Question NW3591 to the Minister of Trade and Industry:

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28 November 2018 - NW3591

Profile picture: Alberts, Adv A

Alberts, Adv A to ask the Minister of Trade and Industry:

(1)Whether, in the light of the current state of trade and industry and the South African economy, he can indicate how South African manufacturing performed in each year since 1 January 2010 up to the latest specified date for which information is available compared to manufacturing in developing and developed countries; (2) Whether South African manufacturing is underperforming compared to other developing and developed countries; if so, (a) why is it the case, (b) why is the Industrial Policy Action Plan (IPAP) not succeeding in getting South African manufacturing to the level of developing and/or developed countries, (c) what is the role of the Black Industrialist Programme in this regard, (d) to what extent has the programme helped the South African manufacturing sector to (i) improve, (ii) become more competitive, (iii) grow and (iv) create more job opportunities, with specific reference to competitiveness, growth and job opportunities; (3) Whether any impact assessment has been conducted to determine the success of his department in promoting the growth of the country’s trade and industry; if not, why not; if so, what are the full relevant findings; (4) Whether there are plans to amend or replace policies that are not working; if so, (a) what are the full relevant details of each policy, (b) what are the defects of each policy and (c) what will it be replaced with?NW4162E

Reply:

 

  1. The Industrial Policy Action Plan (IPAP) seeks to ensure a restructuring of the economy to set it on a more value-adding, labour-intensive and environmentally sustainable growth path. Since 1 January 2010, the South African manufacturing sector performed as follows compared to developing and developed countries:

Manufacturing value-added (annual % growth) 2010-2017

Country/Level of development

2010

‘11

‘12

‘13

‘14

‘15

‘16

‘17

SA

5.9

3

2.1

1

0.3

-0.3

0.9

-0.1

Developed countries

9.6

2.3

0

0.7

2.8

2.5

1.5

2.8

Developing countries

7.7

2.6

1

0.8

1.5

1.1

1.2

1.3

Source: World Bank

2. (a) During the period 2011 to 2013 South Africa’s manufacturing sector grew at a faster pace compared to the manufacturing sectors of the developed and developing countries. From 2014 onwards our manufacturing sector has broadly mirrored the trend exhibited by the developed and developing countries which indicate periods of expansions and contractions.

(b) The past decade of implementing the Industrial Policy Action Plan (IPAP) needs to be understood in relation to the global financial crisis of 2008-2009 and the extended economic crisis which flowed in its wake. The ensuing slump in global demand for many of South Africa commodities resulted in a slowing down of exports and investment in South Africa. In addition, surplus global capacity in the production of many key commodities has created huge challenges for South African manufacturing.

These factors combined with significant domestic economic shocks including, sharply rising and bunched up administered prices, deterioration in basic economic service delivery by key state owned companies and economic infrastructure constraints, skills deficit and mismatches negatively impacted the domestic economy and the re- industrialisation effort through IPAP.

(c ) The Black Industrialist Scheme has been established to facilitate the inclusion and participation of black industrialists in the South African economy. The intention of the Scheme is to contribute towards shifting the demographic composition of South Africa’s industrial sector and to engage under-utilised sources of jobs, revenue, taxes and innovation through the Black Industrialist Scheme.

(d) The Scheme has (i) added additional production capacity to the manufacturing sector across a range of IPAP priority sectors, (ii) become more competitive through technology driven production processes and innovations, (iii) grow through projected investments of R8.6 billion in 2016/17 and 2017/18 and (iv) created 9 138 projected new job opportunities and helped to sustain 6 373 jobs during the same period.

 

3. The Department conducts programmatic impact assessments for example, periodic review of incentive programmes is undertaken to assess whether their objectives and outcomes are being realised and that review informs their future development. It is important to note that, the deployed interventions to change the growth trajectory rest on sound economic research and analysis including with respect to the identification of market failures and the most appropriate measures required to address these. Inherent in this process is a review of interventions deployed to assess their impact and effectiveness. Anecdotal evidence points to the fact that government’s resolute counter-cyclical industrialisation efforts arrested the scale of job losses, preventing potentially catastrophic full-scale deindustrialisation.

The following successes have been registered but they do not represent an exhaustive list of all the outcomes and progress platforms built in the course of the previous years. They serve as a snapshot of a much more substantive body of work which underpins these achievements, based on a set of critical and indispensable principles for industrial policy and industrial development:

  • Manufacturing value-added in real terms grew from R338 billion in 2009 to R384 billion in 2017;
  • Since 2007/08 manufactured exports grew four-fold compared to imports that have doubled. Manufactured exports were dominated by metals, metal products and machinery and equipment;
  • Manufactured exports have continued to diversify and have also been bolstered by robust growth in manufactured exports to Africa;
  • In the automotive sector exports have more than doubled over the last decade and the sector has attracted R45 billion in investment by the majority of the leading global automotive manufacturers; and
  • The Clothing and Textile Competitiveness Programme approved R5.1 billion to manufacturers in the sector and disbursed R4.2 billion to recipients of the incentive. A very significant turn-around in the fortunes of the Clothing, Textile, Leather and Footwear industry has been achieved, bringing relief to a sector which was in deep distress. Not only has the tide been turned with respect to factory closures and lay-offs; gains have been registered in recapturing domestic market share and developing close working relationships between government, manufacturers and domestic retailers. A modest increase in exports has also been achieved; most notably in the footwear sector.

 

4. The Department of Planning, Monitoring and Evaluation (DPME) in the Presidency is tasked with reviewing government’s plans and policies as a whole in order to improve service delivery, outcomes and impact on society. Thus the need to amend or replace any policy will be informed by the monitoring and evaluation processes of DPME as they are constitutionally mandated to monitor, evaluate and report on the implementation of government priorities in line with the National Development Plan.

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