Industrial Policy Action Plan (IPAP)
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INDUSTRIAL POLICY ACTION PLAN Economic sectors, employment and infrastructure development cluster 2018/19 - 2020/21 Economic Analysis 10-year Legacy Review Key Constraints on Industrial Policy Transversal and Sector Focus Areas with Key Action Programmes towards full-scale industrialisation and inclusive growth the dti Customer Contact Centre: 0861 843 384 Website: www.thedti.gov.za © Department of Trade and Industry, May 2018 Photos are courtesy of the dti image library the dti Campus 77 Meintjies Street Sunnyside Pretoria 0002 the dti Private Bag X84 Pretoria 0001 the dti Customer Contact Centre: 0861 843 384 the dti Website: www.thedti.gov.za ISBN: 978-0-621-46268-5 RP: 109/2018 Contents FOREWORD BY THE MINISTER OF TRADE AND INDUSTRY ....................................................................................................................................................................................................4 A MESSAGE FROM THE DIRECTOR-GENERAL .........................................................................................................................................................................................................................9 IPAP IN CONTEXT: ECONOMIC ANALYSIS ...............................................................................................................................................................................................................................10 10 YEARS OF IPAP: A LEGACY REPORT ..................................................................................................................................................................................................................................28 KEY CONSTRAINTS ON INDUSTRIAL POLICY ........................................................................................................................................................................................................................50 TRANSVERSAL FOCUS AREAS ................................................................................................................................................................................................................................................56 SECTORAL FOCUS AREAS: 1 ..................................................................................................................................................................................................................................................106 SECTORAL FOCUS AREAS: 2 ..................................................................................................................................................................................................................................................155 the dti KEY PARTNERS AND TECHNICAL SUPPORT INSTITUTIONS ................................................................................................................................................................................190 KEY PARTNER INSTITUTIONS ............................................................................................................................................................................................................................................191 TECHNICAL SUPPORT INSTITUTIONS ..............................................................................................................................................................................................................................193 the dti | IPAP: 2018/19 – 2020/21 4 FOREWORD BY THE MINISTER OF TRADE AND INDUSTRY 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 Dr Rob Davies MP of new technologies and ultimately design capabilities. However, the boundary between what This is the tenth annual iteration of the Industrial Policy Action were historically considered primary sectors, such as mining and agriculture, and manufacturing Plan (IPAP) and the last of the present administration. In industries and the services sectors, is becoming increasingly blurred. addition to providing an economic analysis of prevailing global For example, the process of producing high-value agricultural produce on large scale for and domestic economic conditions relevant to industrial policy; exports has become extremely technologically complex; more so than some manufacturing time bound action plans and programmes across a range of processes. Similarly, the mechanisation and digitisation of deep-level and above-ground mining sectors and listing the key constraints to an optimal industrial processes require the mastery of complex industrial capabilities, including many technologies strategy, IPAP 2018 provides a summarised Legacy Report and disciplines associated with the digital industrial revolution. In a nutshell, many primary covering progress over the ten years of its existence. 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 In addition, core to South Africa’s industrial policy is the objective of transforming the racially the period since the adoption of the National Industrial Policy Framework (NIPF) and the skewed ownership, management and employment profile of the economy. The synergies experience of implementing successive, updated Action Plans over the course of one decade. between industrial policy and transformation are obvious. If a product is imported, there is no Industrial policy has the over-arching objective of enhancing the productive capabilities of the possibility of building a transformed supply chain. Industrial policy needs to make a concerted economy. In other words, industrial policy aims to increase the economy’s ability to produce effort to ensure that support for investment is integrated with support for transformation. For more and more complex and high value-added products with greater efficiency. In simple terms, example, the Black Industrialist Programme provides significant grant finance for investment in this means to produce more value using less resources. Building the economy’s industrial new plant, provided that the enterprise has at least a 50% black shareholding and/or exercises capabilities is a continuous and long-term endeavour and technologies continuously evolve. control over the business.1 The key challenge to industrial policy is to incentivise investment in plant, technologies and In addition, then, to these matters of context, the following observations are critical, in our view, skills that would have medium to long term benefits to the economy, but which the market would to the future of a successful domestic industrial strategy. 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 Basic economic service delivery productivity improvement and increased welfare. Firstly, basic economic service delivery needs to be in place for there to be effective 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 bottom. 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. 5 On the supply side, SOCs must play a key enabling role in support of the general economic Industrial policy in the global context and industrial effort by providing competitive and efficient electricity, rail and port logistics. On The global context remains critical. The past decade of implementing South African industrial the demand side, they must support localisation, supplier development and black economic strategy needs to be understood in relation to the global financial crisis of 2008-2009 and the empowerment. Urgent attention must be given to the institutional renewal of public-sector extended economic crisis which flowed in its wake. The ensuing slump in global demand for monopolies which have been responsible for significant import leakages, debilitating and many of South Africa commodities resulted in a slowing down of exports and investment in unsustainable increases in electricity, rail and port costs and attendant inefficiencies. South Africa. In addition, surplus global capacity in the production of many key commodities has created huge challenges for South African industry. Institutional coordination For example, in the steel sector an inter-governmental task team was formed to deal with a The realities of institutional coordination need to be carefully considered. Industrial policy crisis in the industry, through the judicious deployment of a range of industrial policy measures. rests on multiple foundations and must embrace a complex set of interlocking and mutually While internationally recognised as a model of government-industry-labour social dialogue, it supportive policies and programmes, held together by the vision set out in the National was essentially a holding action. Much more still needs to be done to ensure that SA’s domestic Development Plan.