State hand in driving industry paying off

11 May 2016

By Acting Cabinet Spokesperson Donald Liphoko

Every new factory that opens its doors in the country is a reason for celebration. It means more jobs and a greater demand for support services such as transport, maintenance and security.

A product manufactured in South Africa advances our industrialisation. Through the Industrial Policy Action Plan (IPAP), the government has promoted long-term industrialisation and industrial diversification.

Our industrialisation is a key driver in the country’s Nine-Point Plan which seeks to inject growth into the economy and create new jobs.

The IPAP emphasises more labour absorbing production and services sectors. There is a strong focus on the participation of historically disadvantaged people and regions.

The Cabinet has approved the latest version of the IPAP for 2016/17 to grow and diversify South Africa's industrial base. The policy builds on its successes since it was first introduced in 2007.

The latest version takes into consideration the depressed global economy and difficult local economic conditions. It prioritises labour-intensive sectors such as the clothing, textiles, leather and footwear sector, agro-processing, and component manufacturing in the rail and automotive sectors.

In the year ahead, the policy will extend the rollout of our Black Industrialist Incentive Scheme. This ground-breaking programme broadens the meaningful participation of black South Africans in the economy and helps remedy some of the injustices of the past.

More black businesses involved in the transformation of the economy and our society will ensure that a greater number of South Africans, especially young people are working.

Furthermore, IPAP 2016/17 strengthens our public procurement so that we can support the local manufacturing sector and increase localisation. This will help us to re- industrialise key sectors and expand our exports.

New growth sectors such as oil and gas, locomotive manufacturing, capital equipment, heavy vehicles and shipbuilding will also receive greater focus.

The government is confident that our intervention will increase the country’s global share of products and promote a more competitive and diversified economy.

Our experience shows that IPAP has made a profound change on our industrial landscape. The Automotive Production and Development Programme has attracted R25 billion in investment over the past five years.

The US motor company Ford recently announced that it was investing R2.5 billion in its manufacturing plant in Pretoria to produce sport utility vehicles for the export market. The investment will create 1 200 jobs for the country.

This follows last year’s R6 billion investment, the single biggest investment in the local automotive sector, by BMW to produce the new generation BMW X3 at its plant in the north of Pretoria.

Plans to replicate this success are being rolled out across other sectors of the economy.

The country’s 12i Tax Allowance Incentive Scheme has supported companies investing in the chemical, cosmetics, plastics and pharmaceuticals sector.

It includes among others an R800 million investment by Cipla Pharmaceutical’s in a new production facility and a €25 million investment by European active pharmaceutical ingredients manufacturer Sterling.

Global consumer group Unilever opened a multi-million rand household care factory in Boksburg and a R600 million ice cream factory in Midrand. Nestlé has committed to source more chicory from local producers to use in its coffee brands.

Our Clothing and Textiles Competitiveness Programme led to 22 factories being opened and in the past six month alone new factories for Ariana Footwear, Prizm Footwear, Safety Boy and Mystic Eyes began production. It has helped safeguard 68 000 jobs and created 7 000 new ones in the clothing, textile, footwear and leather industry.

Our green projects have attracted economic infrastructure investment which is contributing to economic growth, job creation and security of electricity supply.

SMA Solar Technology launched a multimillion rand manufacturing facility in Cape Town and the Technology group Abengoa announced a $660 million investment in the 100MW Xina Solar One project.

The country is also making inroads into rail manufacturing. Locomotives are being built by Transnet Engineering and diesel engines are being assembled in the country by China North Rail.

The construction of a R1 billion factory to build trains locally has commenced. When completed it will manufacture 600 trains, create 1 500 direct jobs and develop 19 000 artisans.

Another sector we have invested in is the film industry which resulted in 87 film and television productions being made. South Africa’s R887 million investment in the sector helped support 81 000 jobs along the value chain.

These accomplishments show that IPAP is a set of concrete actions driving our massive industrial effort.

Donald Liphoko is Acting Cabinet Spokesperson