IPAP 9month Overview

8/7/2019 IPAP 9month Overview

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1

IPAP2 Progress and Progression

2010/11 IPAP2 Nine Month Implementation

and2012/13 IPAP2 Overview

Portfolio Committee on Trade and IndustrySelect Committee on Trade and International Relations

22 March 2011 1



2

IPAP 2:Key pillar of the New Growth Path

Agriculture

Mining

FoodTextiles

Wearing apparel

Leather & leather products

Wood & wood products

Motor vehicles, parts &

accessories

Other manufacturing

Wholesale & retail tradeTransport & storage

Financial services Government services

Paper & paper products

Basic chemicals

Basic iron & steel

Basic non-ferrous metals

EGWBusiness 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

T

otal Backward linkages

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. Furniture

3. Plastic products

4. TV, radio and comm equip

5. Electrical machinery and

apparatus

6. Paper and paper products7. Rubber products

8. Non-metallic minerals

9. Beverages

10. Glass & glass products

11. Profess ional & sc ientific

equip

12. Metal products excl.

machinery

13. Machinery & equipm ent

14. Footwear

1

2 34

5

6

7

8 9111

1 13

14

IPAP: value-added sectors with high employment and growth multipliers

Source: CSID

2



33

IPAP2:Requires comprehensive and integrated action

1. Macro-economic policies which support more competitive andstable real exchange and interest rates

2. Industrial financing channelled to more labour-intensive andvalue-adding sectors

3. Leveraging procurement to raise domestic production and

employment in a range of sectors4. Developmental trade policies such as tariffs and standardsdeployed in a selective and strategic manner

5. Competition and regulation policies: competitive input costs forproductive investments and affordable goods and services for poorand working-class households

6. Skills, technology and innovation policies better aligned tosectoral priorities7. Deploying these policies in general and in relation to more

ambitious sector strategies, as set out in detailed Cross-cuttingand Sector KAPs



44

IPAP2: Sectors

Cluster 1: Qualitatively new areas of focus

– Metals fabrication, capital and transport equipment sectors:leverage Capex programme, rebuild and position as futureexporters

– Green and energy saving industries: solar water heating,concentrated solar power, wind power, energy efficiency

– Agro-processing linked to food security and food pricingimperatives

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 tacklingillegal imports



55

IPAP2: Sectors

Cluster 2: Scale up / broaden interventions in existing IPAP sectors

– Biofuels: establish regulatory framework and support agriculturaland refining investment– Forestry, Paper & Pulp, Furniture: unblock water licences and

promote further processing– Strengthening linkages between Cultural Industries and

Tourism

– Business Process Services: broaden and deepen SA’s productofferings

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



66

Key progress: Cross-cutting highlights

• Public procurement and SOE supplier development

Preferential Procurement Policy Framework Act Regulations - Cabinet approved revisions to PPPFA regulations developed by NT,

EDD and DTI

Alignment with B-BBEE Codes

DTI to designate sectors / subsectors for domestic production atspecified level of local content

DTI has developed sector designation methodology and iscompiling necessary research to designate a range of sectors

Awaits promulgation by NT

- 72% by value of R4,2 billion ARV tender awarded to SA manufacturerswith significant price reductions relative to the 2008 ARV tender

State Owned Enterprises

- First phase of mobilisation within SOEs to introduce localisation andsupplier development into the procurement process. SOEs introducingnew policies, processes, systems and capacity building to embedsupplier procurement leverage more systematically

- Some success stories e.g. recent Transnet procurement of 100locomotives: 90 to be assembled in SA



77


• Industrial Financing

Industrial Development Corporation - IDC reviewed its business model and balance sheet

Identified R70bn over the next five years for investment in NGP andIPAP sectors, dependant on economic conditions

R10bn Job Creation Fund at Prime less 3% over five years

R25bn earmarked towards Green Economy

R5bn Agro-processing fund- IDC funding April – December 2010: 6,471 direct new jobs created and

