Action
Progress Report Briefing by the Honourable Minister of Trade and Industry,
Mandisi Mpahlwa
10 March 2009
Introduction
Over the course of the ending term of the current administration, government
has been implementing a range of interventions aimed at growing the economy,
halving unemployment and poverty. These interventions are outlined in
Accelerated and Shared Growth Initiative (AsgiSA) and have been implemented by
Economic Cluster of government departments.
The AsgiSA interventions and Economic Cluster Programme of Action were
informed by several analyses of the economy, to identify constraints and
challenges to accelerating shared growth and to identify measures to address
these. The constraints which were also highlighted in the mid-term review
included:
* lowering the cost of doing business, including barriers to entry and high
mark-ups in input industries
* significantly lowering the cost of telecommunication
* systematic co-ordination of administered prices
* acceleration of the contribution of education and skills to economic growth
and labour absorption
* financing of small enterprise initiatives and programmes
* management of the exchange rate
* government implementation capacity.
Furthermore, government conducted a 15 year review which made the following
key findings as regards the economy:
* macroeconomic stabilisation created space for growth and redistribution
* current confluence of negative indicators shows need for faster action on
growth
* constraints that require restructuring productive capacity
* co-ordination in economic policy development and implementation requires
improvement
* impact of second-economy interventions require scaling up
* regulation regarding competition and state owned enterprises (soes) need
strengthening
* energy and food security are becoming more prominent issues.
In developing the Cluster's programme of action, the Cluster sought to
identify those cross-cutting interventions that are likely to be most critical
to the achievement of the 2014 goals. The Clusterâs current Programme of Action
(POA) which has been under implementation over last three years has the
following overarching elements viz:
* increasing economic efficiencies
* promoting dynamic sectors
* integrated support for small and micro-enterprises.
In addition, the Cluster identified the following areas for more enhanced
focused to effect the structural change in the economy needed to sustain higher
long term growth.
* ICT Infrastructure, especially broadband
* public transport
* energy
* second Economy
However, the emergence of the global economic crisis that has begun to
filter through the real economy also poses challenges for the government
economic POA. However, the crisis re-emphasises the need to continue
implementing the interventions identified, as these address the long term
structural constraints to the economy and seek to promote a fast growing,
dynamic and resilient economy. This will also ensure that the economy is in a
good position to take advantage of the opportunities that will arise when the
global economic crisis ends in the medium term.
At the January Lekgotla, the Economic Cluster presented an outline of
responses to the global economic crisis which was the basis on which government
engaged its social partners (business, labour and community) under the auspices
of National Economic Development and Labour Council (Nedlac), in the ongoing
task team process that was launched by President Motlanthe in December
2008.
Indeed, the proposed framework to respond to the global economic crisis
draws from the government's Economic Programme of Action and seeks to adapt it
to the current economic environment.
The following is an update on the implementation of the Economic Cluster
programme of action and includes the Apex priorities which were integrated into
the Cluster's programme in 2008.
Promoting economic efficiencies
Progress has been made with regard to review of competition policy and
legislation, as well as in undertaking more active enforcement. The review was
completed in December 2007 and the drafting of the Amendment Bill began in
2008, culminating in the Bill being adopted by Parliament and referred to the
President for assent. The Amendment Bill gives competition authorities
additional tools to deal with uncompetitive behaviour and complex monopolies in
the economy, which hamper the development of more labour-intensive downstream
industries.
The work on the Capital Expenditure programme remains critical to address
inefficiencies in the economy and drive industrial development. On energy, the
Energy Master Plan was approved by Cabinet in 2008. Eskom has also begun with
its built programme. In addition, mothballed power-stations Camden, Grootvlei
and Komati are planned to return-to-service by 2011. Energy conservation in
mitigating electricity challenges in the short-term, while the Electricity
Build Programme and other interventions, such as that of encouraging
Independent Power Producers, are being implemented. Resources of the National
Energy Efficiency Agency, Department of Minerals and Energy (DME) and Eskom,
have been pooled to reach a bigger target market and ensure that an integrated
approach is followed.
In January 2009, the Cabinet Lekgotla approved the broad policy framework
that will guide the Water for Growth and Development Initiative. Progress has
also been made in the construction and maintenance of water infrastructure, as
well as gaining a better understanding of water challenges that face us.
The information communication technology (ICT) policy landscape has been
transformed through the promulgation of the Electronic Communications Act (ECA)
in 2005. The new Act seeks to introduce a licensing regime, competition within
the sector, and facilitate the rolling-out of infrastructure to increase
access. A comprehensive ICT Infrastructure Development Plan was presented to
the July 2007 Cabinet Lekgotla.
