PROGRESS REPORT
ON IMPLEMENTATION
OF THE 2007/8
INDUSTRIAL POLICY
ACTION PLAN
PORTFOLIO COMMITTEE ON TRADE
AND INDUSTRY – 21 May 2008
DTI Delegation
1. Mr Sipho Zikode: Acting Deputy DirectorGeneral
Tel. (012) 394 1396
2. Mr Nimrod Zalk: Chief Director – Industrial
Policy
Tel. (012) 394 1366
3. Mr Nkosi Madula: Director – Industrial
Policy
Tel. (012) 394 1050
2
Overview: Industrial Policy
Action Plan
1.
Sectoral actions

Fast-track implementation of four lead sectors which have
emerged from research and intensive interactions with
stakeholders

Metal fabrication, Capital and Transport equipment

Automotives and components

Chemicals, plastic fabrication and pharmaceuticals

Forestry, pulp and paper, and furniture

Stabilise Clothing and textiles to preserve capabilities and
employment

Maintain momentum on ASGI-SA sector priorities: Tourism,
Business Process Outsourcing, Biofuels

Other sectoral projects

Sectors for which further strategy work needs to be developed
2.
Cross-cutting actions

New areas of emphasis:
o
Industrial Financing and Upgrading
o
Reducing input costs through competition policy and trade
policy (selected import duties)
3.
Improvements in government organisation and capacity
3
Manufacturing output growth
Quarterly Manufacturing output growth: 2000Q1 - 2008Q1 (2000=1000)
135.0
130.0
125.0
(2000=100)
120.0
115.0
110.0
105.0
100.0
95.0
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
-Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q -Q
00 000 000 000 001 001 001 001 002 002 002 002 003 003 003 003 004 004 004 004 005 005 005 005 006 006 006 006 007 007 007 007 008
0
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
4
Source: Statistics South Africa
Manufacturing output Q1 2008
Manufacturing output growth Y-O-Y: 2008Q1 vs 2007-Q1
%
Total
%
1.5 Glass and non-metallic mineral products
%
4.8 Other fabricated metal products
-0.7
-1.1
Batteries
33.2 Other textiles
4.6 Wood, paper, printing and publishing
Chemical products
23.6 Insulated wire & cables
4.1 Dairy products
Electricity distribution apparatus
Other electrical equipment
Electric motors, generators, transformers
20 Special purpose machinery
14.2 Non-metallic mineral products
13 Petroleum
-2
4 Grain mill products
-2.1
3.6 Non-ferrous metal products
-2.5
3.3 Medical appliances, optical and photographic equipment, watches and clocks
-2.7
-2.7
Electrical machinery
12.6 Electronic valves, Radio, television and communication apparatus
3.2 Furniture
Plastic
12.3 Textiles, clothing, leather and footwear
3.2 Basic ferrous and non-ferrous metal, metal products and machinery
Structural metal products
12.2 Other chemical products
-3
3 Motor vehicles, parts and accessories and transport equipment
-4.2
Leather & leather products, fur
11 Knitted & crocheted articles
2.3 Rubber
-4.6
Electric bulbs & tubes
9.8 Food and beverages
1.7 Spinning, weaving, yarns
-4.8
Other transport equipment (e.g. boats, trains, aeroplanes)
8 Production, processing of meat, fish, fruit, vegetables, oils & fats
0.9 Trailers, bodies for motor vehicles
-5.1
Glass
8 Wood & wood products
0.4 Printing, reproduction of recorded media
-6.9
Petroleum, chemical products, rubber and plastic
7.6 Radio, television, professional equipment
0.2 Publishing
-8.5
Parts and accessories for motor vehicles
7.3 Beverages
-0.4 Domestic appliances, office, accounting and computing machinery
-9.6
Wearing apparel
7.1 Footwear
-0.7 Basic iron & steel
-12.3
-0.7 Sawmilling
-14.4
-0.7 Motor cars
-15.7
Paper & paper products
Other food products (bakery, sugar, coffee& tea, spices etc)
7 Furniture and other manufacturing industries (including tobacco)
4.9 General purpose machinery
5
Source: Statistics South Africa
Metal Fabrication, Capital and
Transport Equipment
• Review of import duties of key industrial inputs into
manufacturing
– Duties on carbon and stainless steel removed
– Review of duties on aluminium products
expected to be finalised by June 2008
• Supplier Development Programmes
– Improved performance of machinery / equipment,
metal fabrication and transport equipment
sectors
– Transnet and Eskom have presented draft
Supplier Development Programmes – requires