7,295 direct jobs saved in IPAP sectors

DTI Enterprise Investment Programme (EIP)- Small-medium manufacturing investments

- EIP April – December 2010: 10,211 direct jobs created

12(i) Tax Incentive

- Large manufacturing investments

- Nominal R20bn = R5.6bn



88


• Industrial Financing

Study on long term funding - Phase One: study on long-term sources of concessional industrial

financing, completed:

South Africa has well developed stock market but it is highlyconcentrated in terms of market capitalisation

Only the largest firms and niche sectors like mining use stock

market to raise capital Bond market only tapped by very large private firms, SOE’s and

government

A key issue is mismatch between short-term sources of funds(largely deposits) and long investment terms required in real sectorslike manufacturing

Development banks play a fundamental role in closing this gap inmany countries such as Brazil and Germany

- Phase Two: policy proposals to be completed in 2011/12 and feed intoappropriate processes



99


• National Industrial Participation Programme- Study into more strategic evolution of NIPP – including consolidation of

CSDP and NIPP – completed- Development of revised NIPP architecture on track- Obligations monitored in the region of +/- US$16.5bn- Of these, 80% arise out of the Strategic Defence packages- More than 220 projects have been implemented- Under the Strategic Defence Packages, 5 out of the ‘Big 6’ have

completed their obligations in full- 2010/11 financial year: 123 new jobs created and 432 jobs saved

• Skills- Customised Sector Programme inputs into sectoral skills processes

• Competition- Referrals against: tyre companies; scrap merchants; chemical

companies; airlines; online ticketing company; bicycle companies;construction companies

- Findings against bread price collusion including establishment ofassociated agro-processing fund at IDC to promote competition



1010


• Trade- Exporters Early Warning System on Technical Barriers to Trade

developed by SABS launched Identifies technical barriers to trade for exporters notified to WTO

Distributed via email free to exporters on a weekly basis- ITAC processed numerous applications for increases, rebates and

reductions of duties in line with IPAP priorities- SABS developed a range of enabling standards for various industries /

products



Key progress: Sectoral highlights

• Automotives

- Automotive Investment Scheme (AIS) finalised- AIS 2010/11 financial year

R14bn in investment commitments from assemblers and componentsuppliers secured

Conservative estimate of 12,000 new jobs 2011 – 2013

Large increases in levels of volumes and localisation

• Clothing & Textiles- Clothing Textile Competitiveness Programme (CTCP) and Production

Incentive (PI) 2010/11 financial year:

146 and 25 companies benefiting under the CTCP and PI respectively

40,591 jobs supported / saved

At least 1,111 new jobs created- SARS Illegal imports campaigns focussed on Gauteng and KZN

At least 56 premises inspected

R37m of merchandise detained in relation to counterfeit goods andvarious forms of tax non-compliance

11




• Business Process Services- 2010/11 financial year:

R40 million investments made and 950 jobs created

R42 million new investment commitments approved linked to 806 jobs

3,400 young trainees being trained under the Monyetla II Programme– 70% guaranteed employment by BPO consortium.

• Green Industries- Mandatory installation of solar water heaters in new buildings

Revision of building standards: mandatory installation of solar waterheaters or similar technologies in new buildings

Communication campaign to be rolled out in 2011/12- SABS finalised enabling standards for: solar water heaters; wind energy

turbines; energy efficient lighting, appliances and products; electricbatteries and alternative fuel vehicles; co-generation of electricity andbiofuels

- Significant progress with development of feed in tariff (REFIT) rules- Intra-departmental South African Renewables Initiative (SARI) initiative to

leverage international climate finance to supplement domestic fundingsources for renewable energy production linked to domestic manufacturing

12




• Forestry- 161 water licences for 10,000 hectares issued by the Department of Water

and Environmental Affairs (DWEA)

