1
IPAP2 Progress and Progression
2010/11 IPAP2 Nine Month Implementation and
2012/13 IPAP2 Overview
Portfolio Committee on Trade and IndustrySelect Committee on Trade and International Relations
22 March 20111
2
IPAP 2: Key pillar of the New Growth Path
Agriculture
Mining
Food Textiles
Wearing apparel
Leather & leather products
Wood & wood products
Motor vehicles, parts & accessories
Other manufacturing
Wholesale & retail trade Transport & storage
Financial services Government services
Paper & paper products
Basic chemicals
Basic iron & steel Basic non-ferrous metals
EGW Business services
Excl. medical, dental & vet
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
0 7 14
Employment multipliers
To
tal
Bac
kwar
d l
inka
ges
Low employment multipliers & strong backward linkages
Low employment multipliers & weak backward linkages
High employment multipliers & strong backward linkages
High employment multipliers & weak backward linkages
1. Other chemicals & man-made fibers 2. Furniture3. Plastic products4. TV, radio and comm equip5. Electrical machinery and apparatus6. Paper and paper products7. Rubber products8. Non-metallic minerals9. Beverages10. Glass & glass products11. Professional & scientific equip12. Metal products excl. machinery 13. Machinery & equipment14. Footwear
1
2 34
5
6
7
8 9111
1 13
14
IPAP: value-added sectors with high employment and growth multipliers
Source: CSID
2
33
IPAP2: Requires comprehensive and integrated action
1. Macro-economic policies which support more competitive and stable real exchange and interest rates
2. Industrial financing channelled to more labour-intensive and value-adding sectors
3. Leveraging procurement to raise domestic production and employment in a range of sectors
4. Developmental trade policies such as tariffs and standards deployed in a selective and strategic manner
5. Competition and regulation policies: competitive input costs for productive investments and affordable goods and services for poor and working-class households
6. Skills, technology and innovation policies better aligned to sectoral priorities
7. Deploying these policies in general and in relation to more ambitious sector strategies, as set out in detailed Cross-cutting and Sector KAPs
44
IPAP2: Sectors
Cluster 1: Qualitatively new areas of focus– Metals fabrication, capital and transport equipment sectors:
leverage Capex programme, rebuild and position as future exporters
– Green and energy saving industries: solar water heating, concentrated solar power, wind power, energy efficiency
– Agro-processing linked to food security and food pricing imperatives
Cluster 2: Scale up / broaden interventions in existing IPAP sectors– Automotives, Components, Medium and Heavy Commercial
Vehicles: raise economies of scale and localisation of components– Downstream Mineral Beneficiation: based on establishing
minimum beneficiation levels– Plastics, Pharmaceuticals and Chemicals: focused on plastics
and value-adding pharmaceuticals– Clothing, Textiles, Footwear, Leather: recapture domestic
market share through competitiveness upgrading and tackling illegal imports
55
IPAP2: Sectors
Cluster 2: Scale up / broaden interventions in existing IPAP sectors– Biofuels: establish regulatory framework and support agricultural
and refining investment– Forestry, Paper & Pulp, Furniture: unblock water licences and
promote further processing– Strengthening linkages between Cultural Industries and
Tourism– Business Process Services: broaden and deepen SA’s product
offerings
Cluster 3: Sectors to develop long-term advanced capabilities– Nuclear: leveraging local production and technology transfer– Advanced Materials: feeding into new growth industries such as
aerospace, solar and nuclear– Aerospace: strengthening integration into supply chains
66
Key progress: Cross-cutting highlights• Public procurement and SOE supplier development
Preferential Procurement Policy Framework Act Regulations- Cabinet approved revisions to PPPFA regulations developed by NT,
EDD and DTI Alignment with B-BBEE Codes DTI to designate sectors / subsectors for domestic production at
specified level of local content DTI has developed sector designation methodology and is compiling
necessary research to designate a range of sectors Awaits promulgation by NT
- 72% by value of R4,2 billion ARV tender awarded to SA manufacturers with significant price reductions relative to the 2008 ARV tender
