South Africa's 2010/11 Industrial Policy Action Plan is expected to create over 700,000 jobs and contribute to manufacturing competitiveness

The Department of Trade and Industry (DTI) will unveil South Africa’s 2010/11 Industrial Policy Framework Action Plan (IPAP) to Cabinet tomorrow (18 February). Global growth consultants Frost & Sullivan expected this plan to have a direct and, hopefully, sustainable impact on manufacturing productivity for the country.

The IPAP is expected to focus on improving growth in key manufacturing sectors, with the main thrust being the need to create sustainable employment. Overall, Frost & Sullivan expects the 2010/11 IPAP to aim to create over 700,000 jobs in the next ten years through the various sector strategies and policy decisions.

“In order to meet these expectations, industrial capabilities need to be developed with an increasing return on investments and skills development, as well as creating export competitiveness,” says Frost & Sullivan analyst Laura Peinke. “If this IPAP is not successful, the local manufacturing economy cannot expect to compete in the new knowledge-driven global economy.”

Although President Jacob Zuma’s State of the Nation address only glossed over the new IPAP, the 2007/08 IPAP was largely implemented, and important progress was made through largely easy-to-implement actions. Peinke believes that the key factor to making the 2010/11 IPAP a success will be engagement with industry stakeholders.

“Manufacturing productivity in South Africa has continued to increase over the last ten years, but Frost & Sullivan believes that this will not be sustainable,” Peinke says. “As productivity has increased, local competitiveness has declined.”

Peinke believes that there are a number of reasons for this. They include the high cost and limited availability of capital, a weak skills system, and unreliable and expensive port and rail systems. These are exacerbated by the further expected electricity price hikes.

“These challenges have resulted in indications that South Africa’s industry and export competitiveness has declined relative to other developing countries such as Brazil, India and Malaysia,” she notes. “In order to combat these challenges, government will need to leverage a number of cross-cutting policy decisions.”

The IPAP is expected to include key actions regarding the Industrial Development Corporation (IDC). Many industry stakeholders have already highlighted the importance of sourcing concessional industrial funding through the IDC.

“In addition, the IDC needs to be seen as the industrial financing body for the roll-out of the IPAP,” Peinke says. “Other key policy decisions that are anticipated in the 2010/11 IPAP include government procurement programs which will incorporate the National Industrial Participation Programme (NIPP), and technical infrastructure and standards. “

One of the core focus sectors in the 2010/11 IPAP is the automotive industry. Traditionally the industry has contributed 7% to the country’s GDP, and 13.5% of the country’s exports. In 2008, the industry employed 320,000 people.

“Government is expected to leverage the Automotive Production and Development Programme (APDP) to achieve targets outlined in the previous IPAP, and double production to 1.2 million units by 2020,” Peinke says. “It will also want to increase the local content of components in vehicle production substantially.”

At present local content only makes up 35% of a vehicle, which adds to increasing manufacturing costs as a result of import tariffs and time delays. Frost & Sullivan believes this sector will have one of the largest impacts on job creation, with over 150,000 additional jobs to be created in the next ten years.

The nuclear, metal fabrication and capital equipment, chemicals and advanced manufacturing industries should also receive attention in the new IPAP.