1. PROGRESS REPORT ON IMPLEMENTATION OF THE 2007/8 INDUSTRIAL POLICY ACTION PLAN PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY – 21 May 2008

2. 2 DTI Delegation 1.Mr Sipho Zikode: Acting Deputy Director- General Tel. (012) 394 1396 2.Mr Nimrod Zalk: Chief Director – Industrial Policy Tel. (012) 394 1366 3.Mr Nkosi Madula: Director – Industrial Policy Tel. (012) 394 1050

3. 3 Overview: Industrial Policy Action Plan 1.Sectoral actions  Fast-track implementation of four lead sectors which have emerged from research and intensive interactions with stakeholders  Metal fabrication, Capital and Transport equipment  Automotives and components  Chemicals, plastic fabrication and pharmaceuticals  Forestry, pulp and paper, and furniture  Stabilise Clothing and textiles to preserve capabilities and employment  Maintain momentum on ASGI-SA sector priorities: Tourism, Business Process Outsourcing, Biofuels  Other sectoral projects  Sectors for which further strategy work needs to be developed 2.Cross-cutting actions  New areas of emphasis: oIndustrial Financing and Upgrading oReducing input costs through competition policy and trade policy (selected import duties) 3.Improvements in government organisation and capacity

4. 4 Manufacturing output growth Quarterly Manufacturing output growth: 2000Q1 - 2008Q1 (2000=1000) Source: Statistics South Africa

5. 5 Manufacturing output Q1 2008 Manufacturing output growth Y-O-Y: 2008Q1 vs 2007-Q1 Source: Statistics South Africa

6. 6 Metal Fabrication, Capital and Transport Equipment Review of import duties of key industrial inputs into manufacturing –Duties on carbon and stainless steel removed –Review of duties on aluminium products expected to be finalised by June 2008 Supplier Development Programmes –Improved performance of machinery / equipment, metal fabrication and transport equipment sectors –Transnet and Eskom have presented draft Supplier Development Programmes – requires further demand side detail and unpacking of supply side constraints National Tooling Initiative –Was launched in March 2008 National Foundry Technology Network –Pilot projects will commence in July 2008

7. 7 Metal Fabrication, Capital and Transport Equipment Inter-governmental task team examining feasibility of possible new carbon steel investments –Recommendations to be presented to the Minister in July 2008 for further consideration Develop supplier development strategy in relation to public transport policy (especially commuter rail)

8. 8 Metal Fabrication, Capital and Transport Equipment Sectoral value-added, 1994-2007 Source: RSA Standardised Industry Database

9. 9 Metal Fabrication, Capital and Transport Equipment Sectoral employment, 1994-2007 Source: RSA Standardised Industry Database

10. 10 Automotives and components Finalise replacement scheme to the Motor Industry Development Programme: –Draft revised architecture of the programme has been developed and will be tabled with stakeholders in June 2008 –The architecture of the new programme will be announced in August 2008 Re-launch a three-year supplier development programme: –The Quality Management System component of the project has been rolled out since September 2007. –Other modules will be rolled out in collaboration with United Nations Industrial Development Organisation (UNIDO) before the end of this year Formulate an empowerment plan for the sector: –To be completed by December 2008

11. 11 Automotives and components Sectoral value-added, 1994-2007 Source: RSA Standardised Industry Database

12. 12 Automotives and components Sectoral employment, 1994-2007 Source: RSA Standardised Industry Database

13. 13 Chemicals, Plastics, Pharmaceuticals Review of the import duty on upstream chemical products: –Expected to be completed by June 2008 Increasing polypropylene value-added products used in automotives and packaging industries: –Study finalised –Commence promotion of investment opportunities in June 2008 Fluoro-chemicals Expansion Initiative –Investment commitment secured –Outstanding issue of securing sufficient land Leverage public procurement to promote domestic manufacturing of ARVs (anti-retrovirals) –The ARV tender closed in March 2008 and it will be awarded by the end of May 2008 –Challenges in securing preference for domestic manufacturers in tender process

14. 14 Chemicals, Plastics, Pharmaceuticals Sectoral value-added, 1994-2007 Source: RSA Standardised Industry Database

15. 15 Chemicals, Plastics, Pharmaceuticals Sectoral employment, 1994-2007 Source: RSA Standardised Industry Database

16. 16 Wood, Paper and pulp, Furniture Fast-track the issuing of water licenses for producers facilitating afforestation in the Eastern Cape of: –3,000 hectares in 2008; –8,000 hectares in 2009; –10,000 hectares per year thereafter in the Eastern Cape –Detailed plans for KZN are still being finalised Skills transfer programme to upgrade the technological equipment for small saw millers –Service provider for pilot project in Chris Hani District municipality approved Expansion of furniture industry –Draft furniture strategy completed –The furniture incubator in Mthatha will start operating in November 2008

17. 17 Wood, Paper and pulp, Furniture Sectoral value-added, 1994-2007 Source: RSA Standardised Industry Database

