Research on the Performance of the Manufacturing Sector

SECTION 4: POLICY & PROGRAMMES ON MANUFACTURING

Introduction

Since 1994, government has been attempting to provide support to the business sector through various policy amendments and the development of entirely new policies.

Policy structure is important to the economy as it creates the environment for companies and entrepreneurs to operate in a legal business environment.

Policy also indicates the direction that government wants to take the economy in by clarifying legislature regarding business practices, employment creation, and labour laws.

While there are many economic policies in South Africa, there are few that affect the manufacturing sector in relation to growth and development.

Two key national strategies that affect the manufacturing sector at all levels of government is the NEW GROWTH PATH and the INDUSTIAL POLICY ACTION PLAN II (IPAP II)

The New Growth Path

The new growth path is a framework that seeks to address the issues surrounding unemployment, inequality, and poverty, through strategy implementation relating to job creation.

The main objective of the growth path is job creation; the framework aims to create 5 million jobs by 2020 by attempting to restructure the South African economy to improve performance in relation to labour intensive and an improved growth rate.

The route that the new growth path intends to take to achieve its goals relies on strategies to be implemented to improve local economies and established economic sectors as well as emerging economies with the view of creating more jobs.

The New Growth Path identifies key job drivers which are:

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  Substantial public investment in infrastructure to create employment directly and indirectly by improving efficiency across the economy.
  
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  The targeting of labour absorbing activities in the main economic sectors such as:
  
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    Agriculture
    
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    Mining value chains
    
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    Manufacturing
    
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    Services
    
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  Taking advantage of new opportunities in emerging economies, e.g. Green Economies
  
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  Nurturing rural development and regional integration.
  

Efforts are prioritised in creating employment in the following key sectors:

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  The agricultural value chain
  
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  The mining value chain
  
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  The Green economy
  
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  Manufacturing sectors
  
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  Tourism and services.
  

Industrial Policy Action Plan II (IPAP 2)

The Industrial policy action plan aims to address South Africa’s unsustainable growth path. The policy aims to ensure that stronger cohesion exists between macro and micro economic policies that relate to exchange and interest rates, inflation and trade balance requirements.

Financing will be directed to more labour absorbing and value add sectors. While procurement policies will be influenced to increase production and employment across a range of sectors.

The policy seeks to align skills, technology and innovation policies to sector priorities.

A key priority of the IPAP is to coordinate the efforts of different government departments, agencies and state owned enterprises towards the goal of industry development and ultimately job creation.

The industrial policy action plan is guided by the national industrial policy framework aims to implement governments approach to industrialisation through the objectives listed below:

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  To facilitate diversification beyond current reliance on traditional commodities and non-tradable services. Through the promotion of increased value-add characterised particularly by movement into non-traditional tradable goods and services that compete in export markets as well as against imports.
  
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  The long-term intensification of South Africa’s industrialisation process and movement towards a knowledge economy.
  
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  The promotion of a more labour-absorbing industrialisation path with a particular emphasis on tradable labour-absorbing goods and services and economic linkages that catalyses employment creation.
  
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  The promotion of a broader-based industrialisation path characterised by the increased participation of historically disadvantaged people and marginalized regions in the mainstream of the industrial economy.
  
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  Contributing to industrial development on the African continent, with a strong emphasis on building its productive capacity.
  

The IPAP II has a specific focus on the manufacturing sector and has clustered its focus into three clusters:

Cluster 1 – Qualitatively new areas of focus

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  Realising the potential of the metal fabrication, capital and transport equipment sectors, particularly arising from large public investments
  
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  ‘Green’ and energy-saving industries
  
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  Agro-processing, linked to food security and food pricing imperatives
  

Cluster 2 – Scale up and broaden interventions in existing IPAP sectors

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  Automotives, components, medium and heavy commercial vehicles
  
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  Plastics, pharmaceuticals and chemicals
  
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  Clothing, textiles, footwear and leather
  
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  Biofuels
  
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  Forestry, paper, pulp and furniture
  
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  Strengthening linkages between cultural industries and tourism
  
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  Business process servicing’
  

Cluster 3 – Sectors with potential for long-term advanced capabilities

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  Nuclear
  
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  Advanced materials
  
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  Aerospace
  

Source: IPAP II document

The Industrial policy action plans to implement sector specific programmes in the manufacturing sector with a view to stimulate and promote growth and develop in these industries.

Programmes that is specific to industries in the manufacturing sector:

National Tooling Initiative (NTI)

This initiative aims to rehabilitate South Africa’s tool, die and mould making industry. The NTI plans to improve and strengthen competitiveness and human capacity within the tooling industry with a view to improve the overall competiveness of the manufacturing sector as a whole.

The decline of the tooling industry over the past 20 years has led to underperformance of the manufacturing sector and contributed significantly to the trade deficit, as South Africa is a net importer of tools.

National Foundry Technology Network (NFTN)

The key objective of the NFTN is to facilitate the development of the South African foundry industry through appropriate skills training, technology transfer, and diffusion of state-of-the-art technologies.

This initiative aims to reduce import leakage, increase investments in key manufacturing activities as well as create employment.

Facilitate the upgrade of manufacturing facilities and capabilities to increase domestic production and growth of exports

This programme aims to facilitate capital investment into the white goods industry, to meet technological requirements that will, in turn, help to increase productivity, volumes and efficiencies. Additional interventions will be explored to reduce input costs and protect the domestic industry from imports.

