Review of previous work
Draft Paper January 2013
1.1 Introduction
The volumes and the type of products a country exports are the outcome of many factors. These
factors include endowments (natural resources, capital and human resources); technology; size of
the domestic market; proximity to other markets; and the cost of doing business. Most of these
factors are influenced directly by government policy.
This section discusses both the work that has been done in the policy environment in general
(particularly as it affects exports and export promotion) as well as policies, strategies and
programmes that have a bearing on exporter development and export promotion.
1.2 Policy environment
Since the end of the Apartheid regime in 1994, South Africa’s Government has made considerable
efforts to tackle the high level of inequality and poverty. Policymakers have long sought to overcome
constraints in the economy through a comprehensive framework such as the Growth, Employment
and Redistribution (GEAR) strategy of 1996, the Accelerated and Shared Growth Initiative for South
Africa (AsgiSA) announced in 2006 and, more recently, the 2010/11–2012/13 Industrial Policy Action
Plan (IPAP2) and the New Growth Path (NGP), launched in 2010, which builds on previous policy
initiatives. The National Development Plan: vision 2030 consolidates the earlier policies and offers a
long-term vision.
The NES must be consistent both with national macro policies and also with the mission and
objectives of the dti. It is intended to support achievement of both the National Industrial Policy
Framework and the South African Trade Policy and Strategy Framework.
1.3 National Development Plan–Vision 2030
The NDP is a visionary document, highlighting weaknesses and bottlenecks. The plan, which is aimed
at eliminating poverty and reducing inequality by 2030, is the product of in-depth research over
more than two years by 26 experts appointed by the President to the NPC.
The plan bemoans the fact that “Eighteen years into democracy, South Africa remains a highly
unequal society where too many people live in poverty and too few work. The quality of school
education for most black learners is poor. The apartheid spatial divide continues to dominate the
landscape. A large proportion of young people feel that the odds are stacked against them. And the
legacy of apartheid continues to determine the life opportunities for the vast majority. These
immense challenges can only be addressed through a steep change in the country's performance.”
The Commission’s Diagnostic Report, released in June 2011, set out South Africa’s achievements and
shortcomings since 1994. It identified a failure to implement policies and an absence of broad
partnerships as the main reasons for slow progress, and set out nine primary challenges:
1. Too few people work
2. The quality of school education for black people is poor
3. Infrastructure is poorly located, inadequate and under-maintained
4. Spatial divides hobble inclusive development
5. The economy is unsustainably resource intensive
6. The public health system cannot meet demand or sustain quality
7. Public services are uneven and often of poor quality
8. Corruption levels are high
9. South Africa remains a divided society.
The plan proposes a multidimensional framework “to bring about a virtuous cycle of development,
with progress in one area supporting advances in others.” The achievement of the objectives of the
National Development Plan requires progress on a broad front, but three priorities stand out:
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Raising employment through faster economic growth
Improving the quality of education, skills development and innovation
Building the capability of the state to play a developmental, transformative role.
The NDP points out that sustainable growth and development will require:
 Higher savings
 Investment
 Export growth
The NDP points out that leadership is required to drive the implementation. As far as the NES/NEDP
is concerned, leadership is also a critical ingredient.
The NDP proposes to create 11 million jobs by 2030 by:
 Realising an environment for sustainable employment and inclusive economic growth
 Promoting employment in labour-absorbing industries
 Raising exports and competitiveness
 Strengthening government’s capacity to give leadership to economic development
 Mobilising all sectors of society around a national vision.
Its proposals include:
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Diversifying South Africa’s trade towards emerging economies
Revitalising logistics and transport links
Promoting manufacturing in areas of competitive advantage
 Packaging regional tourism offerings
 Lowering the costs of living and of doing business
With unemployment at roughly 25% in 2010, the NDP aims to put policies in place so that by 2030
unemployment will decrease to 6% while the labour force participation rate will increase from 54%
to 65%. This means that employment needs to increase from 13 million to 24 million people – an 11
million, or roughly 85%, increase in employment over the eighteen-year period.
The goal is therefore for GDP to grow by 5.4% per annum. This implies that by 2030 the economy
will be 2.7 times its size in 2010 with a per capita GDP increase from R50 000 to R110 000. This
should lift most, if not all, out of poverty.
The key ingredients for success are:
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1.3.1
The active efforts of all South Africans
Growth, investment and employment
Rising standards of education and a healthy population
An effective and capable government
Collaboration between the private and public sectors
Leadership from all sectors of society.
The role of exports in the NDP
There have been shifts in global trade and investment that are reshaping the global economy
including the emergence of rapidly growing economies, particularly China, India and Brazil. As
emerging economies increase their share of world trade and investment, the United States, Europe
and Japan will experience a relative decline.
Urbanisation and industrialisation in China and India are likely to keep demand for natural resources
relatively high for the foreseeable future. The emergence of more consumers in the BRIC and
developing countries will broaden opportunities for all economies.
The NDP notes that South Africa should be “Increasing exports, focusing on those areas where South
Africa already has endowments and comparative advantage, such as mining, construction, mid-skill
manufacturing, agriculture and agro-processing, higher education, tourism and business services.”
And also: “Over the past five years, South Africa’s exports to advanced economies have slowed in
response to lower demand. This decline has been offset by increased demand from Asia and higher
prices for commodities. While South Africa has maintained a reasonably sound trade balance, owing
largely to high commodity prices, it is of concern that high value-added and labour-intensive exports
are slowing.” It is clear that more attention needs to be given to these products while maintaining
current markets.
South Africa needs to diversify and “redirect its attention to pursuing niche export opportunities in
the economic powerhouses of the future, many of them emerging economies. “
The NDP highlights the linkages between export, trade and industrial policies. These opportunities
can only be exploited if industrial policy supports sectors and industries that can best produce the
goods and services required of the new markets South Africa wishes to serve.
Figure 1: The quandary of growth and job creation
Source: National Planning Commission’s National Development Plan: Vision 2030 (2011)
South Africa can benefit from rapid growth in developing countries that leads to increased demand
for commodities and expanding consumer markets. At the same time, these trends pose challenges
for middle-income countries as a result of greater competition in manufacturing and certain
information technology-enabled services. The rise of emerging markets also increases international
competition, placing downward pressure on the wages of low-skilled workers in tradable sectors.
The NDP envisions that the share of exports in South African output will rise and the profile will be
more diverse, with a growing portion of non-mineral manufactures and services. A greater
proportion of exports will be directed to emerging markets. Opportunities for increased trade and
bilateral investment in Africa will develop.
Exports are projected to increase by 6% per annum, which in turn is projected to increase income
and thus saving out of income.
The NDP recognises that it is not the export volumes that are important but the type of products
that are exported. The focus should be on labour-intensive manufacturing, mid-skill service exports
and process outsourcing.
It recognises that to expand production requires more active promotion of demand for South African
products in domestic and foreign markets. Policy will focus on developing areas of competitive
advantage, where there are revealed strengths. In the process of implementation, it will be
important to learn from success and failure and to withdraw from sectors where mistakes have been
made. South African companies will be encouraged to participate in regional infrastructure projects,
and also in integrating regional supply chains to promote industrialisation.
INDICATIVE SCENARIOS - SECTOR DISTRIBUTION OF EMPLOYMENT
1.4 New Growth Path
The New Growth Path (NGP) preceded the NDP and is described as a framework that will advance
the country’s target of achieving 5 million new jobs by 2020. It recognises the need for a coordinated
set of actions across a broad front and identifies a “development package” consisting of
macroeconomic strategies, microeconomic measures and stakeholder commitments to drive
employment and economic growth.
1.4.1
Areas of priority
The New Growth Path has six priority areas to job creation:
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Infrastructure development;
Agriculture;
Mining;
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1.4.2
Manufacturing;
The "green" economy; and
Tourism.
Policy packages
The NGP identifies the uncompetitive South African currency as an obstacle to job creation and sets
out clear steps for government to address the impact of the rand on the economy and jobs. It
proposes a looser monetary policy with lower interest rates, greater building of foreign reserves and
a sovereign wealth fund to manage foreign reserves more actively. The document notes that the
monetary policy stance will do more to support a competitive exchange rate while continuing to
target low and stable inflation.
The challenge of keeping inflation under control involves a stronger role for competition policy and
strategic investigations into conduct leading to high and volatile prices for intermediate inputs for
producers and basic consumer goods, including important commodities such as maize, steel and
fertilisers.
The NGP calls for a broad pact between business, labour and government aimed at fostering
employment creation whilst enhancing competitiveness and social equity and development goals.
The pact proposed commitments on wages, prices, savings and jobs. The proposal on commitments
to lower prices by businesses particularly concerns input costs and basic consumer goods.
On labour market policy, the document pursues three objectives:
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To promote partnerships for productivity improvements,
To address concerns about the vulnerability of workers in the labour market, and
To ensure more efficient decision-making.
It calls for productivity pacts between business and labour at workplace and sector level. It commits
to action by the government to reduce worker vulnerability by addressing problems in contract
work, sub-contracting, outsourcing and labour broking. Reforms to the CCMA should also reduce
abuse by managerial and other high-level staff.
1.4.3
Laying the basis for implementation
The responsibility for coordinating the country’s New Growth Path lies with the Department of
Economic Development. The department also oversees the work of key state entities and
programmes engaged in economic development, e.g. the Industrial Development Corporation,
providing finance for industrial development in South Africa and the rest of Africa (www.idc.co.za),
the Competition Commission (www.compcom.co.za); and the Infrastructure Development
Programme.
It identifies measures to strengthen the capacity of the state and enhance the performance of the
private sector to achieve the employment and growth goals. The New Growth Path proposes major
improvements in government, with a call for slashing unnecessary red-tape, improving competition
in the economy and stepping up skills development.
The NGP sets targets for scarce and key skills and identifies the role of government departments and
agencies in working to meet these goals. This emphasis on skills applies across the economy and will
be a centrepiece of partnership with business and labour. Key targets include the aim to produce:
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30 000 more engineers by 2014, with an improved focus on high school maths and science
and changes to university funding formulae to achieve this, and
50 000 more artisans by 2015, with annual targets for Eskom and Transnet and for individual
SETAs to achieve this.
The NGP calls for stepping up the focus on workplace training, targeting on-the-job training and
refresher programmes for 10% of the workforce every year. It also calls for measures to make it
easier to import scarce skills by streamlining the work permit and visa system. This will be
accompanied by a skills transfer programme to ensure that local skills development is enhanced.
It recognises that South Africa cannot develop as an enclave in Africa. It identifies major
opportunities on the African continent and calls for greater focus by South African business on
opportunities in Africa’s fast-growing economies. This is accompanied by commitments to improve
cross-border infrastructure and measures to address unnecessary regulatory obstacles to the
movement of people and goods, as part of building a common market on the continent.
It sees active stakeholder engagement and collective action as central to building a better South
Africa and it requires the government to:
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Facilitate national and workplace productivity accords,
Support community organisation, including through the community works programmes and
other delivery mechanisms that build community and collective action, and
Strengthen existing institutions for social dialogue, including Nedlac, sectoral and local
forums.
The implementation process for the New Growth Path must manage key risks as well as ensuring
clear prioritisation. These risks include the still fragile global recovery; competition and collaboration
with the new fast-growing economies; and competing interests domestically.
1.4.4
The NGP and exports
Re-industrialisation off the back of the opportunities identified in the growth path is critical. The
NGP holds that this is more than simply identifying sectors and product niches; but also markets.
South African businesses need to do more to find opportunities in the fast-growing economies of
China, India and Brazil. Measures to enhance domestic and regional demand as well as extending
export promotion strategically to the rapidly growing economies of the global South. These
measures need a competitive rand to succeed.
The document points out that while trade with China has grown significantly, South Africa still
largely exports raw materials and imports value-added manufactured products. The Comprehensive
Strategic Partnership signed in August 2010 between the two countries commits to “improve,
through a concerted effort, the current structure of trade between the two countries, in particular
by working towards a more balanced trade profile and encouraging trade in manufactured valueadded products…China, in this spirit, will encourage its enterprises to increase investment in South
Africa’s manufacturing industry to promote the creation of value adding activities in close proximity
to the source of raw materials.” Therefore the NES must include practical proposals to take
advantage of this joint commitment.
The NGP sees regional development as an imperative for both solidarity and sustainable growth and
estimates that increased exports to SADC alone can generate almost 60 000 additional direct jobs by
2015 and around 150 000 by 2020.
Export taxes on selected mineral products linked to clear industrial strategies have also been
proposed. Although this would limit exports of those inputs, it would reduce the domestic price of
inputs.
The NGP recommends guidelines for granting exemptions in terms of the Competition Act for
cooperation between producers where this will demonstrably benefit job creation and expansion
into export markets. (See section on the Competition Act.)
The NGP also recommended “developmental trade policies”. These are discussed below.
1.5 Trade and industrial policy
Trade and industrial policy is the responsibility of the dti. The main policy directives of the
department are contained in the National Industrial Policy Framework (NIPF), Industrial Policy Action
Plan (IPAP): 2012-13 to 2014-15, and the South African Trade Policy and Strategy Framework (TPSF).
1.1 National Industrial Policy Framework
The National Industrial Policy Framework (NIPF) provides strategic guidelines to assist in the
development of secondary industries within the country, including the clarification of roles,
responsibilities and interactions between public and private sectors. The objective of the NIPF, as
stated in the State of the Nation Address 2007, is to:
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Intensify implementation of customised sector measures to facilitate investment in BPO,
tourism, bio-fuels, chemicals and to finalise practical programmes for forestry and paper,
clothing and textiles, metals and engineering.
Develop an overarching strategy to prioritise key interventions in mining and mineral
beneficiation, agriculture and agro-processing, the white goods sector, creative industries,
community and social services and pharmaceuticals. This must include a drive to increase
the national capacity to produce capital goods.
