South Africa's Trade Policy: hearings: Day 8; Committee's Strategic Plan: adoption

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Trade and Industry

06 April 2010
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Cosatu representatives welcomed many aspects of the new Trade Policy, though there were concerns about the Trade and Industrial Policy Strategies (TPSF) being non-committal on South Africa’s approach to new generation issues such as trade in public services, competition, government procurement, labour and the environment. A firmer position should be taken in the TPSF on the prerogative of Government to exclude public services, government procurement and other strategic areas from the ambit of the World Trade Organisation (WTO).

The TPSF should also recognise the serious threat the General Agreement on Trade in Services (GATS) posed to social transformation and the guarantee of human rights as well as to ‘policy space’, i.e. national sovereignty. GATS posed a threat to government sovereignty to address the socio-economic challenges facing South Africa and to provide affordable services to the poor.

Members enquired whether lower input costs would entail lower labour costs and how Cosatu influenced and interacted with other union confederation in the SADEC region and across Africa. They asked if the current exchange rate policy was consistent with industrial and trade policies. They wanted to know what Cosatu was doing about the effect of the employment of illegal foreign nationals and what was being done to ensure workers were also given further training.

The Deputy Minister said the Department, Cosatu and other stakeholders should meet to discuss how to form viable co-operatives which would help those in the agricultural sector.

Trade and Industrial Policy Strategies (TIPS) said the Industrial Policy Action Plan was an important document as it aimed to link trade and industrial policies. Weak links were found in the areas of poverty, agriculture, education and technology development. The shift away from primary sectors to manufacturing and service sectors came with the price of high unemployment rates. Education and the upgrading of skills were solutions in this regard. There was also no clear position on South African policy about services trade. SACU had to be transformed as it was not helping small countries develop industrial capacity. Africa’s share of the export market was growing. If this growth trend were to continue for the next 15 years, Africa and Europe could be on the same level in terms of their share of the export market.

Issues discussed included economic growth and jobs; what were the proposals on BBBEEE and co-operatives; the role of the private sector and educational institutions in education on alternative ways to trade in agricultural products.

The Committee discussed the first draft of its Strategic Plan. The priorities were: the Companies Act, the National Credit Act, the issue of preferential procurement and BBBEE. The most important priority was the linkages between trade and IPAP as this would help address unemployment and poverty. The Chairperson said that the referral to rural development should specify the importance of focussing on the empowerment of rural women. The Chairperson said that a proposal would be sent to the Minister stating the Committee’s desired intention for greater presence in the forging of trade agreements. The draft Strategic Plan was approved.

Meeting report

Cosatu submission: South African Trade Policy and Strategy Framework
Ms Zingiswa Losi, Cosatu Deputy President, said as trade policies impacted on employment, economic growth and investment, Cosatu welcomed the new Trade Policy and Strategic Framework (TPSF). In the absence of such a policy, workers and communities were negatively affected through job losses, disruption of their livelihoods and other socio-economic shocks. The TPSF would guide policy makers, negotiators and social partners on the key objectives driving the trade diplomacy of the country.  It deviates from the trade theory orthodoxy that trade policy was solely about export growth and competitiveness, with the erroneous assumption that once such export growth was realised, it would produce positive spin-offs on its own.

Cosatu also welcomed the fact that the TPSF acknowledged the need for trade policy to be guided by industrial policy. It agreed that trade policy was secondary to industrial policy and as such should service industrial development, diversification and modernisation. Trade policies should also be consistent with other macro-economic policies, including exchange rate and local procurement policies.

It proposed the adoption of a strategic tariff policy. This was in place of the textbook approach or ideological stance of expedited phase-down previously employed. A strategic tariff approach promoted dynamic industrialisation as opposed to static comparative advantage. It created the space and time for industries to develop and, where essential, to restructure in response to changing global competition. Despite a trend towards lower duties promoted by developed countries, tariffs remained a crucial instrument of industrial policy.

Cosatu welcomed the focus of beneficiation in the TPSF and the possible use of export duties where required. Beneficiation and diversification were essential given the structure of the South African economy.  It also supported the TPSF’s intention to lower input costs to stimulate labour-creating downstream manufacturing. This, however, could not be done in certain sectors without addressing the issue of import parity pricing. The TPSF employed a narrow reading of trade instruments, concentrating mainly on tariffs. It should also deal with other instruments such as research and development and other subsidies, anti-dumping measures and safeguards.

