Regional Industrial Development Draft Strategy: Department briefing

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
2 August 2006
REGIONAL INDUSTRIAL DEVELOPMENT DRAFT STRATEGY: DEPARTMENT BRIEFING

Acting Chairperson: Mr D A Oliphant (ANC)

Documents handed out:
DTI presentation on Draft Regional Industrial Development Strategy
Draft Regional Industrial Development Strategy (available www.dti.gov.za under Publications)

Department delegation: Dr Raymond Ngobo (Chief Director: Strategic Competitiveness, Mr Tshidiso Motana (Deputy Director: General International Trade and Economic Development) and Mr Lionel October (Deputy Director General: Enterprise & Industry Development)

SUMMARY

The Department of Trade and Industry presented its draft Regional Industrial Development Strategy to the Committee, which highlighted spatial distribution of gross value addition, growth disparities and unemployment trends. The presentation highlighted the need for the strategy and outlined the Department’s intentions.
 
Members sought clarity on the Department’s engagement with municipalities; whether the set objectives of the strategy were achievable; whether the strategy was not too reliant on factors outside the Department’s control; whether land would be available for development and whether adequate support would be given to industrial parks.

MINUTES 

Department presentation

The Department of Trade and Industry (DTI) presented its draft Regional Industrial Development Strategy (RIDS), which highlighted spatial distribution of gross value added (GVA) per 50km mesozone, growth disparities and unemployment trends. The presentation highlighted the need for a RIDS which would ensure all regions could fulfill their economic potential by addressing blockages and barriers to the effective operation of the market. The presentation highlighted the Department’s strategic intent, and broad approaches to regional development. The strategy also addressed the debate on whether Government should make either generic or targeted interventions.

Discussion

Ms F Mohamed (ANC) reminded the Committee that the manufacturing sector had been damaged as a result of dumping. She questioned whether the RIDS would propagate an environment where the manufacturing industry would succeed, given the fact that dumping still remained unresolved.  Massive dumping of goods from countries like China still occurred; she felt that this was a matter that needed to be thoroughly looked at. She sought clarity on whether the Department believed that industry was mature enough to embrace innovation.

Dr Raymond Ngobo (DTI, Chief Director: Strategic Competitiveness) explained that part of the manufacturing strategy was to ensure necessary support was provided to the manufacturing industry, particularly in regard to competitiveness. The strategy provided the foundation for ensuring there was sufficient technological support to the manufacturing industry. He stressed that the manufacturing sector remained very important to the growth of the economy, and explained that the sector still dominated international trade.

He explained that the intention was that the capability within manufacturing would be addressed through the National Industrial Policy (NIP) framework. There were certain manufacturing industries that were mature enough to utilise the opportunities that already exist in the regions, particularly in the timber and metal sectors.

Mr Tshidiso Motana (DTI, Deputy Director: General International Trade and Economic Development) explained that there was protection from dumping as a result of World Trade Organisation (WTO)  agreements, as well as national legislation. South Africa was in fact regarded as an active country in regard of its firm stance against dumping. However greater intervention was needed. China’s textile industry remained a threat in this regard, but the Department was reviewing the issue.

Ms Mohamed noted that the presentation had highlighted that the Department would look at the industrial road maps of the regions and she asked for clarity on the process for accepting the road maps.

Dr Ngobo explained that district municipalities were in the process of formulating District Local Economic Development Plans (LEDPs) as part of their Integrated Development Plans (IDPs). Analysis was currently being conducted on these.

He explained that the Industrial Road Map would be a joint vision between local private sector and Government. It would identify key economic areas that required intervention.

Dr P Rabie (DA) believed that the main challenge faced in terms of promoting industrial development in rural areas was that the basic road structure was often in a “sad state of neglect”.  He believed most rural towns had not experienced significant growth in employment opportunities.

Dr Ngobo concurred that a major challenge did relate to the road infrastructure which would require a collective remedial effort. The Department was already engaging the Department of Provincial and Local Government (DPLG) on the matter. All resources would be converged in order to deliver on the priorities set by the local IDP.

Dr Rabie questioned why the Department had not considered providing tax concessions and maybe even labour concessions in areas that were in dire need of development.

Ms M Ntuli (ANC) noted that the regions that had been identified by the Department were mainly in the former homelands. These areas had desperately little infrastructure. She believed that, if the Department intended bringing businesses and investment from outside of these areas, it would be a disaster. She felt the Department needed to seriously consider training the people from these areas to play a role in the development of these areas themselves. 

Dr Ngobo stressed that the Department wanted to see manufacturing succeed in industrially underdeveloped areas. The intension was not necessarily to encourage businesses to relocate from elsewhere, but rather to foster industrial activities that were already located in such areas.

Ms Ntuli was skeptical about the proposal that financial support would be made available for the construction of industrial parks. Across the country there already existed numerous industrial parks that were under-utilised because they were too expensive. She questioned how the Department intended dealing with this issue and pointed out that it would be useless if parks in rural areas were owned by people from Sandton or Cape Town who did not know the particulars of the area.

