Dr Tebogo Makube

1. 12015
KZN Manufacturing Indaba
21 July 2015
Inkosi Albert Luthuli International Convention Centre

2. 2
In 2007 Government adopted the National Industrial Policy Framework (NIPF), and its practical
implementation plan - the IPAP - as its guiding approach to industrialisation
 IPAP aligned itself with the overall vision and perspectives set out in the National
Development Plan (NDP) of 2012; and remains in line with the job creation strategy
advocated in the New Growth Path (NGP)
 IPAP is linked to the NDP as follows:
 NDP highlights the need for SA to develop a more competitive and diversified economy,
with a deepening productive base in mining, agriculture, manufacturing and associated
services
 NDP recognises that successful resource exploitation and development are critically
dependent on the coherence of shared local and regional investment and regulation
policy
 NDP advocates for the need to move steadily away from an exchange rate linked
primarily to commodity prices, towards one based on the sophistication of SA’s overall
export basket
CONTEXT: 1
2015

3. 3
 The manufacturing sector’s contribution to SA GDP declined sharply from 20.9% in 1994 to
11.6% by 2013, whilst the mining sector’s share increased from 7.3% to 9.2%.
Sectoral composition of the South African economy
2015
Agriculture,
forestry&
fishing, (4.6%) Mining &
quarrying, (7.3%)
Manufacturing,
(20.9%)
Electricity, gas &
water, (3.6%)
Construction,
(3.1%)
Transport,
storage &
communication,
(8.7%)
Community,
social & personal
services, (5.3%)
Wholesale, retail
& motor trade,
catering &
accommodation,
(14.2%)
Finance, retail
estate &
business
services, (16.1%)
General
government,
(16.2%)
Sectoral composition of the South African economy, 1994
Agriculture,
forestry&
fishing, (2.4%)
Mining &
quarrying, (9.2%)
Manufacturing,
(11.6%)
Electricity, gas &
water, (3.0%)
Construction,
(3.7%)
Transport,
storage &
communication,
(8.9%)
Community,
social & personal
services, (6.0%)
Wholesale, retail
& motor trade,
catering &
accommodation,
(16.6%)
Finance, retail
estate &
business
services, (21.5%)
General
government,
(17.1%)
Sectoral composition of the South African economy, 2013
Source: SARB, IDC, the dti

4. 4
 Services sectors have been driving economic growth in South Africa (finance, ICT, business
services). Manufacturing sector registered strong growth over 2004-07 due to robust
export growth and solid growth in domestic demand.
Trends in GDP composition per sector
2015
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
GVA(Constant2010prices,Rmillions(Period))
Year
Primary sector Secondary sector Tertiary sector
11%
21%
68%
Gross value added, 2014
Primary sector, (11%)
Secondarysector,(21%)
Tertiary sector, (68%)
Source: SARB, IDC, the dti

5. 5
 South Africa’s manufacturing industry is dominated by three sectors: namely food &
beverages, petroleum & chemical products, and metals & machinery. These three sectors
account for two thirds of total manufacturing production..
Trends in the manufacturing industry
2015
Furniture&
other, (11.0%)
Food, (16.8%)
Textiles &
clothing, (7.0%)
Wood & paper,
(9.7%)
Chemicals,
(18.6%)
Non-metallic
mineral
products,(4.1%)
Metals &
machinery,
(20.6%)
Electrical
machinery,
(3.0%)
Radio & TV,
(1.5%)
Transport
equipment,
(7.7%)
Contributors to the manufacturing industy, 1993
Furniture&
other, (6.5%)
Food, (24.5%)
Textiles &
clothing, (2.9%)
Wood & paper,
(8.8%)
Chemicals,
(21.1%)
Non-metallic
mineral
products,(3.6%)
Metals &
machinery,
(20.5%)
Electrical
machinery,
(2.7%)
Radio& TV,
(1.4%)
Transport
equipment, (8.1)
Contributors to the manufacturing industy, 1993

6. 6
Manufacturing value addition and import leakage
2015
Source: SARB, IDC, the dti
40
45
50
55
60
65
70
75
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Manufacturingimports&exports(annual%
growth)
Year
Manufacturingexports (% of merchandiseexports)
Manufacturingimports (% of merchandiseimports)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
10
12
14
16
18
20
22
24
2002200320042005200620072008200920102011201220132014
Manufacturingimportleakage(annualgrowth%)
MVA(%ofGDP)
Year
Manufacturingimportleakage (SIC3) Manufacturing, valueadded(%ofGDP)

