Draft Consumer Policy and Integrated Manufacturing Strategy: Department briefings

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
8 September 2004
DRAFT CONSUMER POLICY AND INTEGRATED MANUFACTURING STRATEGY: DEPARTMENT BRIEFINGS

Chairperson:

Accelerating Growth and Development: The Contribution of an Integrated Manufacturing Strategy
Overview of the Consumer Policy Framework

SUMMARY
Representatives from the Department briefed the Committee on their vision and interventions to foster growth in the manufacturing sector. Their second briefing was an overview of the law review process and draft green paper on the consumer policy framework. In the first instance, Members' concerns centred on skills development; product dumping; inadequate industrialisation and the government's almost slavish commitment to following international trade rules to the detriment of local manufacturing growth. In addition, Members raised questions about the costs of enhanced protection of consumer rights and the range of legislation that needed to be amended to accomplish this objective.

MINUTES

Department briefing on growth in manufacturing
Mr F Denner, Chief Director of the Strategic Competitiveness Unit, presented the Department's strategy on "Accelerating Growth and Development: The Contribution of an Integrated Manufacturing Strategy". He reported that the Department's strategy for economic growth through manufacturing rested on four pillars: lowering of cost structure (input prices such as telecommunications, transport, electricity etc.). They had focussed on sectors with potential for growth and employment, e.g. the automotive, clothing and textile, aerospace and pharmaceutical industries; maintaining and sustaining growth in others for global integration and increasing market access; and focusing on skills development, research and development (R and D) and logistics. Mr L October, Deputy Director-General of the Department, added at the end that while statistics on economic growth were usually contested, now the state, university researchers, the South African Chamber of Commerce and others agreed that there had been employment growth and the losses of the 90s had been reversed. The growth in 2000 had been killed by the strength of the Rand but the current growth was fed by domestic demand and driven by many industries. The biggest challenge facing the economy was the Rand as a strong Rand drove decreases in export volumes.

Discussion
Ms D Ramodibe (ANC) asked if the Department would work with the Department of Education to build skills.

Mr M Stephen (UDM) asked how the Department would handle dumping in view of removing barriers to trade. He said also that high-tech manufacturing required less plant capacity and queried what competitive advantage South Africa could have in this sector.

Mr K Bapela (ANC) said that there was a need for a more comprehensive industrial strategy - South African manufacturing comprised 28% of its gross domestic product (GDP). He asked whether South Africa was industrialised enough as the country still imported many capital goods. He also asked if demand was generate locally or whether people were afraid to supply locally and whether others invested in South Africa.

Professor B Turok (ANC) had listened carefully for mention of the 'dual economy' but had not found any. He said that the previous draft of the integrated manufacturing strategy document had emphasised ICT that had prompted the Committee to complain that that focus would not create jobs. The current document was an improvement but had not gone far enough. He asked for data on importing luxury goods and suggested that if there were balance of payment problems, their import should be banned. The Department spoke about competitiveness but it would be more useful if they distinguished between local and international competition. The country was flooded with cheap imports and had lowered its import tariffs more than was stipulated by international trade conventions. Lastly, he said that the Department had missed an opportunity to re-capitalise the tooling industry because it was too busy focusing on the rules of the World Trade Organisation and negotiating with China to focus on training artisans.

Mr S Maja (ANC) asked for more information on skills development. He appreciated the focus on different sectors but asked about the housing sector. He also asked how global integration would be be balanced with domestic demands. He said that a new hybrid economy, rather than a dual economy, was needed and that the economy should be de-racialised. He was glad that the issue of beneficiation had come up. He contended that after the fall of the Berlin Wall, West Germany had "dived" for the skills of East Germany and he wanted to know how East Germany had skilled its workers so efficiently. He also wanted to know whether the Department would consult with other Departments on processing industrial policy.

Very diplomatically, Mr October said that it would require a thesis to answer the questions but that he would do his best. Some of the issues flagged by the Members had already been discussed in the Department but not yet incorporated into the policy documents and that the Committee was ahead of the Department. Boeing, recognising the need for a strong R and D base, locates that part of its operations in Russia. The Rand was a complex issue; at R12 to the dollar, everything from South Africa was cheap but this means to foster export was not sustainable. At the current rate of R6 to the dollar, some industries were battling to export but many had adapted to the stronger Rand.

The Department would work with the Departments of Education and Labour and integrate their efforts. Technical colleges had been neglected and new learnerships and Sectoral Education and Training Authorities (SETAs) were constrained by bureaucracy.

