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8/10/2019 2 1 South Africa the Context and Growth Straregies
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South Africa The Context and Growth
Strategies
Ebrahim Patel
Minister of Economic Development
Republic of South Africa
October 2014
Bali, Indonesia
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South Africa - a country of 52 millionpeople, culturally diverse
More than 300 years of colonialismand 20 years of democracy
Dutch occupation from 1652 to setup a half-way station for ships toBatavia
Colonialism interrupted economic
development of pre-colonialsocieties
Racial oppression defined thelabour market and the pattern ofindustrialisation
Backgrou
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Unusually high levels of poverty, inequality and unemployment thwith big concentration of wealth
Economic concentration resulted in abuse of market dominance monopolies and existence of cartels
Exports were driven by focus on raw materials with limited value locally
Markets were mainly Europe and the United States, with virtuallywith the rest of the continent
Weak human capital base and strategies resulted in serious raciaskills
Low domestic savings base
Limited investment opportunities for black South Africans curtaileindigenous small business development
Challenges inherited with end of
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Strong growth in the economy after democracy, but largely from a consfuelled by rising commodity prices for exported commodities and rising
debt Financialisation of the economy
Limits in that growth model was cruelly exposed during the 2008/9 Grewhen demand for commodities fell, prices dropped and output slowed million jobs lost
Need to shift from exporter of raw materials to an industrialisation strat
leveraging off opportunities: raw material proximity,
location near fast-growing African markets and
new infrastructure spending.
Need for new
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The country adopted a New Growth Path in late 2010 to begin tothese pressures
Developed a series of steps required to implement the new vision
Jobs drivers
Policy drivers
Resource drivers
Jobs as a specific target of policy not a residual outcome of grow
Green growth as an opportunity
Social partnership between labour, capital and the state
New Growth Path
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Infrastructure needs to address complementary national goals svery significant spending leaves not only a legacy of ports and po
stations. We identified five i's: Industrialisation - component and rolling stock manufacturing
Investment - in enterprises which need energy, good logistics sybroadband access
Inclusive growth - covering jobs, youth enterprise, rural develop
Innovation - using infrastructure to stimulate new R&D investme Integration - of the African continent through active focus on pro
promote trade and investment in the continent
T
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The National Infrastructure Plan (2012) has become the key instrument to impthe New Growth Path
economic infrastructure such as transport and logistics, energy generatio
transmission and distribution, water supply, broadband rollout Social infrastructure such as health, education and sanitation as well as b
services to household and rural level
Industrial infrastructure including agro-logistics
Presidency-led, with a Presidential Infrastructure Coordinating Commission (Pbringing together half of Cabinet, all provincial governors and mayors of majo
Adopted 18 Strategic Integrated Projects that pulled together 100s of separat
construction sites into a coherent Plan
The National Infrastruc
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Result: Higher infrastructure
279
440
604 621
470
377363 360
634
-
100
200300
400
500
600
700
800
900
1,000
1,100
1963-1968
1968-1973
1973-1978
1978-1983
1983-1988
1988-1993
1993-1998
1998-2003
2003-2008
Billionsofrandin2013terms
Government infrastructure investment over five-year intervals,
1963 to 2013, in billions of rand at 2013 values
In real terms the
spend to date is
1.7 times as highas the highest spent
in the last 40 years
and three times
higher than the
spend in 1994
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The Presidential Infrastructure Coordinating Commissions role is to
Unblock regulatory and other obstacles
Set timeframes for all authorisations to be completed
Monitor spending at all three spheres of government
Address critical enabling factors such as skills development
Connect infrastructure and industrialization
Role of the Presidential Com
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Example of energy
Worlds 4th largest coal-fired power station undeconstruction
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The largest Green Energy programme in Africa, with 15 000 MWenergy planned over the next 10 years
Transformation of energy at household level in the last 15 years: 1890 to 1996: 5,2 million houses connected
1996 to 2013: 7,2 million houses connected
Localisation of component production: major condenser unit madboiler production has localization components
Energy: moving beyond gro
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Example
Building an African train-manufacturing capabil
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A major construction programme to integrateurban centres to reduce commuting timesand cost and improves safety.
333 new buses were assembled locally forthe new integrated transport systems for twocities.
9880 new train coaches or wagons and 319locomotives were locally assembled, helpingto create jobs and expand industrialcapacity.
25 000 mini-bus taxis were assembledlocally in two new factories. In contrast,before 2012 all taxis in South Africa werefully imported.
New rail-car to transport new automobilesacross the country
T
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Largest infrastructure spending for last 50 years, with investmentplatforms for growth and jobs
1,4 million new jobs created over past 3,5 years, bringing total em15 million people
GDP at end 2013 about US dollars (PPP) $662 billion
Growth rate since democracy roughly 3.2% a year on average, uin the preceding 20 years
SA now a member of BRICS and a growing part of manufacturedto neighbouring countries
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Competition: tenfold increase in fines and penalties, with first steordering breakup of monopolies and steps to regulate prices for p
monopolies State procurement outcomes: compulsory local public procureme
selected products where we have the potential to develop
Industrial funding up by more than 100% over past five years, witinvestment agency approving industrial support loans of $6 billionattracting double that from private co-investor partners
Trade reoriented to the rest of Africa: example of the Ford Rangevehicle
Extensive social security system, covering retirement and child gcomplement employment strategy, in order to address poverty an
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Growth still too dependent on commodity prices: growth rate hassignificantly
Infrastructure costs may increase as we expand the programmecan expand the number of contractors and suppliers
International loan conditionalities may constrain localization provcontracts
Human resource policies to manage industrial tensions are critica
Funding issues need attention to avoid distorting local capital ma State capacity limitations: as regulator, negotiator of contracts, an
of private sector contractors in public projects
Challenges we
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Dedicated policies, not trickle down
Long-term planning for skills development
Address global supply-chains
Regional integration critical for market size
State capacity needs to be built in design and delivery
Maintenance of infrastructure can drive repeat orders
Private sector partnerships crowds in investment. However, the s
protect the public interest.
Conclusions and areas to
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Terimah Kasih!
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A
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Infrastructure development
Mining and local processing ofkey minerals
Agriculture and agro-processing
Manufacturing, including throughreversing deindustrialisationpressures
Green economy
Tourism and key business
services Knowledge-based sectors
Social economy and public sector
African regional development
Key jobs drivers of the New Gro
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Industrial policy as a central driver
Fiscal and monetary policies and exchange rate policies
Skills development to enhance skills base Technology policies to promote innovation
Competition policy to combat monopolies and cartels
Trade policy to expand access to markets
Regional integration policies
Indigenisation policies
Private entrepreneurship through addressing regulatory challengtape and promoting small business
Key policy drivers of the New Growth P
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Budgetary support for industrial and infrastructure development, well-designed incentives
Public procurement policies that direct state purchases State industrial funding and lower interest rates by public corpora
Retirement funds able to back long-term investment horizon
Tapping into private capital markets for public infrastructure and fof industrial investments required
Key resource drivers of the New Growth