Madam Deputy Speaker, Mr Deputy President and hon members, today we are tabling and also making public the 2010-11 to 2012-13 Industrial Policy Action Plan, Ipap. In fact, from 16:00 onwards, the full Industrial Policy Action Plan narrative document can be downloaded from the DTI website at www.thedti.gov.za, as well as the government website, www.gov.za.
Ipap 2, as it has become known, builds on the National Industrial Policy Framework, NIPF, and the 2007-08 Ipap. It represents, in our view, a significant step forward in scaling up our efforts to promote long-term industrialisation and diversification beyond our current reliance on traditional commodities and nontradable services.
The purpose of Ipap 2 is to expand production in value-added sectors with high employment and growth multipliers capable of competing in export markets, as well as against imports in our domestic market. In so doing, Ipap also places emphasis on more labour-absorbing production and services sectors, increasing the participation of historically disadvantaged people and regions in our economy. We believe it will facilitate, in the medium term, South Africa's contribution to industrial development on the African continent.
Manufacturing and other productive sectors of the economy need to be engines of long-term sustainable growth and job creation in developing countries such as our own. However, South Africa's recent growth has been driven to too great an extent by unsustainable growth in consumption, fuelled by credit extension.
Between 1994 and 2008, consumption-driven sectors grew by 7,7% per annum, as compared to productive sectors which grew by only 2,9% per annum. This has been a significant factor behind the reality that, even at the peak of our growth where it touched 5,1% per annum between 2005 and 2007, unemployment never fell below 22,8% of the economically active population.
Manufacturing, which constitutes a sizeable chunk of our value-added production, has not enjoyed sufficient dynamism. Our analysis, which is the product of significant engagement and self-discovery with key stakeholders, tells us that this is due to a combination of factors. These include a volatile and, at times, insufficiently competitive exchange rate for our currency; the high cost of capital relative to our main trading partners, particularly that capital directed towards value-added sectors such as manufacturing; the monopolistic provision and pricing of key inputs into manufacturing; an aged, unreliable and expensive infrastructure system; a skills system too weak to sustain the skills necessary for production; and the failure to adequately leverage public capital and other large and repetitive areas of public expenditure.
These weaknesses have been exacerbated by the global recession. Taken together, they pose enormous challenges that make it imperative that we upscale our industrial policy efforts, building on the achievements of the 2007-08 Ipap.
The 2010-11 to 2012-13 Ipap rests on four cornerstones, which are spelt out in detail in the document which is being tabled today.
Firstly, government intends to develop proposals to enhance access to concessional industrial finance on terms comparable to those of our major trading partners. Our analysis shows that, at the moment, industries in competitor countries have greater access or more favourable terms than do industries in South Africa.
Through addressing this weakness, we believe that we can promote increased investment in Ipap priority and other productive sectors to generate a mix of import replacement and value-added exports production which will help reduce the current account deficit and the balance of payments risks. Increased supply by productive sectors will also help lower price pressures, and hence assist in moderating inflation. This will also contribute to the medium- to long-term objective of diversifying the structure of our economy. Secondly, government will revise procurement legislation, regulations and practices to enable the designation of large, strategic and repeat or fleet procurements of a range of key inputs into infrastructure development programmes.
This will aim sequentially to increase the proportion of competitive local procurement in successive phases of major tenders, which will, in turn, enhance supplier development opportunities and support meaningful broad- based black economic empowerment, BBBEE.
Thirdly, government will deploy its trade policies more strategically. This includes intensifying our campaign led by the SA Revenue Service, Sars, against practices such as customs fraud, underinvoicing, smuggling and illegal imports, all of which profoundly undermine productive capacity and employment in the economy. Trade policy instruments such as tariffs will be deployed on a strategic basis informed by the imperatives of our sector strategies.
Standards, Quality Assurance and Metrology, SQAM, institutions and practices, otherwise known as technical infrastructure, will be strengthened more effectively to lock in South African products in export markets while locking out substandard import products that undermine local production.
Fourthly, anticompetitive practices will be targeted, particularly where these increase the cost of intermediate inputs into downstream labour- absorbing industries, as well as where they impose unfair price rises on consumer goods for low-income households.
