1. Division :EIDD
PORTFOLIO COMMITTEE: 31 October National Industrial Participation Programme (NIPP)
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2. CONTENTS Introduction and Background Performance of NIPP
Industry Impact of NIPP
Key Projects for
Summary of EIA
IS NIPP Working?
Challenges
Recent Developments
Way forward
Questions
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3. INTRODUCTION & BACKGROUND
To leverage economic benefits and support the development of South African industry by effectively utilizing the instruments of Government Procurement
NIPP became obligatory in September 1996.
Applicable on all Government and State Owned Enterprises
Obligation value: 30% of the imported content – equate to economic activity
Principles: Additionality, Causality, No Increase in price, Sustainability
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4. PERFORMANCE OF NIPP(US$)
OBLIGATIONS 
OBLIGATION VALUE
NIP CREDITS AWARDED
OUTSTANDING OBLIGATION
DEFENCE
$13,765,167,611
$7,721,945,577
$6,043,222,034
NON DEFENCE
$2,267,148,037
$1,271,723,191
$1,321,464,288
TOTAL NIP
$16,032,315,648
$8,993,668,768
$7,364,686,322
Encompasses Invest, local sales, exports, tech transfer, SMME, BEE, R&D, training with NIP multipliers
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5. INDUSTRY SECTOR SPREAD OF THE 173 NIPP Projects
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6. GEOGRAPHIC SPREAD
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7. INDUSTRY SECTORS OF NIPP
Manufacturing Sector accounts for 90% of NIPP projects. Aligned with Integrated Manufacturing Strategy & National Industrial Policy Framework.
Key sectors: Basic metal manufacturing, manufacturing of transport equipment and chemicals. (In line with global offset trends)
High tech sectors: Energy, telecommunication, medical equipment
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8. HIGHLIGHTS 2007 Rock Bolt – wire and wire products BEE JV
Mechatronics – integrated mechanical and IT skills development students/year
Novara – plastic recycling
ALC: Global supply of leather seats -250 jobs
Flextech – localisation and global supply of automotive cables -155 jobs
Offshore Oil and Gas Fabrication Centre – 700 jobs
Avalloy – Niche super alloys for aeronautical industry. Accredited RR supplier
Denel SAAB – Design and production aerostructure components
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9. ECONOMIC IMPACT ASSESSMENT (EIA)OF NIPP- BACKGROUND
An EIA was commissioned in March 2007
Input - output model used (SAM) using multipliers
Input provided by the dti was on key NIPP objectives: FDI, exports and local sales & jobs created
Result:
Key macroeconomic indicators:
GDP, Employment, BOP, Fiscal and capital effectiveness
of NIPP projects
Economic Effectiveness Criteria: whether NIPP was
effectively utilising capital as a scarce resource?
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10. SUMMARY OF EIA
Positive Impact on GDP: Direct average annual value added contribution to GDP is R3billion
Positive impact on Balance of Payments (Exports > Imports – on average for NIPP projects)
Government to receive an additional R3.9 billion in taxes due to sales generated by NIP projects
15689 direct jobs created and/or sustained
50308 direct and indirect jobs (66% semi skilled and skilled whilst 34% is for unskilled jobs)
Medium to high tech and skilled to semi skilled focus of NIP projects
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11. CONCLUSION OF EIA:
Average of R16 billion of capital required on an annual
basis to sustain all NIPP projects.
(Covers - initial investment + capital costs required by other sectors across economy to sustain increased levels of economic activity on account of NIPP)
Hence Effective use of Capital:
NIPP is effective in utilising capital (investment) as
a scarce resource as NIPP projects contribute a
greater portion to GDP as compared to other capital
projects of a similar nature.
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12. GOVT SPEND VS BENEFITS DERIVED FROM NIPP
IMPORTED CONTENT OF PURCHASES
Total: Approx: US$11.3bn
Defence: US$3.8 bn
Non Defence: US$7.5 bn
2. Actual FDI’s, EXPORTS AND LOCAL SALES:
FDI: US$ 424m from obligors
Exports: US$ 2.9 bn -market access
Localisation: Local investment and import replacement
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13. CHALLENGES/ LESSONS LEARNT
Project failure due to lack of competitiveness and ability to sustain projects locally
Project failure due to market dynamics
Project failure due to mismanagement of funds by local supplier
Milestone deadlines are in most cases over optimistic – challenges within the operating business environment
Limited support for development of BEE’s and WEE’s
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14. RECENT DEVELOPMENTS DIRECT NIP:
Use tool of NIPP to extend beyond its current scope and also allow for offsets directly associated with the procurement and its associated industry.
Contribute towards building local capacity and local content through Government procurement
OTHER:
Alignment with key Government initiatives such as B-BBEE, SMME’s and Skills Development
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15. WAY FORWARD Incorporate Direct NIP into existing NIPP Guidelines
Communication of Direct NIP to applicable Purchasing Entities – workshops, bilaterals
Increased focus on labour intensive projects(e.g. Magwa Tea), skills development and other key strategic sectors
Alignment between NIPP and the Competitive Supplier Development Programme (CSDP), B-BBBEE, Customer sector Programme initiatives.
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16. Thank you ????
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