/ 18 February 2010

SA unveils job-creating industrial plan

South Africa’s new industrial policy action plan (IPAP) is expected to create almost 2,5-million jobs over the next decade by boosting, and protecting, local factories, a government minister said on Thursday.

Releasing details of the 2010-2013 plan, Trade and Industry Minister Rob Davies said it would focus on improving concessional funding by local finance development agencies, introduce new procurement policies and target anti-competitive practices.

The programme, which comes into effect from April, would help Africa’s biggest economy reduce its trade deficit while improving the country’s long-term manufacturing capacity.

“Increased investment will generate a mix of import replacement and exports which will help lower the current account deficit and reduce balance of payment risks,” he said in a speech to Parliament.

South Africa’s economy grew by an average 5% between 2002 and 2007 but failed to significantly cut unemployment, and government is looking to boost local manufacturing to create more work.

A global slowdown and domestic recession last year cut almost 900 000 jobs and pushed the official unemployment rate close to 25%, highlighting the need for more labour-intensive industries.

Davies, who stressed the need for a more stable and competitive exchange rate, said the plan was aimed at strengthening and expanding production in sectors such as the car and clothing and textile industries, which had been hard hit by the downturn.

“It represents a significant step forward in scaling up our efforts to promote long term industrialisation and industrial diversification beyond our current reliance on traditional commodities and non-tradable services,” he said.

“Its purpose is to expand production in value-added sectors with high employment and growth multipliers that compete in export markets as well as compete in the domestic market against imports.”

Resuscitating industries
Davies said state-aligned Industrial Development Corporation and other developments agencies would be used to expand access to concessional funding, at more favourable lending rates.

The plan also identified up to 10 strategic areas of procurement to scale up local production, including key elements of government’s coal-fired electricity build programme and components needed for the aerospace industry.

Besides cracking down on customs fraud and illegal imports, the government would use its trade policies, including tariffs to create and “resuscitate” certain industries, such as the clothing and textile sector which was struggling to compete with cheaper Chinese imports.

“Tariff setting will be informed by industrial policy. It doesn’t mean apriori high or low tariffs,” he said.

Davies also said IPAP would target anti-competitive practices, particularly those concerning intermediate inputs to downstream labour-absorbing production as well as consumer goods to low income households.

This applied especially to products such as carbon, stainless steel, chemical polymers, fertilizers and aluminium, he said. – Reuters