PARLIAMENTARY HEARINGS : INTEGRATED MANUFACTURING STRATEGY (IMS) APRIL 2002

1. PARLIAMENTARY HEARINGS : INTEGRATED MANUFACTURING STRATEGY (IMS) APRIL 2002 Sagay Moodliar Enterprise & Industry Development Division

2. MIDP : Overview • The MIDP is an export/import complementation mechanism that seeks to force specialization and economies of scale for global integration • Import duties are offset against rebates earned for exports on HS 8704 • The objectives are to provide high quality vehicles, at competitive prices to domestic and global markets while being a platform for sustainable employment, & growth • Improving the sector’s trade balance

3. Introduction • Objective to illustrate how the IMS functions in reality and lessons for value chain cooperation and efficiency • Automotive programme in dti best exemplifies IMS and value chain matrices in SA • Acts as confluence of technology, skills, beneficiation, ICT, logistics, financial services, retail, branding & demands efficient networks. • The dti has an influential policy lever via the Motor Industry Development Programme, in place since 1996

4. MIDP : Performance 2000-1 Direct Employment • Assembly, component, tyre, & retail saw slight increases by 850 jobs • Skilled employment increased faster than less skilled employment Production/productivity measures • Capacity has increased in assembly to 65%, with CBU’s rising to 400k in 2001 (13%) • 80% of African CBU’s made in SA • OEM and Component sectors increase training by 71% and 20%. • Increased usage of CF and SPF dti schemes

5. MIDP : Performance 2000-1 Exports • Total exports in 2001 are R25bn (25% increase) • Ave annual increase of 37% since MIDP introduced in 1996 • CBU exports in 2001 reach 103 000 units, in 96’ this was 10 000. Imports • New vehicle imports rise from 5.6% to 18.7% between 95-2000 • Total imports increased by R7bn between 99-2000. MIDP is creating and enhancing

6. Integrative interventions The dti intervenes in this sector via : • The Motor Industry Development Council • The MIDP itself which acts as the major programme for the sector • The Productive Asset Allowance Scheme • The Strategic Investment Team • Benchmarking Clubs in KZN, E. Cape, and Gauteng • The Auto Industry Development Council

7. Integrative interventions The Motor Industry Development Council • Consists of dti as chair, OEMs, component association, Unions, SARS, SABS, AIDC, BTT • Policy consultation forum and monitoring of the MIDP, now embarking upon post 2007 review • Mechanism to unlock Govt action in critical areas for the sector

8. Integrative interventions The MIDP • Issuing of certificates, monitoring and processing of claims

9. Integrative interventions The Productive Asset Allowance Scheme • Implemented in 2000 to rationalize production by OEM’s • Seen 24 investment projects of R7.44bn assessed, 15 approved to value of R4.96bn. • Major instrument to force rationalization • Model produced for global networks

10. Integrative interventions The Strategic Investment Team • Group of procurement directors of OEMs that dti coordinates around investment mapping and attraction • Used to assess how collective action with dti acting as neutral player can attract 1st tier investors • Success in metals components, plastics, rubber, exhaust systems, interior trim, glass etc

11. Integrative interventions Benchmarking Clubs KZN, E. Cape, & GP • These initiatives were launched by dti to assist small component firms to assess how they competed against local and global firms • 47 small firms benefit from this exercise AIDC • Support of shop floor improvement for component firms • BEE shop floor mentoring programme • Assists dti in MIDC, PAA, SIT

12. Finance Logistics Branding Retail IMS at work in the Auto sector Jobs Exports Investment Skills transfer SME BEE Metals Chemicals Autos MIDC/MIDP SIT PAA Materials ICT & technology diffusion, skills training