1. Accelerating Growth and Development:
The Contribution of an Integrated Manufacturing Strategy
Briefing to the Portfolio Committee on Trade & Industry
8 October 2004

2. A Vision for the economy by 2014
We need an economy that can meet the needs of our economic citizens in a sustainable way:
Access to quality work and enterprise opportunities & necessary capacities and skills
Platform of economic efficiency, inputs, infrastructure, government service etc.
Adaptive, innovative & competitive enterprises
Consumer access to quality goods & services; effective protection legislation and recourse mechanisms
Built on the potential of all our people, resources and geographic areas

3. Extending our policy tradition
A vision beginning with the Freedom Charter
RDP objectives
GEAR programme
Geographic strategies
Integrated Economic Action Plan
Microeconomic Reform Strategy

4. Integrated Manufacturing Strategy?
What is the IMS –
Integrated Manufacturing Strategy?
A vision for the growth path of manufacturing
A series of interventions by government to help achieve that vision
A call to action for all economic stakeholders

5. Objective of the IMS
Accelerate growth, employment and equity through developing high value adding, knowledge-intensive integrated manufacturing built on our full potential
HOW?
Address constraints in the domestic economy to create a platform for competitiveness and economic participation
Integrate to our advantage into the global economy
Equip our enterprises to compete on the basis of new drivers of competitiveness
Integrate equity objectives into each aspect of the strategy
Build partnerships and cooperation between economic stakeholders

6. Extensive consultations
The IMS Process revisited
April 2002:
Revised
IMS draft
released
3rd quarter 2002
Reworked version submitted to
Cabinet
May 2001
First draft of
discussion document
released
Extensive consultations
and dialogue
Parliament,
Nedlac,
other
dialogues

7. Analysis: Policy and Manufacturing before 1994
Resource-oriented, especially minerals, energy and agriculture
Industrial Policy – import-substitution, resource-driven
Apartheid policy legacy included:
racial and geographic inequalities;
distorted demand;
restricted skills development;
Inefficiencies;
inward-orientation, with poor linkages to the region and the world;
restricted access to economic assets & opportunities -> limited capacity for savings, investment and enterprise development.

8. Analysis: The challenges faced in 1994
Interventions required to address both domestic conditions and integration into the global economy
Trends in the domestic economy
Diverse manufacturing base
Continued inward-orientation
Concentration of ownership & lack of equity
Global trends
Liberalisation and acceleration of global capital flows
Selective trade liberalisation
Systems of global governance with unfair outcomes
Dangers of marginalisation

9. Analysis: Policy interventions since 1994
Macroeconomic reform to address crises
Initial set of microeconomic reform measures
Trade reform: tariff simplification and trade negotiations (multilateral & free trade agreements)
Supply-side measures
Small business
Competition policy
Regulatory reform
Institutional transformation
Some sector-specific programmes
Geographic programmes –e.g. SDIs
Some consumer protection reform
Wider reforms
Labour law dispensation and skills development
Agriculture and land reform
Development of a consultative approach

10. SA’s relative competitiveness
The period prior to 2000
Significant restructuring and export growth since 1994, particularly in the manufacturing sector
SA shares in world trade
All Products: 0.7%  0.4%
Manufacturing: 0.2%  0.25%
Industrial capabilities: slipped in most measures Skills
Technological Effort
Infrastructure
Generally low presence in high growth products in world trade
Electro-technical products
Apparel
Automotives
Aerospace

11. Why did we loose ground?
Losing ground on the drivers of industrial capabilities, ie
Skills, esp. technical, tertiary
Technological effort
Infrastructure, especially telecomms
Low presence in the most dynamic products in world trade
Late start in global integration (1993/4)
Even later starter in export services
Much has been achieved, but much needs to be done

12. Global manufacturing trends (1)
% Share in World Trade
Source: UNCTAD, 2002
Non-resource based manufactures outstrip primary products and resource based manufactures

