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NEDLAC: Trade & Industry’s Chamber
Strategic Session
Department of Trade and Industry
2 November 2015
CONTENTS
• Background
• Selected implementation highlights in 2015
• Selected Incentive data
• Transversal interventions
• Sectoral interventions
• Overcoming challenges
• Themes and issues IPAP 2016
• Conclusion
2
BACKGROUND 1
• IPAP 2015/16–2018/19 was approved by the ESEID Cluster & Cabinet in April 2015. This is the 6th year of implementation of IPAP
• Priorities are:
Strengthening a system of industrial financing and incentives with reciprocal conditionalities and ‘packaging’ government and DFI industrial finance support for the productive sectors of the economy
Public procurement to support manufacturing sector, ‘crowd in’ private sector investment and reduce import leakages and align all levers – Designations, CSDP and NIP
3
BACKGROUND 2
Building on significant successes and existing policy platforms in sectors such as Autos, CTLF, Metals and Engineering, BPS, and Film
Boosting new growth sectors such as in Oil & Gas, renewable energy, aerospace and defence
Unlocking export opportunities, especially on the African continent and measures to support regional industrial integration
4
KEY ACHIEVEMENTS: CLOTHING, TEXTILES, LEATHER & FOOTWEAR
5
KEY ACHIEVEMENTS: CLOTHING, TEXTILES, LEATHER & FOOTWEAR
• Clothing and Textiles Competitiveness Programme
– Investment of R2.6 billion has created manufacturing value addition of over R3.9 billion
– Approvals under the Cluster Programme are R712 million, with disbursements to the value of R310 million
• Cluster development
– National and regional clusters are working well, bringing textile manufacturers, apparel manufacturers, retailers and labour together to achieve significant competitive capabilities and advantages – quick turn-around fast fashions, niche products and supplier development
– With stability achieved, business (including retailers), government and labour are partnering to position the sector for sustainable growth
– The Southern Africa Textile and Apparel Cluster was launched in October 2014 on the back of a R200 million grant from the dti
– the dti approved a grant of R69.2 million for the establishment of a National Footwear and Leather Cluster, which has created just over 7 000 jobs and saved 67 000 jobs
6
KEY ACHIEVEMENTS: CLOTHING, TEXTILES, LEATHER & FOOTWEAR
• Leather and leather products
22 new manufacturers were established in the leather industry between 2012 and 2014 with gross domestic capital formation of R371 million in the leather and footwear sector from 2010 to 2013
Exports of the leather and footwear sector grew by 18% in volume terms with significant benefits to the trade balance
In the leather and footwear segment 2,000 sustainable jobs and a reduction of R1.4bn in the sectoral trade deficit
These interventions are leading to the revival of footwear firms which had closed under the pressure of imports
Kayo Shoes reopened in Dimbaza, Eastern Cape in April 2015, resuscitating 417 jobs
A new leather tannery (Fusion Leather) was established in Atlantis, Cape Town.
