1. Accelerating Growth and Development: The Contribution of an Integrated Manufacturing Strategy

2. OUTLINE Process issues A vision for the economy Extending a policy tradition Analysis informing the strategy The challenge Government’s response The role of the Integrated Manufacturing Strategy The platform of Microeconomic Reform What can you expect from the dti? A challenge to stakeholders Measuring our performance The way forward

3. Process issues Parliament, Nedlac, other dialogues May 2001 First draft of discussion document released April 2002: Revised IMS draft released Extensive consultations and dialogue 3 rd quarter 2002 Reworked version submitted to Cabinet

4. A Vision for the economy by 2014 We need an economy that can meet the needs of our economic citizens in a sustainable way: –Access to quality work and enterprise opportunities & necessary capacities and skills –Platform of economic efficiency, inputs, infrastructure, government service etc. –Adaptive, innovative & competitive enterprises –Consumer access to quality goods & services; effective protection legislation and recourse mechanisms –Built on the potential of all our people, resources and geographic areas

5. Extending our policy tradition A vision beginning with the Freedom Charter RDP objectives GEAR programme Geographic strategies Integrated Economic Action Plan Microeconomic Reform Strategy

6. Analysis: Policy and manufacturing before 1994 Resource-oriented, especially minerals, energy and agriculture Industrial Policy – import-substitution, resource-driven Apartheid policy legacy included: –racial and geographic inequalities; –distorted demand; –restricted skills development; –Inefficiencies; –inward-orientation, with poor linkages to the region and the world; –restricted access to economic assets & opportunities -> limited capacity for savings, investment and enterprise development.

7. Analysis: T he challenge faced in 1994 Interventions required to address both domestic conditions and integration into the global economy Trends in the domestic economy –Diverse manufacturing base –Continued inward-orientation –Concentration of ownership & lack of equity Global trends: –Liberalisation and acceleration of global capital flows –Selective trade liberalisation –Systems of global governance with unfair outcomes –Dangers of marginalisation

8. Analysis: Policy interventions since 1994 Macroeconomic reform to address crises Initial set of microeconomic reform measures Trade reform: tariff simplification and trade negotiations (multilateral & free trade agreements) Supply-side measures Small business Competition policy Regulatory reform Institutional transformation Some sector-specific programmes Geographic programmes –e.g. SDIs Some consumer protection reform Wider reforms Labour law dispensation and skills development Agriculture and land reform Development of a consultative approach

9. Analysis: Manufacturing performance since 1994 Some progress made: –Slow growth, but avoided deindustrialisation –Increased export orientation and integration into global markets –Increased share of manufacturing in exports –Some sectors doing particularly well e.g. auto –Improved opportunities for market access –Diversification of markets reduced vulnerability –Increased productivity

10. Analysis: Manufacturing performance since 1994 But: –Declining share of global trade –Trade balance: still net importer of manufactured goods –Continued job losses within manufacturing –Casualisation, subcontracting & informalisation –Particular decrease in demand for unskilled labour, increase in skilled labour demand –Productive investment too low –Declining investment in technology & R&D –Limited progress in relation to small business development, BEE and geographic equity –Poverty and inequality still severe –Continued geographical inequality –Underlying constraints to future competitiveness and equity e.g. inputs, telecomms infrastructure & requisite skills

11. Analysis: Old ways of gaining competitiveness will not work in future: Raw materials Unskilled labour Proprietary production technology Privileged access to markets

12. Analysis: New sources of competitiveness Information and Communication Technologies Technology diffusion Time, efficiency and responsiveness Integration of value chains Economic participation and equity – developing human and economic potential

13. The challenge we face We face numerous constraints: –distortions in our domestic economy –our relationship to the global economy –the changing basis of competitiveness away from our previous areas of advantage We need to develop our domestic potential by strategically engaging with the global economy –Minimise marginalisation –Maximise our use of opportunities to achieve national objectives

14. Government’s response to the challenge Sustainable Growth-oriented Macroeconomic Framework Microeconomic Reform Strategy Platform of efficiency & reduced constraints to growth & development across the economy Integrated Manufacturing Strategy Enable competitive, adaptive & job-creating sectors & enterprises