Develop programmes to facilitate investment in sectors along the supply chain for the
infrastructure programmes, including capital goods in ICT, transport and energy.
Government will also take a variety of steps to improve competition in the economy, among
others to lower the cost of doing business and promote investment, including practical
introduction of the Regulatory Impact Assessment System, developing high-speed and
international broadband capacity, finalising the plan to improve the capacity of the rail and
port operators, and strengthening the effectiveness of our completion authorities.
The NIPF was designed to set out the government’s approach to industrialisation and policy
development and implementation. The NIPF moves to increase the production of value added
products and services, intensification of the South African industrialisation process moving towards a
knowledge economy, the promotion of a labour-absorbing industrialisation path focusing on
incorporating previously disadvantaged and marginalised communities whilst building on the
countries productive capabilities.
In January 2007 Cabinet adopted the NIPF which sets out Government’s broad approach to
industrialisation with the following core objectives:
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To facilitate diversification beyond South Africa’s current reliance on traditional
commodities and non-tradable services. This requires the promotion of increased valueaddition characterised particularly by movement into non-traditional tradable goods and
services that compete in export markets as well as against imports.
The long-term intensification of South Africa’s industrialisation process and movement
towards a knowledge economy.
The promotion of a more labour-absorbing industrialisation path with a particular emphasis
on tradable labour-absorbing goods and services and economic linkages that catalyse
employment creation.
The promotion of a broader-based industrialisation path characterised by the increased
participation of historically disadvantaged people and marginalised regions in the
mainstream of the industrial economy.
Contributing to industrial development on the African continent, with a strong emphasis on
building its productive capacity.
Rather than a ‘one-size-fits-all’ approach to industrialisation, the NIPF focuses on identifying and
addressing the cross-cutting and sector-specific constraints and opportunities prevailing in the
industrial economy through thirteen strategic programmes. These are:
SP1: Sector Strategies
SP2: Industrial Financing
SP3: Trade Policy
SP4: Skills and Education for Industrialisation
SP5: Competition Policy and Regulation
SP6: Leveraging Public Expenditure
SP7: Industrial Upgrading
SP8: Innovation and Technology
SP9: Spatial and Industrial Infrastructure
SP10: Finance and Services to Small Enterprises
SP11: Leveraging Empowerment for Growth and Employment
SP12: Regional and African Industrial and Trade Framework
SP13: Coordination, Capacity and Organisation
The NIPF does not include an NES or an FDI strategy and should be
amended to include this. Sectors
The dti's Industrial Policy Action Plan 2012/13 - 2014/15 identifies
three sector clusters that are critical to the industrial
development of the South African economy, namely1:
Cluster 1 - Qualitatively new areas of focus
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Realising the potential of the metals fabrication, capital
and transport equipment sectors, particularly arising from
large public investments;
Upstream Oil and Gas;
'Green' and energy-saving industries;
Agro-processing, linked to food security and food pricing
imperatives; and
Boatbuilding.
Cluster 2 - Scaled-up and broadened interventions in existing IPAP sectors
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Automotive products and components, and medium and heavy commercial vehicles;
Plastics, pharmaceuticals and chemicals;
Clothing, textiles, footwear and leather;
Biofuels;
Forestry, paper, pulp and furniture;
Creative and cultural industries; and
Business process services.
Cluster 3 - Sectors with potential for the development of long-term advanced capabilities
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Nuclear;
Advanced materials;
Aerospace, Defence; and
Electrotechnical and ICT.
1.2 A South African Trade Policy and Strategy Framework
South African Trade Policy and Strategy Framework builds on the NIPF and sets out the contribution
trade policy should make to advancing industrial development, upgrading and diversification along a
growth path that addresses structural constraints in the economy, including unemployment and
poverty. The Framework sets out the key principles and approaches to South Africa’s strategy for
global integration with respect to its engagements and negotiations at multilateral, regional and
bilateral levels. It aims to provide greater clarity on the linkages between trade and tariff policy and
industrial policy. One of the defining features of trade policy in South Africa today is its demotion
from being a key driver of growth to the use of trade policy as a mere tool of industrial policy.
1
A more detailed disaggregation of the sectors are included in Appendix??
Internationally, open economies with an export base perform much better in terms of economic
growth than do closed economies. Increasingly, production is becoming globally integrated, and
South Africa forms a vital part of international supply chains. Therefore, dismantling barriers to
trade, especially those faced by South African exporters, is a critical component of any economic
strategy that promotes sustainable growth.
Trade policy remains an instrument of industrial policy in a context of narrowing options under
multilateral and bilateral trade arrangements. Trade policy will be informed much more closely by
sector strategies, at both the negotiating and administrative levels. A particular focus will be on
reducing input costs for labour-intensive and value-adding manufacturing sectors. Export and
foreign direct investment promotion will be more targeted.
Tariffs are used as an instrument of industrial policy, and therefore decided on a sector-by-sector
basis. They depend on the needs and constraints of sector strategies. In reality, the South African
Trade Policy and Strategy Framework invites certain industries to apply for selective tariff increases
on products on a case-by-case basis. According to newspaper reports, the dti encourages companies
in strategic industries to apply for tariff increases to protect them from cheap imported products.
Strategic industries are those in the priority sectors defined in the department’s Industrial Policy
Action Plan (IPAP).
The IPAP identifies sets of policies such as procurement, industrial financing, competition and
regulation, skills development and innovation, and trade measures including tariffs, enforcement
and standards, quality assurance and metrology measures to strengthen the productive side of the
economy.
In its semi-annual report on anti-dumping actions to the WTO in August 2012, South Africa had 31
definitive anti-dumping measures in force; 7 under review and 5 under investigation. In addition
according to TRALAC2, the South African International Trade Commission (ITAC) receives many
applications for tariff increases on products used or produced in several strategic industries such as
textile fabrics; glass, paper and plastic products; frozen half shelled mussels. There was also an
application for an increase in the domestic dollar-based reference price for wheat over the past year.
ITAC also finalised investigations into, and recommended tariff increases on, products such as
processed tomatoes, stainless steel sinks and uncooked pasta. The dti is prepared to use the trade
policies at hand to increase tariffs on imported products which threaten local manufactures or
where the applied tariff is below the bound rate allowed by the WTO.
Business Unity South Africa (BUSA) points out that “there are useful points of synergy between the
Trade Policy and the Industrial Policy Action Plan 2, including on nontariff barriers and standards.
Tariffs can be used to indirectly support industrial development and ensure food security but they
are only part of the tool box for creating an overall business environment which is conducive for
growth. The “mechanics” of trade are just as important as the policy, including research and
development, market analysis, border controls and customs procedures, transport infrastructure
and costs, as well as access to information. We hope to see a greater focus on trade facilitation in
the work programme designed to implement and refine the Trade Policy in the future.”
2
Email received from TRALAC on 15 January 2013.
Every nation has some form of “trade policy” in place, with public officials formulating the policy
which they think would be most appropriate for their country. Trade policy generally is a set of rules
and regulations that are intended to change international trade flows, particularly to restrict
imports. Trade policy can involve various complex types of actions, such as the elimination of
quantitative restrictions or the reduction of tariffs. It also refers to trade relations between countries
especially where economic integration is involved.
Edwards and Lawrence (2006) point out that “South African trade policy has exerted a major
influence on the composition and aggregate growth of trade. In the Apartheid period, trade
protection seriously impeded both exports and imports, and the economy depended on favourable
global commodity price trends to avoid running into an external constraint. South Africa developed a
comparative advantage in capital-intensive primary and manufactured commodities partly because
of its natural resource endowments but also because the pattern of protection was particularly
detrimental to exports of non-commodity manufactured goods.”
1.2.1
Tariff Policy
The TPSF states: “Tariff setting in South Africa is decided primarily on a sector by sector basis,
dictated by the needs and imperatives of sector strategies. Sectoral work is grounded on a ‘selfdiscovery’ process of engagement between government and stakeholder to meet industrial policy
objectives. As a general guideline, tariffs on mature upstream input industries could be reduced or
removed to lower the input costs for the downstream, more labour-creating manufacturing
activities. Tariffs on downstream industries, particularly those that are strategic from an
employment or value-addition perspective, may be retained or raised to ensure long-term
sustainability and job creation in the context of domestic production capabilities/potentialities and
the degree of trade and production distortions on these products at the global level.”
In contrast to approaches that advocate a uniform and rapid elimination of tariffs, the strategic
approach to tariff policy places ITAC at the centre of determining the tariff regime. The TPSF
continues: “There is no a priori presumption of the benefits or costs of maintaining either low or
high tariffs, but the upper limits for tariff setting have been set by the obligations South Africa has
taken in the WTO and in other bilateral trade agreements.” The TPSF adopts a “strategic approach to
tariff reform that supports industrial and employment objectives”.
In carrying out this complex task, the methodology that ITAC uses becomes critical. It is a coherent
and transparent methodology that is applied consistently across all sectors and uses the following
adjudication criteria:
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Whether a product is produced domestically or not;
Whether there is tangible potential to produce domestically;
Import and export data;
Demand and supply;
Comparison of domestic prices with import prices;
Productivity;
Productive capacity;
Market share;
Profitability;
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Effective rate of protection;
Employment; and
Investment.
Although the South African tariff rates have declined remarkably since 1994 , informed by the above
approach, South Africa has since the onset of the Global Recession in 2008 introduced higher duties
on 137 lines (mainly textiles and clothing); introduced 10 rebates; tariffs on 9 lines have been
reduced. The average tariffs are considerably higher than those of the European Union.
BUSA feels that the “approach is appropriate and has to date worked relatively well”. The
organisation was, however, concerned that “the functioning of ITAC is efficient and not hampered
and that recommendations made are considered timeously by decision-makers”. BUSA contends
that tariffs alone cannot be used to ensure long-term sustainability and job creation. Tariffs are but
one tool and may in some cases not be the most effective one to achieve the goals of industrial
policy.
Freytag (2011) points out that high tariffs reduce the demand for foreign exchange, increasing the
price of rands in foreign currency terms. This disadvantages exporters. Higher tariffs provide an
incentive for manufacturers to serve domestic markets only. This limits South African exports
further. The input demand channel increases the costs for industries that depend on imported
inputs. Apart from transport equipment, the typical inputs for downstream industries, such as
minerals, chemicals, base metals, machinery, specialised equipment, have below-average
protection.
Multi-lateral trade relations
The World Trade Organisation (WTO) is an organisation that intends to supervise and liberalise
international trade. It was established in 1994 as part of the Uruguay Round trade negotiations and
became operative in 1995. It administers the General Agreement on Tariffs and Trade (GATT), the
first multilateral agreement signed in 1947 to regulate international trade, as well as agreements
that have been signed subsequently. South Africa was one of the founder signatories of the GATT in
1947 and founder members of the WTO .
The WTO deals with the regulation of trade between member countries and provides a framework
for negotiating and formalising trade agreements, and a dispute resolution process aimed at
enforcing members’ adherence to WTO agreements they have signed. It is attempting to complete
negotiations on the Doha Development Round, which was launched in 2001 with an explicit focus on
addressing the needs of developing countries. The future of the Doha Round remains uncertain: the
work programme lists 21 subjects in which the original deadline of 1 January 2005 was missed, and
the round is still incomplete.
Ismael (2012) points out that “South Africa’s participation in the WTO was informed by its domestic
development challenges, and that its values were derived from its long struggle against apartheid
and its transition to a new democracy. In addition, its political leadership in the Doha negotiations
was strengthened by its deep democratic institutions and consultative processes. South Africa’s
values, articulated by Nelson Mandela, reflected a deep commitment to multilateralism and
consensus building, fairness and justice, inclusiveness, and a concern to support and promote
development, within South Africa, and also in developing countries of the South, especially the
African continent.”
Ismael (2012) identifies five negotiating approaches including:
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1.2.2
The need to take into account the interests of ‘both’ South Africa and others, especially that
of the African Continent;
The capacity to listen to different sides of an argument;
Consultations with constituencies at home;
Balancing principles with capacity to implement; and
Adhering to ‘principles’ whilst being pragmatic on ‘strategy’.
Regional and Bilateral Relations
The Southern African Customs Union (SACU)
SACU is an important basis for the government’s global strategy. The revised SACU Agreement,
concluded in October 2002 and effective from July 2004, is the result of a lengthy negotiation
process that commenced in 1994 with the objective of increasing regional integration and
cooperation. The Agreement is of historic significance in that it commits South Africa to effectively
ceding sovereignty over trade policy formulation and implementation to a new institutional base
where decisions will be taken democratically. In terms of the Agreement, all decisions over tariffs
and trade remedies will be taken at the SACU level by a Council of Ministers, which in turn will be
advised by a new SACU tariff body and a commission of senior officials. National institutions, such as
South Africa’s ITAC, will merely provide recommendations to these structures on the basis of
investigations which the former conduct. So SACU will potentially be fully involved in all current and
future negotiations.
The Agreement makes provision for the development of common policies in industry, and
cooperation in agricultural policy, competition policy and anticompetitive practices. It also calls for
the development of harmonised procedures and regulations to govern all aspects of the common
trade regime.
The Southern African Development Community (SADC)
Southern Africa is important to South Africa’s economy - the growing trade surplus with SADC
countries partially contributes to offsetting trade deficits with other regions. The structural trade
imbalance between South Africa and its SADC partners, however, is economically unsustainable over
the longer term. The government therefore sought to restructure regional arrangements by pursuing
policies to promote industrialisation in the SADC. This entails using Southern Africa as an integral
part of supply chains for globally competitive manufacturing processes. Through a combination of
sectoral co-operation, policy co-ordination and trade integration, South Africa’s regional policy aims
to achieve a dynamic regional economy capable of competing effectively in the global economy.
Tripartite Free Trade Area (TFTA)
There is a proliferation of regional trading arrangements. A free-trade area is a trade bloc whose
member countries have signed a free-trade agreement (FTA), which eliminates tariffs, import
quotas, and preferences on most (if not all) goods and services traded between them.
South Africa’s trade strategy aims to expand trade and investment links in Africa in the context of
‘developmental integration’ in Southern and Eastern Africa. While the TPSF seeks to consolidate
links with traditional partners, it emphasises building economic complementarities with rising