Angel Shoes reopened in Cape Town
7
KEY ACHIEVEMENTS: CLOTHING, TEXTILES, LEATHER & FOOTWEAR
0
2000
4000
6000
8000
10000
12000
14000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Exports: Textiles, Clothing, Leather & Footwear(Rand million)
Leather Textiles and clothing Footwear
Source: Quantec
8
KEY ACHIEVEMENTS: CLOTHING, TEXTILES, LEATHER & FOOTWEAR
0
1000
2000
3000
4000
5000
6000
7000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Value add at basic prices(Rand million)
Textiles Clothing Leather Footwear
Source: Quantec
9
KEY ACHIEVEMENTS: AUTOMOTIVES
10
KEY ACHIEVEMENTS: AUTOMOTIVES
The Automotive Investment Scheme (AIS) and People-carrier Automotive Investment Scheme (P-AIS) have together approved more than 40 projects
The largest investment project under the AIS was Mercedes-Benz SA’s C-Class project with an investment of R5.4 billion:
– This created 550 direct jobs and 400 indirect jobs
– 10 new component firms were set up creating 800 jobs in the MBSA value chain
– Mercedes-Benz South Africa (MBSA) has begun the second phase of its aluminium localisation initiative
Other significant landmarks:
Ford Motor Company South Africa is increasing production of the Ranger bakkie, and looks at SA as hub
Continued support to OEM’s resulted in BMW and Mercedes-Benz both producing their one millionth vehicle in 2015
BMW received the JD Power IQS Platinum award for its Rosslyn plant
Goodyear South Africa invested R670-million to increase production of high-value-added (HVA) consumer tyres at its Uitenhage manufacturing plant
11
KEY ACHIEVEMENTS: AUTOMOTIVES
Medium/Heavy Commercial Vehicle segment
The Automotive Investment Scheme (AIS) package has been extended to people-carriers/mini-buses, trucks and buses, and
Bus bodies have been designated for public procurement
Within a year of its launch, the support package has directly led to new investments from companies like Iveco (Italy), Tata (India), BAW (China), Toyota (Japan), FAW (China), and Hyundai (South Korea)
Some examples include:
Toyota opened a R480 million facility for production of the Quantum minibus
First Auto Works (FAW) plant was opened in the Eastern Cape; the plant is expected to produce 5 000 trucks per annum
Volvo Southern Africa is planning to build 1 800 trucks and buses during 2015
12
KEY ACHIEVEMENTS: AUTOMOTIVES
0
20
40
60
80
100
120
140
2010 2011 2012 2013 2014
Automotive industry exports(Rand billion)
Source: Automotive Export
Council
Government support has taken the industry from production of 356 800 units in 2000 to over 566 000 units in 2014
Government support has grown auto exports from just 11 000 units in 1995 to over 270 000 units in 2014.
SA’s auto export earnings rose to a record R115.7bn in 2014
13
KEY ACHIEVEMENTS: AUTOMOTIVES
Source: Naamsa
14
KEY ACHIEVEMENTS: AUTOMOTIVES SA Assembly Investment Trends
2,3 2,2
3,6
6,2
3,1 3,3
2,5
4 3,9
4,74,4
6,9
0
1
2
3
4
5
6
7
8
OEM Investment (R'bn)
Source: Naamsa
R6,9bn record of OEM Investment in 2014
15
KEY ACHIEVEMENTS: BUSINESS PROCESS SERVICES
16
KEY ACHIEVEMENTS: BUSINESS PROCESS SERVICES
• the dti launched the revised Business Process Services (BPS) incentive at South Africa House in London:
– The scheme builds on the success of its predecessor, which led to the creation of 9 077 jobs on the back of financial disbursement of R587m
– The scheme will further support the South African Value Proposition, which has already seen South Africa named “Best Offshoring Destination 2012” by the UK’s National Outsourcing Association (NOA)
• The dti launched CCI Call Centres in KwaZulu-Natal, with an investment value of R200 million
– This will increase the number of jobs from 3 000 to over 5 500
– CCI Call Centres is a beneficiary of the dti’s incentive and has participated in the Monyetla Work Readiness Programme
17
Size of offshore BPO industry in South Africa2010-2014 (financial year figures); Number of FTEs
9,000
26%
12,000
16,00018,000
CAGRx%
• Approximately 300 000 agents and 30 000 support staff
• 18 000 supporting off shore operations
• 9 077 new Offshore jobs created between 2011 and 2014
BUSINESS PROCESS OUTSOURCING
18
Variable Contribution 2007-2010
Contribution 2011-2014
Total contribution
Employment: BPO&O and BPS incentives
9 295 (BPO&O) 9 077 (BPS) 18 372
Trained: Monyetla 4 467 9 356 13 823
Employment: Monyetla 3 483 7 268 10 837
Foreign direct
investment
R349m (actual) R5.9bn (projected)
19
BUSINESS PROCESS OUTSOURCING
20
MANUFACTURING INCENTIVES
MCEP APPROVALS PER PROVINCE: 2013/14 & 2014/15
GAUTENG LIMPOPO EASTERN CAPE
2013/14
139 Approvals
R1.7 b
2014/15
121 Approvals
R 588.3 m
2013/14
4 Approvals
R7.3 m
2014/15
8 Approvals
R32.1 m
2013/14
32 Approvals
R101.1 m
2014/15
23 Approvals
R58.4 m
MPUMALANGA NORTH WEST FREE STATE
2013/14
7 Approvals
R25.9 m
2014/15
12 Approvals
R49.1 m
2013/14
6 Approvals
R35.3 m
2014/15
4 Approvals
R11.4 m
2013/14
15 Approvals
R63.1 m
2014/15
3 Approvals
R41 m
NORTHERN CAPEWESTERN CAPE KWAZULU NATAL
2013/14
2 Approvals
R5.7 m
2014/15
6 Approvals
R10.5 m
2013/14
106 Approvals
R497.8 m
2014/15
104 Approvals
R348 m
2013/14
54 Approvals
R301.7 m
2014/15
53 Approvals
R202.5 m
Limpopo which previously (2013/14) had four approvals valued at R7.3 million obtained
eight approvals amounting to a remarkable R32.1 million in 2014/15.