13. Global manufacturing trends (2)MT RB LT HT
ICT
% Share in World Trade
Source: UNCTAD, 2002
M & H tech manufactures have become most important

14. Analysis: Old ways of gaining competitiveness
will not work in future:
Raw materials
Unskilled labour
Proprietary production technology
Privileged access to markets

15. Analysis: New sources of competitiveness
Information and Communication Technologies
Technology diffusion
Time, efficiency and responsiveness
Integration of value chains
Economic participation and equity – developing human and economic potential

16. Integrated Manufacturing Strategy?
A strategy for manufacturing in the wider sense – including all activities associated with the production of goods
Uses the conceptual tool of integrated value matrices to understand production and how best to intervene effectively
Integrated action with regard to:
Market access
Beneficiation and value addition
Equity and economic participation
Regional production
Knowledge intensity and services integration
Development of integrated value matrices

17. Integrated Value Matrices
BUSINESS ENVIRONMENT / TRADE RELATIONS / RULES OF THE GLOBAL ECONOMY
INFRASTRUCTURE (TRADITIONAL/MODERN): TRANSPORT, ENERGY, WATER, TELECOMMUNICATIONS,
SKILLS / TRAINING
ECONOMIC PARTICIPATION / EQUITY
TECHNOLOGY / INNOVATION
TECHNICAL INFRASTRUCTURE (STANDARDS, METROLOGY, ACCREDITATION)
MANUFACTURING
Product Design
Production
Primary
Marketing & Distribution
Consump-tion
Intermediate
Final
Services
Transport Logistics
New Products
Machinery

18. Challenge for all stakeholders:
Partnerships for growth & development
Developing a common economic vision
Information sharing within and between stakeholder groups – developing a common understanding of trends and drivers in the economy
Building partnerships for strategy development and action at all levels in the economy, including wider stakeholder representation
Developing new ways of thinking and working

19. South Africa’s growth in GDP
Recent performance:
South Africa’s growth in GDP
The second quarter of 2004 saw the South Africa real GDP increase to 3.9%
Depicts solid economic growth during this quarter
Sectors which contributed to this growth, included agriculture, construction, transport, communications but also manufacturing
Source “the dti Statistics in Brief, Q3 publication 2004” data supplied Statistics South Africa

20. South Africa’s growth in GDP
Source “the dti Statistics in Brief, Q3 publication 2004” data supplied Statistics South Africa

21. Manufacturing Sector Indicators
Recent performance:
Manufacturing Sector Indicators
Manufacturing production recorded another month of annual expansion in July, with growth rising by 5.5%
Manufacturing sales expanded by 8.6% year-on-year
For the quarter ending July 2004, manufacturing output increased by 2.5%
Significant contributions came from:
Motor vehicles, parts and accessories
Food and beverages
Textiles, clothing, leather and footwear
Basic iron and steel, non-ferrous metal products
Metal products and machinery
Manufacturing output is expected to remain sturdy
Source “the dti Statistics in Brief, Q3 publication 2004” data supplied Statistics South Africa

22. Manufacturing Sector Indicators
Source “the dti Statistics in Brief, Q3 publication 2004” data supplied Statistics South Africa

23. Manufacturing Sector Employment
Recent performance:
Manufacturing Sector Employment
Year and quarter
Percentage change and change in number of employees compared to same quarter of previous year
2003 September
-0.2% (-3 000)
2003 December
+0.2% (+2 000)
2004 March
+1.3% ( )
2004 June
+2.4% ( )
Source “Survey of employment and earnings” Statistics South Africa

24. Government’s response to the challenge
Enable competitive,
adaptive
& job-creating
sectors & enterprises
Integrated Manufacturing
Strategy
Platform of efficiency &
reduced constraints to growth &
development across the economy
Microeconomic Reform Strategy
Sustainable Growth-oriented
Macroeconomic Framework