1. 1 Broaden participation 2015 KZN Manufacturing Indaba 21 July 2015 Inkosi Albert Luthuli International Convention Centre

2. 2 In 2007 Government adopted the National Industrial Policy Framework (NIPF), and its practical implementation plan - the IPAP - as its guiding approach to industrialisation  IPAP aligned itself with the overall vision and perspectives set out in the National Development Plan (NDP) of 2012; and remains in line with the job creation strategy advocated in the New Growth Path (NGP)  IPAP is linked to the NDP as follows:  NDP highlights the need for SA to develop a more competitive and diversified economy, with a deepening productive base in mining, agriculture, manufacturing and associated services  NDP recognises that successful resource exploitation and development are critically dependent on the coherence of shared local and regional investment and regulation policy  NDP advocates for the need to move steadily away from an exchange rate linked primarily to commodity prices, towards one based on the sophistication of SA’s overall export basket CONTEXT: 1 2015

3. 3  The manufacturing sector’s contribution to SA GDP declined sharply from 20.9% in 1994 to 11.6% by 2013, whilst the mining sector’s share increased from 7.3% to 9.2%. Sectoral composition of the South African economy 2015 Source: SARB, IDC, the dti

4. 4  Services sectors have been driving economic growth in South Africa (finance, ICT, business services). Manufacturing sector registered strong growth over 2004-07 due to robust export growth and solid growth in domestic demand. Trends in GDP composition per sector 2015 Source: SARB, IDC, the dti

5. 5  South Africa’s manufacturing industry is dominated by three sectors: namely food & beverages, petroleum & chemical products, and metals & machinery. These three sectors account for two thirds of total manufacturing production.. Trends in the manufacturing industry 2015

6. 6 Manufacturing value addition and import leakage 2015 Source: SARB, IDC, the dti

7. 7 SA changing trade patters 2015 Automobiles (26.1) Platinum (11.6) Rhodium( 5.9) Palladium (5.3) Iron ore(45.9) Coal (7.0) Chromium ores (10.9) Ferro-chromium (8.9) Region/CountryShare of Exports (%)Main Products (%) Purifying Machinery (11.4) Platinum (7.1) Coal (7.0) Automobiles (6.2) Aviation spirit (6.1) Iron & Steel (3.6) Electrical energy (2.1) Diesel trucks( 5.3) Platinum (37.5) Iron ore (11.8) Aluminium (4.8) Ferro-chromium (4.8) South Africa’s trade patterns have changed in response to global growth trends Emerging Markets and SADC share in South Africa’s export basket is rising: –SADC absorbed 13% of South Africa’s exports in 2011 –almost a quarter of manufactured exports destined to SADC –exports to China increased to 13% in 2011 (averaged 4.2% between 2005-2008) Share of exports to the European Union declined from 33% in 2005 to 21.6% in 2011 Source: the dti, StatsSA, SARB, SA National Treasury

8. 8 Provincial contribution to the National GDP, 2014 2015 Source: SARB, IDC, the dti

9. 9 Manufacturing contribution to provinces’ GDP, 2014 2015 Source: SARB, IDC, the dti

10. 10 Composition of the KZN economy, 2014 2015 Source: SARB, IDC, the dti

11. 11 KZN share of employment by industry 2015 Source: SARB, IDC, the dti

12. 12 DIVERSIFY THE ECONOMY Provide strong support for value added manufacturing, especially in globally competitive non-traditional tradable goods and services PROMOTE A LABOUR- ABSORBING INDUSTRIALISATION PATH - with systematic development of employment- creating linkages and multipliers Industrialisation model focused on INCLUSION OF HISTORICALLY DISADVANTAGED PEOPLE AND REGIONS Contribute towards INDUSTRIAL DEVELOPMENT IN AFRICA - focused on infrastructure, productive capacity and expanded trade for regional economic integration Long term intensification of South Africa’s industrialisatio n process and movement towards a KNOWLEDGE ECONOMY CORE OBJECTIVES OF THE IPAP 2015

