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Hall 2C Tuesday 09h30 - Dr Tebogo Makube
- 1. 12015 KZN Manufacturing Indaba 21July 2015 Inkosi Albert Luthuli International Convention Centre
- 2. 2 In 2007 Governmentadopted the National Industrial Policy Framework (NIPF), and its practical implementation plan - the IPAP - as its guiding approach to industrialisation IPAP aligned itself with the overall vision and perspectives set out in the National Development Plan (NDP) of 2012; and remains in line with the job creation strategy advocated in the New Growth Path (NGP) IPAP is linked to the NDP as follows: NDP highlights the need for SA to develop a more competitive and diversified economy, with a deepening productive base in mining, agriculture, manufacturing and associated services NDP recognises that successful resource exploitation and development are critically dependent on the coherence of shared local and regional investment and regulation policy NDP advocates for the need to move steadily away from an exchange rate linked primarily to commodity prices, towards one based on the sophistication of SA’s overall export basket CONTEXT: 1 2015
- 3. 3 The manufacturingsector’s contribution to SA GDP declined sharply from 20.9% in 1994 to 11.6% by 2013, whilst the mining sector’s share increased from 7.3% to 9.2%. Sectoral composition of the South African economy 2015 Agriculture, forestry& fishing, (4.6%) Mining & quarrying, (7.3%) Manufacturing, (20.9%) Electricity, gas & water, (3.6%) Construction, (3.1%) Transport, storage & communication, (8.7%) Community, social & personal services, (5.3%) Wholesale, retail & motor trade, catering & accommodation, (14.2%) Finance, retail estate & business services, (16.1%) General government, (16.2%) Sectoral composition of the South African economy, 1994 Agriculture, forestry& fishing, (2.4%) Mining & quarrying, (9.2%) Manufacturing, (11.6%) Electricity, gas & water, (3.0%) Construction, (3.7%) Transport, storage & communication, (8.9%) Community, social & personal services, (6.0%) Wholesale, retail & motor trade, catering & accommodation, (16.6%) Finance, retail estate & business services, (21.5%) General government, (17.1%) Sectoral composition of the South African economy, 2013 Source: SARB, IDC, the dti
- 4. 4 Services sectorshave been driving economic growth in South Africa (finance, ICT, business services). Manufacturing sector registered strong growth over 2004-07 due to robust export growth and solid growth in domestic demand. Trends in GDP composition per sector 2015 0 200000 400000 600000 800000 1000000 1200000 1400000 1600000 1800000 2000000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 GVA(Constant2010prices,Rmillions(Period)) Year Primary sector Secondary sector Tertiary sector 11% 21% 68% Gross value added, 2014 Primary sector, (11%) Secondarysector,(21%) Tertiary sector, (68%) Source: SARB, IDC, the dti
- 5. 5 South Africa’smanufacturing industry is dominated by three sectors: namely food & beverages, petroleum & chemical products, and metals & machinery. These three sectors account for two thirds of total manufacturing production.. Trends in the manufacturing industry 2015 Furniture& other, (11.0%) Food, (16.8%) Textiles & clothing, (7.0%) Wood & paper, (9.7%) Chemicals, (18.6%) Non-metallic mineral products,(4.1%) Metals & machinery, (20.6%) Electrical machinery, (3.0%) Radio & TV, (1.5%) Transport equipment, (7.7%) Contributors to the manufacturing industy, 1993 Furniture& other, (6.5%) Food, (24.5%) Textiles & clothing, (2.9%) Wood & paper, (8.8%) Chemicals, (21.1%) Non-metallic mineral products,(3.6%) Metals & machinery, (20.5%) Electrical machinery, (2.7%) Radio& TV, (1.4%) Transport equipment, (8.1) Contributors to the manufacturing industy, 1993
- 6. 6 Manufacturing value additionand import leakage 2015 Source: SARB, IDC, the dti 40 45 50 55 60 65 70 75 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Manufacturingimports&exports(annual% growth) Year Manufacturingexports (% of merchandiseexports) Manufacturingimports (% of merchandiseimports) 0.0 5.0 10.0 15.0 20.0 25.0 30.0 10 12 14 16 18 20 22 24 2002200320042005200620072008200920102011201220132014 Manufacturingimportleakage(annualgrowth%) MVA(%ofGDP) Year Manufacturingimportleakage (SIC3) Manufacturing, valueadded(%ofGDP)
- 7. 7 SA changing tradepatters 2015 Automobiles (26.1) Platinum (11.6) Rhodium( 5.9) Palladium (5.3) Iron ore(45.9) Coal (7.0) Chromium ores (10.9) Ferro-chromium (8.9) Region/Country Share of Exports (%) Main Products (%) 5.5 13.6 9 Commodity Manufactured Total 17.1 25.7 21.6 Commodity Manufactured Total 19.7 5.8 13 Commodity Manufactured Total 11.5 5.2 8.4 Commodity Manufactured Total 3.3 22.4 12.9 Commodity Manufactured Total Purifying Machinery (11.4) Platinum (7.1) Coal (7.0) Automobiles (6.2) Aviation spirit (6.1) Iron & Steel (3.6) Electrical energy (2.1) Diesel trucks( 5.3) Platinum (37.5) Iron ore (11.8) Aluminium (4.8) Ferro-chromium (4.8) • South Africa’s trade patterns have changed in response to global growth trends • Emerging Markets and SADC share in South Africa’s export basket is rising: – SADC absorbed 13% of South Africa’s exports in 2011 – almost a quarter of manufactured exports destined to SADC – exports to China increased to 13% in 2011 (averaged 4.2% between 2005-2008) • Share of exports to the European Union declined from 33% in 2005 to 21.6% in 2011 Source: the dti, StatsSA, SARB, SA National Treasury
