Chairperson, I would like to start by thanking all those members who made, mostly, constructive and thoughtful contributions during this debate. I would also like to appreciate the work of the portfolio committee, under the chairpersonship of Joan Fubbs, for organising public hearings and finalising a comprehensive and excellent report, which succinctly captures most of the salient points made by no less than 38 stakeholders of a very, very high calibre during the course of those hearings.
The parliamentary hearings and the report itself have confirmed something that we ourselves have discovered in ongoing, extensive consultations with key stakeholders, both in business and in labour - that there is overwhelming support in this country for the objectives, analysis, diagnosis and direction of the policy proposals included in Ipap2.
As we have said repeatedly, we regard Ipap as a rolling action plan and a living document. Through ongoing consultations and engagements, we plan to amend and improve our Ipaps in the process -as we describe it - of learning by doing.
Ipap is one of the platforms of the new economic growth path which is designed to place us on a qualitatively new, more labour-absorbing growth path. Ipap is rooted in the perspective which argues that we need to make structural changes in the trajectory of accumulation if we are to reduce the unacceptably high levels of unemployment in this country, and with them poverty and inequality.
Ipap identifies a number of constraints which have led to a situation in which the productive sectors of our economy have grown at only about half the pace of consumption-driven sectors. It proposes a number of ways to address these constraints. We have to work for the success of these policies and programmes against the backdrop of a considerable external shock, whose impact on the industrial sector and on jobs continues to be severe.
The global economic climate is characterised by great uncertainty. Although it appears right now that the world economy is moving out of recession, the extent and the nature of the recovery is uncertain and fragile, at best, with growth in the developed world expected to be, at best, sluggish for many years to come.
This context of uncertainty and oppressed trading conditions for us with our established trading partners in the developed world, in our view, requires that we do things differently. It makes it even more imperative that the policy perspectives and tasks set out in Ipap are implemented.
Frankly I've heard nothing today ... and I think I'll have to make allowances for the fact that people say something different in the portfolio committee from what they say up here. There is an element of grandstanding when they come to this podium. But I think I have heard nothing that suggests that there is any coherent or credible alternative to the strategy which we are proposing.
Further than that - and I want to build on a point that was made by the hon Turok - the lesson from the experience of those developing countries that have performed more successfully during the crisis and which have now emerged as major new poles of economic power and major new forces of dynamism in the world economy, countries like China, India and Brazil, is that all of them, without exception, had active state-led industrial policies which sought to identify, support and nurture key value-added production sectors. In fact, the experience of economies like India, China and Brazil has merely echoed that of every other country at any time in economic history which succeeded in placing itself on a new growth path characterised by increasing as opposed to diminishing returns to scale.
I want to quote from a recent book called Industrial Policy and Development By Mario Cimoli, Giovanni Dosi and Joseph Stiglitz, which says:
All the countries which are nowadays developed undertook indeed relatively high degrees of intervention to support the accumulation of technological capabilities and the transformation of their organisation of production, especially in the early period of industrialisation.
Ipap is indeed based on and draws precisely lessons and learnings from key developing countries which have now emerged as powerful forces in the world economy.
In response to the hon Marais, I want to say that the choice of 13 sectors in Ipap is not the product of some thumb-suck by government. Rather, it is the product of an exercise of self-discovery and continuous engagement with key stakeholders. The fact that we have chosen 13 subsectors is a reflection of the diversity of the existing industrial base. At the same time, the hon Marais appears to have forgotten that there are in fact three identified focus areas. The first of these are metals fabrication, capital goods and transport equipment industries, which we say need to grow and development fundamentally on the back of the infrastructure investment programmes that we will be undertaking in this country. The second focus area is green industries, and the third is precisely one of the ones he mentioned - agroprocessing.
It is also not true that Ipap ignored service sectors. Some high-value service sectors like tourism and business process outsourcing, BPO, are actually part of Ipap. But the bigger picture is that the growth path strategy, which is being developed by my colleague, Minister Ebrahim Patel, will deal with this much more comprehensively because the domain of Ipap is in fact value-added sectors. I would argue that, again, the experience of economic history is that the quality and income-generating capacity of service sectors are much stronger when they are rooted in an economy which has growing and expanding productive sectors than when they are rooted in an economy which does not.
