Deputy Minister Zuko Godlimpi: Trade, Industry and Competition Dept Budget Vote 2024/25

Honourable House Chairperson
Minister Tau and Deputy Minister Whitfield
The Director General and the dtic team
Portfolio Committee Chair, Honourable Masina

It is important to underscore that the Statement of Intent signed by members of the GNU foregrounds state policy with industrial policy.  This is significant because for the first time in our three-decade old democracy, industrial policy will be the starting point of state-wide policy, and not the ending point. This will lead to macroeconomic policy that is anchored on industrial policy.

Three stream transformation perspective

Honourable House Chairperson,

Our approach to industrial policy is underpinned by an eye on transformation, which can be understood from three broad categories; namely, demographic transformation, industrial transformation and spatial transformation.

Demographic transformation of economic participation (BBBEE, Black Industrialist, Worker Share Ownership).
Industrial transformation: shifting from a pit-to-port mining paradigm to higher domestic processing, beneficiation, and the manufacturing of final consumer goods for the world markets. This also includes improving the structural profile of the South African economy, such that its output is based on a distributional platform that is sustainable, that helps with income distribution, helps address high unemployment levels, and makes our economy compete effectively in global markets.
Spatial transformation seeks to address the problem of South Africa’s economic profile, where the bulk of industrial and economic activity is concentrated in 5 metropolitan areas. The SEZ strategy seeks to transform this distortive character of our economic geography.
B-BBEE (Demographic Transformation)

Honourable House Chair, on the demographic transformation frontier, we have noted that the current system for implementing and measuring B-BBEE, including verification practices, has led to compliance being rigged through box-ticking.

This practice undermines the objectives of the black economic empowerment. Considering these concerns and the pressing need to achieve an inclusive economy and social justice in South Africa, we will re-invigorate the implementation momentum of B-BBEE legislation.

This will require re-imagining B-BBEE with an approach and strategy that identifies areas with the greatest opportunities for demonstrable results that advance transformation

Procurement Bill Opportunities and Policy Space created

Honourable House Chair, as you are aware, the 6th Parliament passed the Procurement Bill which was prepared by the department working with the National Treasury. This Bill has been sent to the President for assent. The Bill includes a national framework for preferential procurement.

Competition laws as instruments for transformation

House Chair and honourable members, the competition policy has played a critical role in preventing prohibited practices such as price fixing, collusion, market power abuse, price discrimination as well as addressing complex monopolies.

Through the new Competition amendments, we will use the public interest provisions in the Competition Act to effectively participate in the review of mergers to ensure that the impact each merger has on the economy. These include the impact on industry or region; on employment; small and medium businesses, or BBBEE-controlled firms; the international competitiveness of national industries; and the promotion of a greater spread of ownership, by historically disadvantaged persons and workers.

Industrial Financing

Honourable Chairperson, we work on the understanding that a positive relationship between national savings and gross capital formation is crucial for long-run growth. This assumes that the country’s savings portfolio will be available for public and private investors to finance growth in the capital stock.

Therefore, the responsibility of financing our industrial policy objectives therefore requires an understanding that there must be a shared responsibility the public and private sector financing institution.

This shared responsibility is critical for the future of the country if our objectives for a growth path anchored on minerals beneficiation, green industrialisation, localisation, and innovation-driven manufacturing is to take off.

the dtic Industrial Financing Group will continue to deploy more capital to support higher investment but will need other social partners to play an active role in availing critical resources for meaningful economic growth to be realised.

Black Industrialists

Through the Black Industrialist programme, we want to have an increase in the total share of asset ownership by black South African in the economy. This must go beyond mere shareholding in existing enterprises, speculation and board memberships. We want black industrialist to be at the coal face of innovation, driving dynamic output growth in the economy and contributing to structural transformation of our economy.

Long-run economic growth depends on consistently creating new firms through entrepreneurship, innovation, research and development. However, racialized, and concentrated access to capital markets in South Africa limits the transition of black enterprises from small to large firms, affecting innovative enterprise development and total factor productivity in the long run.

Sector Transformation

Honourable House Chair, the department has set the tone for what should be a national social compact by working in collaboration with industry, labour and civil society to produce sector compacts in the form of master plans for the various industries.

