7 March 2013
We welcome you to the post State of the Nations Address media briefing. This briefing is an opportunity to share with yourselves and the rest of the country progress and plans with regard to government’s commitment to achieving key government priorities which are:
- Decent employment through inclusive growth (Outcome 4)
- An Efficient, Competitive and Responsive Infrastructure Network (outcome 6).
The Cabinet Lekgotla held in February evaluated the impact of the New Growth Path since its adoption in October 2010 and considered progress with implementation of the National Infrastructure Plan. It reaffirmed the dynamic relationship between the National Development Plan as the overall vision of government and the strategies to achieve that vision, namely the New Growth Path as well as its key jobs drivers such as the National Infrastructure Plan and the Industrial Policy Action Plan.
The President in the SONA highlighted the centrality of the NDP common vision for driving government priorities.
Despite signs of improvement, the world economic situation and prospects continue to be challenging. Global economic growth remained tepid in 2012, with most countries experiencing a below par growth or no growth at all. In the face of this subdued growth, the joblessness continues, with global unemployment still above its pre-crisis level and unemployment in the euro area rising rapidly.
Reducing the number of unemployed South Africans is our central challenge. Unemployment means that too many of our people, especially the youth, are excluded from core economic and social relationships, from the opportunity to contribute to our country, their communities and their families. We need to create the conditions in the economy and society that will sustain the growth in jobs and indeed accelerate it.
The New Growth Path was introduced in October 2010 and since then 603,000 more jobs were created.
Overall economic growth has recovered from the 2008/9 downturn. In the past two years, it has averaged well over 2.5 percent a year. That said the second half of 2012 saw a fall in the growth rate, largely due to the recession in Europe and the slowdown in US growth. These global trends affect South African exports, especially through lower mineral prices. In turn, that will increase the obstacles to job creation and growth in the coming year.
Government has identified Infrastructure as one the key drivers for job creation. In this regard the Presidential Infrastructure Coordinating Commission (PICC) was established in 2011 and since then significant progress has been registered.
In the last 12 months under the leadership of the President through the Presidential Infrastructure Coordinating Commission (PICC) has launched the intergovernmental forums of the 18 strategic infrastructure projects. By the end of March 2013, government will have spent about R860 billion rand on infrastructure development since beginning from 2009.
Infrastructure development creates jobs in construction; it grows demand for inputs such as pylons and machinery. It also improves conditions for productive investors who need electricity, water, roads and telecommunications to compete and it improves living conditions in our communities, which for so long were deprived of those basic services.
Last year demand for key minerals declined sharply months before the mining strikes. Sales of platinum to Japan, which is our largest platinum market, fell by 40% in the period before the strike, as the Japanese car industry slumped. By year end, total platinum sales were down by 18,5%. This impacted on jobs, on growth and on investment.
It is precisely to address these cyclical challenges that government fast-tracked infrastructure investment.
A few illustrations:
The 675kms of electricity transmission lines that were laid last year is the largest level in more than 20 years.
In Mpumalanga, following our work over the past year, we are now ready to turn the sod within the next four weeks to commence with the site-clearing and construction of the first new large rail lines by the state since 1986, with construction of the 63km Majuba Rail coal line which form part of the 140 km of new rail in Mpumalanga, as part of our promise to move coal from road transport to rail transport.
The De Hoop Dam taken together with the Mooi Mgeni Dam, creates a new water yield of 126 million cubic meters – significantly more than the water consumption of the city of Mangaung and Msunduzi (Pietermaritzburg) combined.
In addition to these new dam expansions, we have completed a project to provide water from the Vaal River with low-lift pumps, a pump station and 120 km pipeline to deliver additional water to Eskom and Sasol. We are within weeks of completing the Komati scheme that will supply water to two power stations in Mpumalanga. These projects show our commitment to address the infrastructure blockages to expanding industrial production and to expand our generation of electricity to encourage private sector investment in our productive economy so that more jobs are created.
Our road maintenance programme saw basic maintenance of some 21 000 kms of roads in the past year, which is almost equal to the size of the African continent’s coastline. It also created many thousands of job opportunities in the nine provinces.
Last year we distilled our experience of infrastructure bottlenecks into new practices and proposed new legislation. We want to speed up the processes and ensure that government acts in a more integrated and coordinated manner in considering various authorisations for infrastructure build projects, such as water licenses, environmental evaluations, zoning permissions and financing.
We have published an Infrastructure Development Bill last week for public comment and we plan to table the Bill in parliament this year following receipt of public comments. The Bill builds on new approached the state has already begun using in the past few months to speed up regulatory decisions. We are also looking at other innovations to support long-term capital project implementation through providing greater certainty on funding for infrastructure projects, to move away from the stop-start processes that still characterise many projects across government.
We are cracking down on corruption, tender fraud and price fixing in the infrastructure programme and the state has collected a substantial dossier of information on improper conduct by large construction companies, that is now the subject of formal processes of the competition and other law enforcement authorities.
