Rob Davies, one of two deputy ministers of trade and industry, chairs an expert group on industrial policy that is helping to formulate the government’s plan to push economic growth past 6% while reducing poverty and unemployment.
Trades unions have been calling on the government for some time to support more actively specific sectors or industries. Others in business and in the government have preferred to focus on broadly improving the business environment. What is your work suggesting?
It must involve a review of sectoral activity. But we won’t just look at sector priorities; there are some industries within sectors that need attention.
We need a clearer identification of opportunities and challenges, and clearer mobilisation, as well as greater customisation of the support we offer for specific needs.
That support also needs to be deployed on a more conditional basis. Existing incentives seem to have been too broad, and the criteria too general. There is not enough evidence that the right people have accessed them, or that we have seen the right conduct from those who have.
There is also a sense that the scale hasn’t been sufficient, but it would be wrong to say there has been no impact — as you can see from the motor industry development programme.
There has been a debate in the government about how to use tax as a policy instrument. The Treasury seems to prefer what it calls “horizontal equity”, more uniform taxes with less scope for abuse, perhaps gradual reductions across the board. Some other departments have pushed for tax incentives for industries they think are important. Where is that debate today?
It isn’t closed, but the onus is on the Department of Trade and Industry and those who advocate the use of tax instruments to prove that the loss of revenue it can cause achieves results. There have been doubts, for example, about the strategic investment programmes, and some of those doubts are justified, but it can’t be read from this that there will be no use of tax policy [to help develop industry].
There has also been debate about whether to concentrate resources in the cities, where there is scale and efficiency, or to redistribute them to underdeveloped areas, particularly in the countryside. Is any consensus emerging?
The discussion is settling around the idea that there must be a spatial direction to industrial policy. Are we going to force every sector to relocate to the former homelands? No. But movement of footloose sectors and enterprises will be encouraged.
Can you really create major state supports for industry without contravening the rules of the World Trade Organisation (WTO)?
The WTO doesn’t completely prohibit an industrial policy, but certainly this policy is being created in a context that is different from the circumstances that prevailed when the east Asian economies were industrialising. It isn’t a matter of going back to the 1970s in that sense, but there are possibilities in the current framework.
Does the government really have the capacity — financial and human — to pick winners, to monitor their performance, and adequately support their development? The trade and industry department is often characterised as a rather small and overstretched department.
That is, of course, a very major issue. We need to make more effective use of the capacity we already have in the department. And we need an intelligent way of drawing on capacity outside — that is, we need to organise ourselves to make use of the capacity that undoubtedly exists in this country.
Will your work address labour market reform, or are changes to labour laws off that table since proposals for greater flexibility were rejected by the African National Congress’s national general council?
We will be doing work around training, skills development, and so on, but the overall debate on the labour market belongs elsewhere.
Some would say that in Germany and parts of Asia the approach you are proposing, the interventionist approach, is in crisis.
I don’t think so. What is clear is that the neo-liberal model, when exported to developing countries, has been significantly unsuccessful. Market fundamentalism and liberalisation when there are huge [trade] barriers on the other side just don’t make sense. Developing countries that have had an industrial policy have done much better.
You often sparred with [former Democratic Alliance MP] Enyinna Nkem-Abonta on these issues when you were in Parliament. Now that he has joined the ANC, do you think he has changed his mind, or are you open to some of his liberal ideas? He has often said we should have no industrial policy.
I haven’t had a chance to discuss it with him, but you should rather be focusing on the fact that he said there is no room for black people in the DA.