Accelerating Growth and Development:

1

• Accelerating Growth and Development
• The Contribution of an Integrated Manufacturing
  Strategy

Briefing to the Portfolio Committee on Trade
Industry 8 October 2004
2
A Vision for the economy by 2014

• We need an economy that can meet the needs of our
  economic citizens in a sustainable way
• Access to quality work and enterprise
  opportunities necessary capacities and skills
• Platform of economic efficiency, inputs,
  infrastructure, government service etc.
• Adaptive, innovative competitive enterprises
• Consumer access to quality goods services
  effective protection legislation and recourse
  mechanisms
• Built on the potential of all our people,
  resources and geographic areas

3
Extending our policy tradition

• A vision beginning with the Freedom Charter
• RDP objectives
• GEAR programme
• Geographic strategies
• Integrated Economic Action Plan
• Microeconomic Reform Strategy

4
What is the IMS Integrated Manufacturing
Strategy?

• A vision for the growth path of manufacturing
• A series of interventions by government to help
  achieve that vision
• A call to action for all economic stakeholders

5
Objective of the IMS

• Accelerate growth, employment and equity through
  developing high value adding, knowledge-intensive
  integrated manufacturing built on our full
  potential
• HOW?
• Address constraints in the domestic economy to
  create a platform for competitiveness and
  economic participation
• Integrate to our advantage into the global
  economy
• Equip our enterprises to compete on the basis of
  new drivers of competitiveness
• Integrate equity objectives into each aspect of
  the strategy
• Build partnerships and cooperation between
  economic stakeholders

6
The IMS Process revisited
Parliament, Nedlac, other dialogues
Extensive consultations and dialogue
7

AnalysisPolicy and Manufacturing before 1994

• Resource-oriented, especially minerals, energy
  and agriculture
• Industrial Policy import-substitution,
  resource-driven
• Apartheid policy legacy included
• racial and geographic inequalities
• distorted demand
• restricted skills development
• Inefficiencies
• inward-orientation, with poor linkages to the
  region and the world
• restricted access to economic assets
  opportunities -gt limited capacity for savings,
  investment and enterprise development.

8
AnalysisThe challenges faced in 1994

• Interventions required to address both domestic
  conditions and integration into the global
  economy
• Trends in the domestic economy
• Diverse manufacturing base
• Continued inward-orientation
• Concentration of ownership lack of equity
• Global trends
• Liberalisation and acceleration of global capital
  flows
• Selective trade liberalisation
• Systems of global governance with unfair outcomes
• Dangers of marginalisation

9
AnalysisPolicy interventions since 1994

• Macroeconomic reform to address crises
• Initial set of microeconomic reform measures
• Trade reform tariff simplification and trade
  negotiations (multilateral free trade
  agreements)
• Supply-side measures
• Small business
• Competition policy
• Regulatory reform
• Institutional transformation
• Some sector-specific programmes
• Geographic programmes e.g. SDIs
• Some consumer protection reform
• Wider reforms
• Labour law dispensation and skills development
• Agriculture and land reform
• Development of a consultative approach

10
SAs relative competitiveness The period prior to
2000

• Significant restructuring and export growth since
  1994, particularly in the manufacturing sector
• SA shares in world trade
• All Products 0.7 - 1990 ? 0.4 - 2000
• Manufacturing 0.2 - 1990 ? 0.25 - 2000
• Industrial capabilities slipped in most measures
  Skills
• Technological Effort
• Infrastructure
• Generally low presence in high growth products in
  world trade
• Electro-technical products
• Apparel
• Automotives
• Aerospace

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Why did we loose ground?

• Losing ground on the drivers of industrial
  capabilities, ie
• Skills, esp. technical, tertiary
• Technological effort
• Infrastructure, especially telecomms
• Low presence in the most dynamic products in
  world trade
• Late start in global integration (1993/4)
• Even later starter in export services
• Much has been achieved, but much needs to be done

12
Global manufacturing trends (1)
Share in World Trade
Source UNCTAD, 2002

• Non-resource based manufactures outstrip primary
  products and resource based manufactures

13
Global manufacturing trends (2)

• M H tech manufactures have become most important

14
AnalysisOld ways of gaining competitiveness will
not work in future

• Raw materials
• Unskilled labour
• Proprietary production technology
• Privileged access to markets

15
AnalysisNew sources of competitiveness

• Information and Communication Technologies
• Technology diffusion
• Time, efficiency and responsiveness
• Integration of value chains
• Economic participation and equity developing
  human and economic potential

16
Integrated Manufacturing Strategy?

• A strategy for manufacturing in the wider sense
  including all activities associated with the
  production of goods
• Uses the conceptual tool of integrated value
  matrices to understand production and how best to
  intervene effectively
• Integrated action with regard to
• Market access
• Beneficiation and value addition
• Equity and economic participation
• Regional production
• Knowledge intensity and services integration
• Development of integrated value matrices

17
Integrated Value Matrices
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Challenge for all stakeholders Partnerships for
growth development

• Developing a common economic vision
• Information sharing within and between
  stakeholder groups developing a common
  understanding of trends and drivers in the
  economy
• Building partnerships for strategy development
  and action at all levels in the economy,
  including wider stakeholder representation
• Developing new ways of thinking and working

19
Recent performance South Africas growth in GDP

• The second quarter of 2004 saw the South Africa
  real GDP increase to 3.9
• Depicts solid economic growth during this quarter
• Sectors which contributed to this growth,
  included agriculture, construction, transport,
  communications but also manufacturing

Source the dti Statistics in Brief, Q3
publication 2004 data supplied Statistics South
Africa
20
South Africas growth in GDP
Source the dti Statistics in Brief, Q3
publication 2004 data supplied Statistics South
Africa
21
Recent performance Manufacturing Sector
Indicators

• Manufacturing production recorded another month
  of annual expansion in July, with growth rising
  by 5.5
• Manufacturing sales expanded by 8.6 year-on-year
• For the quarter ending July 2004, manufacturing
  output increased by 2.5
• Significant contributions came from
• Motor vehicles, parts and accessories
• Food and beverages
• Textiles, clothing, leather and footwear
• Basic iron and steel, non-ferrous metal products
• Metal products and machinery
• Manufacturing output is expected to remain sturdy

Source the dti Statistics in Brief, Q3
publication 2004 data supplied Statistics South
Africa
22
Manufacturing Sector Indicators
Source the dti Statistics in Brief, Q3
publication 2004 data supplied Statistics South
Africa
23
Recent performance Manufacturing Sector
Employment
Year and quarter Percentage change and change in number of employees compared to same quarter of previous year
2003 September -0.2 (-3 000)
2003 December 0.2 (2 000)
2004 March 1.3 (16 000)
2004 June 2.4 (30 000)
Source Survey of employment and earnings
Statistics South Africa
24
Governments response to the challenge
Enable competitive, adaptive
job-creating sectors enterprises
Integrated Manufacturing Strategy
Platform of efficiency reduced constraints to
growth development across the economy
Microeconomic Reform Strategy
Sustainable Growth-oriented Macroeconomic
Framework