Cosatu welcomed the confirmation of the mandate of the International Trade Administration Commission (ITAC) to ensure its investigations considered the impact on output and employment. ITACs mandate must recognise the right of trade unions and workers to initiate and participate in tariff negotiations and the introduction or review of trade remedies. ITAC’s capacity should be increased to allow it to carry out more investigations as mandated ‘South Africa’s Response to the International Economic Crisis’. Cosatu would argue that ITAC received the kind of focus the Competition Commission had received in recent years.

While Government should focus resources on the agricultural sector, in particular for rural development purposes, trade policy and remedies should be used to ensure that imports of subsidised products as well as products that contravened other WTO agreements were not allowed in South Africa if those products were grown or manufactured locally. The support programmes of especially developed countries were significant features of the global agricultural market. The market was fraught with distortions caused especially by the policies of the EU and the US. The TPSF should state South Africa’s intention to initiate disputes and join other countries’ disputes against developed countries’ protectionist policies.

Cosatu supported the view that SACU should not serve as a captive market for exports but rather as a vehicle for deepening integration and development within the region. For the desired regional integration and development to happen, policy harmonisation on labour, social and industrial policy was paramount and should be pursued by the South African government.

In regard to the World Trade Organisation (WTO) the TPSF correctly committed South Africa to multilateralism in managing globalisation and in forging responses to it. It asserted that the current rules governing international trade, monetary and financial relationship were imbalanced and prejudicial to developing countries. To address this challenge South Africa had led the call to reform these rules and structures in order for them to be more transparent and equitable. The TPSF should commit South Africa to changing its status from a developing country to a ‘small and vulnerable economy’ given its particular circumstances.

In relation to bi- and multilateral relations, Cosatu supported the TPSF stance that it would not accept the templates of others especially on bilateral trade where there are no multilateral disciplines. This point was especially crucial in instances where countries of the North sought ‘WTO-plus’ commitments, such as in the Economic Partnership Agreements (EPAs).

The TPSF was non-committal about the approach South Africa would adopt in navigating the treacherous terrain of new generation issues such as trade in public services, competition, government procurement, labour and the environment. Cosatu would therefore like to see a firmer position being taken in the TPSF on the prerogative of Government to exclude public services, government procurement and other strategic areas from the ambit of the WTO.

The TPSF should recognise the serious threat the General Agreement on Trade in Services (GATS) posed to social transformation and the guarantee of human rights as well as to ‘policy space’, i.e. national sovereignty. GATS posed a threat to government sovereignty to address the socio-economic challenges facing South Africa and to provide affordable services to the poor.

Applying the cautionary principle to GATS would mean that South Africa would make no further GATS offers and would consider withdrawing the Doha Round offers it had already made. This position could be maintained until threatened with a formal dispute or until the negotiations on the outstanding GATS provisions had been concluded. This would maximise the protection of policy space while giving effect to making offers only when it was unavoidable.

Discussion
Mr A Van Der Westhuizen (DA) asked for examples of foreign companies taking over South African companies in order to close these companies down so as to create space for their own exports locally. Was its proposal that South Africa withdraw Doha Round offers it had already made until threatened with a formal dispute not too maverick an attitude for a respectable country to adopt?

Mr E Vlok, Research Director, SACTWU, said multinationals in the dairy industry had, a few years ago, bought up smaller dairies and closed them down. This had led to a more concentrated industry. Cosatu did not view this to be maverick attitude, but was instead necessary due the major socio-economic issues facing South Africa (i.e. job creation, poverty etc).

Mr L Mphahlele (PAC) asked Cosatu to elaborate on its view that trade policy should support industrial policy. Could examples be given of locally-based agricultural manufacturers violating WTO rules?

Mr Vlok said Cosatu had previously been concerned about trade policy leading industrial policy as this did not afford adequate protection for certain industries locally. It welcomed Government’s new move towards preferential trade agreements as this allowed for the protection of some industries as well as opening trade opportunities for others looking to trade in these areas. The violations referred to were by European and American companies especially, against whose subsidised products local manufacturers had to compete.

Mr Radebe (ANC) asked whether lower input costs would entail lower labour costs. Could South Africa learn from Israel’s successes agriculturally?

Mr Vlok said Cosatu did not support lower labour costs. There were many other examples of countries South Africa could learn from in terms of agricultural policy.