7. 7
SA changing trade patters
2015
Automobiles (26.1)
Platinum (11.6)
Rhodium( 5.9)
Palladium (5.3)
Iron ore(45.9)
Coal (7.0)
Chromium ores (10.9)
Ferro-chromium (8.9)
Region/Country Share of Exports (%) Main Products (%)
5.5
13.6
9
Commodity
Manufactured
Total
17.1
25.7
21.6
Commodity
Manufactured
Total
19.7
5.8
13
Commodity
Manufactured
Total
11.5
5.2
8.4
Commodity
Manufactured
Total
3.3
22.4
12.9
Commodity
Manufactured
Total
Purifying Machinery (11.4)
Platinum (7.1)
Coal (7.0)
Automobiles (6.2)
Aviation spirit (6.1)
Iron & Steel (3.6)
Electrical energy (2.1)
Diesel trucks( 5.3)
Platinum (37.5)
Iron ore (11.8)
Aluminium (4.8)
Ferro-chromium (4.8)
• South Africa’s trade patterns have
changed in response to global
growth trends
• Emerging Markets and SADC share
in South Africa’s export basket is
rising:
– SADC absorbed 13% of South
Africa’s exports in 2011
– almost a quarter of
manufactured exports
destined to SADC
– exports to China increased to
13% in 2011 (averaged 4.2%
between 2005-2008)
• Share of exports to the European
Union declined from 33% in 2005
to 21.6% in 2011
Source: the dti, StatsSA, SARB, SA National Treasury

8. 8
Provincial contribution to the National GDP, 2014
2015
Source: SARB, IDC, the dti
GP, 35.2%
KZN, 15.8%
WC, 13.9%
EC, 7.4%
LP, 7.1%
MP, 6.8%
NW, 6.5%
FS, 5.1% NC, 2.2%

9. 9
Manufacturing contribution to provinces’ GDP, 2014
2015
Source: SARB, IDC, the dti
13.5%
15.8%
11.8%
12.2%
2.5%
4.4%
6.5%
8.5%
2.1%
0.0% 5.0% 10.0% 15.0% 20.0%
GP
KZN
WC
EC
LP
MP
NW
FS
NC

10. 10
Composition of the KZN economy, 2014
2015
Source: SARB, IDC, the dti
16.5%
15.8%
13.3%
15.5%
11.9%
5.8%
1.9%
3.0%
3.8%
Finance, retail estate & business services,
(16.5%)
Manufacturing, (15.8%)
General government services, (13.3%)
Wholesale, retail & motor trade, catering
& accommodation, (15.5%)
Transport, storage & communication,
(11.9%)
Personal services, (5.8%)
Mining & quarrying, (1.9%)
Construction, , (3.0%)
Agriculture, forestry & fishing, (3.8%)

11. 11
KZN share of employment by industry
2015
Source: SARB, IDC, the dti
10.8%
14.3%
22.2%
22.6%
7.0%
8.4%
0.2%
9.8%
3.8%
0.9%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
Finance, retail estate & business services
Manufacturing
Community and social services
Wholesale, retail & motor trade, catering &
accommodation
Transport, storage & communication
Private households
Mining & quarrying
Construction
Agriculture, forestry & fishing
Electricity, gas & water

12. 12
DIVERSIFY THE
ECONOMY
Provide strong
support for
value added
manufacturing,
especially in
globally
competitive
non-traditional
tradable goods
and services
PROMOTE A
LABOUR-
ABSORBING
INDUSTRIALISATION
PATH
- with systematic
development of
employment-
creating linkages
and multipliers
Industrialisation
model focused on
INCLUSION OF
HISTORICALLY
DISADVANTAGED
PEOPLE AND
REGIONS
Contribute towards
INDUSTRIAL
DEVELOPMENT IN
AFRICA
- focused on
infrastructure,
productive capacity
and expanded trade
for regional
economic
integration
Long term
intensification
of South
Africa’s
industrialisation
process and
movement
towards a
KNOWLEDGE
ECONOMY
CORE OBJECTIVES OF THE IPAP
2015

13. 2015 13

14. Transversal Focus: Procurement
 Government purchasing power through public procurement contributes between
15% and 25% to GDP (value that is extracted from large scale procurements)
 National Industrial Participation Programme (NIPP): Imported Content => US$10
million
 Defence Industrial Participation: managed by Armscor and applicable to all defence
procurement. Imported Content => US$2 million
 Competitive Supplier Development Programme (CSDP): managed by DPE in
conjunction with State Owned Companies (SOCs) .
 Designation & Local Production
 The Renewable Energy Independent Power Producer Procurement Programme
(REIPPPP)
 The Local Procurement Accord
142015

15. Designated sectors
152015
Minimum
Local Content
Thresholds
Description Date
1. Rail Rolling Stock 65% 16-07-12
2. Power Pylons 100% 16-07-12
3. Bus Bodies 80% 16-07-12
4. Canned/Processed Vegetables 80% 16-07-12
5. Textile, Clothing, Leather and 16-07-12
Footwear Sector 16-07-12
6. Solar Water Heaters (collectors
and storage tanks/geysers)
7. Set-top Boxes 30% 26-09-12
8. Certain Pharmaceutical Products Per Tender 07-11-12
9. Furniture Products 85% 15-11-12
10. Electrical andTelecom Cables 90% 08-05-13
11.Valves Products and Actuators 70% 06-02-14
12. Working Vessels 10-100% 01-08-14
13.Residential Electricity Meters 50-70% 01-08-14
* Instruction notes already circulated by the National Treasury
70% 19-07-12
Sectors Already Designated*
100%