18. 18 Wood, Paper and pulp, Furniture Sectoral employment, 1994-2007 Source: RSA Standardised Industry Database

19. 19 Clothing and Textiles Implement measures to recapture and stabilise the domestic market –Country of origin labelling in place since July 2007 –Mechanisms for monitoring quotas on certain Chinese imports in place since January 2007 Review of import duties on key inputs into the clothing sector: –Review on fabrics not produced in commercial quantities in SA to be completed by August 2008 Interim Textile and Clothing Development Programme (ITCDP) formerly known as the Duty Credit Certificate Scheme (DCCS) extended –Until March 2009 with limited tradability Textiles engineering Centre of Excellence –Established at Council for Scientific and Industrial Research (CSIR) in Port Elizabeth and running since January 2007

20. 20 Way forward on Clothing & Textiles Sector 1.Raise productivity: finalise replacement of ITCDP (DCCS) by March 2009 in the form of a productivity- based incentive scheme 2.Upgrade capital and technology through Enterprise Growth Programme and Industrial Development Corporation (IDC) support 3.Tackle illegal imports: dedicated inter-departmental Illegal Imports Task Team to tackle smuggling and under-invoicing 4.Upscale skills in conjunction with the Clothing Textiles Footwear and Leather (CTFL) SETA 5.Systematically review input costs along the value chain 6.Develop medium-long term innovation and technology plan for the sector

21. 21 Clothing and Textiles Sectoral value-added, 1994-2007 Source: RSA Standardised Industry Database

22. 22 Clothing and Textiles Sectoral employment, 1994-2007 Source: RSA Standardised Industry Database

23. 23 Clothing and Textiles Imports, Q1 2000 – Q1 2008 Source: RSA Standardised Industry Database

24. 24 ASGISA sectors Business Process Outsourcing (BPO) –Roll-out of BPO incentive scheme. 9 approved projects: 9,132 jobs and R658,927 investment. A major global BPO&O operator - TeleTech has been successfully recruited to set up shop in South. –Preliminary agreement reached with Telkom, subject to regulatory approval –Monyetla Work Readiness Programme: funds currently committed to train 6,411 learners. The overall aim is to train about 30 000 learners over the next 4 years Tourism –Customised Tourism Enterprise Programme for small business under umbrella of Enterprise Growth Programme –National Tourism Safety and Awareness Strategies being implemented at provincial level –Tourism Sector Skills Plan revised

25. 25 ASGISA sectors Biofuels –The national consultations on the biofuels industry strategy have been completed. A process of refining the strategy and taking into account the inputs of different stakeholders have been completed. The biofuels task team is finalizing the strategy for submission to cabinet.

26. 26 Industrial financing and upgrading Launch of Enterprise Growth Programme (EGP) by July 2008 Package of R5b tax incentives to be launched by December 2008 Revised rebate for foreign and local production launched in March 2008 Good progress with BPO incentive Jewellery Manufacturing Precinct (JMP) at Oliver Tambo International Airport will be designated as an Industrial Development Zone (IDZ) in October 2008

27. 27 Reducing input costs Amendments to Competition Act to be taken to Parliament – Main elements of amendments include: –To enable the Commission to become more proactive in investigating markets and take measures to ensure market transparency –To remove uncertainty on concurrent jurisdiction in competition matters –To give leniency programme legal foundation to encourage whistleblowers to disclose illegal cartel activities Review of import duties on key intermediate inputs into manufacturing set out above, particularly: –Chemicals –Aluminium

28. 28 Challenges to implementation and ramping up of industrial policy Macro-economic conditions –Interest rates –Currency volatility (and periodic overvaluation) Electricity –Much more strategic approach to electricity allocation required Intra-governmental co-ordination –Financing Lack of clarity on requisite ‘business case’ Needs to be comparable with other country programmes e.g. Brazil (Appendix 1)Appendix 1 –Public procurement issues: e.g. anti-retrovirals, digital set top boxes –Competitive supplier development programmes of State Owned Enterprises

29. 29 Challenges to implementation and ramping up of industrial policy Intra-governmental co-ordination: continued –Export tax on scrap –Skills –Transport Monopolistic pricing of inputs (Appendix 2)Appendix 2 Capacity

30. 30 Strengthening of IPAP process going forward Movement to 3 year rolling action plan from January 2009 Planning will commence in August 2008 to ensure better alignment with government’s Programme of Action and Medium Term Expenditure Framework processes Strengthening the quality and scale of industrial policy interventions Industrial policy opportunities / responses to the electricity crisis –Roll-out of solar water heating and other energy efficiency devices –Promotion of more electricity-efficient / relatively more labour-intensive industries –Industrial policy / technological potential of renewable electricity generation, e.g. solar –Promote energy-efficiency of existing industry –Align with mitigation options to climate change

31. 31 Appendix 1: Brazil launches its industrial policy

32. 32 Appendix 2: Carbon steel costs, supply, pricing

33. 33 Appendix 2: Carbon steel costs, supply, pricing

34. 34 Appendix 2: Carbon steel costs, supply, pricing