Little real fabric on manufacturing plans

Industrial policy is in place, the money has been allocated, but South Africans will have to wait until next year to see how the department of trade and industry’s plan materialises.

Manufacturing, which contributes about 15% to gross domestic product, is at the heart of how the government plans to get the economy ticking, with the Industrial Policy Action Plan 2 focusing on how to get certain sectors back on track. But just how this translates on the ground is questionable, with very little of it evident in the national budget.

In his budget speech this week, Finance Minister Pravin Gordhan placed special emphasis on the need to improve competitiveness in industry and encourage enterprise development.

“A new competitiveness enhancement programme has been initiated as part of the industrial policy action plan, building on existing production incentives in the automotive and clothing textile sectors,” he said.

The department has been allocated R5.8-billion to enhance manufacturing competitiveness and R2.3-billion for industrial development and special economic zones.
Over the next three years, R9.5-billion has been allocated across these programmes, with R25-billion in the next six years.

But the treasury’s estimates of national expenditure states that incentives aimed at supporting investment and competitiveness will be implemented only from 2013.

The Budget Review said this funding would be used to support manufacturers temporarily in distress, build special economic zones and improve skills and technology.

“South Africa can capture a greater share of world manufacturing through focused efforts to achieve a competitive position in global production networks and supply chains. Local firms can also find growing investment opportunities in the African continent,” it said.

Making the most of these opportunities “requires policy reform and action by business and labour to reduce the cost of doing business, cut red tape, raise productivity, diversify exports and promote enhanced regional integration”, the review said.

Much emphasis is placed throughout the budget documents on the importance of South Africa’s fellow Brics (Brazil, Russia, India and China) partners.

The International Monetary Fund expects Brics to account for 24% of global gross domestic product by 2016. There is no better time, then, to establish closer relationships with our emerging market partners.

“China, India and Brazil offer significant opportunities,” said the Budget Review.

According to the World Bank, 85-million manufacturing jobs in China will shift to other countries over the next five years and so the need for the right industrial policy and conditions for investment is critical if South Africa is to benefit from this shift.

But to truly capitalise, South Africa needs government, labour, civil society and the private sector to join together in partnership.