1 the dti Campus 77 Meintjies Street Sunnyside Pretoria, 0002 the dti Postal Address Private Bag X84, Pretoria, Gauteng, 0001 the dti Customer Contact Centre: 0861 843 384 Courier the dti, 12 Robert Sobukwe St, Sunnyside, Pretoria, Gauteng, 0002 the dti Website: www.thedti.gov.za ISBN: 978-0-621-46268-5 RP: 109/2018 the dti | IPAP: 2018/19 – 2020/21 2 ......................................... 3 ........................................... 111 ...................................................................................... 112 .......................................................... 8 ................................................... 115 ............................................................ 11 ................................ 121 ................................................................ 33 ................................................................................. 127 ............................................. 134 ........................................................ 55 ..................................... 141 .......................................... 61 ........................................... 160 ...................................................... 62 ......................................................................... 161 .............................................................................. 71 ................................................................................. 170 ................................................................... 73 9. ..................................................................... 176 ........................................ 85 ........................................... 179 ................................................................ 91 11. ........................................................................ 183 ....................................................................... 93 12. .................................................................. 191 the dti | IPAP: 2018/19 – 2020/21 3 The key challenge to industrial policy is to incentivise investment in plant, technologies and skills that would have medium to long term benefits to the economy, but which the market would screen out because there is lower hanging fruit for short term returns. Industrial investment in targeted technologies and sectors spills over to the rest of the economy, resulting in generalised productivity improvement and increased welfare. Industrial policy has traditionally placed a strong emphasis on the manufacturing sector, precisely because of such spill-over effects, and in terms of production disciplines, the mastery of new technologies and ultimately design capabilities. However, the boundary between what were historically considered primary sectors, such as mining and agriculture, and manufacturing industries and the services sectors, is becoming increasingly blurred. his is the tenth annual iteration of the Industrial Policy Action Plan (IPAP) and the last For example, the process of producing high-value agricultural produce on large scale for T of the present administration. In addition to providing an economic analysis of exports has become extremely technologically complex; more so than some prevailing global and domestic economic conditions relevant to industrial policy; time manufacturing processes. Similarly, the mechanisation and digitisation of deep-level and bound action plans and programmes across a range of sectors and listing the key above-ground mining processes require the mastery of complex industrial capabilities, constraints to an optimal industrial strategy, IPAP 2018 provides a summarised Legacy including many technologies and disciplines associated with the digital industrial Report covering progress over the ten years of its existence. revolution. In a nutshell, many primary sectors have become industrialised, and with time this will become even more the case. The occasion also gives us a useful opportunity to reflect on the implementation of IPAP in the period since the adoption of the National Industrial Policy Framework (NIPF) and In addition, core to South Africa’s industrial policy is the objective of transforming the the experience of implementing successive, updated Action Plans over the course of one racially skewed ownership, management and employment profile of the economy. The decade. synergies between industrial policy and transformation are obvious. If a product is imported, there is no possibility of building a transformed supply chain. Industrial policy Industrial policy has the over-arching objective of enhancing the productive capabilities needs to make a concerted effort to ensure that support for investment is integrated with of the economy. In other words, industrial policy aims to increase the economy’s ability support for transformation. For example, the Black Industrialist Programme provides to produce more and more complex and high value-added products with greater significant grant finance for investment in new plant, provided that the enterprise has at efficiency. In simple terms, this means to produce more value using less resources. least a 50% black shareholding and/or exercises control over the business.1 Building the economy’s industrial capabilities is a continuous and long-term endeavour and technologies continuously evolve. In addition, then, to these matters of context, the following observations are critical, in our view, to the future of a successful domestic industrial strategy. 1 Other criteria: • Provides strategic and operational leadership to the business; • Is entrepreneurial and takes personal risk in the business; • Does business in manufacturing and related sectors, with particular reference to IPAP and IDC focus areas; • Makes a long-term commitment to the business and is not a short- to medium-term investor. the dti | IPAP: 2018/19 – 2020/21 4 Basic economic service delivery In the absence of policy certainty, fragmentation in government, wilful non-compliance and corruption in private and public-sector institutions - all these and more - inevitably Firstly, basic economic service delivery needs to be in place for there to be effective lead to sub-optimal outcomes. industrial policy: As is now very widely accepted, the institutional failure that derives from pervasive corruption and rent-seeking in key SOCs must be rooted out from top to Industrial policy in the global context bottom. The global context remains critical. The past decade of implementing South African On the supply side, SOCs must play a key enabling role in support of the general economic industrial strategy needs to be understood in relation to the global financial crisis of 2008- and industrial effort by providing competitive and efficient electricity, rail and port 2009 and the extended economic crisis which flowed in its wake. The ensuing slump in logistics. On the demand side, they must support localisation, supplier development and global demand for many of South Africa commodities resulted in a slowing down of black economic empowerment. Urgent attention must be given to the institutional exports and investment in South Africa. In addition, surplus global capacity in the renewal of public-sector monopolies which have been responsible for significant import production of many key commodities has created huge challenges for South African leakages, debilitating and unsustainable increases in electricity, rail and port costs and industry. attendant inefficiencies. For example, in the steel sector an inter-governmental task team was formed to deal with Institutional coordination a crisis in the industry, through the judicious deployment of a range of industrial policy measures. While internationally recognised as a model of government-industry-labour The realities of institutional coordination need to be carefully considered. Industrial policy social dialogue, it was essentially a holding action. Much more still needs to be done to rests on multiple foundations and must embrace a complex set of interlocking and ensure that SA’s domestic steel production is globally competitive and supports an mutually supportive policies and programmes, held together by the vision set out in the increasingly globally competitive, value-adding, technology-intensive downstream sector. National Development Plan. Industrial Policy is by its nature an iterative process: the building of industrial capabilities On the one hand, industrial policy must be a policy of the whole of government and not is a step-by-step process. It is not possible for an economy to master highly advanced and just one or two departments. Policy coherence and programme alignment are a complex industrial capabilities, if basic and intermediate capabilities are not in place. This precondition for successful industrial interventions. means that policies need to continually adapt to developments in every industrial sector. On the other hand, the reality is that building institutional capability and coherence is a The key to industrial policy is thus how effectively it can adapt to a very dynamic slow, hard job, particularly given the unevenness of existing capabilities across the South environment. In the case of the automotive industry, for example, SA has made African state. enormous progress in establishing a globally competitive, export-rich automotive sector. This being so, the only practical way to implement effective industrial policy is to ‘learn But the global market requires constant innovation and creativity, and so our efforts