Department of Trade and Industry

DRIVING COMPETITIVENESS:

TOWARDS A NEW INTEGRATED INDUSTRIAL STRATEGY FOR SUSTAINABLE EMPLOYMENT AND GROWTH

Dr David Kaplan

Chief Economist, DTI

May, 2001

1. Why an industrial strategy?

1.1 A good manufacturing strategy promotes investment

1.2 Global trends - the implications for SA manufacturing and the DTI

2 The changing world - the growing importance of markets

2.1 Exploding markets;new international trends

The expansion of market forces in the modern era

The limitations of the marketNew markets, new role for the state: towards

arules-based domestic economy for the peopleMarket rules & market failure: industrialstrategy in South Africa

2 The changing world

2.2 Balancing the rules for domestic and international markets

Domestic markets and the role of competition policy A broader mandate: objectives for DTI industrial strategy:

BEE, SMMEs, Employment

The impact of new technologies is transforming the role of the state Balancing acts: public interest and economic growth Effective regulation requires cooperation across government

2 The changing world

2.3 Globalisation:Whom does it really benefit?

Levelling the playing fields? Multilateral economic institutions

The importance of bilaterals and multilaterals

3 Current Industrial Policy

3.1 The learning years: 1994-1999

3.2 Policy logic and coherence: 1994-19993.3 Policy design: 1994-1999 - best

practice?3.4 Industrial performance: did our

policies work?

Source: Statistics South Africa

1994 1995 1996 1997 1998 1999 200015.13 16.87 18.57 19.92 21.45 23.72 27.87

M A N U F A C T U R IN G - E x p o r ts a s a R a t io o f P r o d u c t io n

1 0

1 5

2 0

2 5

3 0

1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0

Current Industrial Policy: An AssessmentTable 1: Manufacturing - Exports

S o u r c e : S ta t is t ic s S o u th A fr ic a

1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 01 9 0 2 1 1 2 0 8 2 2 2 2 1 6 2 3 1 2 4 6

M A N U F A C T U R IN G - L a b o u r P ro d u c tiv ity: O u tp u t (R 0 0 0 ) p e r e m p lo ye e (c o n s ta n t 1 9 9 5 p r ic e s )

1 8 0

1 9 0

2 0 0

2 1 0

2 2 0

2 3 0

2 4 0

2 5 0

1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0

Table 2: Manufacturing - Labour Productivity

S o u rc e : R e se rve B a n k o f S A

1994 1995 1996 1997 1998 1999 200011 .15 1 2 .90 1 3 .19 1 3 .18 1 2 .59 1 2 .24 1 2 .55

M AN U F AC T U R IN G - In vestm en t as R atio o f C ap ital S tock

11

11.4

11.8

12.2

12.6

13

13.4

13.8

1994 1995 1996 1997 1998 1999 2000

Table 3: Manufacturing - Investment

Source: Statistics South Africa

1994 1995 1996 1997 1998 1999 2000271,020,658 301,847,505 303,035,566 310,263,934 288,692,948 301,259,129 316,579,223

M anufac tur ing - V a lue of S a les (R000 )cons tant 1995 pr ices

270,000

275,000

280,000

285,000

290,000

295,000

300,000

305,000

310,000

315,000

320,000

1994 1995 1996 1997 1998 1999 2000

Table 4: Manufacturing - Value of Sales

S o u r c e : S t a t i s t i c s S o u t h A f r i c a

1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 01 , 4 2 7 , 0 4 5 1 , 4 3 1 , 0 0 8 1 , 4 5 6 , 3 9 3 1 , 3 9 6 , 4 2 9 1 , 3 3 9 , 3 2 8 1 , 3 0 6 , 9 3 3 1 , 2 8 8 , 4 3 8

M A N U F A C T U R IN G - A v e r a g e T o t a l N u m b e r o f E m p lo y e e s

1 2 5 0 0 0 0

1 3 0 0 0 0 0

1 3 5 0 0 0 0

1 4 0 0 0 0 0

1 4 5 0 0 0 0

1 5 0 0 0 0 0

1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0

Table 5: Manufacturing - Employment

4 Towards an integrated industrial strategy framework

4.1 Key factors affecting manufacturing: ICT,

innovation and demanding customers

4.2 Old modes of competitiveness count for

much less

4.3 SA manufacturing: what must be done? Don’t rely on the old ways Don’t bank on cheap labour Forget protection Do pay attention to innovation Enhance knowledge capacities

5 Continuities and new directions

5.1 Continuities: preserving the best of the

old

5.2 New directions: towards a knowledge-

intensive manufacturing sector

5.3 An integrated industrial strategy for the

region

5.4 Phasing in policy changes

5.5 Our history, our special concerns

6 Making the change to a knowledge-based economy

6.1 Constraints Human resources Infrastructure

6.2 Tensions Breaking down departmental barriers Employment levels

7 Making it work:indicative policies

7.1 Skills development

7.2 Acquiring and creating knowledge

7.3 Information and communication technologies

7.4 Networks and best practice

7.5 Consultative policy making

8 Government implementation of the new industrial strategy

framework

8.1 Extending industrial policy across departments

8.2 Business and consumer regulation, competitiveness

8.3 Joined-up government: working with other state departments

9 Government as a learning organisation - the importance of monitoring and evaluation