1. Industrial Policy /. Infrastructure
Industrial Policy / Infrastructure Linkages Strategic Planning Workshop of the Portfolio Committee on Public Enterprises 5 August 2009

2. Industrial policy National Industrial Policy Framework (NIPF)
Vision: diversification beyond reliance on mineral / mineral-processing to more labour intensive, value-adding, inclusive, and regionally integrated growth path
Annual three year Industrial Policy Action Plan (IPAP)
Sectoral priorities
Cross-cutting priorities
Revised and up-scaled IPAP to be taken to Cabinet in January 2010

3. Industrial policy: Emerging sectoral Priorities
Metal Fabrication, Capital Equipment and Transport Equipment
Agro-processing
Automotives, Components and Medium / Heavy Vehicles
Clothing, Textiles, Leather, Footwear
Plastics, Pharmaceuticals and Chemicals
Advanced Manufacturing
“Green” jobs and technologies

4. Industrial Policy: Cross-Cutting Priorities
Industrial Financing
DFI’s: IDC, NEF
Incentive programmes
Competition Policy
Input industries
Goods consumed by working class / poor households
Developmental Trade Policy
Defend space for strategic, sectorally determined tariff setting
Technical Infrastructure (Standards / Accreditation)
Discourage low quality / unsafe imports
Facilitate export market access

5. Intra-governmental co-ordination
Historically, the most successful rapid industrialisations have occurred through industrial polices that have been:
Supported and integrated with associated policies, particularly: macro-economic, trade, infrastructure and skills policies
Backed by very strong political will
Well-resourced both in human and financial terms
Based on rigorous analysis
Linked to credible reciprocal industry performance requirements
Based on a realistic assessment of the balance of forces in the economy
Supported by measures to ensure more equitable and shared growth

6. Infrastructure requirements for SA industrial development
SA manufacturers need a cost-effective rail and port infrastructure
Poor reliability of rail system making it difficult for firms – particularly small and medium firms – to plan
Expensive port system with efficiency / reliability problems
Over-use of road infrastructure with negative costs and externalities
Historical emphasis on investment in rail and port infrastructure for bulk primary and semi-processed products rather than downstream, value-added break-bulk manufactures
High logistics costs places pressure for “compensation” to logistics-intensive industries such as automotives
SA manufacturers need reliable electricity supply and sufficient time to adapt to increases in energy costs
DTI and other stakeholders (business / labour) should be integrally involved in infrastructure planning processes

7. Infrastructure requirements for SA industrial development
$0.00
$100,000.00
$200,000.00
$300,000.00
$400,000.00
$500,000.00
$600,000.00
SANTOS
VERA CRUZ
BUENOS AIRES
LAEM CHABANG
YOKOHAMA
NAGOYA
ANTWERP
SINGAPORE
LE HAVRE
TILBURY
BREMERHAVEN
CAPE TOWN
DURBAN
PORT ELIZABETH
CHARLESTON
BALTIMORE
NEW YORK
Terminal Handling Charge
Cargo Dues
Sea Side Costs
Average Cost per vessel call
Source : AIDC Port Benchmarking Study, 2007

8. Public procurement as a lever for industrial development
Opportunity to leverage SA’s public expenditure programme to create competitive supplier industries
Counteract negative trade balance and associated macroeconomic vulnerability
Resuscitate key sectors like metal fabrication, capital equipment and transport equipment and place them on a competitive export path
Challenges
Short term ‘crisis’ procurement versus long term ‘strategic’ procurement
Limited price advantage
Limited industry / supply chain development
Financing constraints
Buyer side: balance sheet of SOE’s
Seller side: competition with highly concessional export credit

9. Public procurement as a lever for industrial development
Consequences
Loss of various contracts to imports that could have been competitively manufactured in South Africa often leading to job losses
BEE ‘import’ fronting
Very limited industry development / supplier upgrading
Way forward
Stronger governance, greater transparency and more frequent reporting on Competitive Supplier Development Plans of Eskom and Transnet
SOE’s and departments need to urgently address issues of:
Long term ‘fleet’ plan development
Supplier development to raise value-chain efficiencies
Elimination of BEE ‘import’ fronting
Stronger oversight of supplier development role of SOE’s

10. Appendix: State of the Economy
Data courtesy of the IDC

11. Appendix: State of manufacturing
GDP growth by broad sector: Q and Q1 2009
Data courtesy of the IDC