further demand side detail and unpacking of
supply side constraints
• National Tooling Initiative
– Was launched in March 2008
• National Foundry Technology Network
– Pilot projects will commence in July 2008
6
Metal Fabrication, Capital and
Transport Equipment
• Inter-governmental task team examining feasibility of
possible new carbon steel investments
– Recommendations to be presented to the
Minister in July 2008 for further consideration
• Develop supplier development strategy in relation to
public transport policy (especially commuter rail)
7
Metal Fabrication, Capital and
Transport Equipment
Sectoral value-added, 1994-2007
12,000
10,000
Rm (2000)
8,000
6,000
4,000
2,000
1994
1995
1996
1997
1998
1999
Metal products excluding machinery [353-355]
2000
2001
2002
Machinery and equipment [356-359]
2003
2004
2005
2006
2007
Other transport equipment [384-387]
8
Source: RSA Standardised Industry Database
Metal Fabrication, Capital and
Transport Equipment
Sectoral employment, 1994-2007
140,000
120,000
100,000
80,000
60,000
40,000
20,000
1994
1995
1996
1997
1998
1999
Metal products excluding machinery [353-355]
2000
2001
2002
Machinery and equipment [356-359]
2003
2004
2005
2006
2007
Other transport equipment [384-387]
9
Source: RSA Standardised Industry Database
Automotives and components
• Finalise replacement scheme to the Motor Industry
Development Programme:
– Draft revised architecture of the programme has
been developed and will be tabled with
stakeholders in June 2008
– The architecture of the new programme will be
announced in August 2008
• Re-launch a three-year supplier development
programme:
– The Quality Management System component of
the project has been rolled out since September
2007.
– Other modules will be rolled out in collaboration
with United Nations Industrial Development
Organisation (UNIDO) before the end of this year
• Formulate an empowerment plan for the sector:
– To be completed by December 2008
10
Automotives and components
Sectoral value-added, 1994-2007
18,000
17,000
16,000
15,000
Rm (2000)
14,000
13,000
12,000
11,000
10,000
9,000
8,000
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Motor vehicles, parts and accessories [381-383]
11
Source: RSA Standardised Industry Database
Automotives and components
Sectoral employment, 1994-2007
140,000
135,000
130,000
125,000
120,000
115,000
110,000
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Motor vehicles, parts and accessories [381-383]
12
Source: RSA Standardised Industry Database
Chemicals, Plastics,
Pharmaceuticals
•
•
•
•
Review of the import duty on upstream chemical
products:
– Expected to be completed by June 2008
Increasing polypropylene value-added products used in
automotives and packaging industries:
– Study finalised
– Commence promotion of investment opportunities
in June 2008
Fluoro-chemicals Expansion Initiative
– Investment commitment secured
– Outstanding issue of securing sufficient land
Leverage public procurement to promote domestic
manufacturing of ARVs (anti-retrovirals)
– The ARV tender closed in March 2008 and it will be
awarded by the end of May 2008
– Challenges in securing preference for domestic
manufacturers in tender process
13
Chemicals, Plastics,
Pharmaceuticals
Sectoral value-added, 1994-2007
12,000
11,000
10,000
9,000
Rm (2000)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1994
1995
1996
1997
1998
Basic chemicals [334]
1999
2000
2001
2002
Other chemicals and man-made fibers [335-336]
2003
2004
2005
2006
2007
Plastic products [338]
14
Source: RSA Standardised Industry Database
Chemicals, Plastics,
Pharmaceuticals
Sectoral employment, 1994-2007
50,000
45,000
40,000
35,000
30,000
25,000
20,000
1994
1995
1996
1997
1998
Basic chemicals [334]
1999
2000
2001
2002
Other chemicals and man-made fibers [335-336]
2003
2004
2005
2006
2007
Plastic products [338]
15
Source: RSA Standardised Industry Database
Wood, Paper and pulp,
Furniture
• Fast-track the issuing of water licenses for producers
facilitating afforestation in the Eastern Cape of:
– 3,000 hectares in 2008;
– 8,000 hectares in 2009;
– 10,000 hectares per year thereafter in the
Eastern Cape