South Africa, with a population of 44 million and a low GDP, was a very small global market player. Sweden was similar and had adopted the strategy of dropping all income tariffs completely and integrating into the European market. South Africa was constrained from doing this because of the separation of markets and tariff barriers.

He agreed that the country needed stronger anti-dumping measures.

With respect to the question on hi-tech manufacturing requiring less plant and dynamic products, there had been global growth in medium and hi-tech products and South Africa had the potential to compete because of its past military spending in avionics, for example. Other potential areas were pharmaceuticals, which, along with SASOL-type products and technologies, were emerging sectors.

South African manufacturing comprised about 28% of its GDP. In developed economies, it was about 18%. The larger percentage in South Africa was because its exports were low-value. GDP growth should move to higher value products.

Foreign investors would invest in South Africa when the economy grew, in other words, investment would follow growth, not the other way round. The IMS' operational plan had not been drawn up yet. Mr Denner said that operationalising it would be the key work of his unit, which was set up about a year ago. He hoped that the Committee would engage with the plan when it was available.

Regarding the missed opportunity in tooling, Mr October said that the Department had engaged with it as a cross-cutting intervention and had received funding applications to re-capitalise the tooling industry to the value of abut R90 million. NEDLAC had put out the terms of reference.

Mr Njikelane asked for further comments on the automotive industry plans and whether the Department took much account of the LED.

Mr October said that the IDC had changed its mission to include small business development, Africa and equity but it would still be the Department's key vehicle. Over the last ten years, its contribution was more modest than it had been when it created SASOL and ISCOR, although it had created the industry at Saldanha Bay during the last decade. It had been the biggest funder of black economic empowerment (BEE) and its focus would be to drive new areas of growth, such as at Richards Bay, not Coega. BEE would be dealt with at the following week's briefing.

Department Consumer Policy Framework briefing
Mr M Moeletsi, Chief Director of Policy and Legislation, gave an overview of the policy and law review process of the Department Consumer Policy Framework. He reported that between 2000 and 2001 various initiatives resulted in a number of "research" documents on consumer protection policy but these were not holistic in approach. Towards the end of 2002, the task of drafting new policy that recognised the need for a comprehensive framework was begun. Legislation and mechanisms pertaining to consumer protection were reviewed to decide whether they should be repealed or amended and a National Consumer Survey was initiated. An international legislative benchmarking study was conducted and from April to July 2004 consultations were carried out with provincial counterparts; an international and local experts review team and selected stakeholders. Draft policy had now been submitted to Cabinet for approval to consult broadly.

Misleading advertising and selling practices, along with unfair terms in consumer contracts would be prohibited. Products should be labelled to provide a description of products and there should be transparency about price, country of origin and the terms and conditions pertaining to transactions and rights in relation to essential services.

There would be no need for concurrent provincial laws to be changed immediately although they should harmonise with the national framework eventually. A new national regulator and tribunal which would champion consumer rights was proposed. Provincial consumer affairs courts would deal primarily with individual complaints against local/provincial businesses and sector regulators would deal with consumer complaints and education in sectors. The South African Bureau of Standards (SABS) should deal with product safety issues, harmonisation and co-ordination. Other mechanisms envisaged were service and advocacy NGOs, targeting rural areas and providing legal advice, counselling and mediation, product testing, product alerts, information dissemination, research, market monitoring, policy inputs and representation for class action suits.

Government and business support was envisaged through funding and capacity-building programmes.
The public sector support would be engaged by extending Batho Pele to local government, extending consumer protection to utility regulators, fostering co-ordination with Chapter 9 Institutions and overall the equivalent application of consumer law in the public sector.

Discussion
Mr Stephens and Mr Bapela welcomed the proposed changes. Professor Turok agreed that they were welcome but said that the costs would be massive. He proposed that the Department start with civil society/consumer activists that would "get the press on board", see what had been accomplished with this measure and then see what needed to be achieved. Ms Ramodibe agreed with him, but said that new policy would be ineffective without courts. Ms N Khunou expanded on the need for consumer protection and education in light of increased advertising over the festive season that encouraged people to overspend and borrow. Mr Njikelane also welcomed the initiative but asked which sector laws would be amended to deal with dumping of inferior goods on the market. He noted that the policy went beyond consumer protection to promoting consumer rights and even rehabilitating consumers. He supported Professor Turok that such empowerment would be "a loaded area".

Mr Moeletsi hoped the Committee's concerns would be addressed in the next draft. He felt that a regulatory body to ensure redress would be necessary as most businesses knew when they were unfair but continued their practices anyway.

The meeting was adjourned.