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Department of Trade and Industry (DTI)

Implementation of Government's National Industrial Policy Framework:
Industrial Policy Action Plan (South Africa)


Department of Trade and Industry (DTI)

Government of South Africa

August 2007

SARPN acknowledges the DTI as the source of this document: www.dti.gov.za
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Introduction

  1. South Africa has implemented a number of industrial policy initiatives since 1994. However, it has not until now produced a comprehensive statement of government's approach to industrialisation and industrial policy. Cabinet adopted the National Industrial Policy Framework (NIPF) in January 2007. The NIPF sets out government's broad approach to industrialisation in the context of the Accelerated and Shared Growth Initiative for South Africa (ASGI-SA) and its targets of halving unemployment and poverty by 2014 through accelerated growth of at least 6 per cent from 2010.


  2. The Cabinet Lekgotla of July 2007 endorsed the Industrial Policy Action Plan (IPAP) that sets out in detail key actions and timeframes for the implementation of our initial round of industrial policy.


  3. South Africa has achieved stable economic growth since 1994, with acceleration to 5 per cent in 2005 and 2006.


  4. The major weakness identified in South Africa's long term industrialisation process has been that the decline in the share of employment in our traditional tradable sectors - notably mining and agriculture - has not been adequately offset by a sufficiently large increase in the share of relatively labour-intensive employment in non-traditional tradable goods and services - particularly in manufacturing. Therefore the main objectives of the NIPF are:

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

  5. South Africa's key industrialisation challenge is therefore to grow and diversify manufacturing exports and tradable services (such as Business Process Outsourcing and Offshoring and Tourism). There is also unexplored high-value potential in agriculture and mining.


  6. South Africa's industrialisation process faces a number of constraints that have resulted in low manufacturing profitability. This in turn has lead to low investment, low output, and poor export and employment performance particularly in low-and-medium skill manufacturing industries. These constraints include:

    • The level and volatility of the exchange rate.
    • Relatively small market size coupled with relatively costly and unreliable infrastructure and high logistics systems, particularly freight and commuter transport.
    • The monopolistic pricing of key intermediate inputs into the manufacturing sector.
    • Challenges with respect to skills development and training.
    • An intensely competitive global environment.
    • Inadequate state support for investment, upgrading, innovation and technology.

  7. This has resulted in low manufacturing profitability which in turn led to low investment, low output and poor export and employment performance, particularly in low-and medium-skill industries.




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