Industrialisation and local production
Key to the Economic Reconstruction and Recovery Plan is a renewed commitment from the government, business and organised labour to buy local. This second priority intervention of the recovery plan is to support a massive increase in local production and to make South African exports globally competitive. This will encourage greater investment by the private sector in productive activity. The government’s commitment to buy local should lead to increased local production, which will lead to the revival of our manufacturing industry.
All social partners that participated in the development of the Economic Reconstruction and Recovery Plan as part of our social compact have agreed to work together to reduce our reliance on imports by 20% over the next five years. They have identified 42 products – ranging from edible oils to furniture, fruit concentrates, personal protective equipment, steel products and green economy inputs – that can be sourced locally.
If we achieve our target, we will significantly expand our productive economy, potentially returning more than R200-billion to the country’s annual output.
SMME-Focused Localisation Policy Framework
Last year, we undertook to create a larger market for small businesses and to designate 1 000 locally produced products that must be procured from SMMEs. As the Covid-19 pandemic forced the closure of global value chains, we have been able to speed up this initiative as local supply chains became open for locally manufactured products. To this end, Cabinet approved the SMME-Focused Localisation Policy Framework, which identified the 1 000 products.
Furthermore, the Department of Small Business Development and the Department of Trade, Industry and Competition are supporting SMMEs to access larger domestic and international markets. These efforts are supported by robust manufacturing support programmes.
Four master plans
In the State of the Nation Address last year, President Cyril Ramaphosa said that South Africa’s vision for industrialisation is underpinned by sector master plans to rejuvenate and grow key industries. To date four master plans have been completed and signed – which are part of the social compact between labour, business, the government and communities – and have already had an impact in their respective industries.
Through the implementation of the poultry master plan, the industry has invested R800-million to upgrade production. South Africa now produces an additional one million chickens every week.
The sugar master plan was signed during the lockdown, with a commitment from large users of sugar to procure at least 80% of their sugar needs from local growers. Through the implementation of the plan, last year saw a rise in local production and a decline in imported sugar, creating stability for an industry that employs some 85 000 workers. Support for black small-scale farmers is being stepped up, with a large beverage producer committing to expand its procurement sharply.
Since the signing of the clothing, textile, footwear and leather master plan in November 2019, the industry has invested more than half-a-billion rand to expand local manufacturing facilities, including SMMEs.
Through the automobile industry master plan we have worked closely with the auto sector to help it weather the pandemic. By the end of the year, the sector had recovered around 70% of its normal annual production, in difficult circumstances.
In February 2021, the Ford Motor Company announced a R16-billion investment to expand its manufacturing facility in Tshwane for the next-generation Ford Ranger bakkie. This investment will support the growth of around 12 small and medium enterprises in automotive component manufacturing. Nearly half the procurement spend on the construction of bulk earthworks and top structure at the Tshwane Special Economic Zone during this phase is expected to be allocated for SMMEs, an amount equal to R1.7-billion in procurement opportunities.
Toyota has invested in its KwaZulu-Natal facility to start production of the first generation of hybrid electric vehicles to come off a South African assembly line. This follows investment announcements by Nissan, Mercedes-Benz and Isuzu of expanded production facilities, all of which cement South Africa’s position as a global player in auto manufacturing. This year our focus will be on getting the industry back to full production, implementing the Black Industrialist Fund and working on a new platform for expanded auto trade with the rest of the continent. This will be part of our concerted effort to boost the manufacturing sector.
Africa Free Trade Area
This year we will begin to harness the opportunities presented by the African Continental Free Trade Area (AfCFTA), which came into operation on 1 January following the adoption of the Johannesburg Declaration by the African Union.
The AfCFTA provides a platform for South African businesses to expand into markets across the continent, and for South Africa to position itself as a gateway to the continent.
Broad-based black economic empowerment
To address the deep inequalities in our society, we must accelerate the implementation of broad-based black economic empowerment policies on ownership, control and management of the economy. In 2020, the government agreed to landmark deals with companies that will advance black economic empowerment by transferring ownership to their workers.
In November 2020 we held our third South Africa Investment Conference to review the implementation of previous commitments and to generate new investment in our economy. Even under difficult economic circumstances, the investment conference managed to raise some R108-billion in additional investment commitments. Together with investment confirmed from the two previous investment conferences, we have now received R773-billion in investment commitments towards our five-year target of R1.2-trillion.
Firms have reported that R183-billion of these investments has already flowed into projects that benefit the South African economy. This shows that our country is still an attractive investment destination for both local and offshore companies. We have worked to facilitate investment by increasing the ease of doing business, including by making it easier to start a business. In the past year, more than 125 000 new companies have been registered through the BizPortal platform, completing their registration in just a matter of hours from the comfort of their homes or offices. We are making it easier for business to do business.