nedlac: trade & industry’s chamber · the largest investment project under the ais was...

NEDLAC: Trade & Industry’s Chamber

Strategic Session

Department of Trade and Industry

2 November 2015

CONTENTS

• Background

• Selected implementation highlights in 2015

• Selected Incentive data

• Transversal interventions

• Sectoral interventions

• Overcoming challenges

• Themes and issues IPAP 2016

• Conclusion

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BACKGROUND 1

• IPAP 2015/16–2018/19 was approved by the ESEID Cluster & Cabinet in April 2015. This is the 6th year of implementation of IPAP

• Priorities are:

Strengthening a system of industrial financing and incentives with reciprocal conditionalities and ‘packaging’ government and DFI industrial finance support for the productive sectors of the economy

Public procurement to support manufacturing sector, ‘crowd in’ private sector investment and reduce import leakages and align all levers – Designations, CSDP and NIP

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BACKGROUND 2

Building on significant successes and existing policy platforms in sectors such as Autos, CTLF, Metals and Engineering, BPS, and Film

Boosting new growth sectors such as in Oil & Gas, renewable energy, aerospace and defence

Unlocking export opportunities, especially on the African continent and measures to support regional industrial integration

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KEY ACHIEVEMENTS: CLOTHING, TEXTILES, LEATHER & FOOTWEAR

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• Clothing and Textiles Competitiveness Programme

– Investment of R2.6 billion has created manufacturing value addition of over R3.9 billion

– Approvals under the Cluster Programme are R712 million, with disbursements to the value of R310 million

• Cluster development

– National and regional clusters are working well, bringing textile manufacturers, apparel manufacturers, retailers and labour together to achieve significant competitive capabilities and advantages – quick turn-around fast fashions, niche products and supplier development

– With stability achieved, business (including retailers), government and labour are partnering to position the sector for sustainable growth

– The Southern Africa Textile and Apparel Cluster was launched in October 2014 on the back of a R200 million grant from the dti

– the dti approved a grant of R69.2 million for the establishment of a National Footwear and Leather Cluster, which has created just over 7 000 jobs and saved 67 000 jobs

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• Leather and leather products

22 new manufacturers were established in the leather industry between 2012 and 2014 with gross domestic capital formation of R371 million in the leather and footwear sector from 2010 to 2013

Exports of the leather and footwear sector grew by 18% in volume terms with significant benefits to the trade balance

In the leather and footwear segment 2,000 sustainable jobs and a reduction of R1.4bn in the sectoral trade deficit

These interventions are leading to the revival of footwear firms which had closed under the pressure of imports

Kayo Shoes reopened in Dimbaza, Eastern Cape in April 2015, resuscitating 417 jobs

A new leather tannery (Fusion Leather) was established in Atlantis, Cape Town.

Angel Shoes reopened in Cape Town

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0

2000

4000

6000

8000

10000

12000

14000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Exports: Textiles, Clothing, Leather & Footwear(Rand million)

Leather Textiles and clothing Footwear

Source: Quantec

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0

1000

2000

3000

4000

5000

6000

7000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Value add at basic prices(Rand million)

Textiles Clothing Leather Footwear

Source: Quantec

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KEY ACHIEVEMENTS: AUTOMOTIVES

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The Automotive Investment Scheme (AIS) and People-carrier Automotive Investment Scheme (P-AIS) have together approved more than 40 projects

The largest investment project under the AIS was Mercedes-Benz SA’s C-Class project with an investment of R5.4 billion:

– This created 550 direct jobs and 400 indirect jobs

– 10 new component firms were set up creating 800 jobs in the MBSA value chain

– Mercedes-Benz South Africa (MBSA) has begun the second phase of its aluminium localisation initiative

Other significant landmarks:

Ford Motor Company South Africa is increasing production of the Ranger bakkie, and looks at SA as hub

Continued support to OEM’s resulted in BMW and Mercedes-Benz both producing their one millionth vehicle in 2015

BMW received the JD Power IQS Platinum award for its Rosslyn plant

Goodyear South Africa invested R670-million to increase production of high-value-added (HVA) consumer tyres at its Uitenhage manufacturing plant

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Medium/Heavy Commercial Vehicle segment

The Automotive Investment Scheme (AIS) package has been extended to people-carriers/mini-buses, trucks and buses, and

Bus bodies have been designated for public procurement

Within a year of its launch, the support package has directly led to new investments from companies like Iveco (Italy), Tata (India), BAW (China), Toyota (Japan), FAW (China), and Hyundai (South Korea)

Some examples include:

Toyota opened a R480 million facility for production of the Quantum minibus

First Auto Works (FAW) plant was opened in the Eastern Cape; the plant is expected to produce 5 000 trucks per annum

Volvo Southern Africa is planning to build 1 800 trucks and buses during 2015

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0

20

40

60

80

100

120

140

2010 2011 2012 2013 2014

Automotive industry exports(Rand billion)

Source: Automotive Export

Council

Government support has taken the industry from production of 356 800 units in 2000 to over 566 000 units in 2014

Government support has grown auto exports from just 11 000 units in 1995 to over 270 000 units in 2014.