16. Transversal Focus: Industrial Financing
162015
CLUSTER INCENTIVE SCHEME
BROADENING
PARTICIPATION
• Black Business Supplier Development
Programme (BBSDP)
• Co-operative Incentive Scheme (CIS)
COMPETITIVENESS
INVESTMENT
• Sector Specific Assistance Scheme (SSAS)
• Export Marketing & Investment Assistance (EMIA)
MANUFACTURING
INVESTMENT
• Manufacturing Investment Programme (MIP)
• Capital Projects Feasibility Programme (CPFP)
• 12i Tax Incentive
• Automotive Incentive Scheme (AIS)
SERVICES INVESTMENT • Film & Television Production
• Business Process Services (BPS)
• Tourism Support Programme (TSP)
INFRASTRUCTURE
INVESTMENT
• Critical Infrastructure Programme (CIP)
• IDZs

17. Transversal Focus: Industrial Financing
172015
R2 billion has been allocated over the MTEF period to
manufacturing development incentives and support for
growing industries, such as business process
outsourcing
The Manufacturing Competitiveness Enhancement
Programme (MCEP) will spend R5.4 billion over the
MTEF and will assist companies with financial support
to upgrade production facilities
• MCEP is the biggest manufacturing incentive and
supports response to companies impacted by
structural and cyclical economic changes
• Deployed towards upgrading competitiveness of
labour intensive and value-adding manufacturing
sectors
• Grant finance with clear rules-bound access criteria
• Maximise employment and value-added potential in
key sectors
• Exclusions: sectors with dedicated support
programmes

18. Transversal Focus:
Special Economic Zones & Regional Industrial Clusters
182015
• Budget allocation of R3.53bn over MTEF
for SEZ’s
• Promote creation of a regionally diversified
industrial economy
• Establish broader range of industrial parks
and infrastructure for effective clustering
and hubs
• A dedicated and integrated legislative
framework to enable effective regulation
and management
• The Work Programme of the Regional
Economic Communities: joint infrastructure
development and development of regional
value chains
• Cross-border infrastructure and sector
development

19. 192015
TRADITIONAL SECTORS AND SERVICES

20. 202015

21. Sectoral Focus: Automotives
21
 Continuous support for OEMs and local component suppliers
through the revised Automotive Production and Development
Programme (APDP)
 The ASCCI-driven intervention which involves the identification of
products or component groups for localisation as well as the
creation of focused Action Plans to give practical impetus to the
localisation drive
 Stepped up work on African integration across the full auto sector
value chain
2015

22. 222015

23. Energy challenges and impacts on the economy
232015
0
5
10
15
20
25
30
35
40
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004/05
2006/07
2008/09
Electricityprice(c/kWh)
Eskom Average Price, from annual financial statements and statistical yearbooks Real price 2009 base year
Rising electricity prices CO2 Emissions and GPD in Selected Countries ( 1971-2011)
Energy intensity and GPD in selected countries (1971-2011)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000
TPESperCapita(toe)
GDP per Capita (US$)
China Germany India Spain South Korea South Africa Malaysia Source: Nersa, IEA, own calculations

24. Sectoral Focus: Green industries
24
 Green Transport – develop policy for production of compressed natural gas
(CNG), biomethane-fuelled and electric vehicles
 REIPPPP – Leverage procurement and designation of solar photovoltaic energy
inputs into the national grid
 Scale up Industrial Energy Efficiency Programme
 Eco-labelling development programme - development and accreditation of one
new occupational qualification per annum
 Green skills programme - stimulating demand and supply of critical and scarce
“Green Skills’
 Develop of model policy and regulations to support biogas and natural gas use in
transport
2015

25. Sectoral Focus:
Primary Minerals Beneficiation and Construction
25
 Investment in mining and petroleum beneficiation projects will receive R2.7bn
over MTEF
 Development of Mineral Beneficiation Action Plans (MBAP) will unpack the
Minerals Beneficiation Strategy (2011) and give specific policy guidance with
regard to wide-ranging minerals beneficiation
 Targeted support measures to increase the supply of mining capital goods
(plant, machinery, after-market) that can unlock and deepen capital goods
manufacturing industries in SA for local consumption and export into key markets
 Strategic input into the legislative review of the Mining Charter (2010) to include
the recognition and reward of local content
 Expansion of the PGM beneficiation industry - aiming to catalyse practical
collaboration between the local mining industry, fuel cell OEMs and component
manufacturers and potential public and private users
2015

26. 2015 26
Thank you