Mr X Mabaso (ANC) asked to what degree Cosatu influenced and interacted with other union confederations in the SADC region and across Africa?

Mr Vlok answered that Cosatu was involved in both regional and continental trade unions.

The Chairperson asked whether the current exchange rate policy was consistent with industrial and trade policies.

Mr Vlok said a strong, overvalued currency could undermine a lot of the work set out in IPAP.

Mr Mabaso asked what actions Cosatu were taking regarding the effect of the employment of illegal foreign nationals. What were its views on developing countries subsidising their own products? What was being done to ensure workers were also given further training?

Ms Losi said Cosatu had been working with the Department of Home Affairs around this issue, particularly with the Migration Policy, to ensure that there were more stringent measures put in place at the points of entry.

Mr Vlok said WTO rules allowed space for developing countries to subsidise their products, more so than for developed countries. As difficulties arose with these countries’ budgets, trade measures were important in this regard.

Ms Losi continued that Cosatu had also been looking into using the Training Lay-Off Scheme as a tool to train farm workers, thereby ensuring rural development as a way of reducing urban influx.

The Deputy Minister said Cosatu should, in addition to elaborating on the issue of procurement, consider how to get the Second Economy to partake in discussions around trade issues.  Support (financial and non-financial), mentorship and incubation were also important to look into when it came to empowering those in the agricultural sector. There needed be a holistic model to assist people in this sector. The Department, Cosatu and other stakeholders should meet to discuss how to form viable co-operatives which would be of real assistance those in the agricultural sector in need of assistance.

Ms Losi said Cosatu would take up the Deputy Minister’s call for a discussion around the issues she raised.

Mr Xavier Kariem, Deputy Director-General Department of Trade and Industry, said many of the comments made by Cosatu in their presentation had been accommodated in the TPSF, either directly or under the Areas for Future Work section of the document. Nedlac was due to sign off on this document on 7 April 2010.

TIPS: Alignment, Constraints and Challenges of SA Trade Policy and Strategy Framework
Mr Mmatlou Kalaba, TIPS Researcher, said that in terms of alignment with other programmes, IPAP was an important link document as it aimed to link trade and industrial policies. Weak links were, however, found in the areas of poverty, agriculture, education and technology development.
Trade had changed significantly over the past decades and South Africa had followed this trend by adjusting to these shifts. The shift away from primary sectors to manufacturing and service sectors unfortunately came with the price of high unemployment rates. The long-term solution in this regard was education while the short- and medium-term upgrading of skills seemed to be a solution. This required alignment with the Departments of Education, Science and Technology in order to adopt, adapt and advance technology-based products.

There was no clear position around South African policy with regards to services trade. These delays should be used to develop South Africa’s own position. Failure to do so may result in pressure to adopt templates developed by others.

SACU had to be transformed as it was not helping small countries develop industrial capacity. It was not a customs union in the true sense. Africa’s exports were of a diverse nature and its share of the export market was growing. If this growth trend were to continue for the next fifteen years, Africa and Europe could be on the same level in terms of their share of the export market.

Discussion
Mr S Marais (DA) asked what was being done about the education of artisans and other on-the-job training.

Mr Kalaba said the education of artisans was important and was being closely monitored.

Mr Mphahlele asked why economic growth had not created jobs.

Mr Kalaba said the drivers of economic growth could only benefit certain sectors connected to it. Part of the objective of the TPSF was to change this situation.

Mr Mabaso asked what the comments and proposals were around BBBEE and co-operatives. What was being done about SACU not living up to expectations?

Mr Kalaba said co-operatives played a very important role. In order to export or compete globally, however, they needed increased finances and mentorship, among others.

Ms P Lebenya (IFP) asked what role the private sector and tertiary educational institutions played in education. What could be done to educate rural people around other ways to trade agricultural produce?

Mr Kalaba said although there was input from the private sector and educational institutions in this regard, these efforts were fragmented and needed to be co-ordinated for effective capacity-building.

The Chairperson asked why SACU was not seen as a real customs union. What proposals or suggestions would it put forward to address the issue of education?

Mr Kalaba said standard customs unions shared policies. SACU did not have this.

Ms X Gonzalez-Nunez, TIPS Executive Director, said TIPS was not qualified to suggest to the Department of Education how it should approach this issue. It could only ascertain needs in this regard.

