Industrial Participation Programme: briefing by DTI

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Trade and Industry

19 March 2002
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE; ECONOMIC AFFAIRS SELECT COMMITTEE: JOINT MEETING
20 March 2002
INDUSTRIAL PARTICIPATION PROGRAMME: BRIEFING BY DTI
 


Chairperson: Dr Rob Davies (ANC)

Documents:

Industrial Participation Programme Powerpoint presentation
Report on the Industrial Participation Programme: March 2002

SUMMARY
The Department of Trade and Industry delivered a report on how the Industrial Participation Programme is being implemented. The Department's report reflects that it is on track. While the emphasis in the report was on investment and exports, the Committee was concerned about the impact on jobs. The Department will return in April with further information.

MINUTES
Announcements
Public hearings on industrial policy will be held after Parliament resumes on 23 April.

Industrial Participation Programme: briefing by Department of Trade & Industry
The presentation by Mr Bahle Sibisi, Chief Director: Foreign Trade Relations, accompanied by Mr Lionel October, both of DTI, follows the Joint Investigation Report hearings late last year.

Mr Sibisi commented that this report update has been presented to Cabinet as a briefing on the progress on the NIP and DIP projects related to the arms deal and other projects such as SAA and Telkom. The offset obligations will be discharged by 2012. The NIP targets are set for review at 3, 5 and 7 years with BAe Systems having an extension to 11 years. The DIP targets are set for review at 6 and 12 monthly intervals.

The offset obligations are US$14 billion. All projects must be viable. Projects change as market conditions vary but the obligation does not change. There is a review on performance on investments and exports, but no requirement on employment or SMMEs. The NIP projects are expected to generate US$5 billion by 2004, which is the first milestone review date.

Some 38 companies are involved in DIP projects, with R2.1 billion in contracts having been placed by March 2002. These relates to the assembly of corvettes and avionics, plus exports of helicopter frames to Sweden. The contribution to jobs is approximately 5 050, including those saved such as Forest Products near Sabi.

The biggest offset obligation is incurred by BAe Systems, amounting to US$7 billion which is obliged to invest US$2 billion and to generate exports of US$5.2 billion over 11 years.

Agusta: These obligations involve development of gold chain and cape mohair exports, and investigation of a silicon plant at Saldanha. Investments US$44.2 million: Exports US$275.9 million.

Thyssen: A German brewery is being established in East London. Aluminium pipes in Pietermaritzburg. Titanium, auto components and ferrochrome beneficiation are other projects.
Investments US$279.7 million: Exports US$1036.7 million

Thales (formerly Thomson CSF): Four projects valued at US$270 million (being $74 million in investments and $232 million in exports) are to be developed by 2004. These include solar panels, a silicon plant and establishment of a factory in the Cape to produce waste bins for medical waste disposal. Investments US$74.9 million: Exports US$232 million

Ferrostal: Stainless steel beneficiation and engineering services including manufacture of precision strip from Columbus Steel for the automotive industry and establishment of a condom plant at East London. Investments US$515.7: Exports US$1202.3 million

BAe Systems/Saab: Over NIP 20 projects. Global Forest Products has been saved, including jobs. A wide range of projects to generate exports of mining tools and auto components, gold beneficiation, with investments of US$300 million and exports of US$2 billion to be attained by the 2004 milestone. DIP projects are already well on target, NIPs at 50% of target. Over the next two years emphasis will be placed on increasing exports in auto components, aviation, tourism.

The spread of projects endeavours to move the historic emphasis of industry in Gauteng to the Eastern Cape and other areas of high unemployment.

Questions:
Mr K Durr (ACDP): How many jobs have been created, and how many retained? The gold chain exports by Agusta: I understand that the value added in gold chain manufacture is only about 4% -- similar to krugerrand production -- yet the export figures are on the full value of gold, a commodity which we have no difficulty in selling. As regards the automotive industry: isn't there an element of double-dipping to take advantage of existing incentives?

Mr J Selfe (DP): What skills training has been provided in the gold jewellery and manufacturing offsets?

Mr R Davies: Please explain the achievement milestones.

An ANC committee member: Why are there no requirements on jobs and SMMEs? What types of jobs are being created? Are they washing planes and sweeping floors? If there are no technically-related SMMEs, how do you facilitate skills training? I recently visited the Patents Office to investigate the automotive sector -- not one new technology relating to the offsets has been registered.

Mr Rasmeni (ANC): I note the concentration of projects on mineral beneficiation, but there are no job requirements on SMMEs. Please clarify the process.

Mr M Moosa (ANC, NCOP): Rand/dollar figures on page 5. What is your standard, rand of dollars? What provincial participation has been involved in the project selections in liaison with MECs on provincial strategies. What about the SMMEs: all the projects are highly technical.

Answers:
Mr Sibisi: The creation/saving of jobs ratios are about 80% creation and 20% saving. There is no double-dipping on auto incentives except for the catalytic converters for Volvo. We are trying to diversify auto components being sourced from South Africa away from car seats and catalytic converters.

Mr October: The machine tooling of gold chains in Virginia and the Western Cape includes women being trained, and being trained a goldsmiths. The offset contracts do not requirement SMMEs and jobs, but these issues are now being remedied. Between 20% and 30% black participation is now required in the condom and beer plants in East London.

The beneficiation projects are in silicon, stainless steel, titanium and gold. We have focussed upon the Eastern Cape because of the particularly high unemployment there. Agusta has already made its export targets, but still needs to make its investment target next year on the silicon project. The IDC may co-invest in that project in Saldanha. We have large deposits of titanium in South Africa, and there is an increasing shift in the automotive industry away from stainless steel and aluminium to titanium.

Most jobs are very skills intensive. We need semi-skilled jobs, and we are now looking at the agriculture and textile sectors to remedy this deficiency.

Mr Davies noted that this useful report shows that the obligations are being met. He said that they need to come back to the topic in April and examine the milestones. They need to know the relationships between investments and exports. Where are the disjunctures, such as with Agusta -- and the consequences of currency depreciation? They would also want to know the number of jobs, and measurements per project.

Mr Moosa commented that these are government-initiated projects. They should target government priorities such as black employment, women and SMMEs.

Mr October said that the key emphasis on the offsets was investments and exports, and they now realise the need to fine-tune the objectives into jobs.

Meeting adjourned.

 

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