Strategic Overview of the dti Priorities

Dr Rob Davies

Minister of Trade and Industry

to the Portfolio Committee

on Trade and Industry

1 July 2014

1

Mandate• NDP sets the broad vision and strategic direction;

NGP, IPAP, National Infrastructure Programme are programmes to give effect to NDP.

• Manifesto “radical economic transformation”, several elements but include accelerated industrialisation, localisation.

• the dti responsible for IPAP (tho’ a programme of government, not just the dti)

2

Why Industrialisation ?• Higher value addition creates more income and

wealth eg African produces and exports coffee valued at $ 6 bn, converted into products worth $ 100 bn outside Africa ditto mineral products;

• 60% plus of world trade is in intermediate products, Africa’s place is largely as producer and exporter of primary products and importer of finished goods;

• Industrial development key to development of productive forces, diversification and development;

3

Why Industrialisation ? ctd

• Sector has strong job multipliers (see pp 18-19 of current IPAP);

• Whole of Africa now sees industrialisation as critical.

4

Structural Features of Pre-Crisis Growth Path In SA

• Consumption driven sectors growing 2x productive sectors;

• Insertion into world economy as producers and exporters of primary products and importers of finished goods;

• Manufacturing under serious pressure;• Financial resources for productive investment

declining both relatively and absolutely.

5

Impact of Global Crisis• Onset 2008/9 Great Recession cost 1 mn jobs in

SA 200.000 in manufacturing which is 12-14% of GDP;

• Initial response to crisis by developed economies “quantitative easing” unleashed short term “hot money” some of which went to “emerging economies” with higher interest rates -> overvalued currencies -> exports more difficult, more competition from imports.

6

Impact of Global Crisis ctd

• 2012 end of commodity super cycle;

• 2013-14 tentative recovery -> tapering -> reversal of flow of “hot money” -> from over to undervaluation.

7

IPAP 2009-2014• IPAP an Action Plan that implemented following main

measures transversally and in sector specific programmes

• Increased access to DFI finance and incentives against stronger conditionalities;

• A strategic approach to trade and tariff policy both seen as tools of IP;

• Standards “lock in SA exports, lock out sub standard products”;

8

IPAP 2009-2014 ctd

• More aggressive combatting of monopolies;• Localisation – designations, CSDP, NIPP.• Infrastructure development main counter

cyclical response also tool of industrialisation – R 1 trillion spent 2009-2014.

• IPAP shaper of all work of the dti.

9

IPAP 2009-2014 Outcomes• Motor industry investments of R 21,9 bn in 183

projects retaining 46.000 jobs adding 9.850 – public transport and yellow fleet as well as passenger vehicles.

• Clotex – CTCP supports stabilisation with 12.205 new jobs created 2012/13;

• Metals industry – revival with infrastructure procurements incl. 300 buses, 1000 locos, 2600 coaches and wagons.

10

IPAP 2009-2014 Outcomes ctd• Agro processing – stabilisation of key sub sectors, new

investments small scale milling FDI projects;• R 5,5 bn provided by IDC to support “green industries”;• Film R 8 bn contributed to GDP 2008-2012 incentive

supports 343 productions and 75.000 jobs;• Positive results in other sector – chemicals, BPS, advanced

manufacturing etc;• “Industrial policy is working where it is properly resourced

and underpinned by solid research and stakeholder engagement”.

11

Challenges for the Future

• We have not yet decisively placed SA economy on a new growth path driven by productive sectors, higher “value addition” and industrialisation;

• We must anticipate hostile “head winds” from still unresolved global crisis;

12

Challenges for the Future ctd

• Deep seated features of “second machine age” that reinforce inequality – continued substitution of lower skilled workers as digitisation advances exponentially, “winner takes all” markets and imposition of these models through “globalisation”;

13

Imperatives

• Next phase must see more radical measures to advance job creation, reduction in poverty and inequality;

• Industrialisation must be a central objective;

• Industrial policy must be upscaled.

14

Elements of Upscaled IP

• Infrastructure investment must be upscaled and progressively become a stronger tool of industrialisation;

• Localisation must be stepped up and we must advance towards aspirational target agreed in procurement accord of 75%;

• Beneficiation must be deepened using a suite of policy tools, incentives, SEZs, MPRDA – value chains include iron and steel and titanium pigment; PGMs; precious stones and metals; shale gas could be a “game changer”;

• Address constraints – electricity, skills

15

Elements of Upscaled IP ctd

• We must insert our own industrialisation efforts in a context of promoting developmental regional integration on African continent;

• We need more “granular” engagements with more dynamic industrial companies– around greater support in relation to greater conditionalities (employment, local procurement etc)

• We need to promote black industrialists;

16

Trade Policy Issues• Several will “come to a head” before year end;• EPA at end game, last negotiating round

concluded last weekend;• EPA will improve on existing TDCA, latter

included FTA 98% duty free industrial goods only 60% ag products some improvement on MFN, Exports 22 bn euro 2008 2- bn 2012’ imports 20 bn 2008 25 bn 2012;

17

Trade Policy Issues ctd• EPA allows greater harmonisation with SACU,

some improved access for SA wine, sugar, fruit products, allows some space for export taxes compared to TDCA, some additional ag safeguard- We pay in GI recognition, some ag products.

• US AGOA Summit in August will unveil Obama Administrations approach to renewal and SA’s inclusion, mixed signals from US Congress.

18

Trade Policy Issues ctd

• Tripartite SADC-Comesa-EAC exceeded HOS deadline – issue is difficulty of smaller players to define approach to offer/request;

• Challenges in SADC and SACU;• WTO Bali package implementation focussing

mainly on TF with little progress on other parts, competing narratives on way ahead for WTO.

19

Broadening Participation

• the dti will remain with B-BBEE- Advisory Council focussing on promoting black industrialists, DM to lead the dti task team on this;

• SMME and Coops to be transferred to SBM

20

CCRD

• Major issues in liquor, gambling. New Lottery Operator Licence to be awarded this year. IP policy paper still being worked on. Major driver of legislative programme.

• Regulators with boards will now become entities within the dti - NRCS, BEE Commissioner among the first.

21

GSSSD

• Mandate to pursue continuous improvement on all indicators;

• the dti among best performing depts.

22