Review of the NES – current policy context

1. Review of the NES – current policy context Subtitle: Review of the NES Presenter: Ximena Gonzalez-Nunez & Andre Gouws Date: 23 January 2013 3rd Reference Group Meeting TIPS

2. Policy context • Overarching priorities = poverty, inequality and unemployment (NGP, NDP) • Specific dti priorities = incl. trade promotion, industrial development, investment promotion, competitiveness etc (NES, NIPF, TPSF) • Sequencing translates into challenges… • Specific elements bind the two…… • Policy coherence is key.

3. National Planning Commission In June 2011 NPC 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

4. NPC Diagnostic Report 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.

5. NPC – National Development Plan In order to achieve NDP objectives, three priorities stand out: • 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. ? Export growth Savings Investment

6. NDP – strong focus on job creation 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.

7. NDP – job creation: how? Its proposals include: • 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

8. NDP The key ingredients for success are: • 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.

9. NPC NDP Vision 2030 NGP: exports need to grow by 5% therefore manufactures will need to grow by 7-8% Quadrants of growth – need to focus on labour intensive, which needs to grow at 9-10% at least

10. NDP + exports: Changing global context • Patterns of trade and investment are changing with BRIC leading the pack • SA should be adapting its strategies accordingly • NDP highlights the importance of coordinating the suite of policies related to trade, industrial development and investment to take advantage of these arising opportunities

11. NDP + exports: Changing global context • Policy focus on developing areas of competitive advantage, where there are revealed strengths. • Learning by doing 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.

12. NGP: strategic export promotion • Challenge for SA around diversification up the value-chain • Re-industrialisation leveraging off opportunities identified in growth path is critical. • This goes beyond identifying sectors + product niches; but also markets. • SA businesses need to do more to find opportunities in fast-growing BIC economies. (take strategic adv of egeg comprehensive strategic partnership with China)

13. NGP: strategic export promotion • Promoting regional development • Measures to enhance domestic + 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. • Importance of developmental trade policies

14. National Industrial Policy Framework: NIPF • Government’s approach to industrialisation, policy development & implementation. • Moves to : • increase production of value added products and services, • intensification of SA 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. • Contributing to industrial development on the African continent, with a strong emphasis on building its productive capacity.

15. NIPF – 13 strategic programmes 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

16. Industrial Policy Action Plan (IPAP) IPAP identifies specific priority sectors and actions eg: • Leveraging public investment to realise potential of metals fabrication, capital equipment + transport sectors • Agro processing • Plastics, pharmaceuticals + chemicals • Etc….

17. NIPF/IPAP plus Linkages between NIPF, IPAP and export, investment strategies is weak Eg linkages with export councils, but there are gaps that we are addressing through our surveys

18. Trade Policy • Trade policy is an instrument of industrial policy (TPSF) • Trade policy now to 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. • Tariff setting is determined sectorally in a strategic manner; ITAC look at criteria, eg ERP, but also need to look at anti-export bias (this will be unpacked in the statistical analysis)

19. Trade Policy: multilateral Multilateral relations – SA’s participation in the WTO is articulated by its representative, Faizel Ismael as including five negotiating approaches: • 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’

20. Trade Policy: regional/bilateral/S-S Regional/bilateral relations – SACU/SADC/Tri-partite FTA and? • Development of common policies • Commitment to regional integration and increasing intra-regional trade • Opportunities to link into global value chain through regional approach to increased competitiveness • Focus on tapping into non-traditional export markets eg BIC, but still looking after traditional markets eg study to inform lobbying of extension of AGOA • Issues of anti-export bias?

