MEDIA BRIEFING ON THE ECONOMIC INVESTMENT DEVELOPMENT CLUSTER
06 November 2007
BRIEFING BY MINISTER OF TRADE AND INDUSTRY MANDISA MPAHLWA

Documents handed out:
Economic Investment Development Cluster

Audio recording of meeting

SUMMARY
The Minister of Trade and Industry discussed on the progress the Cluster had made concerning the economic investment development cluster programme. The three broad areas addressed were increasing economic efficiency, promoting dynamic growth seekers through the implementation of industrial policy and ensuring integrated service to assist small and micro industries. He expanded on these areas, for instance under the first area he talked about energy, information technology services and public transport. Questions were asked by the media on capital commitments, the changes to the bio fuels strategy, tariff reform, any preliminary thoughts on the motor industry development programme, problems in the automobile industry, the environmental concerns, Business Process Outsourcing investment, and the lack of computers in schools

MINUTES
Briefing by Minister of Trade and Industry
The Hon Mandisa Mpahlwa, Minister of Trade and Industry, discussed the progress made concerning the economic investment development cluster programme. The three broad areas addressed were increasing economic efficiency, promoting dynamic growth seekers through the implementation of industrial policy and ensuring integrated service to assist small and micro industries. The work on economic efficiencies focused on energy, ICT and public transport and specific priorities were discussed. The National Industrial Policy Action Plan was focusing on chemicals and pharmaceuticals, automotives, pulp and paper forestry and furniture and metals and transport equipment as well as clothing and textiles. Key action plans in some sectors were finalized. For industrial policy to be successfully implemented there was a need for appropriate industrial financing, and specific instruments were being developed for sectors. The integration of small and micro enterprise service delivery was under way. There had been significant progress. The service delivery network had been extended. Part of the work in promoting small businesses was improving demand side measures and an announcement would be made on these issues soon. A programme for acceleration of land and agrarian reform had been finalized. The Cluster had made significant progress but there were still challenges in fast-tracking implementation in some areas.

Q With regard to driving clothing textile cluster programme, the quota which had been allocated was running out but no progress had been made. The Minister was asked what were the capital commitments. With regard to those target sectors which had no space to target tariffs, how would this be played out.

A The Minister responded by stating that the Cluster was following the necessary adoption plans, and was presently at the implementation stages, looking at the relevant people to assist. It saw a role in financing industrial corporations, and part of the plan was to achieve an industrial upgrade of the sectors to be able to meet competition. Other fronts were also receiving attention; for instance Port Elizabeth industrial action seemed to be progressing. Work had started to implement the action plan.

Q On the bio fuels strategy, there was word that the Ministerial committee had suggested changes on food security, and the structured length of incentives. The question was asked what were other changes being made in relation to bio-fuel strategy.

A The Minister responded that once the work has been taken to the Cabinet there would be a proper release of the Bio fuel strategy. He did not have enough information, so could not elaborate more on this topic. However from time to time the Bio industry would provide feedback. Recently there was some feedback on food security, as to whether the needs of the country could be met, and there would be a further announcement on this shortly.

Q A journalist asked two questions on the tariff reform. The first related to whether, by the bio- sectoral approach, the Minister meant to reduce tariffs on inputs into strategic sectors, whilst retaining protection by the goods produced by these sectors. The second question related to the apparent divergence of views evidenced in the Medium Term Budget Policy Statement. He asked for clarity on the sectoral approach, and the argument for an economic-wide reduction to boost general economic efficiency.

A The Minister responded that there was a general shift to reducing tariffs. There was a need for new market access for developed and undeveloped countries. Currently it was possible to reduce 5% of the tariffs of all your total produce of trade. These matters were to be dealt with in specific terms, and South Africa’s own approach in the industrial policy framework was to identify a line and involve other stakeholders. It did not need a blanket approach that would apply to all other countries, and this might not be useful. South Africa needed to look at the different sectors, in relative terms, and the competitiveness. Tariffs could not simply be cut to 0%. South Africa also had to look at the history at tariffs and the role they had played, for instance in the automobile industry. He stressed that the sectoral approach was not quite the way it had been put. South Africa was not seeking to use protectionism, but to address tariffs and apply to all sectors.

