Rob Davies upbeat on prospects for SA’s industrial policy
Conditions were promising for the government to "raise its game" in terms of the implementation of industrial policy and to get more bang for its buck, Trade and Industry Minister Rob Davies said on Monday.
The global economy was performing better and factors impeding local growth such as governance weakness and low investor and consumer confidence were being addressed. The more favourable outlook was a contrast to the strong headwinds, both local and global, that had worked against the implementation of industrial policy over the past 10 years.
Contrary to critics who slammed industrial policy as a thing of the past because of the dominance of the services sector, most countries now had an industrial policy, he said.
Davies made the comments at a media briefing on the latest iteration (the 10th) of the Department of Trade and Industry’s flagship Industrial Policy Action Plan (IPAP) for 2018-19 to 2020-21. The plan includes a range of incentives and other support measures for a number of industries such as automotive, clothing and textiles, leather and agro-processing. These support measures had been critical, he said, in fending off the deindustrialisation of the local economy.
In 2018, the department will spend R5.8bn on its various incentive programmes. A new one is in the offing to attract companies to establish their headquarters in SA.
The IPAP is both transversal, — cutting across a number of sectors — and sector specific.
It includes designation of products for local procurement, which he said would be more strongly enforced.
Attention is also being given to the development of a national action plan for the digital industrial revolution and the introduction of new digitised technologies. The department has established a chief directorate for future production technologies.
Another justification for a government-led industrial policy, Davies told reporters, was the deep-seated structural problems in the domestic economy, which was still largely involved in the production and export of primary commodities and which had faced threats of deindustrialisation since the 1990s. It was also characterised by inequality and poverty and wide disparities in terms of ownership and control.
"The IPAP is premised on the principle that an ongoing effort is required to reindustrialise and further deepen industrial development in the country and that this must be part of deep-seated radical economic transformation. The necessity to bring about structural change to the economy remains.
"Manufacturing and industrial development have not had the kind of macroeconomic impact which we still believe is necessary to put our economy on a new, higher and more inclusive growth path," Davies said.
Despite these shortcomings there were signs of strength and there had been some successes.
The increase in manufacturing exports was an indication that parts of the manufacturing sector were internationally competitive. Key achievements over the past 10 years were most apparent in the automotive sector, which contributes 33% of the GDP of the manufacturing sector and 6% to overall GDP.
The sector produces 600,000 vehicles per year, supports 113,000 jobs and had attracted R45bn in investments.
Exports had doubled since the launch of the automotive development programme under IPAP. A draft automotive master plan 2020 for the next phase of the automotive strategy had been thrashed out with the industry and would be launched later in 2018.
Another success story, Davies said, was in the clothing, textiles, leather and footwear sectors, which had been under intense pressure from imports.
Because of the department’s competitiveness incentive programme, the sector had been saved and stabilised and was even showing growth.
An incentive programme was introduced in 2017 for the agro-processing sector, which had contributed to growth.
Since 2009 incentives of about R1.2bn had been extended to agro-processors, which had invested R7bn in the sector.
The film industry also benefited from incentives. DA spokesman on trade and industry Dean Macpherson agreed that there had been some successes with IPAP in areas such as clothing and textiles.
He was critical, however, of the extremely complex policy document. "It is cumbersome, continually changing and difficult for business to keep track of," he said.