21. National Export Strategy Drafted in 2000, but never formally adopted Current process is to review this, including assessing best practice

22. Current constraints to trade promotion Fiscal policy - NT non-interventionist stance has meant limited incentives and tax reductions for exporters Monetary policy – independent SARB with focuson internal stability and not external stability therefore inflation targeting. A more competitive and stable exchange rate would have a positive effect on exports and investment

23. Minerals beneficiation strategy • In line with objective to diversify up the value chain, mineral beneficiation strategy approved by cabinet in 2011 • To unlock competitive advantage, challenges and benefits need to be considered: • 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 • Key commodities have been clustered into specific value chains

24. Incentives offered by the dti • Range of financial support for various economic activities, including manufacturing, business competitiveness, export development and market access, as well as foreign direct investment. • These are part of the focus of the survey we are undertaking

25. Advanced manufacturing technology strategy • Priority sectors identified • Stimulates process of technological upgrading, facilitation of technological resource flow via new knowledge networks; building a creative, innovative environment through supply of skilled manpower, technology infrastructure and funds. • Identifies specific products egautomotives(& transport), metals (& minerals) + technology focus areas eg production technologies, logistics etc • Strong focus on aligning spheres of government and issues such as strategic regional approaches

26. Draft white paper on SA’s foreign policy • Direction that South Africa’s foreign policy is taking is critical to the NES • Draft white paper on SA’s foreign policy in 2011 with strong focus on economic diplomacy • Emphasises new global landscape: • 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.

27. Draft white paper on SA’s foreign policy • South African missions abroad are key and can assist South African business abroad through: • Providing sufficient intelligence on market conditions, • Giving advice on interpreting market intelligence, • Providing information on local cultural nuances that would assist South African business to better access those markets • Advocacy, and • Market access support.

28. Draft white paper on SA’s foreign policy • South African Development Partnership Agency (SADPA) will facilitate and manage development assistance in support of South Africa’s foreign policy objectives • Would be useful to assess how grants given to other countries could be tied to products that SA can export especially around built environment services eg architects etc and capital equipment

29. Special Economic Zones • Busy with data analysis – looks like high value added in-land and heavy industry closer to the coast

30. Capital equipment • Updated Sector Development Strategy (2011) • Sector is complex & linked to other industries such as metals, engineering and the components manufacturing sectors. • Demand dominated by the mining sector as well as state entities • Earthmoving equipment and equipment utilized in the electricity generation and distribution process, road upgrades and maintenance and water services provision. • Key focus is around leveraging large scale public investment to industrialise up the value chain

31. Capital equipment • Leverage infrastructure projects to unlock economic opportunities and expand investment and jobs in the economy (around manufacturing and maintenance) • Infrastructure programme to promote broader industrialisation of the economy, • Infrastructure aimed at integrating African economies to create larger markets and promote deeper intra-regional trade and investment.

32. Capital equipment • New Growth Path (NGP) : Infrastructure development identified as a critical driver of jobs and manufacturing demand across the economy • Presidential Infrastructure Coordinating Commission (PICC): Infrastructure Plan with 17 Strategic Integrated Projects (SIPs), covering more than 150 specific infrastructure interventions. • Includes rail, road and port; dams, irrigation systems and sanitation; new energy generation plants, transmission and distribution of electricity to households; communication and broadband infrastructure; social infrastructure (hospitals, schools and universities) & regional infrastructure.

33. Agriculture • In 2008 the Department of Agriculture Forestry and Fishing (DAFF) drafted an “Agricultural Trade Development Strategy for South Africa”. Its purposes are: • 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.

34. Agriculture • Three main objectives have been identified: • Improving market access for new export opportunities through agricultural trade negotiations. • Long term sustainability of the production of tradable products. • Grow the exporter base.

35. 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

36. Regional Industrial Development Strategy (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.

37. Competition Act • Competition Commission is 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 • In terms of Act exporters cannot collude, though exemptions may be applied for in specific circumstances • In cases where the NES may require export consortia to be formed TISA may need to apply for block exemptions (NGP – also made recommendations that restrictive practices should get relaxed when exporting)

38. Wrap up • Plethora of policies and strategies to be taken into account in reviewing the NES • Some key overarching policy objectives clearly articulated in NDP and other core documents • Practical aspects will also be critical to ensure document is useful – surveys, provincial visits key in this regard 227 Lange St| NieuwMuckleneuk| 0181 P.O. Box 11214 | Hatfield | 0028 Tel: (+27) 12 433 9340/1| Fax: (+27) 12 433 9344