National Industrial Policy Framework / Industrial Policy Action Plan: DTI Workshop

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Meeting report

ECONOMIC AFFAIRS SELECT COMMITTEE; TRADE AND INDUSTRY PORTFOLIO COMMITTEE: JOINT MEETING
5 September 2007

NATIONAL INDUSTRIAL POLICY FRAMEWORK / INDUSTRIAL POLICY ACTION PLAN: DTI WORKSHOP

Chairperson: Mr B Martins (ANC)

Documents Handed Out
National Industrial Policy Framework
Industrial Policy Action Plan (IPAP)
National Industrial Policy :Framework and Industrial Policy Action Plan


NOT RECORDED

SUMMARY
The purpose of the workshop was to familiarise the Select Committee on Economic Affairs and the Trade and Industry Portfolio Committee on the key aspects of the National Industrial Policy Framework (NIPF) and Industrial Policy Action Plan. DTI was congratulated on the paradigm shift of both the policy and the action plan. It finally dealt with some of the Committee’s concerns and openly acknowledged the constraints and the limitations the South African economy.

A major concern of the committees was that there needed to be an alignment between the policy and action plan accompanied by key performance indicators which would allow both Committees to exercise their oversight role on the implementation. In addition the Members indicated that they would require a continuous engagement with the policy to ensure that it was fully internalised and Members could provide better guidance and critique.

MINUTES
Department of Trade and Industry presentation
The Department of Trade and Industry team was lead by the National Minister Mr Mandisi Mphahlwa accompanied by the Director General Mr Tshediso Matona with other Chief Directors responsible for various economic sectors. In his opening remarks the Director General indicated that the framework sought to respond to the current economic growth that South Africa had experienced in the last few years and it was an elaboration of the previous policies ranging from Reconstruction and Development Programme (RDP), Growth, Economic and Redistribution Strategy (GEAR) and the Accelerated Shared Growth Initiative for South Africa (ASGISA). Its main focus was on the manufacturing sector because this was key to the Gross Domestic Product (GDP), employment, current account and overall balance of payments.

A team of experts was put together to develop and compile the policy including consultation with NEDLAC and the labour movement. The policy was a national initiative led by the Department of Trade and Industry with the involvement of myriad of stakeholders ranging from government departments, corporates, civil society, labour and academia.

The institutional mechanism that would underpin the implementation was going to be the greatest challenge because it was an exceedingly complex process. Industrial Policy was not easy due to diverse views based on various schools of thoughts informed by economic theory. The policy sought to strike a balance amongst the contesting views both in terms of theory and practical implementation. The Director General also alluded to the fact that certain elements of the policy might generate legislative amendments on issues such as competition policies.

In conclusion, the Director General indicated that the success of the industrial policy would depend on the available state resources and the complementary support from other critical government departments.

Discussion
Prof B Turok (ANC) expressed his gratitude to the Department on such a bold, brilliant step and candid admission that certain things had gone wrong in the South African economy. The Ministry had not always agreed with the Committee on a number issues and now the Department had fully embraced the views of the Committee at the policy level. It was also truly encouraging to learn that the Department would promote non-traditional industries to stimulate the economy and elevate the role of the domestic market with less reliance on the international financing. The tooling was a foundation of industrialization and the Department should consider raising tariffs to protect infant industries. Once they mature, that could be reversed. This approach was practiced globally and it had been proven theoretically that it can work. The Department should also consider developing key performance indicators so that the Committee was able to exercise its oversight role over the policy.

He sought clarification on whether government had considered imposing high tariffs on luxury items to reduce imports and resolve the problem of the current account. He commented on the fact that the Asian Tigers (Korea, Taiwan, Singapore etc) did not have natural resources and they managed to curb inequality in their countries and South Africa should focus on eradicating poverty, increasing employment and addressing inequality. He also sought clarification on whether the industrial policy framework integrated the regional economic issues, particularly the Southern African Customs Union (SACU) and Southern African Development Community (SADC).

In response, the Director General indicated that the importation of luxury goods was a trade policy issue and the Committee should give guidance on what kind of trade policy was required for stimulating the economy. In some areas, the Department would consider lowering tariffs; in particular, on areas that were a value add in the economies (capital goods). The country had not taken any major Trade Liberalisation since thirteen years ago and the Department was considering aligning the Trade Policy with Industrial Policy to avoid conflicts. In order for the policy to be relevant to the South African context, we should address the key imperatives or priorities. On the development of the domestic market, the retail sector did not create sustainable jobs because it was influenced by domestic consumption, while the high value activities created more sustainable jobs and they were embraced fully in the policy. The Department acknowledged that at implementation level they might experience a snag.

Dr P Rabie (DA) commented that the industrial policy should promote state involvement, as the Asian Tigers did, and ensure that industries that were absorbing labour intensive workforces, were fully supported. The Department should also focus on industries that were active in the rural areas to stimulate economic growth to reduce urbanisation.