The plan details various interventions in dealing with issues relating to
cost (both international and national), and access to ICT infrastructure and
services. Progress has also been made in the construction of submarine cables.
The West African Cable System Consortium is due to conclude its construction
and maintenance agreement. In respect of the UHURUnet submarine cable, the
Baharicom shareholding structure for the cabling will be concluded in the near
future. The cable is expected to be in service during the last quarter of
2010.
Skills shortages continue to pose the constraint to the economy, including
the infrastructure build programme, which seeks to ensure that our economy
continues to grow in the current global economic slow-down. Various initiatives
have been undertaken to promote skills development. The work of Joint
Initiative for Priority Skills Acquisition (Jipsa) has been critical in
identifying the short-term skills requirements to sustain the economy and
better position it for a high growth trajectory. Given the significant
short-term skills needs of the country, the Cluster has overseen the
streamlining and acceleration of processes for securing work-related business
permits. The Cluster is also identifying additional interventions to fast-track
skills immigration, which will include the development of a skills importation
strategy.
We have finalised consultations on the revised National Human Resource
Development (HRD) Strategy with social partners. The work of Jipsa will be
integrated into the new structure, which will oversee the implementation of the
new HRD strategy.
On public transport, the strategy that was presented and approved by Cabinet
in 2007 identified a number of challenges to the efficient functioning of the
public transport system. A number of interventions are being rolled-out to
begin addressing the challenges that are prevalent in the public transport
system. Both the Taxi Recapitalisation Project and the Bus Rapid Transit System
are being rolled-out in partnership with provinces and metros.
With regards the Integrated Infrastructure Plan, the first draft was
submitted to Cabinet for consideration and further work is underway to complete
this work as soon as possible. The aim of this plan is to ensure that policies,
strategies and infrastructure plans of various sectors in government are
coordinated and optimised to support overall government objectives rather than
just sectoral imperatives.
On economic regulators, a framework is currently underdevelopment to ensure
a consistent overall approach to economic regulation in the country.
On climate change, at the July 2008 Cabinet Lekgotla, the Cluster presented
different scenarios to mitigate the impact of climate change and work is
underway to develop the necessary policy responses
Promote dynamic growth sectors through the implementation of the industrial
policy
Industrial Policy Priority Sectors (IPAP)
The IPAP identifies four key priority lead sectors where interventions will
be prioritised to unlock growth and realise employment potential. These are
capital/transport equipment and metals, automotive assembly and components,
chemicals, plastic fabrication and pharmaceuticals; and forestry, pulp and
paper and furniture. These sectors and others to be identified going forward
have been targeted on the basis of following criteria; employment and growth
potential, investments, exports and governmentâs ability to intervene.
With regards to the automotive sector, the review of the Motor Industry
Development Programme (MIDP) was completed in December 2007. The new
replacement scheme (Automotive Production Development Programme) was announced
in September 2008. The new programme seeks to promote domestic manufacturing
and the development of a competitive components sector. Although the new
programme will be fully rolled-out in 2012, some elements will be introduced in
the next financial year, including investment allowance. A task team has also
been established to develop a response to the challenges that face the industry
as reduced demand continues to negatively affect car sales and threaten the
survival of supplier industries.
In chemicals, the two-year tender for the supply of anti-retrovirals (ARVs)
was awarded in mid 2008, with 84 percent of the R3,6 billion contract allocated
to domestic ARV manufacturers. Feasibility studies on the domestic manufacture
of active ingredients and anti TB medicine are currently underway. Initiatives
in the pharmaceutical sector are crucial to ensure that government procurement
is leveraged to develop certain industrial capabilities and facilitate
industrial development.
On the metals sector, a National Foundry Technology Network is fully
operational 17 companies have been benchmarked and technology upgrading has
commenced. The jewellery incubator has been established at gold zone in
Germiston to cover training and small, medium and micro enterprise (SMME)
development. A preliminary report on the study of the limitation and rationale
for the exportation of scrap metal was completed in December 2008.
On the forestry sector, afforestation suitability mapping is still in
progress in Mzimvubu and Umzimkhulu catchments. The forestry sector skills plan
has been submitted to the Department of Labour for its further attention and
action, and a task team has been established to work on the skills development
strategy for the forestry sector. A draft funding policy for small growers has
been completed and will be presented to the forestry functional management
committee. On the sustainability of timber supply, a call for proposals for the
development of a saw timber strategy has been issued.
On clothing and textile, work on developing a competitiveness programme has
been concluded. This programme is focused on improving the overall
competitiveness of the sector and putting it in on a sound footing for the
long-term. The programme also includes industrial and technology upgrading
initiatives. The Industrial Development Corporation (IDC) is finalising the
establishment of a unit to administer the programme.