State Owned Enterprises- First phase of mobilisation within SOEs to introduce localisation and
supplier development into the procurement process. SOEs introducing new policies, processes, systems and capacity building to embed supplier procurement leverage more systematically
- Some success stories e.g. recent Transnet procurement of 100 locomotives: 90 to be assembled in SA
77
Key progress: Cross-cutting highlights• Industrial Financing
Industrial Development Corporation- IDC reviewed its business model and balance sheet
Identified R70bn over the next five years for investment in NGP and IPAP sectors, dependant on economic conditions
R10bn Job Creation Fund at Prime less 3% over five years R25bn earmarked towards Green Economy R5bn Agro-processing fund
- IDC funding April – December 2010: 6,471 direct new jobs created and 7,295 direct jobs saved in IPAP sectors
DTI Enterprise Investment Programme (EIP)- Small-medium manufacturing investments- EIP April – December 2010: 10,211 direct jobs created
12(i) Tax Incentive- Large manufacturing investments- Nominal R20bn = R5.6bn
88
Key progress: Cross-cutting highlights• Industrial Financing
Study on long term funding- Phase One: study on long-term sources of concessional industrial
financing, completed: South Africa has well developed stock market but it is highly
concentrated in terms of market capitalisation Only the largest firms and niche sectors like mining use stock
market to raise capital Bond market only tapped by very large private firms, SOE’s and
government A key issue is mismatch between short-term sources of funds
(largely deposits) and long investment terms required in real sectors like manufacturing
Development banks play a fundamental role in closing this gap in many countries such as Brazil and Germany
- Phase Two: policy proposals to be completed in 2011/12 and feed into appropriate processes
99
Key progress: Cross-cutting highlights• National Industrial Participation Programme
- Study into more strategic evolution of NIPP – including consolidation of CSDP and NIPP – completed
- Development of revised NIPP architecture on track - Obligations monitored in the region of +/- US$16.5bn- Of these, 80% arise out of the Strategic Defence packages - More than 220 projects have been implemented- Under the Strategic Defence Packages, 5 out of the ‘Big 6’ have
completed their obligations in full- 2010/11 financial year: 123 new jobs created and 432 jobs saved
• Skills- Customised Sector Programme inputs into sectoral skills processes
• Competition- Referrals against: tyre companies; scrap merchants; chemical
companies; airlines; online ticketing company; bicycle companies; construction companies
- Findings against bread price collusion including establishment of associated agro-processing fund at IDC to promote competition
1010
Key progress: Cross-cutting highlights• Trade
- Exporters Early Warning System on Technical Barriers to Trade developed by SABS launched
Identifies technical barriers to trade for exporters notified to WTO Distributed via email free to exporters on a weekly basis
- ITAC processed numerous applications for increases, rebates and reductions of duties in line with IPAP priorities
- SABS developed a range of enabling standards for various industries / products
Key progress: Sectoral highlights
• Automotives- Automotive Investment Scheme (AIS) finalised- AIS 2010/11 financial year
R14bn in investment commitments from assemblers and component suppliers secured
Conservative estimate of 12,000 new jobs 2011 – 2013 Large increases in levels of volumes and localisation
• Clothing & Textiles- Clothing Textile Competitiveness Programme (CTCP) and Production
Incentive (PI) 2010/11 financial year: 146 and 25 companies benefiting under the CTCP and PI respectively 40,591 jobs supported / saved At least 1,111 new jobs created
- SARS Illegal imports campaigns focussed on Gauteng and KZN At least 56 premises inspected R37m of merchandise detained in relation to counterfeit goods and
various forms of tax non-compliance
11
Key progress: Sectoral highlights
• Business Process Services- 2010/11 financial year:
R40 million investments made and 950 jobs created R42 million new investment commitments approved linked to 806 jobs 3,400 young trainees being trained under the Monyetla II Programme
– 70% guaranteed employment by BPO consortium.
