Investor Awareness of South African Industrial Policy Action Plan Still Low, says Frost & Sullivan Call for action and collaboration between all sections of society required to achieve national economic growth of 5.4 percent a year, as per NDP
CAPE TOWN, South Africa, Oct. 8, 2013 /PRNewswire/ -- South Africa is now growing slower than most other African economies. According to the United Nations Economic Report on Africa 2013, South Africa has been ranked amongst the five slowest growing African countries since 2008. The number of unemployed South Africans increased by 122,000 in Q2 of 2013; the World Economic Forum (WEF) 2012-13 report highlights a decline of South Africa's competitiveness, both globally and relative to African economies.
New analysis from Frost & Sullivan (An overview of the South African National Development Plan 2030 and the Industrial Policy Action Plan), aimed at increasing awareness amongst current and future investors (domestic and international), captures the essence of the aforementioned programmes, both addressing the long-term vision of South Africa's growth and development.
Conceived as a roadmap for South Africa, and now entering the implantation phase, the National Development Plan (NDP) offers a comprehensive diagnosis of challenges ahead, but also proposes potential interventions, in the form of ambitious targets and priorities for all sections of society.
"Sustainable growth and development will require cross-sector measures and reforms, as significant as fixing the education system, addressing shortcomings in labour market regulations, undertaking spatial transformation, transitioning to a low carbon economy, implementing real social protection for all, and eradicating corruption," states Floriane Cutler, Consultant at Frost & Sullivan. "Ultimately, the NDP aims to raise living standards over the next two decades, to achieve a more equal and prosperous South Africa."
"For the NDP to succeed, national economic growth needs to average 5.4 percent a year by 2030, which is more than double the 2012 figure," emphasises Cutler. As President Zuma made clear at the budget vote in June 2013, such an aspiring goal requires all economic and development strategies to be aligned with the Plan, including the reindustrialisation scheme championed by the Department of Trade and Industry. "Crucial to address the serious challenge of unemployment, the Industrial Policy Action Plan (IPAP) places labour intensive manufacturing at the centre of attention," notes Cutler. "Key areas of ongoing intervention include: mineral beneficiation, the development of new export markets, diffusion of innovation and technology, and local procurement."
"The nineteen industrial sectors outlined in the latest version of the IPAP are specifically targeted towards growth, using a multi-pronged approach to sector development, and will therefore offer increasing business opportunities to local and foreign investors," says Adri Grobler, Head of Public Sector Growth Solutions at Frost & Sullivan Africa. "However, even though the IPAP has been in existence since 2007, private sector awareness of the programme and its implications for business seems to be remarkably low. At Frost & Sullivan's GIL: 2013 Africa conference in August this year, for example, only 30 percent of C-level delegates indicated that they are aware of the current and future implications of the IPAP on the sectors they operate in. In addition to this, businesses still seem skeptical about the effective implementation of suggested interventions and; specifically, about the speed of implementation."
According to Grobler, sectors targeted for scaled-up and broadened interventions include agro-processing; plastics, pharmaceuticals, chemicals and cosmetics; automotive products; metal fabrication; aquaculture; BPO and the creative industries. Qualitatively new areas of focus for South Africa (sector cluster 2) include: upstream O&G services and equipment; green industries; minerals beneficiation and ship building. Sectors with potential for long term national advanced capabilities (sector cluster 3) include: Aerospace and Defense; the electro-technical sector; nuclear; advanced manufacturing and advanced materials. "Advanced manufacturing and advanced materials are interesting inclusions to the IPAP since they are in fact not sectors per se, but rather Key Enabling Technologies (KETs) affecting manufacturing capability in nearly all other sectors."
"Only by dealing with supply-side bottle necks, labour disruption and productivity improvement to full potential, can South Africa achieve the growth numbers set by the NDP. IPAP is highly focused on increasing employment through labour intensive manufacturing, but we have to deal with productivity issues first. Currently it would be like entering a motor race with flat tyres, we would be spending significant amounts of money on the preparation under IPAP, but would still remain uncompetitive if we do not address the fundamentals of comparative advantage," argues Senior Economist at Frost and Sullivan Craig Parker.
"Endorsed shortly prior to the presidential election year, the Plan has inevitably unleashed political debate and controversies, left detractors calling for more state intervention and right commentators advocating for deregulations and privatisation," adds Cutler. "The plan nevertheless follows a pragmatic approach, calling for both a larger and more efficient role of the state, and the use of the market where appropriate."
She concludes that its implementation will require unprecedented trust between business, labour and government – arguably the principal challenge. This phase, however, is now crucial to reverse the economic decline of South Africa.
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