On Business Process Outsourcing (BPO), the roll-out of the government
assistance and support programme for BPO has been underway. Since its launch in
2007, 19 applications were received of which 17 were approved. The approved
projects will result in 15 000 jobs and R1,1 Billion in investment. So far, as
government we have committed R439 million to be disbursed between now and
2012.
The work on BPO also includes targeting designated areas in underdeveloped
regions. In this regard, two call centres have thus far been launched in
Mangaung and Sisonke Municipalities. On the roll-out of Monyetla Work Readiness
Programme, phase one has been completed and over 1,000 previously unemployed
youth have been trained, with over 80% absorption rate.
On tourism, key initiatives underway include the tourism enterprise
development strategy, airlift strategy, framework for integrated service
excellence, review of the current grading system, the tourism HRD strategy, and
2010 plan. On Biofuels, licensing criteria were finalised in May 2008 and
approved for publication. These criteria are currently available on the
Department of Minerals and Energy website (under petroleum licensing
documents).
Industrial policy cross-cutting interventions
Industrial policy cross-cutting interventions are focused on providing a
conducive environment for industrial development. The focus of industrial
financing is to stimulate growth, employment, and broaden participation in the
economy. The Enterprise Investment Programme (EIP) was introduced in July 2008
to replace the Small, Medium Enterprise Development Programme (SMEDP). Work to
finalise tax incentives is at an advanced stage. An IT platform is being
implemented to improve the administration of the incentives. The online
application for EIP was implemented in July 2008.
It is important to highlight that South Africa achieved its target of
spending one percent of its Gross Domestic Products (GDP) on research and
development (R&D) by 2008. In the same year, R&D tax incentives were
also introduced to encourage private sector spend on R&D initiatives. Work
on big science initiatives, such as Square Kilometre Array (SKA), is ongoing.
These initiatives offer the country an opportunity for the development of new
technology, and increasing the number of scientists and engineers. In 2007,
Cabinet approved the ten-year innovation plan. The Department of Science and
Technology (DST) has continued to establish institutional structures to support
the implementation of the plan. On the titanium industry development
initiative, an inter-departmental task team has been established and a detailed
medium-term strategic business plan for the establishment of a viable titanium
industry in South Africa has been developed.
On digital migration, the dual illumination period was officially launched
in November 2008.
Integration of small, medium and micro enterprises (SMMEs)
As part of the strategy to improve access to finance for SMMEs, the Khula
direct lending business case has been completed and was presented to Cabinet in
November 2008. The direct lending strategy is focused on providing finance to
the lower end of the market, which is not serviced by mainstream financial
institutions.
The process of aligning the Preferential Procurement Policy Framework Act
(PPPFA) Regulations with the Broad-Based Black Economic Empowerment (B-BBEE)
Codes of Good Practice, has taken longer than expected but the task team is
working towards finalising the proposals for aligning the two pieces of
legislation. On ensuring the timeous payment of SMMEs by government, a call
centre targeted at assisting SMMEs in this regard will be operational by April
2009.
Work is currently underway to finalise the framework that seeks to integrate
support for small enterprises across three spheres of government. This
framework will focus on the following elements:
* co-ordination of SMME programmes, including provincial networks
* SMME support infrastructure
* Annual joint reporting by all spheres of government.
In terms of employment creation, the Expanded Public Works Programme (EPWP)
remains an important component of promoting public sector employment. The
programme achieved its 1 million employment target. Phase two of the EPWP will
be rolled-out during the next financial year.
Conclusion
The Cluster has made significant progress in implementing several of the
interventions identified in its three year programme of action. These
achievements are in areas such as promoting economic efficiencies e.g. work on
competition policy as well as economic regulation.
In the area of industrial policy, the completion of the framework and
implementation of sectoral actions has been vital in promoting coordination of
the countryâs industrial policy process.
Less was achieved in some POA items, and all work in progress in the
Clusterâs POA will be carried forward into the next term of government. The
work to improve capacity to co-ordinate and facilitate the implementation of
the Clusterâs Programme and securing additional resources to implement
Clusterâs interventions will also be prioritised.
As previously indicated, government and social partners met to consider how
South Africa should respond collectively to the impact of the global economic
slowdown on the local economy. Work in this regard is currently underway to
develop specific interventions to assist industries in distress, and safeguard
the achievements that we have made in terms of employment creation and
industrial development. The team will complete its work in detailing suitable
interventions towards the end of March 2009, the details of which will be
communicated thereafter.
Issued by: Department of Trade and Industry
10 March 2009