Represents between 8,000 – 9,000 direct jobs to be created

Lays the basis for more rapid progress

• Iron and Steel

- Intra-Departmental Task Team Report on lron Ore and Steel adopted byCabinet mandating DMR, DTI and EDD to secure developmental steelprice in exchange for cost plus iron ore

13



Key challenges

• Slow recovery of global economy and key traditional export

markets, in particular the US and EU• Sustained rapid growth of large developing economies / regions

such as China, India, Brazil and Africa

• This implies a challenging process of trade adjustment in a contextwhere value-added exports have gone to advanced trading partners

and Africa and commodity exports to other developing tradingpartners

• Continuous appreciation of real effective exchange rate (REER) tohighest levels on record in Q3 2010 in the context of massivecapital inflows and a large current account deficit

• South African economy still recovering domestically from the globaleconomic crisis

• Slowdown in public and private fixed investment expenditure

• Large drop in manufacturing employment between Q1 2008 and Q2

2010 with slight improvement in Q3 2010 14



Key challenges: Currency

Balance on current account, financial account and real effectiveexchange rate (2000=100) (R million) Q1 1990 – Q3 2010

Source: SARB

-

20

40

60

80

100

120

-60,000

-40,000

-20,000

0

20,000

40,000

60,000

Balance on current account (Rm) Balance on financial account (Rm) REER (1990=100) 15



Key challenges: Investment

Real gross fixed capital formation Q1 2005 to Q3 2010 (R’m 2005 prices)

Source: SARB

16

0

10000

20000

30000

40000

50000

60000

70000

80000

2005/01/01

2005/03/01

2005/05/01

2005/07/01

2005/09/01

2005/11/01

2006/01/01

2006/03/01

2006/05/01

2006/07/01

2006/09/01

2006/11/01

2007/01/01

2007/03/01

2007/05/01

2007/07/01

2007/09/01

2007/11/01

2008/01/01

2008/03/01

2008/05/01

2008/07/01

2008/09/01

2008/11/01

2009/01/01

2009/03/01

2009/05/01

2009/07/01

2009/09/01

2009/11/01

2010/01/01

2010/03/01

2010/05/01

2010/07/01

General government Public corporations Private corporations



1717

KAPs requiring fast-tracking

• Tri-lateral technical process to amend PPPFA regulations completed andawaits promulgation (Lead Departments: NT and EDD, supported by DTI)

• Process to amend SOE shareholder compacts to secure fleet identificationand localisation underway and to be completed (Lead Department: DPEsupported by DTI, DST and EDD)

• Customs Fraud Campaign underway but requires scaling up (Lead Agency:SARS supported by DTI, EDD and DOJ)

• Promulgation of Biofuels Mandatory Uplift Regulations (Lead Department:

DOE, supported by DTI, EDD and DAFF) and implementation of Biofuels fuellevy rebate (Lead Department: NT, supported by DOE, DTI, EDD and DAFF)

• Significant progress with REFIT rules with associated localisationrequirements for renewables (Lead Department/agency: DOE and NERSAsupported by DPE, DTI)

• Strategy drafted to establish and define minimum levels of beneficiation for

10 commodities to lay foundation for building beneficiation value chains(Lead Department: DMR supported by DTI, EDD and DST)

• Implementation of export tax on scrap metals (Lead Department: NTsupported by DTI)



1818

KAPs requiring fast-tracking

• Standard offer for Solar Water Heaters SWH’s with associated localisationrequirements (Lead Department: DOE supported by DTI)

• Inclusion and timing of nuclear in energy mix (Lead Department: DOE,supported by DPE, NT, DST and DTI)

• Progress with Aquaculture strategy (Lead Department: DAFF, supported byDTI, EDD and DWA) and Organic standards (Lead Departments: EDD andDAFF, supported by DTI)

