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Eighth Ipap requires break from the past

Trade and Industry Minister Rob DaviesTrade and Industry Minister Rob DaviesThere is "even more pressing need for structural change in the economy", to break out of commodity dependence and move to a more diversified base, says Minister Davies in launching the latest Industrial Policy Action Plan.

Ipap 2016, considered a "higher impact Ipap", envisages nothing less than a massive, concerted and focused national industrial effort, intimately involving all the key stakeholders and economic partners.

The eighth iteration of the Industrial Policy Action Plan (Ipap 2016/17 – 2018/19) was launched by Trade and Industry Minister Rob Davies on 9 May at Guestro Naledi Inhlanganiso Group Foundry (NI-Forge), in Benoni.

The higher impact Ipap is expected to build on achievements to date. Davies said there was an even more pressing need for structural change in the economy, to break out of commodity dependence and move to a more diversified base in which increasing manufacturing-based value addition, employment creation and export-intensity came to define South Africa's growth trajectory.

Economic growth should not be based on unsustainable models and industrial policy was key to inclusive growth, he said.

"Inclusive growth cannot be achieved by sticking to an imbalanced and unsustainable economic model based on the service sectors growing at twice the rate of the productive sectors, on the back of credit-fuelled consumption and import-intensity. Especially in tough times, there can be no retreat from industrial policy. It must be strengthened, deepened and embraced by all the social partners."

The national industrial effort envisaged in the latest Ipap must be built on four pillars:

  • Policy coherence and policy certainty across the government;
  • A close collaborative effort between the government, business and labour;
  • A commitment to ensure that the linkages between the primary and secondary productive sectors of the economy are maximised; and
  • A combined and constructive drive to overcome the key constraints to manufacturing-led, value-adding growth and labour-intensive manufacturing.

Ipap 2016/17–2108/19: Key focus areas

  • Public procurement – greatly enhanced and enforced compliance with localisation targets set for government departments and state-owned companies.
  • A strong focus on spill-over and labour-intensive sectors – in particular agro-processing; the clothing, textiles, leather and footwear sector; the component manufacturing and sub-assembly sub-sectors in automotives; rail, light manufacturing and engineering in the metals sector; plastics and associated sub-sectors; electro-technical assembly, sub-assembly and component manufacturing; and, downstream timber and pulp products, including furniture and boatbuilding.
  • Carefully targeted industrial financing and incentives – including much stronger export credit and export credit insurance support, in combination with a wide range of sector-specific incentives; and energetic implementation of the recently launched Black Industrialists Incentive.
  • Leveraging the devaluation of the rand to make South African manufactured products more globally competitive and to create opportunities for the expansion and further development of South Africa's domestic manufacturing capabilities.
  • Growing exports: there are four main pillars to the IPAP export strategy:
    • Building partnerships with global original equipment manufacturers (OEMs) focused on transferring technologies and growing South African exports in OEM value chains;
    • Partnering with national export champions to catalyse increased national technology absorption for the development of high value exports;
    • Strengthening existing industry associations and export councils; including establishing a dedicated Export Council for Africa; and,
    • Developing export-orientated production hubs in special economic zones and regional clusters, and fostering industrial decentralisation.
  • Automotives: the Department of Trade and Industry (dti) has established a team of technical experts to develop a post-2020 Automotives Master Plan. It will create a framework to secure even higher levels of investment and production, higher exports, deepening localisation and expanding employment.
  • Gas-based industrialisation: Ipap 2016 introduces a medium-term programme to ensure that gas-based industrialisation increasingly develops into one of the spines of our industrial strategy, leveraging natural gas as both a source of power generation and a driver of industrial diversification.
  • Minimising red tape: to open up space for much more streamlined and business-friendly governance processes.

Ipap 2016 renews efforts to overcome lingering structural obstacles to development and industrialisation, focusing on:

  • Working to stabilise electricity supply constraints, while creating an enabling environment for own- and co-generation and fuel cell technology development;
  • Continuing efforts to secure port and rail network reforms in order to overcome inefficiencies and associated high costs and robustly support exports; and
  • Concerted intra-governmental efforts to address deep-seated and serious skills deficits and mismatches that impact on the capacity of the economy to grow faster and diversify more effectively.

In launching the new iteration of Ipap, Davies listed some of the achievements of 2015/16.

Across the dti's main incentive schemes, some of which are administered by the Industrial Development Corporation, such as the Manufacturing Competitiveness Enhancement Programme, R57.1-billion in private-sector investment was leveraged in financial year 2015-16, on the back of R10-billion in incentives (on-budget R4-billion plus R6-billion in 12i tax allowances). Support is being provided to 1 770 local companies – i.e. at a rate of seven new or established firms every working day in 2015/16.

Public procurement of locally produced clothing and textile products recorded by the National Treasury increased from R264-million in 2013/14 to R479-million in 2015/16 – an increase of 82%.

Designation of bus bodies has led to the local manufacture and assembly of more than 700 bus bodies. Alongside the rejuvenation of the bus industry for the various bus rapid transit systems, there has been a substantial increase in medium and heavy commercial vehicle exports. In 2012, South Africa exported just R1.3-billion worth of these vehicles. By 2014, this had almost tripled to R3.7-billion. Performance is expected to improve even further in 2015/16.

 

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