I would contend that the debate on the desirability of Ipap is now completed with the adoption of this report. The task now is to move towards implementation and the task of rallying important forces behind this particular programme. As the DTI, we are now firmly in implementation mode. In fact, we are committed to presenting a six-monthly implementation report, and that report will have to refer to the period of implementation up to the end of this particular month. We are now two quarters into the implementation of Ipap.
I want to just say that the report which we will be presenting to both Cabinet and Parliament, according to the commitments which we made, will reflect in detail on all the different action plans which have been identified in Ipap. As a sort of preview, I can say that, broadly speaking, most of the work which we have identified that we need to do in these two quarters is being done and is on track. There are very few exceptions. Although I must say that if there are any exceptions, I am not happy with that because I think we need to keep the pressure up to make sure that all the work is done when it needs to be done.
There are a couple of issues that were raised by hon members in the debate that I would just want to refer to. A number of people spoke about the issue of procurement. Indeed procurement was a major, major issue in Ipap itself. I am pleased to be able to report that a joint task team from National Treasury, the Department of Economic Development and the Department of Trade and Industry has reached an agreement on the set of proposed amendments to the regulations of the Public Preferential Procurement Finance Act. These proposals, which are fully compatible with World Trade Organisation, WTO, rules, we believe will considerably scale up our ability to use state procurement as a mechanism to generate and support local manufacturing.
When these proposals are implemented, subject to Cabinet approval, we believe that this will signal the first phase in a broader comprehensive review of state procurement which will address a number of the issues raised by the committee in the report, including the potential of co- ordinated procurement processes at the level of metro municipalities.
As the committee noted in its report, there are a number of positive examples that show what is possible. The eThekwini Municipality's procurement of public transport equipment is exemplary. They achieved 98% local procurement, and it showed what can be achieved when the will is there.
The reason for the display of the exhibition which we are having outside in the private sector of the Volkswagen Polo, is that the local content of that particular vehicle has gone up from 39% to 74%, which is an objective we have set in the automotive programme. [Applause.]
We are proposing that the accreditation for local procurement be undertaken by Proudly South African, which will give that campaign a major boost. We believe that all of this will assist us in moving towards getting a higher proportion of local production from the investments which we are making in infrastructure.
A number of members referred to the issue of ArcelorMittal and Kumba. Let me just say a couple of words on this, although this is not central to this particular report. Let me just say that the unbundling of Iscor in 2001 involved what we are convinced are two public and developmental obligations. The first of these was that the company that received the licence to mine iron ore incision would have to make a proportion - and indeed it was a rather modest proportion - available at cost plus 3% to support local steel production.
The second public and developmental obligation was that the beneficiary or the recipient of that concessional iron ore would have an obligation to pass this on in the form of a competitive steel price that would support downstream manufacture. I think that recent events and the differences between the two companies that have benefited from this arrangement show that there was a weakness in that those public service obligations were embedded in contracts between two private companies.
As is known, the Department of Trade and Industry together with the Department of Economic Development and the Department of Mineral Resources has established a task force which has, as its objective, to ensure that we identify all the levers in government to make sure that those particular objectives are restored.
Make no mistake, it is essential for the success of Ipap that we have in place competitively priced steel available for downstream manufacture.
I don't have any time to go through the large number of other individual recommendations made in this excellent report. Suffice to say that we are prepared in the committee to go through each of them in detail and that we will be reporting, as I said earlier, through the six-monthly report, both to Cabinet and to Parliament.
As far as implementation is concerned, we also believe that the new system of monitoring and evaluation in government, with the different new structures in place - implementation structures and so on - offers us a mechanism whereby all the different contributions coming from all the different parts of government to make Ipap a success can be monitored and be evaluated.
In implementing this important industrial policy initiative, we know that there are no easy victories. We will continue to signal that we are going to be honest and very serious about what we are doing. We call upon all South Africans to do, in this area, what we succeeded in doing in the World Cup - making it a major success.
Let us then work together to make our industrial policy a success. Let us work together to grow the economy and to fight the scourge of unemployment. I trust that the House will adopt the excellent report on the hearings on industrial policy by the Portfolio Committee on Trade and Industry. Thank you very much. [Applause.]
Debate concluded.