Greater government co-ordination on industrial policy needed, says Patel

Trade, industry & competition minister Ebrahim Patel wants greater co-ordination within the government over industrial policy and has proposed the creation by the next administration of an Industrial Policy Coordination Council chaired by the president. 

The proposal is contained in a booklet outlining the achievements of industrial policy over the past five years under the so-called Reimagined Industrial Strategy launched by President Cyril Ramaphosa in 2019 which stressed the need for increased partnership and collaboration.

The Industrial Policy and Strategy Review booklet also outlines what needs to be done by the next administration. The new cabinet will be announced after the elections and there is no certainty Patel will continue in his post. 

The booklet was launched by Patel on Tuesday at the newly established Tshwane Automotive Special Economic Zone where 11 factories produce components for Ford. 

The 124-page review stresses the importance of intergovernmental co-ordination and planning around industrial policy. “Industrial policy is still often considered the responsibility of a handful of departments and agencies rather than a fully co-ordinated, cross-governmental policy. Setting targets and priorities still tends to happen in isolation and long term planning remains a serious challenge. 

“Work in the next administration should aim to formalise this approach through an Industrial Policy Coordination Council chaired by the president. Most cabinet portfolios should have explicit industrial policy targets in performance compacts cascading to provincial and local government level and incorporated in the performance agreements of senior civil servants.” 

The review also suggests government may need to reform the basket of incentives provided to the private sector to increase its impact. Incentive application processes across the government could be streamlined to reduce administrative costs and the scope and range of incentives offered by the three spheres of government reviewed to reduce duplication. The effective tax rates of specific economic sectors should be examined to give support to industry and stimulate investment. Tax incentives should also be used to stimulate technological innovation. 

The review emphasised the rapid scaling up of infrastructure spending should be a priority of the next administration with levels of investment increasing to at least R400bn-R500bn annually and drawing on private and public sector resources. The priority should be improving electricity provision and freight transport for established businesses. 

The booklet notes to be effective industrial policy needs to be integrated into a broader economic policy and synchronised with other policies such as foreign policy, education and skills development policy, fiscal incentives, monetary policy and exchange controls. This it says is “imperative for achieving sustainable economic growth and development”. 

Among the industrial policy achievements highlighted by the review were the formulation of 12 sector master plans including in the poultry, sugar, clothing and textile, automotive and steel sectors. 

Another highlight was the negotiation and finalisation of the Africa Continental Free Trade Area agreement and the conduct of market inquiries in the data, healthcare, grocery and online markets which resulted among other things in a significant reduction in data costs. 

The review notes over the past five years exports of manufactured goods to the rest of Africa increased 58% from R283bn in 2018 to R447bn in 2023. Exports of manufactured goods from SA to the rest of the world topped R1.1-trillion in 2023. 

According to the review, investment facilitation amounted to R1.5-trillion across 317 projects. Foreign direct investment amounted to R1.1-trillion for the five year period 2019-23 compared with R312bn for the prior five year period. 

The number of black industrialists supported by the department of trade, industry & competition (Dtic) increased to more than 1,700 individual businesses employing more than 160,000 workers and with a combined turnover of R183bn per annum. Black industrialists received R39bn in funding over the period. 

A total of 551,000 workers in 125 firms were now part owners of the companies they work for. 

In terms of tariff support there were 20 increases and 26 rebates and reductions.

Public interest agreements under the Competition Act were struck with Coca-Cola, PepsiCo, Shoprite, Imperial and Heineken. 

Industrial funding by the Dtic, Industrial Development Corporation and the National Empowerment Fund totalled R100bn. 

The number of workers covered by programmes of the department and its agencies such as master plans and incentives grew to 1.28-million. 

The review identified productive sector investment, the Africa-led growth strategy, infrastructure development and green industrialisation as future sources of growth. 

ensorl@businesslive.co.za