Incentives


Industrial policy plan reaps benefits

21 May 2012

Since it was introduced over two years ago, the Industrial Policy Action Plan (IPAP2) has stabilised the clothing sector, turned around the automotive sector, added jobs in the business process services sector and had introduced procurement designation to boost local production, Trade and Industry Minister Rob Davies says.

Presenting his Budget Vote in Parliament in Cape Town last week, Davies detailed progress made in the IPAP2 which was launched in February 2010 and which now falls under the New Growth Path.

Opposition members lauded the developments, but pointed out that the department still had a significant amount of work still to do in improving economic support, particularly when it came to boosting support to small businesses and improving export assistance.

Modest increase in employment

Davies said in spite of being introduced in 2009 during the global economic crisis, the Clothing and Textile Competitiveness Improvement Programme had not only stalled employment losses in 2010 but led to a modest increase in employment in 2011.

A total of R14.4-million disbursed to 106 companies, combined with the R310 million disbursed under the production incentive scheme, had supported 48 384 direct and indirect jobs, he said.

The Motor Industry Development Programme (MIDP) had supported investment commitments of over R15-billion investment commitments from both assemblers and component suppliers.

Over 500 jobs were added in the sector in the last quarter, and Davies said a further set of approved projects would create about 11 000 jobs over the next three years.

The transition from the MIDP to the Automotive Production and Development Programme (APDP) by 2013 had largely been completed, he said, adding that this had helped give policy certainty even amid global economic stagnation.

Raising competitiveness

He said the department had borrowed on the lessons of the clothing and textile production incentive, in launching the Manufacturing Competitiveness Enhancement Programme (MCEP).

The department, Davies said, had learnt that the way forward for manufacturing was to invest and raise competitiveness and not wait in the hope that the global environment would improve.

The MCEP, which was launched last week and would supplement the 12i tax incentive, would be deployed towards upgrading the competitiveness of relatively labour-intensive and value-adding manufacturing sectors negatively impacted by the value of the rand, the global economic crisis and necessary increases in the cost of electricity.

The department, through the Small Enterprise Development Agency (Seda), would improve entrepreneurial capacity by rolling out more business incubators in partnership with incubator organisations.

He said incubators, through Seda's incubator programme, had last year by the end of December 2011 created 189 new small enterprises and 931 jobs.

The government is also acting to speed up payments to small businesses.

While Seda had set up an SMME hotline in 2009, the National Treasury had recently issued practice notes to all national and provincial departments including state-owned enterprises to pay businesses within 30 days on receipt of invoice in accordance with Treasury regulations

. This would address cash flow challenges faced by these enterprises, he said.

Boosting internal capacity

Davies said the department was boosting its internal capacity to focus more on the informal, townships and peri-urban enterprises and would also be developing a informal sector strategy, including the micro finance programme.

He said the Cooperatives Amendment Bill has been submitted for certification to the State Law Advisors and was due for submission to Cabinet for approval.

The department had assisted in supporting 220 small scale co-operatives to set up and had trained 175 co-operatives and provided 115 with market access covering both local and international markets during the past year.

"In an effort to increase market access for co-operatives, through the Brics mechanism, South Africa and China have agreed to enter into business contracts - "cooperatives to cooperatives" - on the following three commodities: maize, wine and aquaculture," he said.

Davies said the introduction of the New Companies Act had also changed the manner in which business is undertaken in South Africa and as a result, South Africa has improved significantly in the Africa Competitiveness Report's index for ease of starting a business.

Davies said with demand and growth in Western developed countries likely to remain constrained in the foreseeable future, South Africa would focus on the Brics countries, high growth markets in Africa, Middle East, Asia and other emerging economies such as Turkey, Indonesia, Chile, Vietnam and Thailand.

However, he added that the department would structure South Africa's economic relations with countries of the South in ways that foster complementarily and mutual benefit, while avoiding destructive competition.

Source: BuaNews

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