Industrial policy attracts investment

(Image: GCIS)

"Our experience in the implementation of the plan demonstrates that industrial policy works, provided it is well designed, adequately resourced and informed by robust and constructive stakeholder dialogue and partnerships - this has been demonstrated in a number of sectors," he told reporters at the launch of IPAP 2012/13 version.

The strategy, introduced by government five years ago, has by far been hailed as a robust formula that allows for positive state intervention to assist industrial development in volatile global markets. It was announced then that it would become a rolling three-year plan corresponding to the financial year.

Since the first launch, government had launched its New Growth Path economic strategy, which envisages creating five million jobs by 2020.

R12bn in funding

The IDC has provided funding amounting to more than R12bn since the launch of IPAP2 in 2010. The money was spent on green industries, the automotive sector, agro-processing, textile and other IPAP priority industries.

The Trade and Industry Department will continue to work with other government departments and institutions such as the IDC, to explore future appropriate industrial financing models.

The first IPAP was launched in 2007/08 financial year. Each year since the first development, the department launches a revised three-year rolling IPAP with a 10-year outlook that takes into account on-going global economic changes.

On Monday, Davies said the launch of IPAP 2012/13 provided an opportunity to take stock of the progress made and challenges experienced since the commencement of the first IPAP five years ago.

He accepted that IPAP had been carried out in the face of severe global and domestic economic difficulty. The slowdown in the global economy had led to a drop in export demand in two of South Africa's traditional markets - Europe and the United States.

Despite this, the latest version envisages new gains as the economy was starting to stabilise in some sectors.

Automotive sector one of the strongest

Since the last IPAP version, launched last year, Davies said the automotive sector emerged as one of the strongest in the manufacturing industries, committing more than R15bn in recent investments in the country from both assemblers and component suppliers.

This has been accompanied by large increases in vehicle assembly volumes, with recent investment interests including a US$100m joint trucks and car assembly facility.

The IDC reported that it has already released R10bn of the Jobs Creation Fund announced by President Jacob Zuma last year; a further R25bn was spent on the green economy; R500m on energy efficiency projects, while more than R5bn was used to help companies in distress.

Davies said the implementation of successive versions of IPAP has resulted in significant achievements and on-going scaling up of interventions to retain, grow and diversify South Africa's industrial base.

A major achievement has been the conclusion of work to amend regulations of the Preferential Procurement Policy Framework Act to enable the dti to designate industries for local procurement, including procurement by state-owned enterprises. The first batch of sectors designated in 2011 included buses, rail, textile, food industries, and set top boxes.

"So while the road ahead may be a difficult one, a strong foundation has been laid. This makes it possible to arrest the threat of deindustrialisation and grow value addition and jobs in the manufacturing sectors of the economy, thereby underpinning economic growth and employment creation in the rest of the economy," Davies said.