Launch of the Industrial Policy Action Plan IPAP 2015/16 – 2017/18

CONTEXT, THEMES, PURPOSE

Situating IPAP in the context of overarching government policy

• If the National Development Plan (NDP) sets the overall vision for South Africa’s economy and society on the road to 2030, then the IPAP provides the targeted actions and rolling implementation framework for sustained and deepening industrialisation. Both the IPAP 2015 and the “IPAP in Brief” brochure clearly spell out the key linkages between the IPAP and the NDP.
• It is important to stress that the IPAP is not, as is sometimes incorrectly suggested, an “annual change of industrial policy”. Framed by the National Industrial Policy Framework (NIPF), it is, as its name indicates, an annual action plan, which builds on the work defined and initiated in previous iterations. It seeks to continuously strengthen industrial policy instruments, build upon previous plans and jettison any programmes which have in practice been found not to work.
• Finally, it is also important to note that the IPAP is not the plan of a single government department. It is a joint endeavour of the Economic Sectors, Employment and Infrastructure Development Cluster of Government.

Industrial policy is practised everywhere.

• Industrial theory, policy and practice is frequently misunderstood and sometimes maligned in South Africa, where it is often negatively and mechanically counter-posed to ‘market imperatives’ and asked to accommodate to ‘one-size-fits-all’ policy prescriptions.
• In reality, industrial policy is pervasively practiced all over the world within both developing and developed country contexts.
• Wherever it is practised in a nuanced way, with a realistic grasp of the local/regional context and a strong focus on longer-term outcomes, it provides the foundation stone for the indispensable coordination of government and private sector economic and social actions.
• Sensible and empirically grounded industrial policy develops traction through a dynamic, complex set of inter-locking and mutually supportive transversal (cross-cutting) and sector-specific interventions.

Building alignment and cooperation

Successive IPAPs have consistently been premised on an understanding that successful re-industrialisation requires a laser-focused, national industrial effort.

In practice, what this means is:

• The need for strong policy coherence and programme alignment across all government departments and their agencies, with decreasing reliance on regulatory compliance and a much stronger emphasis on coordinated economic impact.
• The need to decisively change the nature and tone of the conversation between government, business and labour to ensure that all three parties identify areas in which they can actively work together to secure and strengthen their joint efforts, factoring in the tough realities of extremely difficult global and domestic economic conditions.

Industrial policy works

IPAP 2015 rests on the solid foundation that industrial policy works – but only if, and to the extent that:

• it is meticulously researched and designed;
• it is the product of close stakeholder consultation;
• it is properly resourced;
• it is continuously subjected to strong monitoring and impact assessment. to secure continuous improvements to its design and implementation.

CTLF sector

• By way of example: As at 31 March 2015, a total of R 3.7 billion has been approved under the programme, of which R 2.6 billion has been disbursed, since inception in 2010. The Manufacturing Value Addition (MVA) increase, attributable to the CTCP between the base of 2009 and 2014, is R 3.9 billion (exceeding the disbursements by 50% or R 1.3 billion) whilst the overall sector experienced declines in output and Value Added over this period
• National Employment in the sector, utilising annual averages provided in the Quarterly Employment Survey, decreased by approximately 19 000 formal jobs between 2009 and 2014, whilst during the same period, the increase in employment attributable to the CTCP is approximately 6 900 jobs. MVA per Employee increased substantially, especially for Leather, indicating an improvement in labour efficiency as MVA growth was faster than the growth in employment.
• Labour Cost as % of Sales has stabilised since 2012, indicating that improved process efficiencies, exceeded the increased cost pressures (wages, fuel, electricity, etc.)
• On Time In Full (OTIF) deliveries, one of the most important indicators of operational efficiency and customer service, has increased overall, indicating a steadily improving delivery reliability in in all sectors.
• Thus CTCP interventions have already contributed to improved overall competitiveness, sustainability and employment growth for recipients.

At a cost to date of R2.6 billion disbursed, the CTCP facilitated the creation of R3.9 billion of additional MVA as well as 6 900 new jobs, in the short term.

Transversal (cross-cutting) interventions

IPAP 2015 also reflects and highlights steady progress, inclusive of the following transversal programmes:

• Incentives and industrial financing
• A total of 3,384 private sector enterprises across all provinces were provided with incentive and other support in 2014 to a value of R13.6 billion.
• A comprehensive bouquet of incentives is structured, in the main, as an ‘open architecture’ system.
• Increasingly, across all sectors - in an effort to maximise economic impact and critically important export growth - the conditions for access to government support will not only be tightened but increasingly directed towards support for ‘winning’ companies that have demonstrated either the proven capacity or the clear potential to compete in export markets and/or qualify as suppliers to global OEMs.

• Procurement

• the dti has designated 16 sectors, sub-sectors and products for local procurement. Although this package of measures still falls below the levels of support deployed in many other countries, if we take into account other local procurement and supplier development programmes such as the National Industrial Participation Programme (NIPP) and the Competitive Supplier Development Programme (CSDP) then it is safe to say that the combined quantum of support is significant.
• To coincide with the launch of IPAP 2015, the dti announces further designations for local procurement in the following product areas: transformers, power-line hardware and structures, steel conveyance pipes, mining and construction vehicles and building and construction. In the case of the last sector, the first round of construction material designations include cement, fabricated structural steel, pipes and fittings, sanitary ware, glass, frames and roofing materials.

This means that in the 18 Strategic Integrated Projects (SIP’s) under the auspices of the Presidential Infrastructure Co-ordination Committee (PICC), 645 infrastructure projects across the country valued at R3.6 trillion must procure the types of products listed above (and other products previously designated) from local manufacturers.

This is the strongest signal to date that government intends deploying industrial policy instruments where it believes it can achieve maximum leverage to support the private sector.

Securing compliance

• The lever of designation is as strong or as weak as the level of compliance that can be achieved. Upcoming designations will thus be accompanied by much more sharply focused measures to ensure compliance across all government departments and agencies and concentrated attention to the development of state capacity for local strategic sourcing and supplier development.
• Across the whole range of IPAP interventions, local content requirements will continue to be strengthened wherever applicable - including in flagship success areas like the latest window of the Renewable Energy Independent Power Producers Programme (REIPPP).

Media Enquiries
Sidwell Medupe-Departmental Spokesperson
Tel: (012) 394 1650
Mobile: 079 492 1774
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Issued by: The Department of Trade and Industry