• Green Industries- Mandatory installation of solar water heaters in new buildings
Revision of building standards: mandatory installation of solar water heaters or similar technologies in new buildings
Communication campaign to be rolled out in 2011/12- SABS finalised enabling standards for: solar water heaters; wind energy
turbines; energy efficient lighting, appliances and products; electric batteries and alternative fuel vehicles; co-generation of electricity and biofuels
- Significant progress with development of feed in tariff (REFIT) rules- Intra-departmental South African Renewables Initiative (SARI) initiative to
leverage international climate finance to supplement domestic funding sources for renewable energy production linked to domestic manufacturing
12
Key progress: Sectoral highlights
• Forestry- 161 water licences for 10,000 hectares issued by the Department of Water
and Environmental Affairs (DWEA) Represents between 8,000 – 9,000 direct jobs to be created Lays the basis for more rapid progress
• Iron and Steel- Intra-Departmental Task Team Report on lron Ore and Steel adopted by
Cabinet mandating DMR, DTI and EDD to secure developmental steel price in exchange for cost plus iron ore
13
Key challenges
• Slow recovery of global economy and key traditional export markets, in particular the US and EU
• Sustained rapid growth of large developing economies / regions such as China, India, Brazil and Africa
• This implies a challenging process of trade adjustment in a context where value-added exports have gone to advanced trading partners and Africa and commodity exports to other developing trading partners
• Continuous appreciation of real effective exchange rate (REER) to highest levels on record in Q3 2010 in the context of massive capital inflows and a large current account deficit
• South African economy still recovering domestically from the global economic crisis
• Slowdown in public and private fixed investment expenditure
• Large drop in manufacturing employment between Q1 2008 and Q2 2010 with slight improvement in Q3 2010
14
Key challenges: Currency Balance on current account, financial account and real effective exchange rate (2000=100) (R million) Q1 1990 – Q3 2010
Source: SARB
15
Key challenges: InvestmentReal gross fixed capital formation Q1 2005 to Q3 2010 (R’m 2005 prices)
Source: SARB
16
0
10000
20000
30000
40000
50000
60000
70000
80000
2005
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2005
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01
General government Public corporations Private corporations
1717
KAPs requiring fast-tracking• Tri-lateral technical process to amend PPPFA regulations completed and
awaits promulgation (Lead Departments: NT and EDD, supported by DTI)• Process to amend SOE shareholder compacts to secure fleet identification
and localisation underway and to be completed (Lead Department: DPE supported by DTI, DST and EDD)
• Customs Fraud Campaign underway but requires scaling up (Lead Agency: SARS supported by DTI, EDD and DOJ)
• Promulgation of Biofuels Mandatory Uplift Regulations (Lead Department: DOE, supported by DTI, EDD and DAFF) and implementation of Biofuels fuel levy rebate (Lead Department: NT, supported by DOE, DTI, EDD and DAFF)
• Significant progress with REFIT rules with associated localisation requirements for renewables (Lead Department/agency: DOE and NERSA supported by DPE, DTI)
• Strategy drafted to establish and define minimum levels of beneficiation for 10 commodities to lay foundation for building beneficiation value chains (Lead Department: DMR supported by DTI, EDD and DST)
• Implementation of export tax on scrap metals (Lead Department: NT supported by DTI)
1818
KAPs requiring fast-tracking• Standard offer for Solar Water Heaters SWH’s with associated localisation