economies in the South.
The concept of establishing a Tripartite Free Trade Area (TFTA) that joins together the Common
Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the
Southern African Development Community (SADC) has gained currency and momentum in recent
years. The TPSF recognises that in the context of intensifying competition for access to Africa’s
resources and growing markets, advancing the integration agenda in SACU, SADC and the TFTA is
more urgent. To this end the Tripartite Initiative to integrate SADC, the EAC and COMESA is
important. The Common Market for Eastern and Southern Africa, the East African Community and
the Southern African Development Community (COMESA-EAC-SADC) Tripartite brings together 26
southern and eastern African countries, which are members of these three Regional Economic
Communities (RECs). The intention is to free all regional trade within a three-year period.
The ‘Guidelines for Negotiating the Tripartite Free Trade Area among the Member/Partner States of
COMESA, EAC and SADC’, published in June 2011, briefly describe the scope and principles of the
FTA negotiations. The negotiations will take place in two phases: with the usual goods’ issues
occupying most of the first phase; and discussions on competition policy, intellectual property rights
and trade in services carried over to the second phase. At first glance, this seems all too familiar –
the possibility of getting down to business in services, anytime soon, would seem remote.
Beyond the potential gains for South Africa through expanded market access, the TFTA is not
without challenges. Trade in services still remains a critical area for growth that is as yet
inadequately explored and it has only been scheduled for the second phase of negotiations.
Domestically, a re-evaluation of South Africa's approach to trade in services negotiations could reap
major benefits for the country in the rest of the continent.
The TFTA will also potentially enhance South Africa's investment footprint in Africa, in line with our
regional development strategy. South African companies confront investment and competition
policy issues which should prompt some introspection on the issues regionally. It is time to begin
defining a strategy on the so-called new generation issues as ignoring them will not help South
Africa, while a good strategy will maximise the gains and minimise the losses.
The TFTA also presents an opportunity for a revision of the SADC rules of origin whose complexity
has turned them into an effective trade barrier. This will facilitate a move away from the use of rules
of origin as a protectionist measure. Consideration of more general rules by South Africa will pave
the way for deeper and more meaningful integration than has been achieved within SADC for
instance.
The Trade Policy Strategic Framework (TPSF) proposes stronger trade integration with other
developing countries through various instruments of South-South cooperation whose exact content
is not precisely defined. What is apparent, however, is the government's insistence on entering into
preferential trade agreements (PTAs) with these 'south' countries. The effectiveness of these
agreements is very much in question and, in the case of the SACU-Mercosur PTA, the government's
own analysis in the TPSF casts doubt on their efficacy.
SACU, and by extension South Africa, is also in the process of negotiating a PTA with India. Early
signs indicate that this will be an extremely difficult negotiation process and the potential benefits
are also questionable. It then becomes clear that these agreements are driven by political rather
than economic imperatives especially considering South Africa's growing orientation towards
emerging economies, particularly the BRIC. South-South cooperation aside, South Africa does not
seem to have any strategy in place vis-à-vis trade agreements with its major trading partners and
this results in ineffectual PTAs such as the one with Mercosur. Key to such a strategy would be South
Africa relooking at its approach to trade in services, implementing reforms in areas such as
competition and investment, and playing an active role in pursuing coherence on these policies in
SACU and SADC.
Africa Growth and Opportunities Act
Although the Africa Growth and Opportunities Act (AGOA) is a unilateral US dispensation towards
most sub-Saharan African countries, it continues to play an important role in South Africa's
development and export performance. In many ways, the complementarity between trade and
industrial policy is demonstrated by South Africa's support for AGOA and the enactment of the
Automotive Production and Development Programme (APDP) which replaced the Motor Industry
Development Plan (MIDP.) This has gone a long way towards establishing South Africa as a motor
industry manufacturing hub in Africa. The long-term extension of AGOA will be to South Africa's
immense benefit and will ensure that the trading relationship with the USA remains healthy.
Finally, given the above, there is room for more open discussion on South Africa's stance on trade
policy. As we attempt to emulate or replicate the 'growth model' of the largest emerging economies,
will also depend significantly on trade policy and accompanying macro-economic policies. Full
complementarity between South Africa's trade and related policies will enable us to ensure internal
coherence and, hopefully, play an important role leading SACU and the wider SADC region.
Of concern is the lack of change in terms of South Africa’s export basket. Exports tend to be
dominated by the same products. Commodities remain the main export earner. South Africa will
need to increase its exports particularly in higher value-added manufactured products. While this is
primarily a challenge for industrial policy, the TPSF can complement the national effort by enhancing
access to global markets for South African products, and by shaping trade and investment relations,
and their related rules, to support these objectives.
1.3 National Export Strategy
In the mid-2000s, the dti drafted an “Export Strategy.” As far as can be ascertained, the strategy was
never formally adopted; but did serve as road map for TISA. Seven strategic themes were identified:
1. Global Competitiveness
2. Market Access
3. Prioritising Markets
4. National Trade Information System
5. Exporter Development
6. Export Mechanisms
7. Export Incentives and Financing
This proposal will review this Export Strategy and evaluate it. It will also review international best
practice and identify gaps.
An export strategy is a comprehensive approach to increasing a country’s exports. Njoroge (2010)
points out that a national export strategy (NES) can facilitate constructive interaction between the
government, the private sector, civil society and academia in mapping a country’s economic and
export development.
The NES is concerned with competitiveness. The issues that affect the general competitiveness of
countries can be classified in three categories: those beyond the countries border (demand side
issues); those experienced at the border (facilitation issues); and those experienced behind the
borders (supply side issues). The International Trade Centre (2004) has included development issues.
Figure 2: The ITC’s gears approach to developing a national export strategy
Source: The ITC 2004
Research has shown that there is a tendency for export strategies to focus on access and market
development (i.e. border-out) issues, rather than the upstream issues of capacity and competency
development (border-in) and facilitation and transaction-related issues (border). There is also an
absence of an effective public-private partnership to sustain and enrich the process.
These terms are popular in the international trade promotion/development environment. The
Border-out issues have to do with the overseas market(s) and include issues such as market entry
strategies, agent/distributor appointment, in-market promotion, foreign market research, etc.–these
are all demand-side issues. Border-in issues have to do with factors pertaining to the operation of
the exporter (product development, processing, packaging, labelling, etc.) and the firm’s immediate
home-market environment (such as inland transportation)–these are supply-side issues.
It is important that the NES be as comprehensive as possible. Although it is not necessary to
duplicate interventions where these have been drafted, the NES must ensure that they have been
covered. A “gap analysis” from both a policy and implementation point of view must be undertaken.
1.4 Current policy issues hampering or promoting trade
1.4.1
The establishment of the Export Credit Insurance Corporation of South Africa Ltd
(ECIC)
The ECIC facilitates and encourages South African export trade by underwriting bank loans and
investments outside the country, thus enabling foreign buyers to purchase capital goods and
services from South Africa.
1.4.2
Fiscal Policy
Fiscal policy is the responsibility of the National Treasury of South Africa. National Treasury’s policy
directives are mainly contained in the statements on the national budget.
The authorities have been committed to careful fiscal management and maintaining macroeconomic
stability. They are also trying to strike a balance between providing stimuli and maintaining fiscal
sustainability. The fiscal space for managing any future stress diminishes as government debts
increase. They recognise the merits of wage moderation in the public sector, as well of making space
for needed public infrastructure.
Although South Africa has embarked on a more interventionist approach to development, exporters
need stability, certainty and transparency. Exporters do not enjoy many incentives (many of which
are prohibited by the WTO). Various incentives will be proposed by the NES and National Treasury
should provide these without jeopardising macroeconomic stability.
1.4.3
Monetary Policy
The South African Reserve Bank (SARB) is the central bank of the Republic of South Africa. The
primary purpose of the Bank is to achieve and maintain price stability in the interest of balanced and
sustainable economic growth in South Africa. Together with other institutions, it also plays a pivotal
role in ensuring financial stability.
Since the introduction of the flexible inflation-targeting framework in February 2000, the
specification of the target has been reviewed on a number of occasions. The initial target measure
was the CPIX. Following revisions to the methodology employed to compile the CPI, namely a change
in the treatment of housing, mortgage interest costs no longer needed to be removed from the CPI
when evaluating the effects of monetary policy. Since 25 February 2009, the inflation target is a
range of 3 to 6 per cent for the year-on-year increase in the headline CPI (CPI for all urban areas) on
a continuous basis. The inflation target is set by government after consultation with the Bank.
The Bank has opted for a classical cash reserve system as a framework for its monetary policy
implementation. In this framework an appropriate liquidity requirement or structural money market
shortage is created by levying a cash reserve requirement on banks. The main refinancing operation
is the weekly seven-day repurchase auction, which is conducted with the commercial banks, at the
repo (policy) rate as determined by the Monetary Policy Committee. The Bank lends funds to the
banks against eligible collateral, which comprises assets that also qualify as liquid assets in terms of
the prudential liquid asset requirement. In addition to the main repo facility, the Bank offers a range
of end-of-day facilities for the commercial banks to square-off the daily positions on their settlement
accounts, e.g. access to their cash reserve balances held with the Bank, supplementary repos/
reverse repos conducted at the repo rate and an automated standing facility whereby the end-ofday balances on the banks' settlement accounts are automatically settled at a rate of 100 basis
points below or above the policy rate.
A range of open market operations is also conducted to manage the liquidity in the market in order
to give effect to the Bank's monetary policy stance. The open market operations include the issuance
of SARB debentures, reverse repos, the movement of public sector funds between the market and
the Bank and the conducting of money market swaps in the foreign exchange market.
In its Country Report, the IMF stated that “the inflation targeting framework has been crucial in
South Africa’s resilience to the large shifts in the global external environment. It has allowed the
monetary authorities to provide stimulus while keeping inflation expectations well anchored.”
In common with other emerging markets, strong capital inflows into South Africa largely because of
loose monetary policy in developed countries have been the main driver of the rand’s gains in the
recent past. Foreign inflows into South Africa’s bond market tripled in 2010 and although they
slowed in 2011, the rand continued to be strong. The rand has been a positive factor for inflation,
which has been inside the central bank’s target of between 3% and 6% since February 2010.
SARB maintains that it is not planning to target a specific exchange rate level for the rand. As a
result, the currency is volatile and often over- or under-valued. A stronger rand leads to a reduction
in the supply of foreign currency, since it reduces foreign demand for South African exports, as they
are more expensive (in weaker foreign currency terms). Therefore when the rand appreciates,
foreign goods become relatively cheaper and South Africans import more. Further, it has a negative
impact on domestic labour-intensive production, employment and exports.
1.4.4
Monetary policy and exchange rates
Real exchange rates are influenced by government policies and many other factors (spending
patterns, taxes and tariffs, exchange controls, and the competitiveness of SA industries).
A 10% weaker real rand is like a 10% tariff on all imports and a 10% subsidy for all exports. Export
subsidies raise the domestic relative price of exportables, import tariffs raise the domestic relative
prices of import substitutes. Thus weaker real exchange rates encourage production and discourage
imported consumption. A weaker real exchange rate will:
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Stimulate exports
Attract more tourists
Reduce imports
Improve trade balance
Help to diversify exports
Re-orientate the economy towards tradable sectors
Enhance growth and employment of unskilled labour.
These gains will be short lived if the prices of domestically produced substitutes rise to such an
extent that importing these goods would again become favourable to consumers. However, a more
competitive and stable exchange rate will encourage entrepreneurs to invest in an export-orientated
manufacturing sector. Mining and minerals
The government’s industrialisation policy calls for a paradigm shift in mineral development, strategic
investment in assets to maximise long-term growth, enhanced value of exports and opportunities for
sustainable jobs. This beneficiation strategy offers huge opportunities for both local and foreign
direct investment.
The mining industry is an important sector of the South African economy contributing approximately
10% to the GDP in the last decade. It is also the largest contributor to the country’s exports. In 2010,
South Africa as a resource economy was estimated to possess approximately USD 2.5 trillion in nonenergy in situ mineral wealth. This makes it one of the wealthiest mining jurisdictions in the world.
In 2011 the mineral beneficiation strategy for South Africa was approved by cabinet. The policy
advances government’s developmental agenda and seeks to maximiSe national benefits from the
country's mineral resources. It aims to translate South Africa’s comparative advantage inherited
from its significant mineral resources to a national competitive advantage. Ultimately, its goal is
towards enhancing the value of exports, localising imports and creating sustainable jobs.
The strategy is aligned to a national industrialisation programme, which seeks to enhance the
quantity and quality of exports, promote creation of decent employment and diversification of the
economy, including promotion of the green economy. Further, the strategy is contributory towards
a strengthening of the knowledge economy in support of the overall competitiveness of the
economy.
This strategy is anchored on a range of legislations and policies such as the Minerals and Mining
Policy for South Africa (1998). It advances the objectives of:
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The Minerals and Petroleum Resources Development Act (MPRDA);
The Broad-Based Socio Economic Empowerment Charter (BBSEE);
The Precious Metals Act;
The Diamonds Amendment Act;
Energy growth plan; as well as
Compliance with environmental protocols.
The strategy identifies several instruments that constitute an enabling environment for beneficiation
(policies, legislation, incentives etc.). To attain this competitive advantage, the challenges and
benefits need to be considered:
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Access to raw material for local beneficiation
Lack of infrastructure
Research and development
Skills sought for expediting local beneficiation
Access to international markets for beneficiated products
The strategy recommends a set of integrated solutions to mitigate identified binding constraints and
leverage on existing national processes, such as the New Growth Path and the national
infrastructure programme.
The strategy outlines ten strategic mineral commodities, from which five value chains are selected.
The value chains specified are intended to indicate the inherent value for South Africa in embracing
beneficiation for all strategic mineral commodities. The strategy is, therefore, not a blueprint for
individual commodity value chains, but provides a framework within which value chain specific
interventions will be anchored.
These minerals are:
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Chromium
Manganese
Coal and Uranium
Nickel
Diamonds
Platinum
Gold
Titanium
Iron-Ore
Vanadium
These have been clustered according to their value chains and five value chains that will be the
preliminary focus of the new beneficiation strategy have been identified. The five value chains are:
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Energy commodities (coal, uranium and thorium)
Iron and steel (iron-ore, chromium and manganese)
Pigment and titanium production (titanium and vanadium)
Autocatalytic converters and diesel particulate filters (platinum)
Jewellery fabrication (diamonds, gold and platinum)
1.5 DTI’s incentives
The dti provides financial support to qualifying companies in various sectors of the economy.
Financial support is offered for various economic activities, including manufacturing, business
competitiveness, export development and market access, as well as foreign direct investment.
A summary of these is given below:
Aquaculture Development and Enhancement Programme ( ADEP)
The Aquaculture Development and Enhancement Programme (ADEP) is an incentive programme
available to South African registered entities engaged in primary, secondary and ancillary
aquaculture activities in both marine and freshwater classified under SIC 132 (fish hatcheries and
fish farms) and SIC 301 and 3012 (production, processing and preserving of aquaculture fish). The
grant is provided directly to approved applications for new, upgrading or expansion projects.
Business Process Services (BPS)
The South African government implemented a Business Process Outsourcing & Off-shoring (BPO&0)
incentive programme as from July 2007. Between July 2007 and March 2010, the incentive resulted
in the creation of at least 6,000 new jobs and attracted R303 million in direct investment.
As part of a process of improving South Africa’s position as an investment destination, a systematic
review of the BPO & O incentive programme was undertaken with the private sector resulting in a
revised BPS incentive.
Capital Projects Feasibility Programme (CPFP)
The Capital Projects Feasibility Programme (CPFP) is a cost-sharing grant that contributes to the cost
of feasibility studies likely to lead to projects that will increase local exports and stimulate the
market for South African capital goods and services.
Clothing and Textile Competitiveness Improvement Programme (CTCIP)
The Clothing and Textile Competitiveness Improvement Programme (CTCIP) aims to build capacity
among manufacturers and in other areas of the apparel value chain in South Africa, to enable them
to effectively supply their customers and compete on a global scale. Such competitiveness
encompasses issues of cost, quality, flexibility, reliability, adaptability and the capability to innovate.
Critical Infrastructure Programme (CIP)
The Critical Infrastructure Programme (CIP) is a cost sharing grant for projects designed to improve
critical infrastructure in South Africa. The grant covers qualifying development costs from a
minimum of 10% to a maximum of 30% towards the total development costs of qualifying
infrastructure. It is made available to approved eligible enterprise upon the completion of the
infrastructure project concerned.
People-carrier Automotive Investment Scheme (P-AIS)
The People-carrierAutomotive Incentive Scheme (P-AIS)is a sub-component of the Automotive
Incentive Scheme (AIS) and provides a cash grant of between 20% and 35% of the value of qualifying
investment in productive assets approved by the dti.
Production Incentive (PI)
The Production Incentive (PI) forms part of the overall Clothing and Textile Competitiveness
Programme (CTCP) and flows from the implementation, by the Department of Trade and Industry
(the dti), of customised sector programmes (CSPs) for the clothing, textiles, footwear, leather and
leather goods industries. The PI Guidelines seek to enable companies to present their business cases
to the CTCP Desk of the Industrial Development Corporation (IDC). They also provide a framework
for the CTCP Desk to evaluate such cases.
Sector Specific Assistance Scheme (SSAS)
The Sector Specific Assistance Scheme (SSAS) is a reimbursable 80:20 cost-sharing grant offering
financial support to export councils, joint action groups and industry associations.
Seda Technology Programme (STP)
seda Technology Programme (Stp) is a division of seda (Small Enterprise Development Agency)
focusing on technology business incubation, quality and standards and technology transfer services
& support to small enterprises.
Support Programme for Industrial Innovation (SPII)
The Support Programme for Industrial Innovation (SPII) is designed to promote technology
development in South Africa’s industry, through the provision of financial assistance for the
development of innovative products and/or processes.
Technology and Human Resources for Industry Programme (THRIP)
The Technology and Human Resources for Industry Programme (THRIP) is a partnership programme
funded by the Department of Trade and Industry (the dti) and managed by the National Research
Foundation (NRF). On a cost-sharing basis with industry, THRIP supports science, engineering and
technology research collaborations focused on addressing the technology needs of participating
firms and encouraging the development and mobility of research personnel and students among
participating organisations.
The Manufacturing Competitiveness Enhancement Programme (MCEP)
The Manufacturing Competitiveness Enhancement Programme (MCEP), one of the key action
programmes of the Industrial Policy Action Plan (IPAP) 2012/13 – 2014/15, will provide enhanced
manufacturing support to encourage manufacturers to upgrade their production facilities in a
manner that sustains employment and maximises value-addition in the short to medium term.
Tourism Support Programme (TSP)
The Tourism Support Programme, a sub programme of the Enterprise Investment Programme (EIP)
was introduced in 2008, replaced the Small and Medium Enterprise Development Programme
(SMEDP) tourism programme. The incentive offered a grant of between 15% and 30% of qualifying
investment costs for establishing new and expanding existing tourism operations in South Africa. The
incentive provided for qualifying investment costs of furniture, equipment, vehicles, land and
buildings and improvements of up to R200m. The maximum incentive is R30m and is payable over
three years.
Since inception until 31 March 2012, a total of 545 applications were approved with an investment
value of R6.8 billion and an incentive value of R1.1 billion. It is projected that 9 054 jobs will
ultimately be created as a result of the supported projects.
The Minister of Trade and Industry, Dr Rob Davies, has announced the termination of the
administration of the Tourism Support Programme (TSP) by the dti as from 01 October 2012.
1.6 Advanced Manufacturing Technology Strategy
The Advanced Manufacturing Technology Strategy (AMTS) identified priority sectors within the
South African economy, and stimulated the process of technological upgrading, facilitation of
technological resource flow via new knowledge networks and built a creative and innovative
environment through a supply of skilled manpower, technology infrastructure and funds.
The AMTS is centred on a select number of sectors and technology focus areas. Industry Sectors to
be focused on include:
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Automotive (and Transport);
Metals (and Minerals);
Chemicals;
Clothing and Textiles;
Craft;
Aerospace;
Capital Goods.
Technology focus areas include:
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Advanced materials;
Product technologies;
Production technologies;
Logistics;
Cleaner production technologies;
ICT in Manufacturing;
SMME Development;
SQAM Technology issues.
Standards, quality assurance, accreditation and metrology (SQAM) were identified as cross-cutting
focus areas, and it is envisaged that additional sectors and focus areas will be added in future.
The strategy will be implemented through a combination of interventions i.e. Centres of Innovation,
Innovation Networks and specific initiatives and programmes.
The AMTS recognises the importance of human resource development in order for the South African
manufacturing sector to excel and advance. In response to the sector’s requirement of human
resource development, the strategy proposes to focus on industry-driven and academic institutionsupported human resource development.
The AMTS also stresses the need for provincial and metropolitan council alignment in support of
implementing initiatives. Moreover, the Gauteng Provincial government highlights three main areas
of intervention regarding economic policy:
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Realignment of the regions manufacturing sector (towards value-added production efforts),
Developing the province as a smart centre and
Expand the finance and business centres.
Without advancing technological processes and production methods these objectives cannot be
attained.
1.7 The draft White Paper on South Africa’s Foreign Policy
There has always been an interaction between domestic business interests and foreign policy in
general and commercial diplomacy in particular. The direction that South Africa’s foreign policy is
taking is therefore critical to the NES. The draft White Paper on South Africa’s Foreign Policy (2011)
points to “the rise of new economic powers influencing a shift in the balance of the global
distribution of power”. It states as these emerging economic powers assert their positions and seek
to increase their influence in global affairs, new economic and political groupings are formed. This
has resulted in:
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New global markets;
Redirection in trade and investment flows;
Globalizing labour market;
Realignment of economic alliances;
Increase in social divisions;
New consumption patterns and
New production networks.
The white paper emphasises that the success of South Africa’s economic diplomacy will determine
the extent to which domestic priorities can be achieved. South Africa must be able to participate
competitively in the global market place where “globalisation continues to shape the world at an
accelerating pace. People, businesses and governments are interlinked across the borders of the
nation-state. Trade, global finance, and migration have encouraged decades of economic growth.”
The white paper affirms that the Department International Relations and Cooperation (DIRCO) is the
principal adviser on foreign policy, and lead coordinator and manager of South Africa’s international
relations and cooperation. The Department and its missions abroad carry out its mandate by, inter
alia, conducting economic diplomacy, advising on international law matters and acting as custodian
for all South Africa’s international agreements. South Africa’s economic diplomacy will therefore be
focused on providing guidance to government and the business sector on economic developments
and markets, pursuing market access for South African products, attracting investments and tourism,
removing barriers to trade, and supporting the development of larger markets in Africa.
Successful economic diplomacy requires a close partnership with government, business, and labour.
A coordinated government-wide effort is essential to promote South Africa’s economic interests in
the international arena, including the use of high-level engagements. Economic diplomacy should
explore ways to strengthen ties with other regional economic groupings and deal more effectively
with non-tariff barriers. Within the partnership of government, business, and labour it is important
that South Africa’s values, principles, and reputation are reflected in their conduct abroad. South
African missions abroad are key and can assist South African business abroad through:
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Providing sufficient intelligence on market conditions,
Giving advice on interpreting market intelligence,
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Providing information on local cultural nuances that would assist South African business to
better access those markets
Advocacy, and
Market access support.
To achieve this DIRCO needs to improve its economic research capacity to strengthen its economic
diplomacy.
South Africa will continue to support the regional economic programme of SADC that provides for
policy co-ordination and convergence, sectoral co-operation and market integration through the
SADC Free Trade Area. The proposed integration of SADC, the Common Market for East and
Southern Africa (COMESA), and the East African Community (EAC) would also contribute to
increased economic interaction.
Under the auspices of the Department, the South African Development Partnership Agency (SADPA)
will facilitate and manage development assistance in support of South Africa’s foreign policy
objectives. Therefore, to enable effective coordination and to ensure policy cohesion and synergies
in South Africa’s bilateral and multilateral interactions, the establishment of a professional
diplomatic service as well as these coordinating structures through the adoption of legislation should
be pursued. Given dynamic changes in the global environment in which the Department operates, it
will be critical for it to have the institutional flexibility to adapt its structure and operations to meet
new challenges.
1.8 Special economic zones
A special economic zone (SEZ) is a geographically designated area of a country set aside for
specifically targeted economic activities, which are then supported through special arrangements
(which may include laws) and support systems that are often different from those that apply in the
rest of the country.
Uses of SEZs:
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Tools for long-term industrial and economic development,
Creating an enabling and sustainable environment for foreign and domestic direct
investment to thrive,
Building targeted industries, developing regions and building industrial infrastructure.
There are different categories of SEZ
Sometimes countries use different names for the same concept, but the strategic intention is more
important than the names used. An Export Processing Zone (EPZ) is a designated area set up by
government to promote industrial and commercial exports and to provide tax and other incentives
to export. Historically, EPZs are exempt from numerous laws including labour laws. Another
prominent feature of an EPZ is that, once declared, the zoning applies only to industrialists or
investors that export 100% of the finished goods produced in the zone with no flexibility to sell some
of the products locally, even when expedient or practical.
Overview of SEZs History in South Africa
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Industrial Development Zones: Introduced around 2000 to promote value-added exports
and export-oriented industries,
Spatial Development Corridors: Introduced to link key development nodes through
transportation networks and to catalyse development along the corridors,
Industrial Parks: Apart from private sector ones, the pre-1994 government introduced
industrial parks to develop nodes intended to promote “separate development”
In proposing legislation allowing for SEZs, it has been made clear that labour laws will not be relaxed
in the new arrangements for accelerating industrial development through special economic zones.
The director general of the Department of Trade and Industry said : “Government needs full support
from organised labour and business for the proposed special economic zones to work effectively. It
is not in our best interest to deregulate labour laws in order to attract Foreign Direct Investment
(FDI) and therefore exploit our workers. The model of special economic zones that the government
is pursuing shifts away from competing on the basis of cheap labour to competing on the basis of the
quality of services and support measures provided in the zones and their host regions. Our
challenge is therefore to develop a comprehensive package of support measures that will be
adequate to attract desired investments but also assist the country to master the desired industrial
capabilities.”
The main aim of the SEZ bill and policy is to support the acceleration of industrial development in
order to promote growth and creation of sustainable and decent jobs and also to promote the
creation of a regionally diverse industrial economy through the creation of new industrial hubs in
under development regions.
The SEZs can be utilised to create a sustainable environment for foreign and domestic direct
investment and build targeted industries aimed at developing strategic industrial capabilities and
industrial regions.
The South African Industrial Development Zone concept
The Minister of Trade and Industry may identify an area as suitable for development of an Industrial
Development Zone by notice in the Gazette if the Minister is satisfied that designation of the area as
an Industrial Development Zone will:
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Facilitate the creation of an industrial complex having strategic economic advantage;
Provide the location for the establishment of strategic investments;
Enable the exploitation of resource-intensive industries;
Take advantage of existing industrial capacity, promote integration with local industry and
increase value-added production;
Create employment and other economic and social benefits in the region in which it is
located; and
Be consistent with any applicable national policies and law, as determined by appropriate
environmental, economic and technical analyses.
An IDZ is a purpose built, industrial estate linked to an international air or sea port, which might
contain one or multiple Customs Controlled Areas (CCA) tailored for manufacturing and storage of
goods to boost beneficiation, investment, economic growth and, most importantly, the development
of skills and employment in these regions. A port (air or sea port), is a place appointed or approved
by the Commissioner of the South African Revenue Service (SARS) under the Customs and Excise Act,
1964 (Act 91 of 1964) through which goods may be imported or exported.
The key objectives of the programme are to:
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Attract foreign direct investment (FDI);
Attract advanced foreign production and technology methods in order to gain experience in
global manufacturing and production networks;
Develop linkages between domestic and zone-based industries;
Provide world-class industrial infrastructure.
Benefits of the incentive scheme
The following SARS offerings are available to enterprises in a customs control area:

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Relief from customs duties at time of importation into a CCA
•
any goods for storage;
•
raw material for manufacture; and
•
machinery used in the manufacturing process.
Simplified customs procedures
•
Clearance of goods – importation, exportation and transit
•
Application for designation, licensing and registration
•
Release of cargo
•
Consideration of stage consignments if the requirements are met
•
Consideration of release under embargo
•
Lesser amounts for security – licensing, registration and movement of bonded
goods
Fiscal incentives on goods when
•
Goods are imported for storage,
•
Raw material imported for manufacture,
•
Machinery imported for used in the manufacturing process; or
•
Any material imported for use in the construction of the CCA infrastructure.
•
Goods are exported from the CCA to a foreign country.
•
Any services are rendered to a CCAE or in the CCA
Subsidised infrastructure
•
No import duties payable on goods imported for use in the construction and
maintenance of the infrastructure of a CCA in an IDZ (rebate item 498.02).
•
No Value-Added Tax shall be payable when:
 Goods imported for use in the construction and maintenance of the
infrastructure of a customs controlled area
 Land supplied to a CCAE in the CCA for sale, letting or any other agreement
 Electricity or water supplied to the IDZ Operator or CCA Enterprise located in
the CCA
Additional benefits include:


World-class industrial support infrastructure;
Links to an international port of entry;
ANDRE, DON’T YOU THINK WE COULD SHORTEN THE ABOVE INCENTIVES INTO TWO
SENTENCES? AND THEN DELETE THE FOLLOWING INCLUDING APPLYING FOR THE ICENTIVES.
RATHER AN OVERKILL IN THE CONTEXT OF THIS REPORT. JUST REFER TO SARS WEB SITE?
Restrictions on the incentive scheme

