Strategic Overview of the dti Priorities

1. Strategic Overview of the dti Priorities Dr Rob Davies Minister of Trade and Industry to the Portfolio Committee on Trade and Industry 1 July 2014

2. Mandate • NDP sets the broad vision and strategic direction; NGP, IPAP, National Infrastructure Programme are programmes to give effect to NDP. • Manifesto “radical economic transformation”, several elements but include accelerated industrialisation, localisation. • the dti responsible for IPAP (tho’ a programme of government, not just the dti)

3. Why Industrialisation ? • Higher value addition creates more income and wealth eg African produces and exports coffee valued at $ 6 bn, converted into products worth $ 100 bn outside Africa ditto mineral products; • 60% plus of world trade is in intermediate products, Africa’s place is largely as producer and exporter of primary products and importer of finished goods; • Industrial development key to development of productive forces, diversification and development;

4. Why Industrialisation ? ctd • Sector has strong job multipliers (see pp 18-19 of current IPAP); • Whole of Africa now sees industrialisation as critical.

5. Structural Features of Pre-Crisis Growth Path In SA • Consumption driven sectors growing 2x productive sectors; • Insertion into world economy as producers and exporters of primary products and importers of finished goods; • Manufacturing under serious pressure; • Financial resources for productive investment declining both relatively and absolutely.

6. Impact of Global Crisis • Onset 2008/9 Great Recession cost 1 mn jobs in SA 200.000 in manufacturing which is 12-14% of GDP; • Initial response to crisis by developed economies “quantitative easing” unleashed short term “hot money” some of which went to “emerging economies” with higher interest rates -> overvalued currencies -> exports more difficult, more competition from imports.

7. Impact of Global Crisis ctd • 2012 end of commodity super cycle; • 2013-14 tentative recovery -> tapering -> reversal of flow of “hot money” -> from over to undervaluation.

8. IPAP 2009-2014 • IPAP an Action Plan that implemented following main measures transversally and in sector specific programmes • Increased access to DFI finance and incentives against stronger conditionalities; • A strategic approach to trade and tariff policy both seen as tools of IP; • Standards “lock in SA exports, lock out sub standard products”;

9. IPAP 2009-2014 ctd • More aggressive combatting of monopolies; • Localisation – designations, CSDP, NIPP. • Infrastructure development main counter cyclical response also tool of industrialisation – R 1 trillion spent 2009-2014. • IPAP shaper of all work of the dti.

10. IPAP 2009-2014 Outcomes • Motor industry investments of R 21,9 bn in 183 projects retaining 46.000 jobs adding 9.850 – public transport and yellow fleet as well as passenger vehicles. • Clotex – CTCP supports stabilisation with 12.205 new jobs created 2012/13; • Metals industry – revival with infrastructure procurements incl. 300 buses, 1000 locos, 2600 coaches and wagons.

11. IPAP 2009-2014 Outcomes ctd • Agro processing – stabilisation of key sub sectors, new investments small scale milling FDI projects; • R 5,5 bn provided by IDC to support “green industries”; • Film R 8 bn contributed to GDP 2008-2012 incentive supports 343 productions and 75.000 jobs; • Positive results in other sector – chemicals, BPS, advanced manufacturing etc; • “Industrial policy is working where it is properly resourced and underpinned by solid research and stakeholder engagement”.

12. Challenges for the Future • We have not yet decisively placed SA economy on a new growth path driven by productive sectors, higher “value addition” and industrialisation; • We must anticipate hostile “head winds” from still unresolved global crisis;

13. Challenges for the Future ctd • Deep seated features of “second machine age” that reinforce inequality – continued substitution of lower skilled workers as digitisation advances exponentially, “winner takes all” markets and imposition of these models through “globalisation”;

14. Imperatives • Next phase must see more radical measures to advance job creation, reduction in poverty and inequality; • Industrialisation must be a central objective; • Industrial policy must be upscaled.

15. Elements of Upscaled IP • Infrastructure investment must be upscaled and progressively become a stronger tool of industrialisation; • Localisation must be stepped up and we must advance towards aspirational target agreed in procurement accord of 75%; • Beneficiation must be deepened using a suite of policy tools, incentives, SEZs, MPRDA – value chains include iron and steel and titanium pigment; PGMs; precious stones and metals; shale gas could be a “game changer”; • Address constraints – electricity, skills

16. Elements of Upscaled IP ctd • We must insert our own industrialisation efforts in a context of promoting developmental regional integration on African continent; • We need more “granular” engagements with more dynamic industrial companies– around greater support in relation to greater conditionalities (employment, local procurement etc) • We need to promote black industrialists;

17. Trade Policy Issues • Several will “come to a head” before year end; • EPA at end game, last negotiating round concluded last weekend; • EPA will improve on existing TDCA, latter included FTA 98% duty free industrial goods only 60% ag products some improvement on MFN, Exports 22 bn euro 2008 2- bn 2012’ imports 20 bn 2008 25 bn 2012;

18. Trade Policy Issues ctd • EPA allows greater harmonisation with SACU, some improved access for SA wine, sugar, fruit products, allows some space for export taxes compared to TDCA, some additional ag safeguard- We pay in GI recognition, some ag products. • US AGOA Summit in August will unveil Obama Administrations approach to renewal and SA’s inclusion, mixed signals from US Congress.

19. Trade Policy Issues ctd • Tripartite SADC-Comesa-EAC exceeded HOS deadline – issue is difficulty of smaller players to define approach to offer/request; • Challenges in SADC and SACU; • WTO Bali package implementation focussing mainly on TF with little progress on other parts, competing narratives on way ahead for WTO.

20. Broadening Participation • the dti will remain with B-BBEE- Advisory Council focussing on promoting black industrialists, DM to lead the dti task team on this; • SMME and Coops to be transferred to SBM

21. CCRD • Major issues in liquor, gambling. New Lottery Operator Licence to be awarded this year. IP policy paper still being worked on. Major driver of legislative programme. • Regulators with boards will now become entities within the dti - NRCS, BEE Commissioner among the first.

22. GSSSD • Mandate to pursue continuous improvement on all indicators; • the dti among best performing depts.