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30 May 2007

Chairperson
Honourable members

This Council has unique responsibilities and perspectives which mean that its oversight over national government departments is of a different order and a different character from that of the other House in our National Parliament.

As honourable members know, the Constitution gives our provinces considerable powers in the areas of trade and the promotion of economic development. All our provinces have MECs and departments responsible for economic development. Municipalities, likewise, have powers and responsibilities for local economic development, particularly through the formulation and implementation of Integrated Development programmes. Our Constitution also entrenches the principle of co-operative government requiring that all three spheres of government work together to ensure coherence and complementarity. The National Council of Provinces (NCOP) is thus in a unique position to oversee the big picture of the relationship between the efforts of the three spheres of government, in this case, in the areas of trade and industry.

This year has seen advancement in our work on industrial policy at national level. We have announced that within the very near future, we will publish the Industrial Policy Framework Document, along with an Industrial Policy Action Plan for the current fiscal year. The mandate for the current year's Industrial Policy Action Plan (IPAP), derives from the President's State of the Nation address, where he indicated that action programmes would be formulated and implemented for a number of specific sectors. Essentially what we have done is to drill down into the Customised Sector programmes in various stages of development in the named sectors, and identified all the low hanging fruit initiatives recommended in key action plans, that we can move towards implementing quickly, and within available budgetary resources. This year's IPAP will thus outline a fairly broad range of actions across a fairly diverse range of sectors.

However, the IP Framework Document indicates that we intend to move towards making IP interventions on a larger scale, sufficient to strategically influence the direction of industrial development in this country, and also to make support measures available more conditionally. This means that even as we finalise this year's IPAP, we are beginning work on future IPAPs that will differ significantly from the current year's one. Essentially, making larger scale interventions requires that we engage with some of the big ticket recommendations in the comprehensive service plans (CSPs) and this will inevitably require greater choice, sequencing and prioritisation. Future IPAPs should therefore be expected to focus on a smaller number of larger interventions, focused on a smaller number of sectors than this year's.

One priority that has already emerged is capital goods industries capable of producing inputs for the very significant infrastructure development programme that is already underway. We need to ensure that a significant portion of the various items that will be procured by the various infrastructure development projects are manufactured in South Africa, and that we therefore use the infrastructure programme as a tool of industrial development. This will require that we drill down further and identify particular capabilities in this area that we now have, or had in the past, as well as other strategic inputs we can produce whose continued reliance on foreign suppliers would be problematic for one reason or another. We then need to identify what is required to promote the production of such capital goods in South Africa. In this work, we will be working closely with the Department of Public Enterprise's Supplier Development Programme, to identify the prospects for promoting offsetting foreign investment in targeted capital goods areas.

Beyond this, certain parts of agro-processing and of chemicals are emerging as possible new priorities along with ongoing programmes to promote beneficiation of mineral products. At the same time we will need urgently to respond on the successor programmes to the Motor Industry Development Programme (MIDP), and the clothing and textile DCCs, as well as the proposed capital upgrading programme for this sector.

Each of our provinces has simultaneously developed their own Growth and Development programmes. Most of these have identified sectors where provinces believe they have comparative advantages or could create competitive advantages. Municipalities, through their IDP processes, have likewise identified priority areas, in some cases in close collaboration with provinces.

A major challenge as we move into the next phase of our industrial policy work is to ensure that there is alignment and coherence between the priorities that have emerged from the work that has taken place at the three spheres. It makes no sense for a province or a municipality to be pursuing a priority that is not being championed at national level, and vice versa.

A further challenge will be to locate our industrial policy within a spatial development perspective. We all know that despite the significantly improved economic growth that has taken place in recent years, significant disparities persist and may even have been exacerbated in small towns and rural areas. Unless we act decisively, we could be in danger of further polarising our economy with dominant enclaves, well connected to the global economy, advancing, while areas marginalised by apartheid, become further isolated as wealth and employment disparities increase.

The key policy pronouncement in this regard is the 2003 National Spatial Development Perspective. The National Spatial Development Perspective (NSDP) identified various categories of development potential in the space economy of the country and laid the basis for determining guidelines and interventions appropriate to meeting the differing development needs of the various economic regions in South Africa. The NSDP is forcing all of us to confront some hard questions: do regionally specific plans and proposals have real prospects, or are they just wish lists? If proposals have real prospects, what do we all need to do to ensure a more equitable, but also realistic, spatial economic development? How do we deal with competing projects that have emerged from provincial processes?