Review of the Committee’s Strategic Plan
The Chairperson asked which issues the Committee should prioritise.

Mr Van Der Westhuizen replied that under Industrial Policy, the first two paragraphs should be reworked to consider the revised IPAP.  Under Broader Economic Participation (p.9), tenderpreneurship should be included as an issue to be looked into to ensure broader economic participation. As the Committee was to play a role in the revision - and not merely implementation - of both the National Gambling Amendment Act as well as the Companies Act, the sentences dealing with these should be amended to reflect this. As the Companies and Intellectual Property Registration Office (Cipro) was to become a commission, this should be listed as one of the Committee’s areas of focus.

The Chairperson said the report would accommodate both the issues the Committee had dealt with as well as the Committee’s position on these issues. The Committee’s position on the National Lotteries Board, Gambling remained the same as it had outlined its reports on these respective issues. (The Committee was, however, waiting for the Department to table its report on the study it commissioned before the Committee finalised its position on the Gambling Act.) There were significant amendments to the Companies Act, which dealt with Cipro. The Committee was awaiting the results of the forensic enquiry undertaken by the Minister before it finalised its position on this issue. Although the Committee had yet to deal with the Liquor Act, it was, as yet, not a major priority. The National Credit Act was an important issue for the Committee to deal with. Public procurement was a critical issue which needed reviewing. In terms of the priorities of the Committee’s oversight strategy, the linkages between trade and IPAP was the most important one in order to address the issues of employment and poverty.

Mr Mabaso said that the issue of Broad-Based Black Economic Empowerment Act should be looked into, with particular focus on co-operatives.

The Chairperson asked whether the Committee had a mandate over the issue of BBBEE.

The Parliamentary Liaison Officer said the President nominated and appointed the Advisory Council and the Department would be the Secretariat.

The Chairperson said that the Committee would seek clarification from the Minister around whether the Board would account to Secretariat or the Department of Trade and Industry. Should preferential procurement be separated from BBBEE or should it be allocated a section for itself?

Mr Marais said that as there was a disjuncture between the requirements set out in the BBBEE and the Preferential Procurement Acts; these were separate issues and should be aligned.

Mr Radebe said that the issue of entrepreneurship should be separated from that of BBBEE.
The Chairperson asked whether the Strategic Plan should be restructured to give so as to afford industrial policy greater importance.

Mr Njikelana (ANC) proposed an operational framework which would consist of three areas: Strategy, Programme and Operational Plan.

Mr Radebe said that the Strategic Plan should be restructured with a focus on Government priorities.

Mr Van Der Westhuizen seconded Mr Njikelana’s proposal. The Committee should also liaise with the Department and the Minister around timelines for the Companies Act.

The Chairperson said a researcher should look into gaps within existing legislation in order to ascertain what the Department’s involvement was in certain areas.

Ms F Khumalo (ANC) said that women in rural areas should be noted as a priority under BBBEE.

The Chairperson said that the referral to rural development was too narrow and should specify the importance of focussing on the empowerment of rural women.

Mr Njikelana said that the Committee should, in this regard, link up with the relevant Department.

The Chairperson said that though there was nothing prohibiting it, it should be formalised in writing in Parliament’s rules that Committees be allowed to work together on issues which cut across them. The Committee should visit provinces other than the Western Cape, especially those most in need of economic development. Committee meetings held outside of Parliament will achieve broad oversight over its priorities as well as run the Committee meeting itself.

Mr Van Der Westhuizen said the Committee should be more involved in bi-lateral trade agreements.
The Chairperson said that a proposal would be sent to the Minister stating the Committee’s desired intention for greater presence in the forging of trade agreements. While some of the Committee’s priorities would be ongoing, there should be tighter timeframes. Task teams should be appointed to deal with some of the larger pieces of legislation. Study visits should be undertaken to other African countries. The Committee would consult with Tralac on the best way to undertake an oversight visit to Namibia, linking up to SACU. Could the Committee justify a study visit before the end of the financial year?

Mr Marais said that, if the budget allowed, the Committee should focus on gleaning lessons from other emerging economies, such as Brazil and India.

Mr Radebe said that the Committee could also learn from countries such as Germany.
The Chairperson said that while the Committee was not ruling out Northern countries, its focus would remain on the South. The Committee should carefully consider it needs before choosing to visit a country.  It would continue meeting every Wednesday

The draft was approved.

The meeting was adjourned.

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