 Mr Lionel October (DTI; Deputy Director General Enterprise & Industry Development) believed Ms Ntuli had raised a legitimate point in that some industrial parks were standing empty. However he felt it was important for the Committee to understand what had happened in those cases. Many of those parks had been built under the old regime and had simply been located in the wrong areas. Business had been deterred by the extra transport cost associated with the supply of resources and labour.    

The Department’s strategy was therefore to locate sectoral industrial parks near raw materials and labour; for example industrial parks for the furniture cluster would only be located in an area where logging took place. The industrial parks and clusters the Department envisaged would be located close to areas where sustainable resources and manpower existed. The improvement of infrastructure would play a key part in delivering what the Department envisaged.

Mr L Laubschangne (DA) expressed sympathy with the Department who he believed were being told to achieve the impossible. He felt the strategy was reliant on too many factors out of the Department’s control or jurisdiction; for example it would be dependent on skills, infrastructure and competent municipalities. He believed the Department needed to draw up a proposal that they would be able to deliver on. He felt that unless the other Government Departments were going to come on board and assist the DTI, they did not stand a chance of achieving the strategy’s objectives.

Dr Ngobo stressed that the strategy should not be viewed in isolation from other Government strategies, for example the issue of training was being taken care of by the National Skills Development Strategy. The Department had already started engaging with the Department of Labour to make sure that the infrastructure was provided for the prioritisation of the National Skills Development Strategy.

Mr Motana concurred with Mr  Laubschangne that it would be impossible for the Department to achieve all the objectives highlighted in the strategy on their own. However this had never been the intention; Government as a collective would work together for the implementation of the strategy. He stressed that implementation would definitely be a collective effort from Government.

Mr Laubschangne noted that he had just attended the African Peer Review session and explained that a Nigerian academic had made the interesting comment that empowerment was not about Broad-based Black Economic Empowerment (BBBEE); it was about education. Mr Laubschangne believed that the education standard in South Africa was abysmal; pupils could hardly read or write because of the poor level of their education. He highlighted that in countries such as China education had played a key part in economic advancement.

He believed that infrastructure would be a major challenge and stressed that it would be hard to attract industry to areas with poor road infrastructure or no street lighting.

Mr Laubschangne sought clarity on why the Department had not considered export processing zones or special economics zones. He pointed out that these zones had been the very basis of industrial development in countries such as Mauritius, China and Ireland. Why had this issue not been thoroughly tackled in the strategy? 

Mr Motana explained that the Department had adopted a unique approach to economic or industrial zones. They had not embraced all the elements that could be seen in such zones in other developing countries; these would simply not work in South Africa. For example, the suspension of labour rights would never be tolerated in SA. The Department had used some of the thinking behind labour zones, but did so in a manner that was ethical within the South African context. They had for example made use of tariff policies to protect certain sectors, which often overlapped with geographical location.

Mr S Rasmeni (ANC) questioned whether the Department had begun a process of really engaging with municipalities. He sought clarity on whether there had been input in the strategy from municipalities.

Dr Ngobo explained that the Department was currently engaging with the municipalities. He commented that the Department was hoping that each municipality, in developing their own Industrial Road Maps would input into the Provincial Growth and Development Strategies, which would support key interventions identified either by the Road Map or in the Provincial Growth and Development Strategy.

Mr Rasmeni questioned whether the Department supported industrial development in those areas that really did not show any potential for development or whether these would be left out.

Mr October explained that it depended on why an area was underdeveloped. For example, if an area had been neglected historically, it was relatively easy to propagate the development of industry and it would therefore be incorporated into the strategy. However, there was little that could be done for areas that were disadvantaged by geography, such as rural parts of the Northern Cape.

Dr M Sefularo (ANC) noted that the Committee would receive a briefing from the Department on the 23^rd of August on their industrial policy and questioned if the (RIDS) was subordinate to the industrial policy, or visa-versa.

Mr October explained the two policies were complimentary; he would expand on the relationship between the two when they presented the Industrial Policy to the Committee.

Dr Sefularo suggested that the Committee should call for a co-owned, co-presented Government strategy on the matter so that Members could be very clear about what was being done across the board regarding some of the areas that were outside of the Department’s direct jurisdiction.

Mr S Maja (ANC) raised concern about the lack of land in rural areas, the majority of which was still in the hands of chiefs and white farmers. This was obviously problematic for the Department and he asked what they were doing about it.

Mr October confirmed that agrarian reform was an issue of concern to the Department.  They were currently engaged with other Departments on the matter.

Mr A Harding (ID) felt that the strategy was extremely ambitious and he questioned if the Department even had the kind of resources required to deliver the objectives highlighted in the strategy. He was concerned that the Department had not provided the whole picture of how it intended to achieve the targets laid out in the strategy. The presentation had for example not included a delivery plan and he called on them to be realistic.

The meeting was adjourned.