Our departments are working on skills plans for every Strategic Integrated Project and we are developing concrete actions to use infrastructure to industrialise South Africa. Indeed, some real progress has been made on this front, with funding by the state to assist private sector companies to manufacture locally more of the components and inputs used by the infrastructure programme.
The infrastructure implementation has been a valuable source of learning for government, pointing to what we need to do to be more effective and identifying weaknesses in speedy delivery that we are addressing. In the year ahead, we will fast-track many of the projects that the PICC has announced.
The lesson from our successes have been that we must coordinate, integrate and focus on implementation. We will now take those lessons and use it in other parts of our work, particularly on the programme to industrialise the economy.
In a few weeks time, President Zuma will host a meeting of the Presidents of China, Russia and Brazil and the Prime Minister of India, when the 5th BRICS Summit takes place here on our shores. The theme of the Summit holds out hope for the African continent, focussed on “BRICS and Africa – partnerships for development, integration and industrialisation”.
This is the opportunity for the continent to forge more balanced economic relations with the fastest-growing parts of the global economy. Above all, this means that Africa must build a sophisticated manufacturing base, processing more of our agriculture and mining products here on the continent and selling these to our trading partners as finished consumer goods, so that we create more decent work opportunities for our people.
The PICC now monitors 44 % of all state infrastructure projects on a quarterly basis, focused on the 18 SIPs. This is about R24bn spent quarterly. The full Budget is R65bn.
We now track the job creation within the R24 bn of spending. This portion alone provides jobs to about 145 000 people across the country.
The breakdown is as follows:
· Energy projects: 43 500 jobs
· Water 7 400 jobs
· Fuel pipeline 2 500 jobs
· Industrial and related infrastructure on manganese 2 600 jobs
· Roads financed through the national funded programme: 32 000 jobs
· Education (universities and national school build only): 10 300 jobs
Other projects in housing, clinics, provincially funded roads, rail construction preparation and manufacturing of components account for the remaining jobs 49 000 jobs.
The vision that government has adopted is that we will strive for a labour market which is conducive to investment, economic growth, employment creation and Decent Work.
The DOL, through UIF has collaborated with Mining Qualification Authority, MERSETA, and MICT Seta in training unemployment insurance beneficiaries on artisan and ICT related training. A total of R300 million has been set aside over the next three years for this particular initiative. During the 2012-13 financial years 3500 unemployment insurance beneficiaries will undergo training by these SETAs.
Strong and consistent intervention in the manufacturing sector
The President indicated during the 2013 SoNA that deliberate state intervention can and has turned certain industries around. The National Industrial Policy Framework (NIPF) and its implementation plans give a good example of this.
In regard to the R1bn port rebate announced by the President in 2012 in order to support and bolster the manufacturing sector in South Africa, R796m was claimed and Transnet remains committed to disburse the full R1bn discount.
Experience in implementing IPAP demonstrates that industrial policy can and does succeed in South Africa if it is well designed, is supported across departments in government; is adequately resourced and informed by robust and constructive stakeholder dialogue. This has been demonstrated in a number of sectors and transversal interventions. The implementation of successive iterations of the Industrial Policy Action Plan (IPAP)has resulted in the creation of significant new policy platforms as well as measurable impact in key sectors, especially in the Automotive; Clothing Textiles, Leather and Footwear; film industry; and Business Process Services sectors where important lessons can be cascaded into other sectors.
On the industrial financing front, significant progress has been achieved with respect to the long term reorientation of the Industrial Development Corporation (IDC) towards focusing more on financing IPAP the New Growth Path (NGP) sectors. The IDC made R102bn available for IPAP and New Growth Path sectors over five years to support more labour intensive projects. The values of approved funding increased to 55 per cent while the number of businesses that were supported increased by 33 per cent. To date R13.5bn has been committed, with 268 companies having already benefited from the fund.
Out of R25bn earmarked towards the green economy, R5.5bn has been committed. With respect to the R7.7 bn for agricultural and forestry value chains, R1.1bn has been committed. 102 companies have benefited from the R6.1bn support fund earmarked for companies in distress. The IDC will also lower the cost of funding for businesses by sourcing an additional R2bn from the UIF in order to support more labour intensive enterprises.
The 12(i) Tax Incentive of R5.6bn has secured large manufacturing investments to the value of R22.5bn. Between 2006 and 2011. On budget financing for IPAP programmes did not increase relative to GDP, in real terms until the 2012/13 budget with the launch of the Manufacturing Competitiveness Enhancement Programme (MCEP) in May 2012, with a budget allocation of R5, 8bn over the current three-year MTEF.
It is designed as a support response deployed towards upgrading the competitiveness of labour intensive and value-adding manufacturing sectorsto maximise employment and value-added potential in key sectors.The MCEP offers grant finance, interest make-up and working capital - with clear rules-bound access criteria – specifically earmarked for the upgrading of production facilities and the acquisition of new technologies. It provides for feasibility studies, cluster competitiveness enhancement and standards and conformity assessments.
