(AsgiSA) Annual Report 2008 - South African Government Information

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Accelerated and Shared Growth Initiative for South Africa ANNUAL REPORT 2008 6. Industrial policies 6.1 Background AsgiSA proposed that the State adopted a more active industrial policy to move the economy towards increasingly inclusive growth. Industrial policy refers to measures targeted at ensuring a more efficient economy. A particular aim is to address the constraints to growth in sectors that can diversify the economy and provide sustainable employment on a large scale. Industrial policy in this sense relates not to manufacturing industry alone, but to the economy as a whole, including agriculture, mining and services. In South Africa, industrial policy has to take on two core challenges. On the one hand, products of the mining value chain, including refined metals and coal-based chemicals, account for substantially over half of all exports. This situation leaves the economy dependent on world commodity prices. That was highly beneficial during the commodity boom between 2002 and 2007. However, it proved less desirable when, as in the past year, commodity prices declined. Furthermore, the minerals value chain is mostly capital-intensive and unable to create employment on a large scale. On the other hand, South Africa has very low employment by world standards. Less than half of all working-age adults have some kind of gainful employment, compared to an international average of around two thirds. But new economic activities that could generate more opportunities for lower-skilled and relatively inexperienced people require government support. In particular, the State must often provide appropriate infrastructure and assist with access to input, credit, technology, marketing systems and training. AsgiSA pointed to cross-cutting strategies needed to improve the efficiency and equity of the economy, including reductions in the cost and improvements in the quality of economic infrastructure; reduced regulatory burdens and delays; a stronger competition policy to address excessive concentration of ownership in upstream and some wage-goods industries, where monopoly-pricing can inflate costs across the economy; and incentives for research and development. In addition, it emphasised Broad-Based Black Economic Empowerment (BBBEE) to encourage transformation of industries beyond the transfer of equity. 62
Accelerated and Shared Growth Initiative for South Africa ANNUAL REPORT 2008 AsgiSA also said government should do more to support labour-intensive sectors with the potential for rapid growth, suited to South African circumstances, and open to opportunities for BBBEE and small business development. Specifically, it suggested tourism, BPO and biofuels as high priorities. Additional priority sectors include agriculture and agro-processing; chemicals; metals fabrication; the creative industries; clothing and textiles; consumer equipment; and forestry, wood and paper. 6.2 Summary of progress A major step toward a stronger industrial policy occurred with the adoption of the National Industrial Policy Framework and the Industrial Policy Action Plan (IPAP) in 2007. IPAP reflected the AsgiSA priorities of encouraging new industries while improving overall efficiency through cross-cutting measures. During 2008, the Competition Commission adopted a more strategic approach to the economy, focusing on sectors where the lack of competition had a particularly negative impact. In the three top priority sectors in AsgiSA – tourism, BPO and biofuels – progress was made in developing policy frameworks as well as providing limited and targeted subsidies. In addition, progress was made in supporting other sectors, notably the forestry, pharmaceutical and auto industries. The electricity shortfall at the start of 2008 and the steep economic downturn toward its end posed major challenges. The electricity emergency pointed to the need both for better alignment of infrastructure provision with economic imperatives, and for more sensitive management of the mining value chain. The worldwide economic downturn in the second half of the year alleviated the electricity crisis, thanks largely to a fall in demand from mining and refineries. However, it posed new and pressing problems, especially for export industries. More generally, it has become increasingly obvious that an effective industrial policy able to achieve inclusive and sustained growth requires much stronger alignment of government policies and functions, including infrastructure provision and skills development. That, in turn, demands a stronger central co-ordination function, increased funding and greater consensus among all stakeholders about the best path to achieve economic development over the longer run. 63
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(AsgiSA) Annual Report 2008 - South African Government Information

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