- 8. 8 Provincial contribution tothe National GDP, 2014 2015 Source: SARB, IDC, the dti GP, 35.2% KZN, 15.8% WC, 13.9% EC, 7.4% LP, 7.1% MP, 6.8% NW, 6.5% FS, 5.1% NC, 2.2%
- 9. 9 Manufacturing contribution toprovinces’ GDP, 2014 2015 Source: SARB, IDC, the dti 13.5% 15.8% 11.8% 12.2% 2.5% 4.4% 6.5% 8.5% 2.1% 0.0% 5.0% 10.0% 15.0% 20.0% GP KZN WC EC LP MP NW FS NC
- 10. 10 Composition of theKZN economy, 2014 2015 Source: SARB, IDC, the dti 16.5% 15.8% 13.3% 15.5% 11.9% 5.8% 1.9% 3.0% 3.8% Finance, retail estate & business services, (16.5%) Manufacturing, (15.8%) General government services, (13.3%) Wholesale, retail & motor trade, catering & accommodation, (15.5%) Transport, storage & communication, (11.9%) Personal services, (5.8%) Mining & quarrying, (1.9%) Construction, , (3.0%) Agriculture, forestry & fishing, (3.8%)
- 11. 11 KZN share ofemployment by industry 2015 Source: SARB, IDC, the dti 10.8% 14.3% 22.2% 22.6% 7.0% 8.4% 0.2% 9.8% 3.8% 0.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Finance, retail estate & business services Manufacturing Community and social services Wholesale, retail & motor trade, catering & accommodation Transport, storage & communication Private households Mining & quarrying Construction Agriculture, forestry & fishing Electricity, gas & water
- 12. 12 DIVERSIFY THE ECONOMY Provide strong supportfor value added manufacturing, especially in globally competitive non-traditional tradable goods and services PROMOTE A LABOUR- ABSORBING INDUSTRIALISATION PATH - with systematic development of employment- creating linkages and multipliers Industrialisation model focused on INCLUSION OF HISTORICALLY DISADVANTAGED PEOPLE AND REGIONS Contribute towards INDUSTRIAL DEVELOPMENT IN AFRICA - focused on infrastructure, productive capacity and expanded trade for regional economic integration Long term intensification of South Africa’s industrialisation process and movement towards a KNOWLEDGE ECONOMY CORE OBJECTIVES OF THE IPAP 2015
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- 14. Transversal Focus: Procurement Government purchasing power through public procurement contributes between 15% and 25% to GDP (value that is extracted from large scale procurements) National Industrial Participation Programme (NIPP): Imported Content => US$10 million Defence Industrial Participation: managed by Armscor and applicable to all defence procurement. Imported Content => US$2 million Competitive Supplier Development Programme (CSDP): managed by DPE in conjunction with State Owned Companies (SOCs) . Designation & Local Production The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) The Local Procurement Accord 142015
- 15. Designated sectors 152015 Minimum Local Content Thresholds DescriptionDate 1. Rail Rolling Stock 65% 16-07-12 2. Power Pylons 100% 16-07-12 3. Bus Bodies 80% 16-07-12 4. Canned/Processed Vegetables 80% 16-07-12 5. Textile, Clothing, Leather and 16-07-12 Footwear Sector 16-07-12 6. Solar Water Heaters (collectors and storage tanks/geysers) 7. Set-top Boxes 30% 26-09-12 8. Certain Pharmaceutical Products Per Tender 07-11-12 9. Furniture Products 85% 15-11-12 10. Electrical andTelecom Cables 90% 08-05-13 11.Valves Products and Actuators 70% 06-02-14 12. Working Vessels 10-100% 01-08-14 13.Residential Electricity Meters 50-70% 01-08-14 * Instruction notes already circulated by the National Treasury 70% 19-07-12 Sectors Already Designated* 100%
- 16. Transversal Focus: IndustrialFinancing 162015 CLUSTER INCENTIVE SCHEME BROADENING PARTICIPATION • Black Business Supplier Development Programme (BBSDP) • Co-operative Incentive Scheme (CIS) COMPETITIVENESS INVESTMENT • Sector Specific Assistance Scheme (SSAS) • Export Marketing & Investment Assistance (EMIA) MANUFACTURING INVESTMENT • Manufacturing Investment Programme (MIP) • Capital Projects Feasibility Programme (CPFP) • 12i Tax Incentive • Automotive Incentive Scheme (AIS) SERVICES INVESTMENT • Film & Television Production • Business Process Services (BPS) • Tourism Support Programme (TSP) INFRASTRUCTURE INVESTMENT • Critical Infrastructure Programme (CIP) • IDZs
