The offset programme of the multi-billion rand arms procurement package has markedly improved the economic landscape of South Africa over the past six years, according to Trade and Industry Minister Alec Erwin.
Writing in the 2002 review of the National Industrial Participation Programme (NIPP), Erwin said the NIPP obligations on the foreign arms suppliers helped fundamentally and strategically reshape the economy.
The programme emphasised industrial expansion on the ”basis of mutual benefit, driven by sound business principles so vital to ensure that projects are sustainable over the longer term”.
”Investments generated through industrial participation requirements of the NIPP in return for large state procurements offshore have enabled foreign investors to add value to their local supply chains and guarantee the quality and consistency of local
supply, while still making a profit.
For the state the benefits are considerable,” he said.
The NIPP came into effect in South Africa on September 1, 1996. Government’s Industrial Participation Secretariat was presently monitoring obligations with participation credits worth approximately R140-billion covering more than 60 projects, according to the 2002 review.
The programme is obligatory and can be discharged in various ways, including investment, export promotion, research or collaborative business activity.
Not all of the industrial offset projects have been a booming success though.
The Ecoplug tree stump-killing device, which is manufactured in Cape Town, has failed to take root because of its reported high price.
Ecoplug SA’s former marketing manager Dereck Suckling said that one of the main customers — government’s Working for Water campaign — was not buying enough of the plugs because it was priced too high for the local market.
Suckling said the plugs cost about R175 for 100, while the real cost of manufacturing the plug cost only about 40 to 50 cents. The Ecoplug consisted of a capsule filled with a herbicide, that when inserted into stumps killed the root system.
His views were echoed by Andrew Brown, the Cape Peninsula National Parks co-ordinator for alien plant clearing.
”We have used some Ecoplugs with mixed results. They are effective at killing plants, but the problem is that it is time-consuming to insert them and the costs are prohibitive,” he said.
Brown said there were no future plans to roll out the use of Ecoplugs to other national parks in the country.
Speaking from Eskilstuna, Sweden, Ecoplug founder and president Hans Merving said the company employed about 15 staff and officially commenced production in 2000/2001 financial year.
Some staff were employed at the factory where plastic moulds were made for the capsules. The remaining staff consisted of disabled people in Gugulethu who were employed to fill the capsules with a herbicide. The company also had an administrator based in Wellington.
”They are only part-time employees… we are still not in full production yet,” said Merving.
He said the South African affiliate company was currently exporting to Sweden, Norway and Finland with tests and registration procedures currently underway in 20 other countries such as the United States, Canada, Chile and Ecuador.
Merving confirmed the company did recently reduce the price from R2,75 to R1 per plug on big volumes.
He did not want to divulge the costs of production and overseas revenue, only saying that he foresaw the ”market increasing in the future to 100 to 200 million plugs”.
Ecoplug is one of a selected list of projects — approved by approved BAE/SAAB — ranging from ship repairs to jewellery manufacturing, with a combined projected value of investments/exports totalling $2,5-billion.
BAE/SAAB won the contract to supply South Africa with Hawk trainer and Gripen fighter aircraft.
According to the NIPP review, the programme was ”explicitly” directed at achieving key national economic objectives such as sustainable economic growth, SMME development, value-added exports and job creation and economic advantages for previously disadvantaged.
Lionel October, the deputy director-general for enterprise industry development, told Sapa projects were screened beforehand for commercial viability.
”They must produce business plans which are tested by sector experts for their viability. We don’t want to create white elephants.”
He said the Department of Trade and Industry had an ongoing monitoring process, checking on projects every six months.
”We are satisfied with the NIPP are using government procurement to achieve other objectives… we want the programme because we are a developing country that must use every tool at our disposal”.
He said that hypothetically, if one project failed, it did not reduce the obligations of companies to South Africa, as ”companies just needed to find other projects to invest in” in order to make up the necessary industrial participation credits.
The department will brief Parliament’s portfolio committee on trade and industry about the latest developments concerning NIPP on Tuesday. – Sapa