Discuss SA industrial development policies and assess their suitability in terms of international best practice Industrial development - focus on all three sectors of the economy as well as SMMEs Best practice - best practice part of economic development - best practice from an international perspective include 3 general principles Relying on markets Fiscal and monetary self-discipline Global integration Developing countries must use innovative strategies to build markets and make markets work for them.

Integrated Industrial Development In 2001 SA Govt introduced an integrated industrial development plan Called the Integrated Manufacturing Strategy (IMS) focusing on improving competitiveness For businesses to be feasible cross-cutting services and key inputs need to be in operation. Cross-cutting Services Infrastructure - to be competitive it must have a modern infrastructure - includes modern modes of transport, logistical services at harbours, airports and railway stations - social infrastructure include an education system that meets the demand of the economy.

Cross-cutting Services Access to finance - SA industrial development hampered by shortage of finance for small business and BEE – Govt created Khula Enterprises - Business Partners Human Resources Development - Focuses on post schooling - Skills Development Act=needs for industrial development - National Skills authority – SETAs - Skills Development Levy – 1% Technology - R and D essential for discovery of new knowledge - HSRC and CSIR subsidised by Govt to provide research

Key Inputs Services that are essential for survival and competitiveness of business The cost of these services have an impact on cost of production and prices as well as competitiveness\ Include Transport Telecommunications – digital and fixed line Energy – electricity and liquid fuel

REGIONAL DEVELOPMENT Increasing the economic livelihood of a specific area or areas South Africa’s Regional Development Policy Spatial Development Incentives (SDIs) - fostering sustainable industrial development in areas of poverty and unemployment - focuses high level support where socio economic conditions require Govt assistance - SDIs driven by central govt but cut across provinces – involves all three levels of government - Areas = Maputo Development Corridor; Lumbombo SDI; Richards Bay SDI; Wild Coast SDI; Fish River SDI; West Coast Investment Initiative SDI; etc - Made possible through public-private partnerships (PPP) - Private sector set up the business and public sector provides the infrastructure - Govt benefits in form of taxes and reduced unemployment and private sector receives profits and improved infrastructure

REGIONAL DEVELOPMENT Industrial Development Zones (IDZs) - purpose-built industrial sites, physically enclosed and linked to an international harbour or airport - encourage growth by promoting exports and creating jobs - they are allowed to import duty free and obtain supplies VAT free from SA - production geared towards exports to foreign countries = IDZ zones Gauteng IDZ – O R Tambo Airport Richards Bay – metals Coega (PE) Saldanha

REGIONAL DEVELOPMENT Incentives - to attract FDI and domestic investment for SDIs, industrial development programmes and employment creation programmes n Small Medium Enterprise Development Programme (SMEDP) - aimed at new or expanding small medium businesses - available to business in following industries = manufacturer = food processing = aquaculture = tourism Duty-free incentives - given to business within an IDZ - to encourage domestic and foreign businesses to be set up in IDZs and produce goods for exports

REGIONAL DEVELOPMENT Critical Infrastructure Programme (CIP) - cash granted for projects to improve the infrastructure in SA, roads, electricity etc Foreign investment Grant (FIG) - cash grant for foreign investors who invest in new manufacturing businesses in SA - investor is compensated for cost of moving new machinery and equipment from abroad Skills Support Programme (SSP) - cash grants of up to 50% for costs of training - encourage investment in training and new skills Black Business Supplier Development Programme (BBSDP) - 80% to black owned enterprises to provide training in management efficiency Strategic Investment Programme (SIP) - allowances available to projects in the manufacturing, computer and research and development fields