Ms S Cheng (DA, Gauteng) commented that South Africa should learn from the Asian Tigers by combining capital intensive and labour intensive means to create jobs. South African should buy the goods that were exported from South Africa cheaper such as cars. South Africa should pay more attention to rural development and invest more resources on textile and footwear to create jobs in particular for women. The government should consider reducing the incentive or remove the incentive to the automobile industry because they repatriate profits that they were making in the South African market. Their companies do not pay their taxes in South Africa because their head offices were located in European countries etc. The Department should also consider the cost of capital in South Africa because it was exorbitant. Lastly the government should invest in the knowledge industry as it was a critical instrument of economic growth.

In response, the Director General said that he agreed with the sentiments about the automobile industry and the Department was engaging with the industry to ensure that the issue of localisation of products was taken seriously. The textile and clothing industry was very complex because it had various actors and the Department had spent an incredible amount of time mitigating tensions amongst sector players. The good thing that had come out of the engagement was that the industry had endorsed a sector strategy which sought to resolve issues of quota and South African products. The Department had devised a number of instruments to ensure that new entrants in the market were not confronted with exorbitant costs in starting a business. This was done through incentives, subsidy and industrial financing.

Mr M Rasmeni (ANC) commented on the co-ordination of the policy since its implementation depended on the active role of other departments like Science and Technology. He sought the views of the Department on the fact that the business sector feels that the cost of labour was expensive in South Africa while labour unions had contrasting views. The institutions that were the pillars for the success of the framework should formalise the nature of their supportive role to ensure accountability and for the Committee to exercise its oversight role over various departments.

Mr S Maja (ANC) enquired whether government was considering nationalizing other strategic industries to ensure state participation in the economy and open opportunities for rural communities. He also sought the views of the Department on the impact of industrial policy framework on the economy.

In response the Minister indicated that nationalisation was not the only way of ensuring that the state becomes an active participant in the economy and that the matter was not as simple as it was assumed to be. The various labour intensive interventions that the Department had integrated in the framework was to ensure rural development like forestry and bio-fuel using either maize or sugar cane. In view of the National Industrial Policy Framework impact, the Department had projected 15% employment growth in the manufacturing sector. The projections were not based on any particular model.

Mr L Labuschagne (DA) commented that the common thread in the Asian Tigers was the investment in education. With the current challenge of skills shortage, what did the Department envisage would happen to meet the requirements of the policy. He further commented that the Human Resource Development Policy in South Africa was race based. He also sought clarification on the fact that the business sector had been seeking an audience with the Minister but he was never available.

In response the Director General indicated that on the issue of skills shortage, the Cabinet economic cluster had internalised the issues and began to hold discussion on the skills for industrialisation. The Ministry or Department had an open door policy to stakeholders because they were important in contributing to a growing economy.

Ms M Themba (ANC, Mpumalanga) sought clarification on the role of the provinces and their share in the industrial policy both in terms of their contribution in the framework and the benefits they would accrue in relation to certain industries.

In response, the Director General indicated that the Department had engaged directly with all the spheres of government and where they were expected to play a critical role both during the conceptual phase and implementation phase, they were brought up to speed with developments.

Ms N Ntwanambi (ANC, Western Cape) sought clarification on the involvement of labour unions during the conceptual stages of the policy and whether the Department of Transport had been involved because transport facilitate business transactions. She requested more information on whether the heavy goods should be transported by rail or road because currently rail had become a white elephant infrastructure.

Mr Hendrickse sought clarification on whether there was tangible support for agricultural because farmers were struggling, particularly Black farmers.

In response, the Director General indicated that agriculture was a critical sector for the South African economy and the Department had recently realised that perhaps they should not have removed agricultural subsidies as fast as they did because both the US and the Europe still supported their agricultural sector. In addition the Department was also supporting agro-processing as a focus point in rural areas.

Clarification was sought on the definition of industrial financing and whether other government financing institutions would be taking part in realizing the objectives of the policy such as Khula and the Land Bank. The Member asked was whether the Department still perceived the energy and telecommunications sectors as critical to the industrialisation of the country. He further enquired about the exclusion of research and development as a key driver of innovation, particularly in Science.

In response, the Director General indicated that the state deployed its financial resources and other financial resources would be generated through foreign direct investment. The energy and telecommunication sectors were critical to the full realization of the industrial policy. Eskom in particular was beefing up its infrastructure to ensure that it met the increasing demand for electrification. The Department had also concluded a developmental tariffs agreement with Telkom. In terms of research and development, the Department of Science and Technology was the championing this because ICT was an enabler of certain economic activities.

Mr J Maake (ANC) asked if the industrial policy had integrated all other similar economic interventions at regional level such as Local Economic Development and the Integrated Development Plan.

The Director General replied that there was no physical document that integrated these but the policies find their expression from the industrial policy. The Framework also acknowledges the existing policies.

In conclusion the Director General indicated that the Committee and the Department were at the same level in terms of the industrial policy because they were not too farfetched from each other. The Department might have not put more emphasis on certain elements which the Committee felt strongly about, but the policy was a living document, dynamic and would improve as the government gained experience in its implementation.
The Department would continue to engage with Committee on various matters.

In closing the Chairperson urged members to interact with the document and the Framework was in the public domain for further interrogation. The Committee would set up a process to ensure continual interaction with the Department.

The meeting was adjourned.

 

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