Key amongst these is the newly introduced Industrial Policy Action Plan (IPAP), also known as IPAP2. The IDC played a contributing role in the development of IPAP and now that it has now been approved by Cabinet, we hope to play an important part in its successful implementation. As Minister of Trade and Industry Rob Davies has said, IPAP represents a significant step forward in scaling up South Africa’s efforts to promote long term industrialisation and industrial diversification beyond our current reliance on traditional commodities and non-tradable services. The new policy is driven by the need to grow the productive sectors of the economy. Between 1994 and 2008 consumption-driven sectors grew by 7.7% per year, compared with the productive sectors of the economy which grew by only 2.9% per year. This has meant that even at the peak of our average annual growth – 5.1% between 2005 and 2007 - unemployment levels did not come down.For the IDC, our priority remains creating jobs and in support of IPAP, and we will continue to focus our efforts on job creation in a number of labour-intensive sectors including: chemicals; clothing; textiles; bio-fuels; wood, paper and forestry; tourism and business process services. In addition, we’re excited about opportunities in new areas of focus in industrial policy, in particular, metals fabrication, green and energy saving industries and agro-processing. We will also be working with the Department of Economic Development through the Department of Trade and Industry. For IPAP to be a success it requires co-ordination across different departments and the integration of inter-related policies. We believe the new administration has put in place the necessary structures to allow this to happen. The revival of domestic manufacturing activity, particularly if renewed public sector efforts to enhance local procurement start bearing fruit, should provide increasing business opportunities and result in higher demand for IDC funding. We’ll also be looking to maximise the benefits for the domestic economy from government’s planned R845bn public sector infrastructure investment planned for the next three years. In particular, we need to understand how related industries can benefit – how can we strengthen, revitalise and encourage manufacturing capabilities as spin-offs from this spend. Collaboration with institutions such as the Development Bank of South Africa, which focus on developing bulk infrastructure, will also help us to identify ways to leverage this opportunity. |
The IDC has had some recent success in partnering the private sector to provide funding in areas where the risk appetite from the private sector has not been sufficient to meet demand for finance. We’ll continue to look for ways to expand these types of partnerships – based on a situation where there is fair sharing of risk and reward. We have also been working closely with National Treasury in order to look at ways to make Public Private Partnerships (PPPs) more successful on the ground. The IDC has implemented a number of PPPs in the healthcare sector which we are optimistic will set a precedent to show how public and private sector can work together in genuine partnership in providing finance to meet developmental needs. The IDC’s initiatives outside of South African borders remain an important part of our growth strategy. Although we remain focused primarily on South Africa, with 85% of our investment portfolio based in this country, it’s our vision to provide development finance across Africa. Regional and continental initiatives could help to unlock potential so that African countries start to trade with each other and also increase the range of products and services they export.
Africa experienced its best performance over the past decade, with GDP growth in Sub-Saharan Africa having been bolstered by strong global demand, a surge in commodity prices, substantial foreign direct investment inflows, a stronger degree of integration within the world economy and through vastly improved macro-economic stability. Infrastructure development has also been key in unlocking Africa’s growth potential. In addition, emerging and developing countries have seen their role in the global economy rising over time. By 2008, such economies accounted for around 45% of world GDP and contributed 35% to global exports of goods and services. Considering their 85% share of the global population and a substantial proportion of the world’s natural resources, their growth potential is yet to be fully realised. While the global economy is gradually recovering, it will not happen overnight. The sluggish and possibly protracted recovery in advanced economies will keep competitive forces extremely strong. It is thus imperative that South Africa’s private and public sectors, as well as the country’s labour force, take serious steps to improve efficiencies and productivity, continue with skills development initiatives and improve the domestic business environment from the operational and investment attractiveness standpoints, in order to ensure gains in global competitiveness, secure traditional markets and penetrate new ones. The year ahead looks to be challenging, but with the backing of an excellent team at the IDC and an enabling industrial policy framework, the IDC looks set to find innovative ways of putting South Africa on the growth path. |
