South African Business is an annual guide to business and investment in South Africa. Published by Global Africa Network Media in Cape Town, the 2016 edition is in its fourth year of publication.
The publication provides up-to-date information and analyses of the country's key economic sectors, as well as detailed economic overviews of each of the nine provinces in South Africa.
SPECIAL FEATURE IPAP in
SPECIAL FEATURE IPAP in action In 2015 the dti launched the latest version of their Industrial Policy Action Plan (IPAP) 2015/16-2017/18. The IPAP is a comprehensive joint endeavour of the Economic Sectors, Employment and Infrastructure Development Cluster of Government which, framed by the National Industrial Policy Framework (NIPF), is an annual action plan which builds on the work defined and initiated in previous iterations of South Africa’s industrial policy. The IPAP seeks to continuously strengthen industrial policy instruments, build upon previous plans and jettison any programmes which have in practice been found not to work. If the National Development Plan (NDP) sets the overall vision for South Africa’s economy and society on the road to 2030, then the IPAP provides the targeted actions and rolling implementation framework for sustained and deepening industrialisation. The importance of industrial policy Industrial theory, policy and practice is frequently misunderstood and sometimes maligned in South Africa, where it is often negatively and mechanically counter-posed to ‘market imperatives’ and asked to accommodate to ‘one-size-fits-all’ policy prescriptions. In reality, industrial policy is pervasively practiced all over the world within both developing and developed country contexts. Wherever it is practised in a nuanced way (with a realistic grasp of the local/regional context, as well as a strong focus on longer-term outcomes), it provides the foundation stone for the indispensable coordination of government and private sector economic and social actions. Sensible and empirically grounded industrial policy develops traction through a dynamic, complex set of inter-locking and mutually supportive transversal (cross-cutting) and sector-specific interventions. Successive IPAPs have consistently been premised on an understanding that successful re-industrialisation requires a laser-focused, national industrial effort. In practice, what this means is that there is a need for strong policy coherence and programme alignment across all government departments and their agencies, with decreasing reliance on regulatory compliance and a much stronger emphasis on coordinated economic impact. In addition, there is also a need to decisively change the nature and tone of the conversation between government, business and labour to ensure that all three parties identify areas in which they can actively work together to secure SOUTH AFRICAN BUSINESS 2016 54
SPECIAL FEATURE and strengthen their joint efforts, factoring in the tough realities of extremely difficult global and domestic economic conditions. As at 31 March 2015, a total of R3.7-billion has been approved under the programme, of which R2.6-billion has been disbursed since inception of IPAP in 2010. The Manufacturing Value Addition (MVA) increase, attributable to the CTCP between the base of 2009 and 2014, is R3.9-billion (exceeding the disbursements by 50% or R1.3-billion) while the overall sector experienced declines in output and Value Added over this period. National Employment in the sector (utilising annual averages provided in the Quarterly Employment Survey) decreased by around 19 000 formal jobs between 2009 and 2014 while, during the same period, the increase in employment attributable to the CTCP was approximately 6 900 jobs. MVA per Employee increased substantially, especially for Leather, indicating an improvement in labour efficiency as MVA growth was faster than the growth in employment. Labour Cost as a percentage of sales has stabilised since 2012, indicating that improved process efficiencies, exceeded the increased cost pressures (wages, fuel, electricity, etc.). On Time In Full (OTIF) deliveries, one of the most important indicators of operational efficiency and customer service, has increased overall, indicating a steadily improving delivery reliability in in all sectors. Thus, CTCP interventions have already contributed to improved overall competitiveness, sustainability and employment growth for recipients. At a cost to date of R2.6-billion disbursed, the CTCP facilitated the creation of R3.9-billion of additional MVA as well as 6 900 new jobs, in the short term. Transversal (cross-cutting) interventions IPAP 2015 also reflects and highlights steady progress, inclusive of the following transversal programmes: • Incentives and industrial financing • A total of 3 384 private sector enterprises across all provinces were provided with incentive and other support in 2014 to a value of R13.6-billion. • A comprehensive bouquet of incentives is structured, in the main, as an ‘open architecture’ system. • Increasingly, across all sectors the conditions for access to government support will not only be tightened but increasingly directed towards support for ‘winning’ companies that have demonstrated either the proven capacity or the clear potential to compete in export markets and/or qualify as suppliers to global OEMs. Procurement The dti has designated 16 sectors, sub-sectors and products for local procurement. Although this package of measures still falls below the levels of support deployed in many other countries, if we take into account other local procurement and supplier development programmes— such as the National Industrial Participation Programme (NIPP) and the Competitive Supplier Development Programme (CSDP)—then it is safe to say that the combined quantum of support is significant. The lever of designation is as strong or as weak as the level of compliance that can be achieved. Upcoming designations will thus be accompanied by much more sharply focused measures to ensure compliance across all government departments and agencies and concentrated attention to the development of state capacity for local strategic sourcing and supplier development. Across the whole range of IPAP interventions, local content requirements will continue to be strengthened wherever applicable—including in flagship success areas like the latest window of the Renewable Energy Independent Power Producers Programme (REIPPP). The full IPAP can be downloaded from www.thedti.gov.za. 55 SOUTH AFRICAN BUSINESS 2016
