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New ‘higher-impact’ industrial-policy plan by Jan, Davies promises

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New ‘higher-impact’ industrial-policy plan by Jan, Davies promises

15th June 2009

By: Terence Creamer
Creamer Media Editor

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A new “higher-impact” Industrial Policy Action Plan (Ipap) should be completed by January, South Africa’s newly installed Trade and Industry Minister Dr Rob Davies said on Monday.

The new plan, which would follow on from a far-reaching review, would seek to deepen South Africa’s manufacturing base, particularly around the R787-billion infrastructure programme.

Speaking after a meeting with Business Unity South Africa (Busa), which took place in Sandton, Davies stressed, however, that the review would not seek to overhaul the overarching framework of the National Industrial Policy Framework (NIPF), despite some weaknesses.

The NIPF and the first Ipap, which were released in 2007, selected four “lead” sectors for specific support, including: the automotive and components industries; the metals, capital- and transport-goods sector; the forest-products industry; and the chemicals industry.

“It is not my intention to entertain further debate on the strategic framework,” Davies assert, while acknowledging that the NIPF could be improved.

Instead, the revised Ipap would deal with the more “difficult” sector-specific and cost-cutting issues not entertained under the first version, which Davies acknowledged had targeted “the low-hanging fruit”.

But the Minister, who had been Deputy Minister previously, also stressed some of the successes of the previous Ipap, including the completion of the Companies Act and the beefing up of competition legislation, with the amended Act now only awaiting President Jacob Zuma’s signature.

AUTO-CAT INDUSTRY TO GET SUPPORT

At a sector level, Davies said the finalisation of the Automotive Production and Development Programme (APDP), which would replace the Motor Industry Development Programme from 2012, as the high point of the first three-year Ipap round.

He also confirmed that the APDP would be expanded to embrace both the auto-catalysis industry and heavy commercial vehicles, which had hitherto been excluded from the revamped support scheme.

This confirmation was in line with a recent message from the new chairperson of the Catalytic Converter Industry Group (CCIG), Paul Thompson, who indicated that there was a growing expectation that large-scale catalytic-converter manufacturing would receive ongoing support.

The country currently supplied about 11% of the world’s automotive catalytic converters, but the CCIG had been signalling for some time that, in the absence of incentives, the industry could be lost.

In a wide-ranging meeting with Davies, Busa members had appealed for greater clarity on industrial and trade policy, the associated incentives scheme and timeframes for the delivery.

But Davies also stressed the need for reciprocity from sectors and companies that were to be supported, indicating that job retention and skills development commitments would be sought.

Many of the companies operating in the so-called lead sectors were currently in distress, owing to the second-round effects of the global financial crisis and could well need immediate and scaled-up assistance.

Davies indicated hat such support, with conditions, would be forthcoming, while the Industrial Development Corporation confirmed that some R6-billion would be set aside over the coming two years to help firms made vulnerable by the prevailing economic crisis.

At this stage, government was not contemplating having any direct say over executive bonuses and remuneration, or dividend policies, but Davies indicated that such criteria might have to be contemplated in future, particularly where government money had been used to bail-out a specific enterprise.

INFRASTRUCTURE INPUTS

The Minister also stressed that there would also be a major focus on attempting to rebuild South Africa’s industrial base, especially around providing inputs for the R787-bilion infrastructure drive.

In fact, Davies again indicated that more effort was required to meet the stated localisation goal of reducing “import leakage” around the infrastructure programme from 40% to 30%.

He added that, given South Africa’s chronic current account deficit on its Balance of Payments, the programme itself could be brought into jeopardy if that target was not met.

Business welcomed the emphasis being given to firms in distress, as well as the commitment to greater localisation, with the Confederation of Black Business Organisations president Jimmy Manyi indicating that black business was particularly keen to support efforts to boost local content.

Busa president Brian Molefe also welcomed progress on the bail-outs and the new industrial-policy trajectory, but he cautioned government to ensure that it packaged the bail-outs in such a way as to ensure that South Africa could not be accused of being protectionist.

That said, Busa lamented the lack of NIPF implementation progress thus far, saying that both industrial and trade policy could be important to “offset some of the negative impacts” of the prevailing economic crisis.

Specifically, business wanted further clarity on the incentive regime, the implementation of the industrial-upgrading plan for manufacturing and the role of development finance institutions in the roll-out of the industrial strategy

Busa indicated that it was looking forward to the review of Ipap, which was already under way.

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  • Trade and Industry Minister Rob Davies speaks about government's plan for a 'higher-impact' industrial policy. (15/6/2009) Cameraperson: Nicholas Boyd. Editing: Darlene Creamer.
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