Chairperson, Ministers, Deputy Ministers, hon members, officials from the Department of Trade and Industry, the Council of Trade and Industry Institutions, leaders of organised business and labour, distinguished guests - and I know from last night's meeting that if I don't say good morning to the Techno Girls I will be in serious trouble - ladies and gentlemen, more than a century ago, in an era when there was less of a consciousness of gender equity issues, Karl Marx famously wrote: "Men make their own history but not in the circumstances of their own choosing".
This administration took office in the midst of the most severe global economic crisis since the 1930s and just as the South African economy plunged into recession, declining by 1,3% in 2009 and losing close to a million jobs. Nearly 200 000 of the jobs lost were in the already fragile manufacturing sector. This represented job losses of 220% in a sector that accounted for about 14% of our GDP.
Given this bleak backdrop, we had no choice but to act decisively by intervening as assertively as possible in the economy to protect our people's livelihoods and their already imperilled dignity. This commitment to saving jobs required of us to sharpen our interventions in support of industrialisation; to reform certain regulations in order to improve the business operating environment, and to drive the diversification of export markets for South African products.
The DTI's primary purpose in supporting this government's overall strategy is to create decent employment through inclusive economic growth. This commits us to contributing to the New Growth Path's target of creating five million decent jobs by 2020, while simultaneously raising the growth rate and reducing inequality.
The particular focus of the work of the DTI within this broad objective is to support manufacturing, which is one of the pillars of the New Growth Path - one of the job drivers. We have now reached mid-term, which is a good time for us to reflect on our progress.
In February 2010, the DTI published the Industrial Policy Action Plan, Ipap2. While this built on the National Industrial Policy Framework and the Industrial Policy Action Plan introduced in 2007, Ipap 2 sought to bring about a significant shift in the scale of our industrial policy, which we judged was necessary under the circumstances to put our economy on a more labour-absorbing growth path. Ipap 2 recognised and argued that this would require bringing about structural changes to our economy.
In particular, it would require putting the needs of productive activities at the fore in order to bring about a major shift from the consumption- driven and import-intensive growth path we had been on in the years before the great recession of 2008-9. It would also require recognising that manufacturing, the productive activity that adds value to the endowments of nature, is critical to advancing from developing to developed and from poor to rich. It is also the only path followed by any country anywhere at any time in economic history that successfully made the transition.
Over the past three years, we have made a number of significant breakthroughs, which I am glad to bring to the attention of the House. Firstly, we stabilised the clothing, textile, leather, and footwear industries. Secondly, we strengthened the performance of the automotive industry. Thirdly, we helped prompt an increase in employment in the business process services sector. Fourthly, we assertively adjusted public procurement so that it can act as a vehicle to promote local production.
We all know of the challenges that have confronted the clothing, textile, leather, and footwear industries over many years. It had been apparent for some time that the incentive introduced in the 1990s - the duty credit certificate scheme - was not working and was having the perverse effect of stimulating greater import competition. Accordingly, we energetically engaged our counterparts in the Southern African Customs Union to end the duty credit certificate scheme and replace it with a production-based incentive in 2009. This new scheme, the Clothing and Textile Competitiveness Improvement Programme, supports investments that raise competitiveness. Even though it has been in force for only a couple of years, this scheme has already resulted in greater job stability and even some employment growth among those companies accessing the programme.
Under this new programme, disbursements totalling R112 million have been approved, R14,4 million of which was disbursed to 106 companies. This, combined with the R310 million disbursed under the production incentive scheme, has supported 48 384 direct and indirect jobs.
A major breakthrough was the agreement reached with one of the major retailers in the industry, Foschini, to procure garments from South African SMMEs. This is precisely the sort of commitment to our local economy that we need from South African companies, particularly from retailers.
In spite of coinciding with the global economic crisis, the Clothing and Textile Competitiveness Improvement Programme has not only stalled employment losses, but has also led to a modest increase in employment in 2011. Under the circumstances, this is a remarkable achievement.
In the case of the automotive sector, the transition from the Motor Industry Development Programme to the Automotive Production and Development Programme by 2013 has largely been completed. This has helped to build confidence in South Africa's capabilities and given policies certainty, even in the midst of global stagnation. We fast-tracked one of the key investment measures of the APDP and this facilitated investment commitments worth over R15 billion from both assemblers and local component manufacturers.