At present we have eight masterplans which are an example of industrial social compacting, an approach which Professors Rodrik and Stiglitz have framed as “…channels of communication, that enable government agencies to understand private firm constraints and potential, as well as reshaping their understanding in light of new information and changing circumstance.”

Automotive Master Plan

The Automotive Master Plan was completed in 2018 with the objectives of producing about 1.4 million vehicles with 60% local content by 2035.

Globally the automotive sector is gradually moving away from the combustion engine vehicles towards battery powered electric vehicles and hybrid models. To keep up with these rapid green economy changes, the government published the EV White Paper setting a roadmap for a transition to electric vehicle production and distribution in South Africa.

Our industrial strategy intends on building specialized battery manufacturing capacity leveraging on critical mineral endowment of not just South Africa, but the entire SADC region. View the Africa Continental Free Trade Agreement as a vital growth anchor and maximise our competitive advantage to be the lead producer of manufacturing technologies for the continent. This also includes the consolidation of a pan-African minerals corridor to collectively limit the export of raw-minerals and build high-value addition within the continent.

The initial focus is on supporting local production by offering relatively enhanced incentives compared to those received for internal combustion engine vehicles. As the department, working with stakeholders in the industry and related value chains, we will be focusing on EV White Paper implementation as a matter of priority.

Pursuant to this, the Minister earlier today met with investors who want to take up the opportunities presented by South Africa for EV production. The message from the investment community is that South Africa is indeed a destination of choice. Using the instruments at our disposal, we can be able to make the investment case for South Africa to be the key production site for EV in the region and the continent.

The Steel and Metal Fabrication Master Plan

The Steel and Metal Fabrications industry is critical for manufacturing -led growth and our export expansion strategy. In order to raise the levels of manufacturing capacity of the South African economy, low domestic steel prices are essential. To achieve these outcomes, we will be working with the sectoral partners to address the binding constraints affecting the pricing structure of the sector.

One of the key elements of this revised industrial policy strategy we are working on, is the issue of transversal policy coordination across the state. For example, our industrial strategy goals have implications for the policy mandate of the Department of Minerals and Petroleum Resources, State Owned Companies such as Eskom and Transnet and to a degree specialized SOCs such as Denel and ARMSCO.

The availability of mining inputs at a cheaper price, the cost and security of energy, the expansion of our energy transmission infrastructure, the improvement of the rail logistics network, the review of our tariff regime, and the revitalization of a robust defence industry with modernizing technological capability; are critical in stimulating and sustaining a competitive domestic steel and metal fabrications industry.

Clothing, Textile, Footwear, Leather (CTFL) Masterplan

Part of what the master plans are helping us to do, is to protect local industries by understanding the unique threats they are facing.  For instance, the Clothing, Textile, Footwear, Leather (CTFL) industry is not just under pressure from fair international competition, but is also faced with threats arising from transhipments, under invoicing and unregulated imports.

As a response to these challenges, we are upping our game to improve the effectiveness of our multi-agency approach to curb illicit imports. The lead agencies on this front are the International Trade Administration Commission of South Africa (ITAC), SARS and the Border Management Authority. From a dtic perspective a key focus is building the capacity of our agency ITAC, to conduct inspections in other countries at the ports of origin.

Spatial Transformation

Special Economic Zones (SEZs)

The development of our economy has maintained a rigid spatial character, defined by a concentration of industrial activity in 5 metropolitan centres. It is for this reason that our Special Economic Zones strategy seeks to redefine the spatial logic of our industrial economy.

Whilst our SEZs have played an important role in job creation and output performance, they still retain a great deal of potential for manufacturing-led growth and development.

In line with what Minister Tau has said regarding cooperative governance and a whole of government approach to policy and implementation, it is therefore critical for the dtic working with provincial and local government to inform the implementation of our SEZ strategy.

The Tshwane Automotive SEZ is a case in point of this institutional model of cooperation. Each one of the three spheres of government, national, provincial and local government each own 33% of the SEZ. This shared responsibility allows the  SEZ work efficiently and effectively.