Roll-out of national solar-water-heating programme – manufacturing and installation capacity

This programmes ties into the Green Industry and aims to develop solar water heater production in order to increase the local market size and provide manufacturers with sufficient time to upscale production. A phased approach to this programme will result in an increase in local manufacturing of Sola Water Heaters, skills development, employment, and ultimately a stable market that will promote investment.

Solar and Wind Energy

This intervention relates to renewable energy supply and the manufacturing of local content for this supply. The aim of this programme is to increase local involvement in this industry to increase the employment intensity of the electricity generation sector.

Clean and Multi-Energy Stoves

This intervention aims to support universal access to clean energy through a technology-appropriate intervention at the household level that also holds low-tech local manufacturing opportunities. This intervention will also improve rural energy security and create low-tech jobs within the energy sector.

Industry Standards and Accreditation

This programme aims to develop safety and quality standards for the boatbuilding industry in order for local firms to adhere to international standards with a view to increase competiveness and access to international markets.

Establish aquaculture hatcheries

The aquaculture sector is dependent on the reliable supply of juvenile aquatic animals for further growth by aqua-farmers. This intervention entails the establishment of two hatcheries to provide a reliable and continuous supply of high-quality juveniles to the aquaculture sector. DST is establishing two abalone hatcheries as the extension of the pilot Hondeklip Bay intervention.

Development of the organic food sector

This programme is directed at the implementation of the Organic Produce Strategy. This sector has high-value subsectors which hold the potential to create 20 000 jobs over a five-year period in the primary and processing phases of the Agro Processing value chain.

Enhancement of competitiveness in the fruit and vegetable canning industry

This programme is directed at an initiative to improve the competiveness of the fruit canning industry to enhance the long term sustainability of the industry.

Automotive Production and Development Programme (APDP)

This programme encompasses Regulatory amendments and implementation of the tariff regime, production incentives and volume assembly allowance elements of the APDP this programme deals more with the policies surrounding production and development within the automotive manufacturing sector.

Identification of opportunities to broaden and deepen automotive component manufacturing

This programme is an OEM let strategy to further advance the technology of suppliers in key subsectors of the automotive industry; they are electronics, body parts, interiors, exteriors, chassis, and drive-train.

Competitiveness Improvement of Automotive Component Manufacturers (CIACM)

This programme seeks to improve competiveness amongst manufacturers through benchmarking, gap identification, and assistance to close competitiveness gaps, with a view to enable local component manufacturers to compete better with their counterparts based in the Far East. This will also lead to more local content being used in the vehicle assembly sector.

Enterprise Reference Architecture (ERA) portal for small and medium enterprise (SME) suppliers

This programme attempts to provide manufacturing firms with a platform by which they can optimise existing technology investments through best practice, which can also be used as a tool to enhance competitiveness and technology utilisation amongst third and fourth tier manufacturers.

Mentorship of SME component manufacturers

This programme is essentially a learning project for SME component manufacturers through mentors over a specific period of time.

Gold loan scheme to promote jewellery production

This scheme is an initiative that attempts to assist local jewellery manufacturers to acquire gold from financing agencies at a stable price with competitive interest rates.

Skills development to meet the pharmaceutical manufacturing sector’s and the SA public and private healthcare sector’s demand for qualified staff

This programme aims to cater to the needs of the skills shortage within the pharmaceutical sector including research and development as well as manufacturing. The programme will address scarce skill training by adjusting training programmes to meet the demand.

Clothing, Textiles, Footwear and Leather Competitiveness Programme

This programme aims to enable the sector as a whole to compete effectively with foreign competitors both in local and the export markets; this will also have a substantial effect on improving company level competiveness.

Illegal imports programme

This programme is designed to eradicate the illegal importing of clothing and textile products to South Africa. The programme also aims to promote the policy of Country of Origin labeling. The total elimination of illegal imports will level the playing field for local manufacturers.

Skills development

This programme focuses on the improvement of skills within the textiles sector. The programme will involve the finalization of funding agreements with the National Skills Fund (NSF). The strategy will be implemented through the Textiles and Clothing Centre of Excellence established at the CSIR in Port Elizabeth in order to speed up the implementation process.

Accelerated development in the biofuels sector

This programme aims to speed up the development of the biofuels sector at farm and manufacturing level. In order for the accelerated development in this sector to become a reality a more conducive and improved regulatory environment. This program also seeks to solidify certainty around the demand for biofuels.

Skills transfer and technology upgrading programme for small scale saw millers

This programmes aims to improve the current skills and technology upgrading programme in order to provide small scale saw millers with production efficiency measures that will ultimately eradicate wastage that results from operations.

Furniture Sector Strategy

Due to the fragmented nature of the furniture industry there is a need to finalise a strategy and action plan for the furniture industry as a whole. This intervention seeks to address the constraints regarding skills transfer and the lack of appropriate institutional framework including the potential for clusters. The benefits of cluster formation includes economies of scale, shared infrastructure, shared transport costs, sharing of information and reduced input costs.

Charcoal manufacturing enterprises

This programme aims to support and establish charcoal plants in both the Eastern Cape and KwaZulu Natal as the inputs (jungle Wattle) are relatively cheap and in abundance. The activity requires unskilled labour but is labour intensive.