21
IPAP: TRANSVERSAL FOCUS AREAS 1
22
IPAP: TRANSVERSAL FOCUS AREAS 2
IPAP: SECTORAL FOCUS AREAS 1
23
IPAP: SECTORAL FOCUS AREAS 2
24
IPAP: SECTORAL FOCUS AREAS 3
25
IPAP: SECTORAL FOCUS AREAS 4
26
OVERCOMING CHALLENGES
• A solutions-based approach to key challenges has been adopted by the Economic Cluster. This will be directly applied to such key issues as:
Electricity supply/pricing and problems at municipality level
Procurement:
• Securing stronger compliance with Localisation/ Designations and CSDP – across all government departments and institutions
• Building capacity in support of the audit requirement for localisation
• Stepped-up designations (including a range of key products in the infrastructure programme)
Port tariffs and rail and ports inefficiencies – re-balancing and improvements
Technical Infrastructure (SQAM): ongoing efforts to secure stronger support for manufacturing (testing/ illegal imports etc.)
27
IPAP 2016: KEY THEMES & INTERVENTIONS
1. Achieving higher impact IPAP in adverse global market conditions and fiscal constraints
2. Interventions to support steel producers and downstream steel intensive manufacturers
3. Beneficiation and upstream capital goods sector –Mining Phakisa
4. Close alliance between the dti and the DST to support technology absorption, diffusion and research & development
IPAP 2016: KEY THEMES & INTERVENTIONS
5. Securing stronger localisation compliance and higher impact in public procurement programme –Designations, CSDP and NIP
6. Ongoing incremental steps to secure stronger system of industrial financing, incentives and export support
7. Strengthening clusters, export councils and the interface with the private sector
8. Strengthening sector interventions where sub-optimal programmes exist – chemicals, plastics, agro-processing
IPAP 2016: KEY THEMES & INTERVENTIONS
9. Higher impact regional industrial integration programmes and an integrated approach to Africa export opportunities.
10. Roll out gas-based industrialisation programme aligned with the IRP and GUMP
11. Develop SEZs as dynamic platforms for FDI and for the deepening of strategic industrial and export capacity -both in the SEZs themselves and in associated regional industrial clusters
CONCLUSIONS 1
IPAP 2015/16 was the sixth iteration of the Industrial Policy Action Plan
Cabinet has given unambiguous support for a significantly upscaled, higher-impact IPAP from its 2016/17 iteration onwards
Implementation is being driven in the face of very significant headwinds: lingering global recession, end of the commodity super-cycle and a range of acute domestic constraints
Evidence nevertheless demonstrates that where interventions are well researched, designed and managed, are adequately resourced and are the subject of close collaboration and alignment between stakeholders – very significant gains can be made, while existing and emerging policy platforms can be further built upon
31
CONCLUSIONS 2
IPAP is a very important tool for management, planning and oversight
It is critical that compliance across and between government departments, spheres of government and SOCs is secured in a collaborative national industrial effort
There are no short-cuts – continuous improvement, learning-by-doing, strengthening the capacity of the state and deepening stakeholder engagement and relations are the critical factors
32
Thank you
33