1. Wind Power for Local Economic Development: South Africa leading the Way - 28 September 2010 - Gallagher Convention Centre Gerhard Fourie: Director Advanced Manufacturing, Department of Trade and Industry

2. Content Declining Share of Manufacturing in GDP Industrial Policy Action Plan Investigation into the Development of a Wind Energy Industrial Strategy for South Africa Possible Support Measures

3. Declining Share of Manufacturing Sector SA economy increasingly dominated by services-related sectors - in line with international trends. Share of the manufacturing sector - the 2nd largest sector of the economy - decreased sharply since the early 1990s in light of globalisation, trade liberalisation and an increasingly challenging global trading environment.

4. 4 Declining Share of Manufacturing in GDP An unsustainable consumption-driven growth path Divergence of GDP growth by production and consumption sectors, 1994-2008 (R2000) Source: SARB

5. 5 Credit Extension versus Investment Source: CSID (SARB), 2009 Despite massive private credit extension only a small proportion is being channelled towards fixed investment … Private sector credit extension by all monetary institutions, 1990 – 2008 (%)

6. 6 Failure to leverage public capital expenditure Public investment and trade balance in metal products and machinery, 1990 - 2008 Source: SARB

7. 7 Industrial Policy Action Plan Increasing concerns about carbon emissions and climate change will have a profound impact on our future economic landscape, Increasing eco-protectionism in advanced economies Increasing energy costs will be a major threat to manufacturing Department of Energy – Renewable Targets Opportunities to develop new industries and substantially increase energy efficiencies Key opportunities –Solar Water Heating –Concentrated Solar Power –Wind –Biomass –Automotives –Substantial improvements in industrial energy efficiency Potential to create thousands of direct jobs but requires more scoping IPAP 2 - http://www.thedti.gov.za/ipap/ipap.htmhttp://www.thedti.gov.za/ipap/ipap.htm

8. 8 Investigation into the Development of a Wind Energy Industrial Strategy for South Africa Sector research was required to qualify and quantify the opportunities presented to establish a local Wind Turbine Manufacturing Sector. Possible support measures will be determined by the underlying economic constraints and opportunities that shape the study Funded by United Nations Development Programme and the Royal Danish Embassy – Under SAWEP

9. Scenarios for the localisation of wind energy project spend ScenarioAssumptions% value Local spend/MW 1. Low-industrial content Grid connection, civil works, other capital costs, fully imported wind turbines 29R4.64million 2. Medium-low industrial content Grid connection, civil works, other capital costs, tower locally made, rest of turbine imported 47R7.52million 3. Medium-high industrial content Grid connection, civil work, other capital costs, tower, blades, generator and nacelle made locally, rest imported 66R10.6million 4. High industrial content Grid connection, civil works, other capital costs, most of turbine made locally, except for specialised items such as gearbox, rotor bearings 87R13,9million

10. Possible Support Measures IPAP 2 suggests a systematic promotion of green and energy-efficient goods and services in South Africa – can include wind turbine manufacturing Integrated Resource Plan will determine viability of localisation The sector may be designated as a priority. –This process may lead to a Key Action Plan (KAP) for the industry with key performance indicators for next IPAP phase. The strategic leveraging of public procurement - overhaul of Preferential Procurement Policy Framework Act (PPPFA) Competitive financing programme to assist South African suppliers to acquire project financing at competitive rates in order to compete with foreign suppliers when bidding to supply into large capex projects in South Africa. Range of dti Incentives Next Step - Consultation with potential vendors, manufacturers and developers

11. Gerhard Fourie Director Advanced Manufacturing GFourie@thedti.gov.za Tel: +27 12 3941151 Thank you