– Detailed plans for KZN are still being finalised
• Skills transfer programme to upgrade the
technological equipment for small saw millers
– Service provider for pilot project in Chris Hani
District municipality approved
• Expansion of furniture industry
– Draft furniture strategy completed
– The furniture incubator in Mthatha will start
operating in November 2008
16
Wood, Paper and pulp,
Furniture
Sectoral value-added, 1994-2007
12,000
10,000
Rm (2000)
8,000
6,000
4,000
2,000
1994
1995
1996
1997
1998
1999
Wood and wood products [321-322]
2000
2001
2002
2003
Paper and paper products [323]
2004
2005
2006
2007
Furniture [391]
17
Source: RSA Standardised Industry Database
Wood, Paper and pulp,
Furniture
Sectoral employment, 1994-2007
65,000
60,000
55,000
50,000
45,000
40,000
35,000
30,000
1994
1995
1996
1997
1998
1999
Wood and wood products [321-322]
2000
2001
2002
2003
Paper and paper products [323]
2004
2005
2006
2007
Furniture [391]
18
Source: RSA Standardised Industry Database
Clothing and Textiles
• Implement measures to recapture and stabilise the
domestic market
– Country of origin labelling in place since July
2007
– Mechanisms for monitoring quotas on certain
Chinese imports in place since January 2007
• Review of import duties on key inputs into the
clothing sector:
– Review on fabrics not produced in commercial
quantities in SA to be completed by August 2008
• Interim Textile and Clothing Development
Programme (ITCDP) formerly known as the Duty
Credit Certificate Scheme (DCCS) extended
– Until March 2009 with limited tradability
• Textiles engineering Centre of Excellence
– Established at Council for Scientific and
Industrial Research (CSIR) in Port Elizabeth and
running since January 2007
19
Way forward on Clothing &
Textiles Sector
1. Raise productivity: finalise replacement of ITCDP
(DCCS) by March 2009 in the form of a productivitybased incentive scheme
2. Upgrade capital and technology through Enterprise
Growth Programme and Industrial Development
Corporation (IDC) support
3. Tackle illegal imports: dedicated inter-departmental
Illegal Imports Task Team to tackle smuggling and
under-invoicing
4. Upscale skills in conjunction with the Clothing
Textiles Footwear and Leather (CTFL) SETA
5. Systematically review input costs along the value
chain
6. Develop medium-long term innovation and
technology plan for the sector
20
Clothing and Textiles
Sectoral value-added, 1994-2007
4,500
4,000
Rm (2000)
3,500
3,000
2,500
2,000
1994
1995
1996
1997
1998
1999
2000
Textiles [311-312]
2001
2002
2003
2004
2005
2006
2007
Wearing apparel [313-315]
21
Source: RSA Standardised Industry Database
Clothing and Textiles
Sectoral employment, 1994-2007
120,000
110,000
100,000
90,000
80,000
70,000
60,000
50,000
40,000
1994
1995
1996
1997
1998
1999
2000
Textiles [311-312]
2001
2002
2003
2004
2005
2006
2007
Wearing apparel [313-315]
22
Source: RSA Standardised Industry Database
Clothing and Textiles
Imports, Q1 2000 – Q1 2008
3,000,000,000
2,500,000,000
2,000,000,000
1,500,000,000
1,000,000,000
500,000,000
1Q
00 000 000 000 001 001 001 001 002 002 002 002 003 003 003 003 004 004 004 004 005 005 005 005 006 006 006 006 007 007 007 007
20
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
08: Textiles (311-312)
09: Wearing apparel (313-315)
23
Source: RSA Standardised Industry Database
ASGISA sectors
•
•
Business Process Outsourcing (BPO)
– Roll-out of BPO incentive scheme. 9 approved
projects: 9,132 jobs and R658,927 investment. A major
global BPO&O operator - TeleTech has been
successfully recruited to set up shop in South.
– Preliminary agreement reached with Telkom, subject
to regulatory approval
– Monyetla Work Readiness Programme: funds currently
committed to train 6,411 learners. The overall aim is to
train about 30 000 learners over the next 4 years
Tourism
– Customised Tourism Enterprise Programme for small
business under umbrella of Enterprise Growth
Programme
– National Tourism Safety and Awareness Strategies
being implemented at provincial level
– Tourism Sector Skills Plan revised
24
ASGISA sectors
•
Biofuels
– The national consultations on the biofuels industry
strategy have been completed. A process of refining
