Rob Davies. Picture: BUSINESS DAY
Rob Davies. Picture: BUSINESS DAY

Bad governance, corruption, state capture, and a lack of cohesion across the government has impeded the department of trade and industry’s efforts to re-industrialise the economy, minister Rob Davies said on Tuesday.

However, in his address to the Cape Town Press Club on the prospects for the economy, Davies said the election of President Cyril Ramaphosa has provided hope that these matters can be addressed. The investment climate has improved remarkably over the past year as policy certainty takes hold, though Davies conceded that Eskom and the electricity crisis poses a serious risk to the country, both operationally and financially.

Davies said the dramatic increase in foreign direct investment to SA last year when it had declined globally was an indication of this. Foreign direct investment to SA increased from $1.3bn to more than $7bn.

“Our industrial policy has worked but it has not done what we wanted it to do,” Davies said, attributing this to poor governance and corruption. Examples are the abuse of the department’s localisation programme to importers at the expense of local manufacturers and the maladministration of the country’s borders that allowed under-invoicing of products to become rife as the work of Sars and the customs administration deteriorated.

High administrative prices, particularly electricity, have also had a negative impact on economic growth.

Davies believes the coming election is a kind of referendum on Ramaphosa’s reform agenda. If the ANC comes in with a sizeable majority, Ramaphosa will have a mandate to introduce reforms.

Davies was asked what he has done to fight corruption and replied that the reason he has stayed in the government for all these years is to look after the interests of the department. There were many times, he said, when he was not sure whether he would retain his post in the frequent Cabinet reshuffles that took place under former president Jacob Zuma.

Opposition parties offer no real solutions to the problems facing the country, he added.

Davies noted that the rate of de-industrialisation since the 1990s has diminished but there has been no real recovery, and no real re-industrialisation and growth in value-added manufacturing. Efforts have to be doubled to re-industrialise the economy through, among other things, the department’s industrial policy action plans.

The minister did express confidence in the effectiveness of the programmes of the department including localisation; financial incentives; tariff protection; the competitiveness enhancement programme for the clothing and textile industry; the automotive development programme; and the assistance given to the steel industry.

BEE remains crucial but has to mean real participation in the control and operation of companies. he said.

Davies stressed that the need for a structural change in the economy, away from a dependence on primary commodity production, is needed to promote growth and address unemployment, poverty, inequality and economic exclusion.