requirements (Lead Department: DOE supported by DTI)• Inclusion and timing of nuclear in energy mix (Lead Department: DOE,
supported by DPE, NT, DST and DTI)• Progress with Aquaculture strategy (Lead Department: DAFF, supported by
DTI, EDD and DWA) and Organic standards (Lead Departments: EDD and DAFF, supported by DTI)
• Food Safety Agency (Lead Department: DAFF, supported by DTI, EDD and DOH)
• Important progress recorded with issuing of water licences for forestry but requires scaling up (Lead Department: DWA supported by DTI, DAFF and EDD)
• Set Top Boxes (STB’s) roll-out and associated localisation (Lead Department: DOC, supported by DTI)
Taking IPAP2 Forward2011/12 -2013/14
• Very substantial progress has been recorded in IPAP2 2010/11 and the majority of KAPs are on track
• DTI is engaging at various levels to facilitate completion of KAPs that require fast-tracking– With relevant Departments– Economic Sectors and Employment Cluster– Department of Performance, Monitoring and Evaluation of the
Presidency
19
Taking IPAP2 Forward2011/12 -2013/14
• IPAP2 2011/12 will focus on continuity and implementation of strategies and KAPs identified in IPAP2 2010/11
• However, there are some areas of intervention for further scaling up:– Stronger alignment between IPAP sector strategies and skills
development system Engagement with DHET to introduce sector specific programmes
derived from sector strategies, like Monyetla Work Readiness Programme
– Scaling up of Green industries work Engagement with REFIT tariff to ensure new renewable energy
generation is linked to development of domestic green manufacturing capacity
South African Renewables Initiative (SARI) to leverage international climate finance to supplement domestic funding sources for renewable energy production linked to domestic manufacturing
20
Taking IPAP2 Forward2011/12 -2013/14
• Areas of intervention for further scaling up: – Technology
Introduction of product development support measures– Addition of limited number of new sector/sub-sector programmes,
e.g. Oil and gas Boatbuilding
• Launch of IPAP2 2011/12 – 2013/14 in April 2011
• Refinement of monitoring system for measuring and reporting on impact, particularly jobs
• Capacity building: dedicated Certificate and Honours courses developed with Wits, African Programme on Rethinking Development Economics
21
Appendix Real interest rates
Short term interest rates – January 2011
Source: The Economist
22
Appendix Real interest rates
Long term interest rates – January 2011
Source: The Economist
23
2424
AppendixCurrency
Source: SARB
24
Real Effective Exchange Rate (2000 = 100) and Rand / US Dollar, Jan 2009 – Jan 20116
6.5
7
7.5
8
8.5
9
9.5
10
10.5
1185
90
95
100
105
110
115
120
Real Effective Exchange Rate Rand / Dollar
2525
AppendixManufacturing
Manufacturing monthly production indexed (2005 = 100) and Y-O-Y growth, January 2005 to December 2010
Source: StatsSA
25
26
Source: Quantec
AppendixTrade Balance
-5,000,000,000
-4,000,000,000
-3,000,000,000
-2,000,000,000
-1,000,000,000
0
1,000,000,000
2,000,000,000
1Q
1990
3Q
1990
1Q
1991
3Q
1991
1Q
1992
3Q
1992
1Q
1993
3Q
1993
1Q
1994
3Q
1994
1Q
1995
3Q
1995
1Q
1996
3Q
1996
1Q
1997
3Q
1997
1Q
1998
3Q
1998
1Q
1999
3Q
1999
1Q
2000
3Q
2000
1Q
2001
3Q
2001
1Q
2002
3Q
2002
1Q
2003
3Q
2003
1Q
2004
3Q
2004
1Q
2005
3Q
2005
1Q
2006
3Q
2006
1Q
2007
3Q
2007
1Q
2008
3Q
2008
1Q
2009
3Q
2009
1Q
2010
3Q
2010
Agriculture, forestry & fishing Manufacturing Mining26
Trade balance by sector Q1 1990 – Q32010
2727
AppendixManufacturing employment
Source: StatsSA
27
Employment in the manufacturing sector ‘000, Q1 2008 – Q4 2010
1400
1450
1500
1550
1600
1650
1700
1750
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q32009 Q42009 Q12010 Q2010 Q32010 Q42010