I am pleased to see, as was reported yesterday, that more than 500 jobs were added in the sector in the last quarter that has just finished.
The investments that were made involved major international companies like Ford, Volkswagen, BMW and Mercedes-Benz. This has been accompanied by large increases in the number of vehicles assembled locally and by the production of component parts in South Africa. For example, the production line for the Volkswagen Polo with a local content increased from around 30% to over 70%.
Turning to the third main area of progress, significant advances have been made in the business process services sectors, with a number of foreign operators making the decision to locate themselves in South Africa over the past year, creating over 1 000 new jobs.
A further set of approved projects will create approximately 11 000 jobs over the next three years. About 3 400 young trainees were trained under the Monyetla II Programme. In addition to this, the first Amazon customer service centre in Africa was established in Cape Town to service global English-speaking and German-speaking clients. This was supported by the change we made in the incentive programme - from the incentive programme based on capital expenditure to the one based on operation expenditure. This shows that where there is a will, there is a way and that we can compete in the global economy. However, as the President has repeatedly emphasised, there is a number of related challenges. We need to increase the basic skills of our people. This will continue to be critical in the medium term for future prosperity.
Another major achievement has been the conclusion of interdepartmental work to reform the Preferential Procurement Policy Framework Act regulations. This work was completed at the end of last year and it enabled the DTI to designate industries for public procurement by all public entities, including the state-owned enterprises. According to the specific case in each instance, designated products and sectors will have to be procured by all procurement officers from South African manufacturers.
The first wave of designations included buses, railway rolling stock, power pylons, canned vegetables, clothing textiles, and leather and footwear. Last month, we followed these with the oral solid dosage designation in the health sector. Already, a progressive approach to procurement and supplier development has shown positive results in that sector, in the awarding of 72% of a R4,2 billion antiretroviral tender to SA manufacturers, without additional costs to the state and in compliance with broad-based black economic empowerment considerations. The reference-price system that we intend to build into the oral solid dosage designation is intended to ensure that this tender will have a similar outcome. I am pleased to see that the announcement we made in this regard resulted in a number of companies indicating their intention to invest in other sectors.
Funding for these sorts of strategic interventions is important. Accordingly, it is pleasing to announce that the Industrial Development Corporation, under the guidance of the Ministry of Economic Development, has made available an additional R102 billion for supporting industrial policy and the New Growth Path, including R10 billion set aside at prime less 3% over five years. We said in Ipap that scaling up the operations of development finance institutions was fundamental to providing and securing a solid financial basis for industrial investment.
Not only must our economy protect jobs and grow to create new jobs, but it must do so in a sustainable and responsible manner, recognising the new opportunities that exist in the renewable energy sector and other green subsectors. The work we have been doing, in co-operation with our partners in other departments in government, on beefing up standards has assisted the growth of a range of new sectors, particularly related to green industries and industrial energy efficiency.
It used to be said by progressive leaders that they were too red to be green. Now, we recognise that we are too red not to be green. Sustainable development is about people as well as the planet. And sustainability is becoming more and more significant in competitiveness.
In the same vein, inward investment in greenfield manufacturing plants by multinationals, such as Unilever, Procter and Gamble, Kimberly-Clark, Nestl, FAW Motors, Kiran Global Silica and LG, among others, contribute to our vision of inclusive growth and a sustainable future. The Unilever plant stands out as an environmentally sustainable plant and will become the design standard for all future Unilever plants globally. This reflects the type of quality investment and company that South Africa is able to attract to service the South African market and the whole African continent.
As we look ahead, we must recognise how much and how fast the world's economy is changing. Much of the EU, a major market for South African value- added products, looks set to be trapped in economic recession for some time to come. South Africa and Africa are well positioned, however, with Africa poised to become the next growth story after Asia. These circumstances require that we act smartly to mitigate the risks while positioning ourselves for the medium-term benefits that will arise as Africa begins to assume its rightful position in the world economy as a manufacturer of products. In particular, we need to act to ensure that the global economic slowdown does not have a disproportional impact on jobs in manufacturing, as it did during the first wave of the great recession in 2009.
