Ipap: Moving SA towards greater industrialisation

The industrialisation of a country is a journey and not merely a destination, writes Trade Minister Rob Davies.

Earlier last week I joined the management and employees of Guestro Castings and Machining – a black-owned manufacturing company – to launch the eighth iteration of the country’s Industrial Policy Action Plan (Ipap).

South Africa’s framework for industrialisation is within the National Industrial Policy Framework and Ipap unpacks the priorities for the country for the year as it moves towards greater industrialisation.

Read: Billions in support for private enterprises

The industrialisation of a country is a journey and not merely a destination. As such, when reflecting on Ipap, I am reminded of the eminent Japanese economist Kenichi Ohno who speaks about the hard graft involved in “learning to industrialise”. South Africa is firmly on this journey and Ipap helps us with the monumental task of learning to industrialise.

I am convinced that history and analysts will one day look at our journey to industrialisation as the road on which we addressed many of the deep-seated structural problems that characterise our economy. It is impossible to achieve industrialisation without addressing structural impediments in a systematic way. This is what Ipap helps us to achieve.

With a view to creating sustainable movement towards industrialisation, we are now asking the following questions:

* How do we achieve a higher-impact industrial policy?

* How do we achieve stronger policy coherence and programme alignment across government departments and agencies – and what are the key institutional arrangements that can achieve this?

* How do we strengthen the collaborative working relationships between the government and the private sector to secure higher levels of investment in the productive sectors of the economy?

* How do we mobilise domestic capital to help strengthen and diversify the economy, increase its competitiveness, grow exports and create employment?

* How do we build on the very significant progress outlined in the key achievement highlights section of Ipap 2016 – particularly in the automotive, clothing, textiles, leather and footwear and agro-processing sectors – and increasingly in the rail and transport capital goods sector?

* Finally, how do we overcome the remaining structural constraints to our re-industrialisation drive – and what are the key policy levers that should be deployed for maximum impact?

With a view to respond to these questions, the eight iteration of Ipap includes the following:

* The energetic implementation of the recently launched Black Industrialists programme.

* More carefully targeted industrial financing and incentive support, including and especially putting in place much stronger export credit and export credit insurance to support export effort.

* A stronger focus on sector-specific rather than generalised incentives.

When we evaluated the Manufacturing Competitiveness Enhancement Programme we can say confidently that it has been successful and has supported many companies across a range of sectors at the height of the global recession.

However, in keeping with our focus to accelerate our industrialisation programme, we want to shift the point of focus towards the kinds of sector-specific incentives where their success has been clearly demonstrated in the automotive and clothing and textiles sectors. Ipap 2016, therefore, includes a section of work to design sector-specific incentives for the agro-processing and rail components sectors. These are of particular importance in the context of our ongoing efforts to support the labour-intensive sectors of the economy.

I urge South African companies to leverage the devaluation of the rand to make locally manufactured products more globally competitive and create opportunities for the expansion of exports and further development of our domestic manufacturing capabilities.

We are also cognisant of the role that government must play in creating the conditions for a more development-friendly business and investment environment and this is a key theme of Ipap 2016. In this regard, we commit to:

* Establish an interministerial committee to tighten up the intra-governmental co-ordination required to underpin the new One-Stop Investment Centres.

* Facilitate a rapidly expanding partnership between the Companies and Intellectual Property Commission and all the major banks to provide official company registration facilities both within their branches and online.

In addition, the government has set itself a target of 75 percent local procurement by 2019, which will be supported by a specific set of policy instruments.

Local procurement

The government has also designated a significant number of products for local procurement and, by all accounts, manufacturing firms have benefited from the fact that aggregate local demand has been raised for locally produced products.

As we continue to strengthen the achievements of Ipap we will renew efforts to overcome lingering structural obstacles to development and industrialisation, focusing on:

* Working to stabilise electricity supply constraints, while creating an enabling the environment for own – and co-generation – fuel cell technology development.

* Continuing efforts to secure port and rail network reforms in order to overcome inefficiencies and associated high costs and robustly support exports.

* Concerted intra-governmental efforts to address deep-seated and serious skills deficits and mismatches that impact on the capacity of the economy to grow faster and diversify more effectively.

Ipap is not just another document, framework or policy. It is a working plan that has yielded successes in its lifetime and is contributing to the country’s journey towards industrialisation.

* Dr Rob Davies is South Africa’s trade and industry minister.

** The views expressed here do not necessarily reflect those of Independent Media.

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