the strategy and taking into account the inputs of
different stakeholders have been completed. The
biofuels task team is finalizing the strategy for
submission to cabinet.
25
Industrial financing and
upgrading
• Launch of Enterprise Growth Programme
(EGP) by July 2008
• Package of R5b tax incentives to be
launched by December 2008
• Revised rebate for foreign and local
production launched in March 2008
• Good progress with BPO incentive
• Jewellery Manufacturing Precinct (JMP) at
Oliver Tambo International Airport will be
designated as an Industrial Development
Zone (IDZ) in October 2008
26
Reducing input costs
• Amendments to Competition Act to be taken to
Parliament
– Main elements of amendments include:
– To enable the Commission to become more
proactive in investigating markets and take
measures to ensure market transparency
– To remove uncertainty on concurrent
jurisdiction in competition matters
– To give leniency programme legal foundation
to encourage whistleblowers to disclose
illegal cartel activities
• Review of import duties on key intermediate inputs
into manufacturing set out above, particularly:
– Chemicals
– Aluminium
27
Challenges to implementation
and ramping up of industrial
policy
• Macro-economic conditions
– Interest rates
– Currency volatility (and periodic overvaluation)
• Electricity
– Much more strategic approach to electricity
allocation required
• Intra-governmental co-ordination
– Financing
• Lack of clarity on requisite ‘business case’
• Needs to be comparable with other country
programmes e.g. Brazil (Appendix 1)
– Public procurement issues: e.g. anti-retrovirals,
digital set top boxes
– Competitive supplier development programmes
of State Owned Enterprises
28
Challenges to implementation
and ramping up of industrial
policy
• Intra-governmental co-ordination: continued
– Export tax on scrap
– Skills
– Transport
• Monopolistic pricing of inputs (Appendix 2)
• Capacity
29
Strengthening of IPAP process
going forward
• Movement to 3 year rolling action plan from January
2009
• Planning will commence in August 2008 to ensure
better alignment with government’s Programme of
Action and Medium Term Expenditure Framework
processes
• Strengthening the quality and scale of industrial
policy interventions
• Industrial policy opportunities / responses to the
electricity crisis
– Roll-out of solar water heating and other energy
efficiency devices
– Promotion of more electricity-efficient / relatively
more labour-intensive industries
– Industrial policy / technological potential of
renewable electricity generation, e.g. solar
– Promote energy-efficiency of existing industry
– Align with mitigation options to climate change
30
Appendix 1: Brazil launches its
industrial policy
31
Appendix 2: Carbon steel
costs, supply, pricing
Production Costs 2008 Q1: Hot Rolled Coil ($ per tonne)
700
600
Saldanha
24/168
= 14th percentile
400
Vanderbijlpark
40/168
= 24th percentile
300
200
167
165
163
161
159
157
155
153
151
149
147
145
143
141
139
137
135
133
131
129
127
125
123
121
119
117
115
113
111
109
107
105
103
99
101
97
95
93
91
89
87
85
83
81
79
77
75
73
71
69
67
65
63
61
59
57
55
53
51
49
47
45
43
41
39
37
35
33
31
29
27
25
23
21
19
17
15
13
9
11
7
5
0
3
100
1
$ per tonne
500
Source: Metal Bulletin Research
32
Appendix 2: Carbon steel
costs, supply, pricing
Liquid Steel Production ('000 tonnes)
8,000
7261
7055
7033
7,000
6375
6,000
'000 tonnes
5,000
5,067
4,855
4,863
4,231
4,000
3,000
2178
2194
2192
2144
2004
2005
2006
2007
2,000
1,000
0
Flat Products
Long Products
Total
Source: Arcelor Mittal
33
Appendix 2: Carbon steel
costs, supply, pricing
MEPS Regions HRC, 2-3 mm, width over 1.1 meters- Mar 05-Mar 08
7500
7000
6500
6000
5000
4500
4000
3500
3000
Average EU
Average Asia
Average North America
World Average
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
July-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
Dec-06
Nov-06
Oct-06
Sep-06
Aug-06
July-06
Jun-06
May-06
Apr-06
38777
38749
Jan-06
Dec-05
Nov-05
Oct-05
Sep-05
Aug-05
Jul-05
Jun-05
May-05
Apr-05
2500
38412
Rand/Ton
5500
MITTAL Price List Price (Less 2.5% Settlement discount)
Source: Meps
34