2 1 South Africa the Context and Growth Straregies

8/10/2019 2 1 South Africa the Context and Growth Straregies

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South Africa The Context and Growth

Strategies

Ebrahim Patel

Minister of Economic Development

Republic of South Africa

October 2014

Bali, Indonesia


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South Africa - a country of 52 millionpeople, culturally diverse

More than 300 years of colonialismand 20 years of democracy

Dutch occupation from 1652 to setup a half-way station for ships toBatavia

Colonialism interrupted economic

development of pre-colonialsocieties

Racial oppression defined thelabour market and the pattern ofindustrialisation

Backgrou


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Unusually high levels of poverty, inequality and unemployment thwith big concentration of wealth

Economic concentration resulted in abuse of market dominance monopolies and existence of cartels

Exports were driven by focus on raw materials with limited value locally

Markets were mainly Europe and the United States, with virtuallywith the rest of the continent

Weak human capital base and strategies resulted in serious raciaskills

Low domestic savings base

Limited investment opportunities for black South Africans curtaileindigenous small business development

Challenges inherited with end of


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Strong growth in the economy after democracy, but largely from a consfuelled by rising commodity prices for exported commodities and rising

debt Financialisation of the economy

Limits in that growth model was cruelly exposed during the 2008/9 Grewhen demand for commodities fell, prices dropped and output slowed million jobs lost

Need to shift from exporter of raw materials to an industrialisation strat

leveraging off opportunities: raw material proximity,

location near fast-growing African markets and

new infrastructure spending.

Need for new


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The country adopted a New Growth Path in late 2010 to begin tothese pressures

Developed a series of steps required to implement the new vision

Jobs drivers

Policy drivers

Resource drivers

Jobs as a specific target of policy not a residual outcome of grow

Green growth as an opportunity

Social partnership between labour, capital and the state

New Growth Path


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Infrastructure needs to address complementary national goals svery significant spending leaves not only a legacy of ports and po

stations. We identified five i's: Industrialisation - component and rolling stock manufacturing

Investment - in enterprises which need energy, good logistics sybroadband access

Inclusive growth - covering jobs, youth enterprise, rural develop

Innovation - using infrastructure to stimulate new R&D investme Integration - of the African continent through active focus on pro

promote trade and investment in the continent

T


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The National Infrastructure Plan (2012) has become the key instrument to impthe New Growth Path

economic infrastructure such as transport and logistics, energy generatio

transmission and distribution, water supply, broadband rollout Social infrastructure such as health, education and sanitation as well as b

services to household and rural level

Industrial infrastructure including agro-logistics

Presidency-led, with a Presidential Infrastructure Coordinating Commission (Pbringing together half of Cabinet, all provincial governors and mayors of majo

Adopted 18 Strategic Integrated Projects that pulled together 100s of separat

construction sites into a coherent Plan

The National Infrastruc


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Result: Higher infrastructure

279

440

604 621

470

377363 360

634

-

100

200300

400

500

600

700

800

900

1,000

1,100

1963-1968

1968-1973

1973-1978

1978-1983

1983-1988

1988-1993

1993-1998

1998-2003

2003-2008

Billionsofrandin2013terms

Government infrastructure investment over five-year intervals,

1963 to 2013, in billions of rand at 2013 values

In real terms the

spend to date is

1.7 times as highas the highest spent

in the last 40 years

and three times

higher than the

spend in 1994


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The Presidential Infrastructure Coordinating Commissions role is to

Unblock regulatory and other obstacles

Set timeframes for all authorisations to be completed

Monitor spending at all three spheres of government

Address critical enabling factors such as skills development

Connect infrastructure and industrialization

Role of the Presidential Com


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Example of energy

Worlds 4th largest coal-fired power station undeconstruction


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The largest Green Energy programme in Africa, with 15 000 MWenergy planned over the next 10 years

Transformation of energy at household level in the last 15 years: 1890 to 1996: 5,2 million houses connected

1996 to 2013: 7,2 million houses connected

Localisation of component production: major condenser unit madboiler production has localization components

Energy: moving beyond gro


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Example

Building an African train-manufacturing capabil


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A major construction programme to integrateurban centres to reduce commuting timesand cost and improves safety.

333 new buses were assembled locally forthe new integrated transport systems for twocities.

9880 new train coaches or wagons and 319locomotives were locally assembled, helpingto create jobs and expand industrialcapacity.

25 000 mini-bus taxis were assembledlocally in two new factories. In contrast,before 2012 all taxis in South Africa werefully imported.

New rail-car to transport new automobilesacross the country

T


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Largest infrastructure spending for last 50 years, with investmentplatforms for growth and jobs

1,4 million new jobs created over past 3,5 years, bringing total em15 million people

GDP at end 2013 about US dollars (PPP) $662 billion

Growth rate since democracy roughly 3.2% a year on average, uin the preceding 20 years

SA now a member of BRICS and a growing part of manufacturedto neighbouring countries


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Competition: tenfold increase in fines and penalties, with first steordering breakup of monopolies and steps to regulate prices for p

monopolies State procurement outcomes: compulsory local public procureme

selected products where we have the potential to develop

Industrial funding up by more than 100% over past five years, witinvestment agency approving industrial support loans of $6 billionattracting double that from private co-investor partners

Trade reoriented to the rest of Africa: example of the Ford Rangevehicle

Extensive social security system, covering retirement and child gcomplement employment strategy, in order to address poverty an


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Growth still too dependent on commodity prices: growth rate hassignificantly

Infrastructure costs may increase as we expand the programmecan expand the number of contractors and suppliers

International loan conditionalities may constrain localization provcontracts

Human resource policies to manage industrial tensions are critica

Funding issues need attention to avoid distorting local capital ma State capacity limitations: as regulator, negotiator of contracts, an

of private sector contractors in public projects

Challenges we


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Dedicated policies, not trickle down

Long-term planning for skills development

Address global supply-chains

Regional integration critical for market size

State capacity needs to be built in design and delivery

Maintenance of infrastructure can drive repeat orders

Private sector partnerships crowds in investment. However, the s

protect the public interest.

Conclusions and areas to


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Terimah Kasih!


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A


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Infrastructure development

Mining and local processing ofkey minerals

Agriculture and agro-processing

Manufacturing, including throughreversing deindustrialisationpressures

Green economy

Tourism and key business

services Knowledge-based sectors

Social economy and public sector

African regional development

Key jobs drivers of the New Gro


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Industrial policy as a central driver

Fiscal and monetary policies and exchange rate policies

Skills development to enhance skills base Technology policies to promote innovation

Competition policy to combat monopolies and cartels

Trade policy to expand access to markets

Regional integration policies

Indigenisation policies

Private entrepreneurship through addressing regulatory challengtape and promoting small business

Key policy drivers of the New Growth P


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Budgetary support for industrial and infrastructure development, well-designed incentives

Public procurement policies that direct state purchases State industrial funding and lower interest rates by public corpora

Retirement funds able to back long-term investment horizon

Tapping into private capital markets for public infrastructure and fof industrial investments required

Key resource drivers of the New Growth

2 1 South Africa the Context and Growth Straregies

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