South Africa's new industrial policy action plan, or Ipap2, should be used to support macroeconomic policy through the development of foreign-exchange earning and/or import-substituting productive capacity, Business Unity South Africa (Busa) said on Tuesday.

Busa CEO Jerry Vilakazi told Engineering News Online following a media event in Johannesburg, that the organisation was concerned that many major public contracts were still being concluded outside of South Africa's borders.

He noted that Ipap2 could, if appropriately implemented and managed, mitigate import leakage and become a driver of industrial development.

"Busa had consistently argued for the use of public procurement to support local production and development. We are concerned that implementation remains a challenge, owing to an apparent lack of common ground between the National Treasury and the Department of Trade and Industry (DTI).

"The Treasury is still pushing somewhat for preferential procurement, where Busa and the DTI think that a lot more local procurement need to take place to develop our small, medium, and micro-enterprises and to, most importantly, create additional job opportunities in the country," Vilakazi said, while lamenting that poor planning around the procurement of the World Cup busses, where minimal local procurement was achieved.

Further, Busa believed that industrial financing was crucial to the success of the success of the Ipap2. Vilakazi, therefore, welcomed the plan to focus South Africa's Industrial Development Corporation (IDC) on Ipap2 priorities.

However, he said to make the effort successful it was crucial to ensure that the IDC's funding was sustainable and added that the institution's structure should, thus, be reviewed.

Overall, Vilakazi said that the objective of the Ipap2 must be to address factors which diminished the country's global competitiveness, and that it should seek to increase levels of competitiveness and productivity in the national economy.

ELECTRICITY THREAT

Busa also noted that the gradual decline in South Africa's energy security remained the greatest threat to the country's economic development and sustainability.

It reiterated its support for the $3,75-billion World Bank loan to State-owned utility Eskom, arguing that should the loan be turned down, it would translate into yet higher electricity tariffs, or raise the risk of load shedding should the Medupi power station was not completed in time.

Vilakazi described those opposing the loan as hypocrites, as failure to address South Africa's energy challenge would impact on the achievement of other economic and social objectives.

Nevertheless, Busa supported the diversification of South Africa energy mix away from coal, and called on government to fast-track the development of an integrated resource plan.