Amongst products which will be focused on are products such as carbon and stainless steel, chemical polymers, fertilisers and aluminium. We will build on the very positive achievements of the competition authorities in the recent past.
These cross-cutting interventions will apply across the board. They will also be customised to underpin focused and significant interventions in three clusters of sectors.
New focus areas will include, firstly, metals fabrication; capital and transport equipment, which we see as major new opportunities for growth; and the creation of decent work arising from the infrastructure investment programme.
Secondly, there will be a focus on green and energy-saving industries. This will involve quick wins like the manufacture of solar water heaters which regulations will require to be in new houses in the near future.
Thirdly, there will be a greater focus on agro-processing industries. In addition, Ipap 2 will build on and broaden interventions in sectors which were identified in the first Ipap. These include the automotive and components sectors where there will be a new focus on medium and heavy industries, as well as public transport vehicles through inclusion in the automotive production and development programme. These sectors will include the plastics, pharmaceuticals and chemicals industry; and the clothing, textiles, footwear and leather industry where a new incentive scheme has been developed. They will include biofuels; forestry; paper, pulp and furniture; cultural industries and tourism; and business process outsourcing, BPO, services or so-called call centres.
The third cluster will focus on sectors in which we have the potential to develop long-term advanced capabilities in areas such as the nuclear industry, advanced materials and aerospace.
In each of these sectors, a careful and strategic combination of policy instruments is set out in detail in Ipap 2. Ipap 2 is a product of extensive collaborative work by the economic sectors and employment cluster of Ministers. Its adoption by the national Cabinet follows extensive engagement throughout government departments, SOEs and various other public institutions. It was also widely canvassed with labour and business organisations and, indeed, its conceptualisation was formed through exercises of self-discovery with organised labour and business.
Ipap 2 is but one component of our broader efforts, as government, to integrate interrelated policies to place us on a new growth path, as mentioned by the Minister of Finance yesterday. That work is being led by the Minister of Economic Development, Minister Ebrahim Patel.
Ipap 2 is, from 16:00 onwards, a public document. The Portfolio Committee on Trade and Industry has scheduled public hearings to allow for further consultation. It will also be formally presented to the National Economic Development and Labour Council, Nedlac, Trade and Industry Chamber in the near future. The DTI remains open to further concrete proposals and suggestions to strengthen the action plan, bearing in mind, in particular, that this is a three-year rolling action plan.
Ipap 2 is a living document which outlines a range and combination of industrial policy interventions and instruments to address the critical challenges of our economy. It will, from now on, take the form of a three- year rolling action plan, which will be strengthened and refined on an annual basis.
Ipap will identify the leading and partner departments and institutions responsible for its implementation. It underlines the necessity for the integration and alignment of the work of government departments and institutions. It identifies the constraints and risks, economic rationale, economic outcomes expected, and key action plans, KAPs, for each one of these areas.
It attaches ambitious but realisable timelines for this work. Its implementation will be reviewed and monitored against these measurable actions, and it will be the subject of annual amendments and strengthening.
It is estimated that the Ipap will result in the creation of 2 477 000 direct and indirect jobs over the next 10 years. It will diversify and grow exports, improve the trade balance, build long-term industrial capacity, grow our domestic technology, and catalyse skills development.
It is neither a wish list nor a set of unattainable objectives. It is an action plan which, like any other, will require sustained and focused work and perseverance if it is to succeed - which it must. Above all, it is a call to our workers, industry, business leaders, public servants, and citizens at large to join hands with government in building our economy and a better life for all. By working together, we can do more. [Applause.]
In conclusion, I want to thank the staff of the Department of Trade and Industry and, in particular, the director-general, Tshediso Matona and the Deputy Director-General of the Industrial Development Division, IDD, Nimrod Zalk, who've worked on the policy and action plan.
I also want to thank officials from other government departments who participated in the regular industrial policy meetings which we held to produce the current Ipap. My gratitude also goes to my fellow Ministers and Deputy Ministers in the economic sectors and employment cluster for their contributions and support.
Finally, I am indebted to Deputy Ministers Thandi Tobias-Pokolo and Maria Ntuli for their indispensable support. We place the Ipap 2 on the table, and we look forward to the engagement by Parliament. Thank you very much. [Applause.]