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Industrial policy

Industrial Policy / Infrastructure Linkages Strategic Planning Workshop of the Portfolio Committee on Public Enterprises 5 August 2009. Industrial policy. National Industrial Policy Framework (NIPF)

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Industrial policy

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  1. Industrial Policy / Infrastructure LinkagesStrategic Planning Workshop of the Portfolio Committee on Public Enterprises5 August 2009

  2. Industrial policy • National Industrial Policy Framework (NIPF) • Vision: diversification beyond reliance on mineral / mineral-processing to more labour intensive, value-adding, inclusive, and regionally integrated growth path • Annual three year Industrial Policy Action Plan (IPAP) • Sectoral priorities • Cross-cutting priorities • Revised and up-scaled IPAP to be taken to Cabinet in January 2010

  3. Industrial policy: Emerging sectoral Priorities • Metal Fabrication, Capital Equipment and Transport Equipment • Agro-processing • Automotives, Components and Medium / Heavy Vehicles • Clothing, Textiles, Leather, Footwear • Plastics, Pharmaceuticals and Chemicals • Advanced Manufacturing • “Green” jobs and technologies

  4. Industrial Policy: Cross-Cutting Priorities • Industrial Financing • DFI’s: IDC, NEF • Incentive programmes • Competition Policy • Input industries • Goods consumed by working class / poor households • Developmental Trade Policy • Defend space for strategic, sectorally determined tariff setting • Technical Infrastructure (Standards / Accreditation) • Discourage low quality / unsafe imports • Facilitate export market access

  5. Intra-governmental co-ordination • Historically, the most successful rapid industrialisations have occurred through industrial polices that have been: • Supported and integrated with associated policies, particularly: macro-economic, trade, infrastructure and skills policies • Backed by very strong political will • Well-resourced both in human and financial terms • Based on rigorous analysis • Linked to credible reciprocal industry performance requirements • Based on a realistic assessment of the balance of forces in the economy • Supported by measures to ensure more equitable and shared growth

  6. Infrastructure requirements for SA industrial development • SA manufacturers need a cost-effective rail and port infrastructure • Poor reliability of rail system making it difficult for firms – particularly small and medium firms – to plan • Expensive port system with efficiency / reliability problems • Over-use of road infrastructure with negative costs and externalities • Historical emphasis on investment in rail and port infrastructure for bulk primary and semi-processed products rather than downstream, value-added break-bulk manufactures • High logistics costs places pressure for “compensation” to logistics-intensive industries such as automotives • SA manufacturers need reliable electricity supply and sufficient time to adapt to increases in energy costs • DTI and other stakeholders (business / labour) should be integrally involved in infrastructure planning processes

  7. Average Cost per vessel call $600,000.00 $500,000.00 $400,000.00 $300,000.00 $200,000.00 $100,000.00 $0.00 SANTOS TILBURY DURBAN NAGOYA LE HAVRE ANTWERP NEW YORK VERA CRUZ YOKOHAMA BALTIMORE SINGAPORE CAPE TOWN CHARLESTON BUENOS AIRES BREMERHAVEN LAEM CHABANG PORT ELIZABETH Terminal Handling Charge Cargo Dues Sea Side Costs Source : AIDC Port Benchmarking Study, 2007 Infrastructure requirements for SA industrial development

  8. Public procurement as a lever for industrial development • Opportunity to leverage SA’s public expenditure programme to create competitive supplier industries • Counteract negative trade balance and associated macroeconomic vulnerability • Resuscitate key sectors like metal fabrication, capital equipment and transport equipment and place them on a competitive export path • Challenges • Short term ‘crisis’ procurement versus long term ‘strategic’ procurement • Limited price advantage • Limited industry / supply chain development • Financing constraints • Buyer side: balance sheet of SOE’s • Seller side: competition with highly concessional export credit

  9. Public procurement as a lever for industrial development • Consequences • Loss of various contracts to imports that could have been competitively manufactured in South Africa often leading to job losses • BEE ‘import’ fronting • Very limited industry development / supplier upgrading • Way forward • Stronger governance, greater transparency and more frequent reporting on Competitive Supplier Development Plans of Eskom and Transnet • SOE’s and departments need to urgently address issues of: • Long term ‘fleet’ plan development • Supplier development to raise value-chain efficiencies • Elimination of BEE ‘import’ fronting • Stronger oversight of supplier development role of SOE’s

  10. Appendix: State of the Economy Data courtesy of the IDC

  11. Appendix: State of manufacturing GDP growth by broad sector: Q4 2008 and Q1 2009 Data courtesy of the IDC

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