Q It had been indicated that the Motor Industry Development Programme (MIDP) content was due for release next year. The question was asked whether the mid term review of the Programme had come up with any further thoughts, whether the same support would be given even in the new cycle and what were the principles underpinning it. The MDBPS had shown that there were some benefits but it was costly. The views of the Minister were requested on this issue

A The Minister said the MIDP was necessary because the automotive industry had been in existence for 35 years, and was operating on high costs. There was a need to assess the automobile industry, and the Cluster would only be able to answer these questions by examining why South Africa needed the industry, why there was a need for development. There should be a balance between the viability and the costs of the industry.

Q A journalist from the Business Report asked if the Minister could give some ideas of what problems the automotive industry was facing, the key issues, and how these were understood.

A In regard to the automotive industry the Minister said there was a variety of issues to be looked at, such as whether the Cluster could foresee certain levels of support of the motor industry, what it had achieved in turning around, and the higher ambitions to raise the level of support. He believed that there was a need for the automobile industry

Q A journalist noted that a recent article had suggested that countries, including South Africa, could live with an environmental text. The question was posed whether that did not represent a major shift as the NEMA text had been rejected before because it was excessively demanding on developing countries.

A The Minister responded that South Africa, Brazil and India had major difficulties with the NEMA text as it stands, but had not outright rejected it. Some fundamental questions had been raised and hopefully they would be addressed in November. He had not seen any article produced by India in this regard. Other countries had found it useful, particularly the agricultural text because they were able to navigate around it, in a way similar to what the USA had been able to do with subsidies, and had been able to spend more on agriculture. Europe was able to adopt and adapt to it. The problem was that this took a co-efficient of 2013, so there had been a tight range placed on developing and undeveloped countries.

The Minister said that there were studies that had been done by various agencies, but there were some issues lacking in the industrial policy action framework. In the South African context, there was a need to look at the various issues. Monopoly pricing for imports had nothing to do with import tariffs, the environment and so forth .Competitiveness was about all factors. The South African tariffs had been substantially reduced. An agreement between South Africa and the European Union was made to reduce tariffs on all imports from 86% to 0 by 2012 . In respect of exports to Europe the tariff would reduce from 90% to 0. South Africa was looking to do the same with Southern African Development Community (SADC) countries to reduce the tariffs to 0%, but the problem with this was that there was not much development in trade in SADC countries. The approach was not a cut down bullet point, nor was it intended that South Africa would cut down all tariffs and all would be solved. There was a need to look at the South African economy and the constraints and opportunities. The Cluster wanted to address the industrial policy to have competitiveness, not issues with the exchange rate, but the fundamental work.

Q A journalist from IT web asked about Business Processing Offshore (BPO) investment. HE asked when the first applications should be set-up and operated. He enquired if there was any information in regard to the investment call centres, and why there was a need for a specific call centre of people investing in excess of R170 million.

A The Minister said that in regard to the call centre it had been a decision of Cabinet to ensure that South Africa had a facility to provide a service to investors. Part of the issue with this was that administrative and bureaucracy matters did become burdensome for potential investors, who would then tend to look elsewhere. The centres were intended to help the investors in that if they needed to find out information on something they could call the centres.

Q A journalist noted that in the MTBPS it had been noted that the Department of Education claimed that there were more than 70 000 schools with no computers. That amounted to half the schools. It was asked what is the Department planning in order to overcome this problem, even though the private sectors have taken initiatives.

A The Minister of Education, Hon Naledi Pandor, stated that a large number of schools did not use their computers for teaching and learning objectives. The Cluster was ready to invest in ICT for schools, after getting the necessary information and advice. It would also look at options with provinces, then plan an action strategy. By 2013 no child would leave school without having had ICT training.

A journalist stated that the MIDP has not been successful lately and the cost of implementing it was very high.

Q The Minister of Trade and Industry noted that there was not a blanket approach.

The briefing was adjourned