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14. Transversal Focus: Procurement  Government purchasing power through public procurement contributes between 15% and 25% to GDP (value that is extracted from large scale procurements)  National Industrial Participation Programme (NIPP): Imported Content => US$10 million  Defence Industrial Participation: managed by Armscor and applicable to all defence procurement. Imported Content => US$2 million  Competitive Supplier Development Programme (CSDP): managed by DPE in conjunction with State Owned Companies (SOCs).  Designation & Local Production  The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP)  The Local Procurement Accord 14 2015

15. Designated sectors 15 2015

16. Transversal Focus: Industrial Financing 16 2015 CLUSTERINCENTIVE SCHEME BROADENING PARTICIPATION Black Business Supplier Development Programme (BBSDP) Co-operative Incentive Scheme (CIS) COMPETITIVENESS INVESTMENT Sector Specific Assistance Scheme (SSAS) Export Marketing & Investment Assistance (EMIA) MANUFACTURING INVESTMENT Manufacturing Investment Programme (MIP) Capital Projects Feasibility Programme (CPFP) 12i Tax Incentive Automotive Incentive Scheme (AIS) SERVICES INVESTMENT Film & Television Production Business Process Services (BPS) Tourism Support Programme (TSP) INFRASTRUCTURE INVESTMENT Critical Infrastructure Programme (CIP) IDZs

17. Transversal Focus: Industrial Financing 17 2015 R2 billion has been allocated over the MTEF period to manufacturing development incentives and support for growing industries, such as business process outsourcing The Manufacturing Competitiveness Enhancement Programme (MCEP) will spend R5.4 billion over the MTEF and will assist companies with financial support to upgrade production facilities MCEP is the biggest manufacturing incentive and supports response to companies impacted by structural and cyclical economic changes Deployed towards upgrading competitiveness of labour intensive and value-adding manufacturing sectors Grant finance with clear rules-bound access criteria Maximise employment and value-added potential in key sectors Exclusions: sectors with dedicated support programmes

18. Transversal Focus: Special Economic Zones & Regional Industrial Clusters 18 2015 Budget allocation of R3.53bn over MTEF for SEZ’s Promote creation of a regionally diversified industrial economy Establish broader range of industrial parks and infrastructure for effective clustering and hubs A dedicated and integrated legislative framework to enable effective regulation and management The Work Programme of the Regional Economic Communities: joint infrastructure development and development of regional value chains Cross-border infrastructure and sector development

19. 19 2015 TRADITIONAL SECTORS AND SERVICES

20. 20 2015

21. Sectoral Focus: Automotives 21  Continuous support for OEMs and local component suppliers through the revised Automotive Production and Development Programme (APDP)  The ASCCI-driven intervention which involves the identification of products or component groups for localisation as well as the creation of focused Action Plans to give practical impetus to the localisation drive  Stepped up work on African integration across the full auto sector value chain 2015

22. 22 2015

23. Energy challenges and impacts on the economy 23 2015 Rising electricity prices CO 2 Emissions and GPD in Selected Countries ( 1971-2011) Energy intensity and GPD in selected countries (1971-2011) Source: Nersa, IEA, own calculations

24. Sectoral Focus: Green industries 24  Green Transport – develop policy for production of compressed natural gas (CNG), biomethane-fuelled and electric vehicles  REIPPPP – Leverage procurement and designation of solar photovoltaic energy inputs into the national grid  Scale up Industrial Energy Efficiency Programme  Eco-labelling development programme - development and accreditation of one new occupational qualification per annum  Green skills programme - stimulating demand and supply of critical and scarce “Green Skills’  Develop of model policy and regulations to support biogas and natural gas use in transport 2015

25. Sectoral Focus: Primary Minerals Beneficiation and Construction 25  Investment in mining and petroleum beneficiation projects will receive R2.7bn over MTEF  Development of Mineral Beneficiation Action Plans (MBAP) will unpack the Minerals Beneficiation Strategy (2011) and give specific policy guidance with regard to wide-ranging minerals beneficiation  Targeted support measures to increase the supply of mining capital goods (plant, machinery, after-market) that can unlock and deepen capital goods manufacturing industries in SA for local consumption and export into key markets  Strategic input into the legislative review of the Mining Charter (2010) to include the recognition and reward of local content  Expansion of the PGM beneficiation industry - aiming to catalyse practical collaboration between the local mining industry, fuel cell OEMs and component manufacturers and potential public and private users 2015

26. 26 Thank you