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
All activities, and the manufacture of all goods in contravention of any South African Act
shall be prohibited within an IDZ. Contraventions shall attract the penalties prescribed by
law;
No person or company shall bring into, or cause to be brought into, an IDZ a substance or
good, the possession of which is considered illegal or illicit or items prohibited by the laws of
South Africa or binding international conventions to which South Africa is a signatory;
Enterprises who wish to manufacture goods, the manufacture of which requires special
permits, license or legislative consent, shall acquire such special permit, license or legislative
consent prior to the commencement of production and shall disclose their intention to
manufacture such goods in their IDZ enterprise agreement.
Application for the IDZ designation

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Interested parties may approach the Minister to apply for a specified area linked to a sea or
airport with customs facilities to be considered as an area suitable for the development of
an Industrial Development Zone;
The application must contain the information set out in the guidelines;
The application for designation must be accompanied by an application for an IDZ operator
permit by the intended company for the area proposed for development;
The Minister may request additional information from the applicant when considering the
application.
Applying for an IDZ permit

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Any party interested in obtaining an IDZ operator permit shall, in the prescribed manner,
submit a completed IDZ operator permit application to the Minister;
In case of a new IDZ, the application for an IDZ operator permit must accompany the
application for designation of an area for which the IDZ Operator permit is sought;
In case of an existing IDZ, the provisions regarding transfer of an IDZ Operator permit must
be complied with.
An applicant for an IDZ operator permit must:


Demonstrate control of the land within an existing IDZ or within the area under application
designated for development as an IDZ or within a new IDZ pertinent to its application in the
detail and manner as indicated in the guidelines ;
Submit a comprehensive feasibility study in the detail and manner as indicated in the
guidelines ;
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Indicate its ownership structure through the submission of a shareholders' agreement of the
intended IDZ Operator indicating shareholders, percentages of shareholding, requirements
for transfer of shares, requirements for distribution of assets upon liquidation or
deregistration;
Comply with such other criteria and prerequisite procedures as set out in the guidelines to
this programme;
Each applicant shall submit four (4) copies of the application to the Minister, one (1) copy of
which must be an original;
The Minister shall be entitled to return incomplete applications to applicants for subsequent
completion or request further information regarding an applicant's application prior to its
consideration by the Minister.
1.9 Capital Equipment
HAVE YOU MATERIAL FOR THIS?
1.10 Agriculture
In 2008 the Department of Agriculture Forestry and Fishing (DAFF) drafted an “Agricultural Trade
Development Strategy for South Africa”. Its purposes are:
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To monitor and evaluate global and local trends in trade and to provide an informed
strategic direction that can form part of government and industry’s plans of action, to be
reviewed and monitored regularly to measure progress.
To provide a common understanding and directives within government and its institutions
and the agricultural industry with regard to the application of trade policy instruments: trade
negotiations, tariff policy, trade and business support services and regulatory support.
To provide broad based direction on how trade in agricultural and food products can
contribute to the shared growth objectives of ASGI-SA and employment creation.
Three main objectives have been identified:
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Improving market access for new export opportunities through agricultural trade
negotiations.
Long term sustainability of the production of tradable products.
Grow the exporter base.
1.11 Defence export strategy
???
1.12 Creative industries
In the Department of Arts and Culture’s Medium-term Strategic Framework, Programme 2: Arts and
Culture in Society contains the following points:
 Promotion of arts and culture in South Africa and mainstreaming its role social development.
 Promotion of social enrichment, social cohesion and nation building through arts, culture
and heritage.
 Promotion of social inclusion of previously marginalised groups in arts, culture and heritage.
 Socio-economic empowerment of women, youth and special groups through skills,
participation and opportunities in the arts, culture and heritage sector.
There is no specific reference to exports.
http://unctad.org/en/Pages/DITC/CreativeEconomy/Creative-Economy-Programme.aspx
1.13 Regional Industrial Development Strategy (RIDS)
Given the presence of numerous spatial-economic-developmental inequalities within South Africa,
the South African government set out to develop a more spatial-economically focused development
programme i.e. the RIDS. RIDS is the mechanism designated by the national government to respond
to spatial differentiations in the economic welfare levels of the country. It not only aims to support
and capitalise on growing and leading regions, but to assist and support regions indicating economic
development delays and restraints.
Given the spatial dimension, RIDS recognises the migratory factor present in the South African
economy, as well as the fact that poor communities are not only confined to lagging regions, but can
also be prominent in regions with leading and growing economies. (ANDRE, WHICH BEGS THE
QUESTION: WILL ECONOMIC GROWTH RID US OF POCKETS OF POVERTY? THERE IS AN OLD ENGLISH
SAYING “LIKE TAXES, THE POOR ARE ALWAYS WITH US”.)The strategy acknowledges the impacts of
endogenous factors i.e. the local labour force etc. on the economy – leading to a bottoms-up
approach in terms of economic development. This approach identifies and builds on the existing
resource and skills- base of the region involved.
The RIDS also recognises that change is dynamic and inescapable – prompting the strategy to be
reviewed on a periodic basis in order to keep up with the ever-changing global economy.
The objectives of the RIDS are as follows

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Attempt, as far as possible to reduce economic disparities between regions, address the
needs of both the first and second economies and to narrow the gap between them.
Pay particular attention to the needs of those regions which are lagging behind the national
norms.
Enhance the current regional strengths and lead sectors or the economy.
Promote sustainable economic growth and employment in provinces and municipalities.
Build regional competitive capabilities and firm-level support measures; and
Enhance regional performance in attracting foreign direct investment.
Three distinct regions are referred to throughout the RIDS, and were identified based on the level of
economic development and cohesion of the region. Interventions into these regions will differ
significantly depending on their economic and development status.
1.13.1 Regional Typology according to the RIDS, 2006: ANDRE, IN VIEW OF THE REVIEW
POLICY STATED ABOVE, HAS THIS BEEN REVIEWED SINCE 2006?

Regions with Potential – based on known economic strengths, competitiveness and
economic clusters/lead sectors. They may include areas of industrial concentration.


Regions of Latent Potential – based on available resources and comparative advantages
which are not being used to their full potential but which, through catalytic support, could
become more economically vibrant. Such regions may include IDZ’s and SDI’s, and will often
benefit from improvements in the local beneficiation of available timber, agricultural and
mineral products or the promotion of key assets, e.g. tourism.
Declining Regions – based on either economic decline as a result of mine or industrial
closures in a particular area or areas of long-term structural inequality, such as any of the
former homelands. In such areas enhancing service support, skills development, business
retention and expansion and perhaps support for agriculture would need to be the focus.
Figure 1 represents the core economic regions, delineated by the strategy. Evidently the
comparative and competitive advantages illustrated by the regions were a direct result of the
dominant economic activity and industrial concentration nodes within these regions. This
concentration of activities led to a clustering of related economic activities is clearly a key regional
competitive advantage as indicated in Figure 1.
The RIDS proposes the development of partnerships and growth coalitions within regions due to the
dynamic and robust growth patterns that occur as soon as initiatives are driven by local role-players
i.e. civil society, private sector and local authorities. Government intervention within these coalitions
will vary, based on the degree of local private sector diversification. This role can vary between
providing assistance and support to well diversified economies or to a more active and prominent
role in regions were the private sector is less prominent.
Figure 1 – Economic Regions and spatial linkages ANDRE, THE ILLUSTRATION DIDN’T COME
THROUGH
Source: Draft RIDS, Chapter 7, DT (2006)
The RIDS has indicated that the South African economy is plagued by regional level disparities –
which has led to some regions becoming economically dominant and prosperous with other regions
lagging, crippled by their isolation from the mainstream and global economy. These lagging regions,
for the most part include areas such as the former homelands (of which the study area form part of),
has limited resources and economic assets and are usually located in seclusion – cut off from the
primary economy.
The challenge presented in these instances is for lagging areas to optimise their economic potential.
The RIDS development interventions are primarily focused on supporting the manufacturing sector
and aims at addressing industrial practises by means of a more contemporary approach. The RIDS is
moving away from traditional approaches i.e. grants and tax incentives, strategic projects, special
privileges and special export processing zones in terms promoting economic development. The
contemporary approach focuses on a bottoms-up approach and the strengthening of world-class
regions (not focusing only on strengthening lagging regions but also supporting leading regions). The
RIDS also highlights the use of Systematic Competitiveness – which clarifies the roles and
responsibilities of the various role-players.
In line with the various interventions proposed by the RIDS various RID support measures were also
identified in order to increase the strategy’s effectiveness and to introduce new innovative support
systems into the economy. These support measures include SEZ’s, Industrial Parks, Logistic Parks,
Industrial Estates, Innovation Hubs, Regional Growth Coalitions and Industrial Clustering, and
Support to firms.
1.14 National Industrial Participation Programme, 1996
The NIPP forms part of the DTI’s key interventions developed to achieve the departments’ mandate
of stimulating growth, investment and exports. The NIPP was developed in order to assist the DTI in
its endeavours to reshape the country’s economy on a strategically level. The NIPP was founded on
the basis of sound business principles, mutual benefit with projects being entered into sustainable
over the long term.
The mission of the programme is to “…leverage economic benefits and support the development of
South African industry by effectively utilising the instrument of Government Procurement.”
In order to achieve the overarching mission the programme aims to achieve the following objectives:

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
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

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Sustainable economic growth;
Establishment of new trading partners;
Foreign investment into South Africa;
Exports of South African “value added” goods and services;
Job creation
HRD;
Technology transfer; and
Economic advantages of previously disadvantaged communities.
The programme differentiates between foreign customers and South African customers.