The Automotive Sector
The technical work for the completion of the transition from the Motor Industry Development Programme (MIDP) to the Automotive Production and Development Programme (APDP) in 2013 has largely been completed. The sector has demonstrated an unequivocal vote of confidence in South African capabilities and policy in the form of more than R15 billion in recent investment commitments from both assemblers and component suppliers, leading to largeincreases in vehicle production volumes and deepening localisation in the sector as well as other significant spillover effects for the economy including with respect to the balance of payments.
Particularly worth noting are the following:
- Component exports amounted to R40bn with a projected 13% increase next year
- Exports of vehicles of an expected 280 000 units is projected to increase to 361 000 units net year
- The recent commitment of $100 million for truck and car assembly plant by China’s First Auto Works
- The approval by the IDC of funding provision to component manufacturers for the localisation of componentry in the motor vehicle industry supply chain.
- The continuing roll-out of the Automotive Investment Scheme (AIS) under which approximately 63 003 jobs, including 7,858 project jobs, will be supported over a 3 year period
Clothing, Textiles, Leather & Footwear
The Duty Credit Certificate (DCC) Programme was replaced with an industry upgrading incentive in 2009: the Clothing Textile Competitiveness Programme (CTCP).
The CTCP has resulted in significant competitiveness improvements even though the implementation of the CTCP overlapped with the global economic crisis, interventions have resulted in stabilisation and even modest growth in some sub-sectors with the arrest of employment losses by 2010, with a modest increase in employment registered in 2011. The sector is the cheapest job creator in the economy.
Key progress highlights in the sector include the following:
- Approximately R148m worth of approvals have been granted in support of 123 companies. This represents support for 49,888 out of a total of 101 511 jobs in the sector.
- An additional R501m has been approved by IDC and is expected to create and save 2 400 jobs.
- Foschini has committed to procuring 70% of its merchandise domestically.
- Footwear sector projects have seen an increase in annual production from 52 million shoes to an expected 100 million over the next three years.
- Approximately 32 000 people are employed in the footwear and leather value chain.
The Department of Trade and Industry disbursed incentives to the value of R736million over 3 years in the sector and facilitated investment of R3, 7bn in the food-processing sector. This supported the retention of 14 000 jobs and created 7 000 new jobs. Two major projects to the value of R1, 1bn were approved for the 12i tax incentive.
- Company specific action plans are being implemented with companies with an investment pipeline of R942million (pioneer), R220m (GWK) and R120m (Astral)
- The fruit-canning sector has been supported through the development of new canning products.
- The finalising of the Soy and furniture strategy and action plans was completed with pilot investments in the Soybean processing completed.
Business Process Services.
- R4.1bn investments have been facilitated including major global companies involved in the sector.
- Approved projects to create 15 000 jobs over 3 years
- 3 000 trainees trained under the Monyetla programme over the last year with 70% placed by 27 major investors. The Monyetla Programme is a very good example of demand led training, which serves as an excellent example for other sectors.
The key focus here is on the manufacturing of componentry inputs into South Africa’s 17, 8 Gigawatts renewable energy generation programme. This major initiative will be supplemented by solar water heating and other industrial opportunities arising from the urgent requirement for higher energy efficiency across the economy as a whole. Highlights in this sector include:
- Completion of the Solar and Wind Energy Manufacturing Strategy.
- Industrial Energy Efficiency Programme launched in November 2011, solar water heating obligatory for most new buildings under the Energy Efficiency Building Regulations.
- Two rounds of Renewable Energy generation bids awarded, with minimum levels of local content ranging from 25% to 45% and maximum targets set to increase to 65% with stronger local component requirements in solar, wind and solar CSP.
- IDC approval of funding for two local manufactures of solar water heaters.
Metal Fabrication, Capital and Transport Equipment (MFCTE)
There are three core components to the dti’s approach: leveraging the large-scale public procurements in rail and electricity; providing associated upgrading support; and taking advantage of mining capital equipment investment domestically and on the rest of the continent. Progress highlights in this sector include the following:
- the opening of a R1bn metals coating facility (Safal Steel) in KZN;
- continuous engagement with PRASA on its rolling stock renewal programmeand mandating the location of the major SOCs’ renewal and build programmes within the Competitive Supplier Development Programme (CSDP) and the designations regime – with more components targeted in this regard. The SOC’s renewal programme is estimated to create 65,000 direct and indirect jobs over 20 years
- The National Tooling Initiative pilot tooling apprenticeship programme which hitherto trained
- 522 students have been granted R200 million by the National Skills Fund. Similarly to the Monyetla Programme this constitutes a very important example of demand side training
SOLAR WATER GEYSERS
In addition to the REIPPP, the department is vigorously pursuing the roll out of the Solar Water Heater Geyser programme towards the achievement of the 1 million installations target by 2014. More than 330 000 Solar Water Heater Geysers units have been installed.
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