15. The foundation provided by the Microeconomic Reform Strategy Coordinated action across government on issues beyond the authority of any single department Improve efficiency of the economy as a whole and reduce barriers to entry Key performance areas: –growth –competitiveness –employment –small business development –BEE –geographic equity

16. The foundation provided by the Microeconomic Reform Strategy (2) Key programmes: –Input sectors (telecomms, energy, transport) : efficiency and access –Cross-cutters: infrastructure, HRD, access to finance, technology & innovation –Priority sectors: agriculture, tourism, ICTs, cultural, exports (auto, clothing & textiles, metals & beneficiated minerals, agro-processing, chemicals)

17. Objective of the Integrated Manufacturing Strategy Accelerate growth, employment and equity through developing high value adding, knowledge-intensive integrated manufacturing built on our full potential HOW? –Address constraints in the domestic economy to create a platform for competitiveness and economic participation –Integrate to our advantage into the global economy –Equip our enterprises to compete on the basis of new drivers of competitiveness –Integrate equity objectives into each aspect of the strategy –Build partnerships and cooperation between economic stakeholders

18. What is the IMS? (1) A vision for the growth path of manufacturing A series of interventions by government to help achieve that vision A call to action for all economic stakeholders

19. What is the IMS? (2) A strategy for manufacturing in the wider sense – including all activities associated with the production of goods Uses the conceptual tool of integrated value matrices to understand production and how best to intervene effectively

20. Integrated Value Matrices: Leather

21. Value matrices interconnections: Auto & Components Automotiv e Sector 5% of GDP Chemicals/Plastics e.g. bumpers, trim Finance e.g vehicle finance Textiles/Synthetics, natural fibres e.g. environmentally sound interior trim Agro /leather e.g. leather seats Tool & Die Making Metals/carbon steel, aluminium, stainless, magnesium Design Suppliers of consumables ICT Estimated impact on GDP 8% 10% steel industry output consumed by auto Leather seats = 16% of component exports Engineering services

22. Integrated action with regard to: –Market access –Beneficiation and value addition –Equity and economic participation –Regional production –Knowledge intensity and services integration –Development of integrated value matrices What is the IMS? (3)

23. What can you expect from the dti ? Championing competitiveness within government in a way that supports equity Packages of customised services and products in prioritised sectors, developed in partnership with stakeholders More accessible and efficient broad-based services across the economy, to provide a platform for efficiency and equity

24. What can you expect from the dti ? Championing Competitiveness Leadership role in the economic & employment cluster Provision of valid and reliable information on the economy to economic actors

25. What can you expect from the dti ? Customised Services Developed in partnership will stakeholders in high potential sectors –cross-functional programmes, initially for: –clothing & textiles –agro-processing –metals & minerals –tourism –auto & transport –crafts –chemical & biotech –knowledge-intensive services & ICT For each sector, there will be a process of analysis, strategy development and action Also customised programmes for value matrix enablers: HRD, technology, infrastructure & logistics

26. What can you expect from the dti ? Broad-based services Services to address more generic issues critical to the development of the economy as a whole Increased relevance, accessibility and efficiency In addition to high volume services provided, will be specific programmes for: –Market access –Regulatory environment –Investment –Access to finance –Policy coherence

27. A challenge for all stakeholders: Partnerships for growth & development Necessary partnerships: –within government both vertically (national, provincial, local) & horizontally (interdepartmental) & their agencies –within the dti group of institutions –between economic actors at all levels in the economy –bringing in previously excluded voices –Parliament –knowledge networks

28. A challenge for all stakeholders: Partnerships for growth & development Purpose of partnerships –Developing a common economic vision –Information sharing within and between stakeholder groups – developing a common understanding of trends and drivers in the economy –Building partnerships for strategy development and action at all levels in the economy, including wider stakeholder representation –Developing new ways of thinking and working

29. Measuring our performance Developing our understanding of the key drivers in the economy Developing appropriate indicators to measure and evaluate: –efficiency –outputs –impact in relation to our objectives Benchmarking our relative performance and competitiveness, and best-practice of other DTI-equivalents Reviewing progress in partnership with stakeholders

30. The way forward Taking up the opportunity presented to us Moving from dialogue to collective action Securing the long-term sustainability of growth, employment and equity in our economy