The South African customer benefits by means of implementing the NIP business plan which
leads to the creation of additional and new business activities by undertaking one or more of
the following actions: investment, export promotion, SMME and BEE promotion, R&D,
technology and knowledge transfer, job creation and/or to increase localised sales.
Participation in the programme for South African customers is centred on the ability of the
industry to satisfy the requirements of both the programme and the foreign supplier.
 The foreign customer is eligible to participate only if the imported content of the goods
basket amounts to US$ 10 million or more.
ANDRE, THIS IS RATHER OLD – DOES IT STILL EXIST?
1.15 Enterprise development
1.15.1 The White Paper on national strategy on the development and promotion of small
business in South Africa
In March 1995 an important milestone was achieved when government released its White Paper on
national strategy for the development and promotion of small business in South Africa, the first time
a comprehensive policy and strategy on small business development was formulated in the country.
The 1995 White Paper on national strategy on the development and promotion of small business in
South Africa included:
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Creating an enabling legal framework
Streamlining regulatory conditions
Facilitating access to information and advice
Facilitating access to marketing and procurement
Facilitating access to finance
Facilitating access to affordable physical infrastructure
Providing training in entrepreneurship, skills and management
Improving industrial relations and the labour environment
Facilitating access to appropriate technology
Encouraging joint ventures
Capacity building and institutional strengthening
Introducing differential taxation and other financial incentives
8.23.2 Integrated strategy on the promotion of entrepreneurship and small enterprises
Since the 1995 White Paper, government-owned institutions and programmes have evolved within
all three spheres of government with the aim of providing comprehensive support to small business.
These institutions have made progress in delivering a wide range key support services.
Summary of strategic programmes

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
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

Fostering entrepreneurship culture and increasing the enterprise creation rate
Establish a dedicated network of SMME finance
Create demand for Small Enterprise products and services
Strengthening local network for small business development support services
Improving small enterprise competencies and delivery capacity
Strengthening Enterprise Networks



Providing necessary support incentives
Improving regulatory environment
Entrepreneurship and small business research
1.15.2 Trade and Investment Development Programme (TIDP) for SMEs
The Trade and Investment Development Programme (TIDP), a project co-funded by the European
Union and the South African Government until the end of the first quarter of 2004, aimed to develop
the competitiveness of South African businesses in the SMME sector so that they would be able to
sell their products in international markets. It was felt that this in turn would stimulate job creation,
and contribute to export-oriented economic growth and the diversification of South Africa’s exports.
The Programme, which was run by the Ntsika Enterprise Promotion Agency (now Small Enterprise
Development Agency – SEDA), had three focus areas:
A Training Programme in International Competitiveness
Through a network of intermediary organisations and service providers located in various parts of
South Africa, Ntsika conducted both export awareness seminars and export orientation training
courses. The former were intended to be both motivational and informative covering the
opportunities and challenges inherent in exporting and the various export support packages on offer
from both government and private sector entities. The latter aimed to prepare the would-be
exporter for the challenges of selling abroad, covering the various components of export readiness,
some of the technical aspects of exporting and the development of an export marketing plan.
Product and Market Development for Export
This aspect of the TIDP concentrated on the provision of subsidised company specific technical
assistance and training in the areas of: product development and productivity improvement
(including quality and packaging enhancement); international health, safety and environmental
protection standards; market research and access strategies; negotiation and selling skills; the
development of suitable promotional materials; export costing and pricing issues; trade
documentation and freight procedures.
International Partnership Development Programme
More experienced exporters in the SME sector were encouraged through this programme to
develop trade/business partnerships with counterparts in the European Union. This was achieved
through organised networking events staged within South Africa, the southern African region and in
European countries. Participants were required to submit evidence of market research and contacts
with potential business partners, as well as a business plan outlining the company’s growth strategy
and planned export drive.
The sectors targeted for assistance under the TIDP were largely those identified by the dti as having
the most export potential: furniture, clothing and textiles, chemicals, machinery and equipment,
footwear and leather, metals and allied products, automotive products, and arts and craft.
With the termination of the EU funding contract, SEDA’s trade development activities are now being
focused on specific projects that have either a history of measurable success, or are considered to be
of strategic importance to the country. They currently include the continuation of the Export
Orientation Course using the structures that have been built up over the years, and support for the
national Trade Point initiative. (Note that SEDA has wide-ranging programmes aimed at small
business development.)
The establishment of local Trade Points
The idea of establishing a worldwide network of Trade Points to reduce the costs of international
trade for small and medium-sized business entities was first mooted in 1992. These costs (associated
with meeting regional/national standards, quality certification, customs clearance, transport,
banking, insurance, telecommunications and information acquisition) had been identified within
UNCTAD, the initiators of the concept, as the primary inhibiting factor in increasing the participation
of SMEs in international trade. To small and medium-sized enterprises, particularly those located in
land-locked countries, the cost involved tended to eclipse any perceived benefit associated with
export ventures.
The Trade Point programme was initially piloted in 16 locations, many of which were in South
America. Today, more than 100 Trade Points, located in the Americas, Europe, the Middle East, Asia
and Africa, participate in the Trade Point programme which is now operated by the World Trade
Point Federation (WTPF). Across the world, more than 85% of Trade Point customers are from micro,
small or medium-sized enterprises and, of these, more than 31% are micro enterprises.
A Trade Point is intended to be a source of trade-related information, a trade facilitation centre and
a gateway to global electronic networks. It was envisaged by UNCTAD, the Trade Point Programme’s
founder, as a place – virtual or physical – where participants in foreign trade transactions, e.g.
freight forwarders, transport companies, customs authorities, banks, insurance companies, etc.,
could be brought together under a single umbrella to cost-effectively provide all required services
for trade transactions. In addition, through the then GTPNet (now known as the World Trade Point
Federation [WTPF] website), Trade Points would also provide local importers and exporters with
international trade-related information pertaining to business and marketing opportunities,
potential buyers and suppliers of products, trade regulations, delivery logistics and national technical
specifications.
In South Africa, the establishment of Trade Points in the main centres has been the responsibility of
SEDA. There are currently four Trade Points in South Arica, in Johannesburg (hosted by the
Johannesburg Chamber of Commerce and Industry), in Durban (hosted also by the Chamber of
Commerce), Port Elizabeth and Mbombela (Nelspruit).
1.16 The Competition Act
The Competition Commission is a statutory body constituted in terms of the Competition Act, No 89
of 1998 by the Government of South Africa empowered to investigate, control and evaluate
restrictive business practices, abuse of dominant positions and mergers in order to achieve equity
and efficiency in the South African economy.
The Act does not distinguish between domestic and foreign markets and the proposed Export
Consortia will have to apply for exemption.
The purpose of the Competition Act is to promote and maintain competition in South Africa to:

Promote the efficiency, adaptability and development of the economy;

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Provide consumers with competitive prices and product choices;
Promote employment and advance the social and economic welfare of South Africans;
Expand opportunities for South African participation in world markets and recognise the role
of foreign competition in the domestic markets;
Ensure that small and medium-sized enterprises have an equitable opportunity to
participate in the economy; and
Promote a greater spread of ownership, in particular to increase the ownership stakes of
historically disadvantaged persons.
The Act prohibits restrictive horizontal practices which are agreements between, or concerted
practice by, firms, or a decision by an association of firms if:





It has the effect of substantially preventing, or lessening, competition in a market, unless a
party to the agreement, concerted practice, or decision can prove that any technological,
efficiency or other pro- competitive gain resulting from it outweighs that effect; or
It involves any of the following restrictive horizontal practices:
Directly or indirectly fixing a purchase or selling price or any other trading condition;
Dividing markets by allocating customers, suppliers, territories, or specific types of goods or
services; or
Collusive tendering.
Restrictive vertical practices are also prohibited. These occur when agreements between parties has
the effect of substantially preventing or lessening competition in a market. If a party to the
agreement can prove that any technological, efficiency or other pro-competitive, gain resulting from
the agreement outweighs that effect the agreement can be allowed..
Clearly exporters can increase their export values through collaboration. Firms however can extend
their collaboration from foreign markets to domestic markets. This would clearly be contrary to the
spirit if not the letter of the law.
In terms of subsection (2)(a) The Competition Commission may grant an exemption only if:–