SA’s auto export earnings rose to a record R115.7bn in 2014

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Source: Naamsa

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KEY ACHIEVEMENTS: AUTOMOTIVES SA Assembly Investment Trends

2,3 2,2

3,6

6,2

3,1 3,3

2,5

4 3,9

4,74,4

6,9

0

1

2

3

4

5

6

7

8

OEM Investment (R'bn)

Source: Naamsa

R6,9bn record of OEM Investment in 2014

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KEY ACHIEVEMENTS: BUSINESS PROCESS SERVICES

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KEY ACHIEVEMENTS: BUSINESS PROCESS SERVICES

• the dti launched the revised Business Process Services (BPS) incentive at South Africa House in London:

– The scheme builds on the success of its predecessor, which led to the creation of 9 077 jobs on the back of financial disbursement of R587m

– The scheme will further support the South African Value Proposition, which has already seen South Africa named “Best Offshoring Destination 2012” by the UK’s National Outsourcing Association (NOA)

• The dti launched CCI Call Centres in KwaZulu-Natal, with an investment value of R200 million

– This will increase the number of jobs from 3 000 to over 5 500

– CCI Call Centres is a beneficiary of the dti’s incentive and has participated in the Monyetla Work Readiness Programme

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Size of offshore BPO industry in South Africa2010-2014 (financial year figures); Number of FTEs

9,000

26%

12,000

16,00018,000

CAGRx%

• Approximately 300 000 agents and 30 000 support staff

• 18 000 supporting off shore operations

• 9 077 new Offshore jobs created between 2011 and 2014

BUSINESS PROCESS OUTSOURCING

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Variable Contribution 2007-2010

Contribution 2011-2014

Total contribution

Employment: BPO&O and BPS incentives

9 295 (BPO&O) 9 077 (BPS) 18 372

Trained: Monyetla 4 467 9 356 13 823

Employment: Monyetla 3 483 7 268 10 837

Foreign direct

investment

R349m (actual) R5.9bn (projected)

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BUSINESS PROCESS OUTSOURCING

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MANUFACTURING INCENTIVES

MCEP APPROVALS PER PROVINCE: 2013/14 & 2014/15

GAUTENG LIMPOPO EASTERN CAPE

2013/14

139 Approvals

R1.7 b

2014/15

121 Approvals

R 588.3 m

2013/14

4 Approvals

R7.3 m

2014/15

8 Approvals

R32.1 m

2013/14

32 Approvals

R101.1 m

2014/15

23 Approvals

R58.4 m

MPUMALANGA NORTH WEST FREE STATE

2013/14

7 Approvals

R25.9 m

2014/15

12 Approvals

R49.1 m

2013/14

6 Approvals

R35.3 m

2014/15

4 Approvals

R11.4 m

2013/14

15 Approvals

R63.1 m

2014/15

3 Approvals

R41 m

NORTHERN CAPEWESTERN CAPE KWAZULU NATAL

2013/14

2 Approvals

R5.7 m

2014/15

6 Approvals

R10.5 m

2013/14

106 Approvals

R497.8 m

2014/15

104 Approvals

R348 m

2013/14

54 Approvals

R301.7 m

2014/15

53 Approvals

R202.5 m

Limpopo which previously (2013/14) had four approvals valued at R7.3 million obtained

eight approvals amounting to a remarkable R32.1 million in 2014/15.

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IPAP: TRANSVERSAL FOCUS AREAS 1

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IPAP: TRANSVERSAL FOCUS AREAS 2

IPAP: SECTORAL FOCUS AREAS 1

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24


25


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OVERCOMING CHALLENGES

• A solutions-based approach to key challenges has been adopted by the Economic Cluster. This will be directly applied to such key issues as:

Electricity supply/pricing and problems at municipality level

Procurement:

• Securing stronger compliance with Localisation/ Designations and CSDP – across all government departments and institutions

• Building capacity in support of the audit requirement for localisation

• Stepped-up designations (including a range of key products in the infrastructure programme)

Port tariffs and rail and ports inefficiencies – re-balancing and improvements

Technical Infrastructure (SQAM): ongoing efforts to secure stronger support for manufacturing (testing/ illegal imports etc.)

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IPAP 2016: KEY THEMES & INTERVENTIONS

1. Achieving higher impact IPAP in adverse global market conditions and fiscal constraints

2. Interventions to support steel producers and downstream steel intensive manufacturers

3. Beneficiation and upstream capital goods sector –Mining Phakisa

4. Close alliance between the dti and the DST to support technology absorption, diffusion and research & development


5. Securing stronger localisation compliance and higher impact in public procurement programme –Designations, CSDP and NIP

6. Ongoing incremental steps to secure stronger system of industrial financing, incentives and export support

7. Strengthening clusters, export councils and the interface with the private sector

8. Strengthening sector interventions where sub-optimal programmes exist – chemicals, plastics, agro-processing


9. Higher impact regional industrial integration programmes and an integrated approach to Africa export opportunities.

10. Roll out gas-based industrialisation programme aligned with the IRP and GUMP

11. Develop SEZs as dynamic platforms for FDI and for the deepening of strategic industrial and export capacity -both in the SEZs themselves and in associated regional industrial clusters

CONCLUSIONS 1

IPAP 2015/16 was the sixth iteration of the Industrial Policy Action Plan

Cabinet has given unambiguous support for a significantly upscaled, higher-impact IPAP from its 2016/17 iteration onwards

Implementation is being driven in the face of very significant headwinds: lingering global recession, end of the commodity super-cycle and a range of acute domestic constraints

Evidence nevertheless demonstrates that where interventions are well researched, designed and managed, are adequately resourced and are the subject of close collaboration and alignment between stakeholders – very significant gains can be made, while existing and emerging policy platforms can be further built upon

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CONCLUSIONS 2

IPAP is a very important tool for management, planning and oversight

It is critical that compliance across and between government departments, spheres of government and SOCs is secured in a collaborative national industrial effort

There are no short-cuts – continuous improvement, learning-by-doing, strengthening the capacity of the state and deepening stakeholder engagement and relations are the critical factors

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Thank you

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nedlac: trade & industry’s chamber · the largest investment project under the ais was...

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