthen enforcement of labour legislation in order to improve the quality of work in forestry
– Accelerate PPA process for issuing of co-generation licenses to improve viability of existing sawmillers
2. Furniture– Establishment of clusters for small furniture manufacturers (SMME) in KZN, WC
and Gauteng– Establish furniture centre of competence
3. Charcoal manufacturing– Establish charcoal plants in EC and KZN using mainly jungle wattle (alien
species) as input
Key departments / agencies: DAFF, DWEA, DTI, EDD, Provincial / Municipal Government, ASGISA-EC, Land Bank, SEDA
5858
Appendix ACultural Industries and Tourism
• Closer integration between Cultural Industries and Tourism work
• Key opportunities
– Strengthen linkages between cultural industries and tourism to bolster both
– Broaden cultural industries response
5959
Appendix ACultural Industries and Tourism
Key Actions
1. Cultural industries– Rollout Craft Hubs to more provinces– Build on Film Rebate, IDC Funding and significant international and
domestic successes– Develop a music industry strategy
2. Tourism– Research airline cost structures such as fuel levies– Identification of niche tourism development opportunities– Identification and promotion of cultural industry events that can bolster
SA’s tourist offering e.g. music, literature
Key departments / agencies: DTI, DAC, EDD, DST, DOT, Provincial Government, Metros, IDC, NFVF
6060
Appendix ABusiness Processing Services
• Build on successes of BPS incentives• Further research and strategy related to tradable and non-tradable
services that can create decent jobs and generate foreign exchange• Key opportunities
– Grow BPS programme• Potential to create 56,000 direct decent jobs over ten years in BPS
Key Actions1. BPS
– Continue to rollout BPS incentive– Continue Monyetla skills programme– Leverage lower telecomms costs– Promotion of SA as BPS destination
Key departments and agencies: DTI, NT, DoHE, DHE&T, Training institutions and private investors
6161
Appendix AAdvanced Manufacturing
• Advanced manufacturing is extremely broad area of work. Involves the commercialisation of advanced technologies and integration into high-value production systems
• Key opportunities:
– Nuclear
– Advanced Materials
– Aerospace
• Raise long-term manufacturing and growth capabilities
• Potential to create 67,500 direct jobs in nuclear over next ten years with significant positive impact on trade balance
6262
Appendix AAdvanced Manufacturing
Key Actions
1. Nuclear– Leverage procurement of the Nuclear build programme for localisation and
participation in global nuclear value chains– Conformity Assessment Framework for SA nuclear industry– Skills development support
2. Advanced Materials– Targeted development of metals / materials linked to downstream
beneficiation opportunities such as Titanium– Nano-materials– Commercialisation of natural fibre composites (Kenaf, flax, sisal, hemp)– Composites
3. Aerospace– Deepen and broaden supply into global aerospace value chains– Leverage public purchase of aircraft
6363
Appendix AAdvanced Manufacturing
Key Actions
4. Electronics– Leverage digital migration process in relation to set-top-boxes and digital
televisions
Key departments / agencies: DTI, DoE, DPE, NT, DHE&T, DoH, DAFF, CSIR, Eskom, NNR, NECSA
6464
Appendix BProfitability of manufacturing (SIC 3) relative to F.I.R.E. (SIC 8) (measured by gross operating surplus per capital)
Source: Rodrik, 2006
65
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
ZAF
MYS
65
Appendix B
Source: Rodrik, 2006
Share of manufacturing in total employment: South Africa versus Malaysia, 1970-2008
6666
Appendix B
-
20,000
40,000
60,000
80,000
100,000
120,000
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000 1
99
1
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Employment in Services
Wholesale And Retal Trade Catering and Accommodation Transport and Storage
Finance and Insurance Business service Communication (RHS)
Employment in services, 1991 - 2008
Source: CSID (Quantec), 2009