Any restriction imposed on the firms concerned by the agreement or practice concerned, or
category of either agreements or practices concerned, is required to attain an objective
mentioned in paragraph (b); and
The agreement or practice concerned, or category of agreements or practices concerned,
contributes to any of the following objectives:
•
Maintenance or promotion of exports;
•
Promotion of the ability of small businesses, or firms controlled or owned by
historically disadvantaged persons, to become competitive;
•
Change in productive capacity necessary to stop decline in an industry; or
•
The economic stability of any industry designated by the Minister, after
consulting the Minister responsible for that industry.
It is therefore recommended that TISA apply for block exemption where export consortia are being
set up under the auspices of the National Export Strategy.
1.17 Conclusion
Appendix
1.18 Accelerated and Shared Growth Initiative of South Africa, 2006
The overarching objectives of AsgiSA are to raise and accelerate the current economic growth
trajectory to reach a record high level, to stimulate sectors and create opportunities that are more
labour intensive, hence moving towards decreasing the unemployment rate whilst encouraging and
stimulating local communities and economies in order to ensure that growth is shared and
inequalities are diminished. Through AsgiSA’s efforts to accelerate and share economic growth a
large scale social transformation can be expected in the next decade. This social transformation will
have a significant impact on marginalised and rural communities – located in the heart of the
country’s second economy.
AsgiSA’s approach to economic development and growth recognises that communities have the
ability to be their own mechanisms of change – providing an economic environment expectant of a
much higher level of community involvement - during the development process. In order to align
with the overarching objectives of AsgiSA, local, national and provincial government has taken a
much more vigorous approach towards creating an enabling environment, conducive for expanding
the business sector, integrating the first and second economies as well as a much more integrated
public-private sector relationship.
The challenge of halving poverty and unemployment by 2014 has been posted by the South African
Government alongside the challenge of identifying ways and initiatives to accelerate and share
growth throughout the county. In order to address these challenges on a national level, they firstly
have to be addressed on a local and provincial level. This implies the creation of an economic
environment suitable for growth and development as well as the attraction of investment (be it local
or international).
1.19 Decentralisation and deconcentration policies
“The development of the underdeveloped areas cannot be separated from the development of the
industrial sector. The creation of industries in these areas is an important stimulant to socioeconomic progress and to the creation of employment opportunities over a wide front”. (Black
Development in South Africa, 1976). This reasoning led to the development of former state policies
such as the Deconcentration, Decentralisation and Homelands policies. These policies were aimed
at purposely redirecting the expansion and positioning of economic activities as to stimulate the
creation of employment outside of metropolitan areas.
The primary focus of the abovementioned policies was to correct the inadequate development of
non-metropolitan areas – creating more balanced regional development. These areas were
characterised as being highly populated – with little or no economic or other infrastructure.
Moreover metropolitan areas had an advantage as being the preferred place of residence again
leading to a lesser focus on developing non-metropolitan areas, ultimately resulting in poor
economic growth of the respective areas, poor education, high population growth and inadequate
infrastructure. The abovementioned policies were not designed to stifle development and growth
of metropolitan areas but to ensure that growth and development occur more evenly – shared
between localities outside metropolitan areas.
The Industrial Decentralisation Policy provided for the decentralisation of industries to former
homelands and adjoining white areas. The programme provided for the establishment of new
industries as well as the transfer (expansion & relocation) of existing industries from the larger
metropolitan areas. These programme made use of various incentive measures to promote
decentralisation and deconcentration such as –
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Tax concessions;
Initial and investment allowances;
Low interest rates for loans;
Price preference on certain purchases;
Allowances for the cost of power, housing water etc;
Rebates in terms of transport (rail & harbour);
Low leasing rates.
According to the abovementioned legislation deconcentration points were identified areas adjacent
to metropolitan regions. These areas had the sole purpose of relieving the pressures of industrial
concentration in the various metropolitan areas. Industrial development points can be defined as
“…points where alternative agglomeration advantages could be created to counterbalance the
existing metropolis and thus create employment opportunities in the specific regions. (RSA, 1982).
1.20 Transport
The NDP looks at a variety of factors influencing South Africa’s economy and society, including
transport infrastructure; a seven-page segment in a 489-page report.includes:
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Research and development,
Market analysis,
Border controls and customs procedures,
Transport infrastructure and costs, as well as
Access to information.
In a rather ambitious opening statement to the transport section, the NDP notes that, by 2030,
investments in the transport sector will bridge geographic distances affordably, reliably and safely so
that all South Africans can access previously inaccessible economic opportunities, social spaces and
services. It will also support economic development by allowing the transport of goods from points
of production to where they are consumed. This will aid in facilitating regional and international
trade.
The NDP further states that the State will, by 2030, oversee a transport system that will provide
basic infrastructure where needed. Where independent service providers will best meet transport
needs, government will enable licensing within a framework of effective regulation.
“Crucially, the State agents responsible for transport will have the competence, information
gathering and planning facilities and the necessary leadership to achieve these goals,” notes the
document.
The NDP follows this up by sketching South Africa’s current transport reality, noting that it needs
reliable, economical and smooth-flowing corridors linking its various modes of transport, namely
road, rail, air, seaports and pipelines.
“Currently, these corridors are dominated by outdated, malfunction-prone railway technology and
poor intermodal linkages. Ports are characterised by high costs and substandard productivity relative
to global benchmarks,” states the NDP.
“Although rail is the ideal mode of transport for large, uniform freight travelling further than 400 km,
69% of all freight transport activity is by road, parts of which are rail friendly. This strains a road network already suffering from significant maintenance backlogs and contributes to poor road safety.
“Providing suitable means for the safe, efficient and cost-effective transport of people and goods is
crucial. Such mobility broadens social and economic access, alleviating poverty.”
As solutions to these challenges, the NDP places a number of policy and planning priorities on the
table, including creating workable urban transit solutions, strengthening and optimising freight
corridors, providing long-distance passenger transport options and ensuring rural access and
mobility.
Priority 2: Strengthen and Optimise Freight Corridors
South Africa is a transport-intensive economy, states the NDP. However, its advantages in terms of
resources “are greatly eroded by high transport costs and poor freight transport infrastructure.
South Africa’s minerals sector, for example, has the potential to drive economic growth in the short
term, yet it is being stifled by limited capacity to transport mineral commodities, particularly coal,
manganese and iron-ore, on existing rail lines”.
Planning should prioritise improving the capacity, efficiency and sustainability of these corridors,
while enhancing the performance of seaports and inland terminals, notes the NDP.
Plans should be informed by “experience and the poor performance” of Transnet’s capacity
expansion programmes, it adds. The Richards Bay Coal Terminal, for instance, is greatly underused
because capacity on the rail link did not keep up with expansion on the terminal.
“Given the magnitude of these capacity constraints and the huge financial and organisational
resources needed to improve corridor performance, effective partnerships need to be developed
between the public and private sectors. Healthy competition between service providers is also key,”
states the NDP.
A number of corridors have been identified for expansion and improvement.
The first one is the Durban–Gauteng corridor. “As the corridor that handles most of the country’s
high-value freight, it’s the first priority,” says the NDP. “It’s also the most strategic corridor to
achieve a shift of freight from road to rail by overcoming rail’s main drawback – lack of intermodal
flexibility – by improving the performance of terminals on either end. It could demonstrate that the
institutional model needed for corridor improvement rests with aligning the interests of cities with
those of authorities across all tiers of government, as well as the transport operators that connect
the intervening space.”
Keys to success on this corridor include unrestricted access into the terminals for freight, removing
bottlenecks on the road and rail routes, and expanding terminal capacity.
Planning priorities include building new hubs or inland terminals around Gauteng for improved roadrail transfers. According to the NDP, at least three new Gauteng hubs will replace existing inner-city
hubs as they reach full capacity.
Higher rail density and throughput to achieve economies of scale will require upgraded technology
to move and control trains.
Transnet has developed plans that will address the capacity of Durban’s port, states the NDP.
Further container capacity to meet South Africa’s needs over the longer term will be provided by
constructing a new terminal on the site vacated by moving Durban’s airport to La Mercy.
Coal transport corridors are also in need of strengthening. The Waterberg coalfields in Limpopo
need to be linked to both domestic power generators and to export facilities in Richards Bay, notes
the NDP. Planning should also take Botswana’s need to access Indian Ocean ports for its own coal
exports into consideration.
The NDP also recognises the need to develop a north–south corridor, a Durban to Dar-es-Salaam
transport network, linking the two major ports of the Southern African and Central and East African
economic communities.
Here, the NDP is especially critical of port costs in South Africa. “As indicated by the ports regulator,
South African ports perform poorly, operating at levels below comparative operations and at costs
that are significantly higher than the global average. This is hindering the nation’s development
objectives. Poor performance is largely due to the absence of competition in terminal operations
and Transnet’s business model, which uses surplus generated by ports to fund investments
elsewhere. The trade-offs obscured within the Transnet group must be addressed if port prices are
to be competitive.”
The White Paper on National Transport Policy
In this White Paper, published in September 1996, the vision of the South African Government for
transport is set out as being:
“… to provide safe, reliable, effective, efficient, and fully integrated transport operations and
infrastructure which will best meet the needs of freight and transport customers at improving levels
of service and cost, in a fashion which supports government strategies for economical and social
development whilst being environmentally and economically sustainable”
Transport policy : Moving South Africa Project/The Moving South Africa Action Agenda
This project outlines the strategic framework for the South African transport sector through 2020. It
addresses urban, rural, freight and special transport needs, analyzes the sustainability of the present
transport system and presents possible solutions to the problems facing the industry.
Implementation of government planning policy and legislation to improve spatial development and
road planning would reduce commuter distances and traffic jams. The aim is to implement of some
form of travel-demand management, such as parking and access control or incentives, in conjunction
with developing an improved public transport system, rather than simply construct more roads
which would increase automobile use.
The document also sets out a number of key strategic actions aimed at overcoming these strategic
challenges, and to fulfil the aims set out for urban public transport, such as corridor densification
and the optimal deployment of modes to meet customer service requirements. With regard to the
latter, it is argued in the document that commuter rail, as it is currently operated, only becomes
viable in corridors of more than 30 000 passengers per direction per day. Dedicated investment to
ensure such numbers is hence required in corridors that have, or show potential to reach, such
numbers. In corridors where the number of passengers is between 10 000 and 30 000 per direction
per day, road-based transport with dedicated infrastructure or priority measures, at least over parts
of the corridor, is proposed. In the case of low ridership corridors of less than 10 000 passengers per
direction per day, the policy position as spelt out in the document is that such corridors do not
warrant dedicated infrastructure investment.
In a follow-up publication launched in May 1999, the National Department of Transport unveiled the
“Action Agenda” to give effect to the objectives set out in its Moving South Africa strategy. In this
“strategic framework”, the Department not only spells out how it will endeavour to meet the
transport needs of the nation in a sustainable way, but also expresses the view that transport is “…
an enabling industry, one which exists not only to meet goals inherent to transport, but also to meet
other pressing national and social objectives. Included in this list of objectives are:

“economic growth, creating a high and rising standard of living for all citizens as set out in
GEAR and the RDP;

increased trade, especially with neighbouring SADC countries;

improved access to employment opportunities; and

increased social integration”.
The Action Agenda is about action to unwind the legacy of a transport system which emerged
through inward industrialisation, which was the hallmark of apartheid economic policy.
The core for freight users:

It builds a new platform where the needs of the rural farmer and of the high-end valueadded exporter can be met.

It develops a platform in transport which can innovate and flex according to the
emerging needs of the new industrial and economic strategy.

It calls for focussed investment and development to create a strategic backbone system
which can support the majority of customers - particularly value-added exporters - while
at the same time sustains a supporting network that guarantees economic integration
and enables the spatial redistribution of wealth.
Privatisation works for UK ports (http://www.ftwonline.co.za/Default.aspx?NewsNo=17655
Thu, 29 November 2012)
The decision by the UK government to privatise its ports has played a big role in their transformation
and competitiveness, said Raksha Maharaj, trade and investment adviser UK Trade and Investment.
While the UK ports sector includes a number of different ownership models, most of the larger ports
in the UK are in private ownership, following several privatisation rounds under the Ports Act of
1991.