A strategic conversation on some of these issues has begun, but only begun, at Ministers and MECs (MinMec) level. We have agreed on a need to develop a three year MinMec work plan focusing on high impact priorities. To this end we have begun to engage with the 174 or so provincial projects identified in provincial Growth and Development Summit (GDS) processes with a view to identifying between 10 and 15 that will be the focus of more substantive interventions. In this process we have agreed that there will be at least one such project in each of the nine provinces. We have also as dti proposed, 12 such projects and are awaiting any suggested amendments to the list from the provinces.

The Department of Trade and Industry is in the meantime finalising a new Regional Industrial Development Strategy (RIDS), which we hope to table soon. The RIDS will specifically seek to address spatial constraints and opportunities related to industrial development programmes at municipal level.

Finally, we are in the process of reviewing Industrial Development Zones (IDZs), not with a view to changing the basic concept underlying them, but in order to improve their effectiveness as a means of attracting investment. Changes in the regulatory framework as well as in support programmes may emerge as a result. As we improve programmes, we must however, expect to have to make choices and establish clearer priorities in decisions on future IDZs. We cannot expect to see IDZs everywhere in the country. If we did, we would be undermining the very rationale of IDZs as special export-orientated centres of production in our country.

As I indicated, at executive level we have really only begun our strategic conversation on some of the critical issues arising from the imperative to promote more equitable spatial economic development. I would respectively suggest that this Council might find it worthwhile also to engage on some of these critical questions.

Chairperson
Honourable members

It is pleasing to note that the NCOP continues to take an active interest in trade policy issues. As I indicated in my speech in the National Assembly yesterday, this year will see three very critical trade negotiation processes come to a head one way or another with implications for all of us. The first of these is, of course, the World Trade Organisations (WTO) Doha Round negotiations. With the French Presidential elections now completed, the German Presidency of the European Union (EU) about to end, and the United States (US) left with only a few months before its focus is entirely upon Presidential elections, a brief window of opportunity to restart the stalled negotiations has now been identified by some of the major players.

South Africa continues to favour the soonest possible conclusion of a developmental outcome to the Doha Round, but we must stress that for us, the content of an agreement and our insistence that it must in the end advance the interests of developing countries, is as and indeed possibly more important than an early close to the process. The fundamental issue in determining whether or not the WTO process moves forward, remains, in our view, whether or not the major developed country trading blocs can develop sufficient political will to make the kind of reforms in agricultural trade which have long been identified as necessary to give developing countries an opportunity to expand exports in an area where many already have a natural comparative advantage and/or could acquire further competitive advantages.

South Africa continues to pay particularly close attention to the negotiations taking place in the area of Non Agricultural Market Access (Nama). We have observed with dismay that Nama continues to be regarded by the major trading blocs as an area where so-called advanced developing countries, including South Africa, merely pay for the reforms which developed countries need to make in the agricultural sector. Through our work in coordinating the Nama 11 group in the WTO, we are striving to ensure that we do not find ourselves in a position where we are asked to make a disproportionate contribution in industrial tariff reductions, to secure only modest gains in agriculture.

The second critical negotiation this year will be the Economic Partnership Agreement (EPA) negotiations which African, Caribbean and Pacific regions are undertaking with the European Union. Following a proposal from the Southern African Development Community Negotiating Configuration, of which we are part, the review of the bilateral Trade Development and Co-operation Agreement which we have with the European Union and South Africa will now be integrated and merged into the EPA negotiations. We believe that this could contribute to a harmonisation of an important external trading relationship within the region that could make an important contribution to regional integration. I mentioned in my speech yesterday that there are a number of difficult and complex questions we are having to confront in these negotiations, which the EU is insisting, must be concluded by 31 December this year, failing which they are saying most of the ACP will find themselves trading on worse terms than they currently do under the Cotonou arrangements.

The third trade related issue which looks likely to be resolved in one way or another during the course of this year, is the Southern African Development Community (SADC) regional integration agenda, and in particular the debate about a move to a Customs Union. We in South Africa, have insisted that a move towards a Customs Union will only be possible once the work of putting in place the SADC Free Trade Area, envisaged by the Maseru Trade Protocol, has been completed.

More than that, any move to a Customs Union must be shown to be contributing towards the promotion of growth and poverty reduction in the region, must take account of existing arrangements, and the variable geometry of the region, and must ensure that any common external tariff which emerges, allows space for tariffs to be a policy instrument of industrial development, and not simply a revenue raising device. This debate I believe, is a critical one for the future of the region, and merits much fuller engagements by parliamentarians.

Chairperson and honourable members, I have focused on just some of the areas of the work of the Department of Trade and Industry with which I believe we can all benefit from a deeper engagement with members of this Council, in the Select Committee in particular. I look forward to us having those opportunities in the near future and I have pleasure in commending Budget Vote 32 to this Council.

Thank you.

Issued by: Department of Trade and Industry
30 May 2007