• Food Safety Agency (Lead Department: DAFF, supported by DTI, EDD and

DOH)• Important progress recorded with issuing of water licences for forestry but

requires scaling up (Lead Department: DWA supported by DTI, DAFF andEDD)

• Set Top Boxes (STB’s) roll-out and associated localisation (LeadDepartment: DOC, supported by DTI)



Taking IPAP2 Forward2011/12 -2013/14

• Very substantial progress has been recorded in IPAP2 2010/11 andthe majority of KAPs are on track

• DTI is engaging at various levels to facilitate completion of KAPsthat require fast-tracking

– With relevant Departments

– Economic Sectors and Employment Cluster– Department of Performance, Monitoring and Evaluation of the

Presidency

19




• IPAP2 2011/12 will focus on continuity and implementation ofstrategies and KAPs identified in IPAP2 2010/11

• However, there are some areas of intervention for further scaling up:– Stronger alignment between IPAP sector strategies and skills

development system

Engagement with DHET to introduce sector specific programmesderived from sector strategies, like Monyetla Work ReadinessProgramme

– Scaling up of Green industries work Engagement with REFIT tariff to ensure new renewable energy

generation is linked to development of domestic green

manufacturing capacity South African Renewables Initiative (SARI) to leverage international

climate finance to supplement domestic funding sources forrenewable energy production linked to domestic manufacturing

20




• Areas of intervention for further scaling up:– Technology

Introduction of product development support measures– Addition of limited number of new sector/sub-sector

programmes, e.g.

Oil and gas Boatbuilding

• Launch of IPAP2 2011/12 – 2013/14 in April 2011

• Refinement of monitoring system for measuring and reporting onimpact, particularly jobs

• Capacity building: dedicated Certificate and Honours coursesdeveloped with Wits, African Programme on RethinkingDevelopment Economics

21



AppendixReal interest rates

Short term interest rates – January 2011

Source: The Economist

22-2

-1

0

1

2

3

4

5

6



AppendixReal interest rates

Long term interest rates – January 2011

Source: The Economist

23

-6

-4

-2

0

2

4

6



2424

AppendixCurrency

Source: SARB

24

Real Effective Exchange Rate (2000 = 100) and Rand / US Dollar, Jan 2009 – Jan 20116

6.5

7

7.5

8

8.5

9

9.5

10

10.5

1185

90

95

100

105

110

115

120

Real Effective Exchange Rate Rand / Dollar



2525

AppendixManufacturing

Manufacturing monthly production indexed (2005 = 100) and Y-O-Y growth,

January 2005 to December 2010

Source: StatsSA25



26Source: Quantec

AppendixTrade Balance

-5,000,000,000

-4,000,000,000

-3,000,000,000

-2,000,000,000

-1,000,000,000

0

1,000,000,000

2,000,000,000

1Q199

0

3Q199

0

1Q199

1

3Q199

1

1Q199

2

3Q199

2

1Q199

3

3Q199

3

1Q199

4

3Q199

4

1Q199

5

3Q199

5

1Q199

6

3Q199

6

1Q199

7

3Q199

7

1Q199

8

3Q199

8

1Q199

9

3Q199

9

1Q200

0

3Q200

0

1Q200

1

3Q200

1

1Q200

2

3Q200

2

1Q200

3

3Q200

3

1Q200

4

3Q200

4

1Q200

5

3Q200

5

1Q200

6

3Q200

6

1Q200

7

3Q200

7

1Q200

8

3Q200

8

1Q200

9

3Q200

9

1Q201

0

3Q201

0

Agriculture, forestry & fishing Manufacturing Mining 26

Trade balance by sector Q1 1990 – Q32010



2727

AppendixManufacturing employment

27

Employment in the manufacturing sector ‘000, Q1 2008 – Q4 2010

1400

1450

1500

1550

1600

1650

1700

1750

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q32009 Q42009 Q12010 Q2010 Q32010 Q42010

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IPAP 9month Overview

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