In his state of the nation address, President Zuma signalled the strategic leadership role that will be played by the Presidential Infrastructure Co- ordinating Commission, which has already done a considerable amount of work towards producing a comprehensive and coherent 20-year infrastructure development plan capable of both providing a countercyclical response to the world's economic travails and at the same time laying the foundation for economic development, including a major new wave of industrialisation.
Our role as the dti will be to align industrial policy with this national strategy and to ensure that our industries are well placed to capture a significant share of the market for inputs the infrastructure programme will create and that we indeed capture a larger share than we did in earlier ways of infrastructure development.
Lessons of the clothing and textile production incentive, among others, have taught us that the way forward for manufacturing is to invest and continue in raising competitiveness, not to hang around and wait in the vain hope that the global environment will improve. It is for that reason that the 12i Tax Incentive Programme has now been supplemented by the announcement in the budget of the Manufacturing Competitiveness Enhancement Programme, MCEP, which will be deployed towards assisting companies to raise their competitiveness, particularly those in relatively labour- intensive and value-adding manufacturing sectors.
The R5,75 billion that has been budgeted for the Medium-Term Expenditure Framework, MTEF, will go a long way towards supporting companies to make critical investment decisions. We had the pleasure of launching the MCEP earlier this week and provided significant details about how the scheme will operate. Applications can start coming in from now onwards and the programme will begin to operate next month.
Trade and competition policies are now strategically more aligned with industrial policy objectives. Tariff setting is taking place on a significantly more sophisticated and strategic basis, informed by sectoral analysis and priorities, and the evolution of industrial policy. We are now working smarter and harder on campaigns to tackle customs fraud, illegal imports, and to combat the entry of products that do not meet the minimum mandatory standards. All of this work needs to be scaled up, but we have taken some important steps forwards in this regard. All these breakthroughs are a clear demonstration of what targeted industrial support and state-led intervention can achieve. This is the modern developmental state in action.
While we must inevitably pay close attention to the global economy and its shifting sands, we recognise the importance of small and medium-sized businesses to an inclusive economy at home. To improve entrepreneurial capacity, we have begun scaling up small business incubation programmes through the work of the Small Enterprise Development Agency, Seda, and the enterprise development division within the DTI.
We are convinced that incubation programmes are of particular value, and we are seeking to expand and build a number of programmes, including through partnerships, around the private sector. This is crucial to advancement.
To fast-track timely payment to SMMEs, National Treasury issued practice notes to all national and provincial departments, including the SOEs, requiring 30-day payment to SMMEs. Seda also established a call centre to facilitate this process. I am pleased to say that 25 000 calls have been received since the centre was established, and it has managed to facilitate payment of over R280 million.
Internal capacity to focus specifically on informal, township and peri- urban enterprises is being strengthened, while work on developing the informal sector, including through the provision of microfinance, will begin soon.
The review of the Broad-Based Black Economic Empowerment Act has been completed and a new Bill has been gazetted for public comment. Work is also proceeding on amending regulations and codes. As a whole, this intervention seeks to strengthen enterprise development through the impact of BEE, in addition to addressing unintended consequences, such as fronting.
Co-operatives remain an important, if undervalued part of our economy and of an inclusive growth strategy. The Co-operatives Amendment Bill has been submitted for certification and is due to be tabled in Parliament very shortly. In the meantime, 220 small-scale co-operatives have been established and 115 have been provided with market-access opportunities in both local and international markets during the past year.
In an effort to increase market access for co-operatives through the Brics mechanism, South Africa and China agreed to enter into business contracts on a "co-operatives to co-operatives" footing on the following commodities: maize, wine and aquaculture.
While developed countries remain important markets and sources of investment and technology for South Africa, our exports to these economies remain well below the peak achieved in 2008, just prior to the global economic crisis. By contrast, the continued and rapid rates of growth in trade and investment with emerging developing economies continue to characterise our trade relations. For example, our trade with the Bric countries grew by 29%. As demand and growth in the North is likely to remain constrained in the foreseeable future, South Africa's prospects for economic growth and development through trade will increasingly depend on diversifying and strengthening economic links with dynamic economies in the South and also through promoting integration in Africa.
While we acknowledge that Africa has emerged as the most important market for South Africa's manufactured exports and that Africa is well poised to become the next global economic growth pole, its full potential will remain unfulfilled unless the continent as a whole industrialises. [Time expired.] [Applause.]