- 17. Transversal Focus: IndustrialFinancing 172015 R2 billion has been allocated over the MTEF period to manufacturing development incentives and support for growing industries, such as business process outsourcing The Manufacturing Competitiveness Enhancement Programme (MCEP) will spend R5.4 billion over the MTEF and will assist companies with financial support to upgrade production facilities • MCEP is the biggest manufacturing incentive and supports response to companies impacted by structural and cyclical economic changes • Deployed towards upgrading competitiveness of labour intensive and value-adding manufacturing sectors • Grant finance with clear rules-bound access criteria • Maximise employment and value-added potential in key sectors • Exclusions: sectors with dedicated support programmes
- 18. Transversal Focus: Special EconomicZones & Regional Industrial Clusters 182015 • Budget allocation of R3.53bn over MTEF for SEZ’s • Promote creation of a regionally diversified industrial economy • Establish broader range of industrial parks and infrastructure for effective clustering and hubs • A dedicated and integrated legislative framework to enable effective regulation and management • The Work Programme of the Regional Economic Communities: joint infrastructure development and development of regional value chains • Cross-border infrastructure and sector development
- 19. 192015 TRADITIONAL SECTORS ANDSERVICES
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- 21. Sectoral Focus: Automotives 21 Continuous support for OEMs and local component suppliers through the revised Automotive Production and Development Programme (APDP) The ASCCI-driven intervention which involves the identification of products or component groups for localisation as well as the creation of focused Action Plans to give practical impetus to the localisation drive Stepped up work on African integration across the full auto sector value chain 2015
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- 23. Energy challenges andimpacts on the economy 232015 0 5 10 15 20 25 30 35 40 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004/05 2006/07 2008/09 Electricityprice(c/kWh) Eskom Average Price, from annual financial statements and statistical yearbooks Real price 2009 base year Rising electricity prices CO2 Emissions and GPD in Selected Countries ( 1971-2011) Energy intensity and GPD in selected countries (1971-2011) 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 TPESperCapita(toe) GDP per Capita (US$) China Germany India Spain South Korea South Africa Malaysia Source: Nersa, IEA, own calculations
- 24. Sectoral Focus: Greenindustries 24 Green Transport – develop policy for production of compressed natural gas (CNG), biomethane-fuelled and electric vehicles REIPPPP – Leverage procurement and designation of solar photovoltaic energy inputs into the national grid Scale up Industrial Energy Efficiency Programme Eco-labelling development programme - development and accreditation of one new occupational qualification per annum Green skills programme - stimulating demand and supply of critical and scarce “Green Skills’ Develop of model policy and regulations to support biogas and natural gas use in transport 2015
- 25. Sectoral Focus: Primary MineralsBeneficiation and Construction 25 Investment in mining and petroleum beneficiation projects will receive R2.7bn over MTEF Development of Mineral Beneficiation Action Plans (MBAP) will unpack the Minerals Beneficiation Strategy (2011) and give specific policy guidance with regard to wide-ranging minerals beneficiation Targeted support measures to increase the supply of mining capital goods (plant, machinery, after-market) that can unlock and deepen capital goods manufacturing industries in SA for local consumption and export into key markets Strategic input into the legislative review of the Mining Charter (2010) to include the recognition and reward of local content Expansion of the PGM beneficiation industry - aiming to catalyse practical collaboration between the local mining industry, fuel cell OEMs and component manufacturers and potential public and private users 2015
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Editor's Notes
- #19 Work is underway to realise this objective by ensuring that regions which have not been designated as SEZs could instead benefit from agglomeration of activities. The interventions envisaged could take the form either of spatial agglomerations and/or active cooperation between firms.
- #20 Heavy reliance on raw material production and unbeneficiated exports, with too little value addition and few forward and backward linkages to other economic sectors - further aggravated by underdeveloped infrastructure Regional work programme: the establishment of joint infrastructure development projects, development of regional value chains and the provision of technical assistance for policy and institutional development. Cross-boarder infrastructure project: to complement the Free Trade Area (FTA) discussions to create a market of more than 600 million people in South, Central and East Africa