Advancing an Industrial Strategy for Redistributive Economic Growth to Attain Our Growth Target and Create Decent Jobs
Madam Speaker,
Honourable President,
Ministers and Deputy Ministers,
Honourable Members,
Mr. President,
Except for the occasional adhominem attacks, very little of the strategic issues of development you have raised today have been in dispute. On your proposed strategy to deal with low economic growth in order to tackle poverty, inequality and unemployment; I will try to give some detail on the path forward.
Wits academic, Professor Imraan Valodia, reminds us that the top 0.1% of South Africans hold 25% of our nation’s wealth. In stark contrast, the bottom 50% of our population live in a state of negative wealth; their debts exceed their assets. Our income distribution is not much better, making us one of the most unequal societies in the world.
The World Bank, in an important policy paper released this February, commenting on how South Africa must deal with its endemic inequality problem states that:
“The state will have to focus on making growth as inclusive as possible by extending economic opportunities to all, with an effective redistribution policy and by correcting market failures.”
Honourable House Chair, on this score, we agree with the World Bank.
On this very point, our Constitution sets us a very high bar. It boldly proclaims:
“To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken.”
That is our national goal – the achievement of equality. Inclusive economic growth is a vital part of that equality.
One of the main markers of the developmental state we strive to build is the creation of a national economy that generates and distributes wealth as equitably as is possible. Generally, to achieve this outcome, developmental states work on Industrial Strategies that help them achieve high economic growth, create decent jobs for millions of their citizens and capture a significant global markets as a backbone of demand to support their growth.
Honourable Members,
Our economic strategy is explicitly designed to advance this strategic orientation for South Africa. Through our Industrial Strategy, the Transformation Fund, and other targeted investment programmes, we are laying the foundation for an inclusive, reindustrialised economy that creates decent jobs and unlocks opportunity.
We do so in the context of significant global shifts. The world is undergoing deep structural transformation, accelerated by technological competition, environmental pressures, and a geopolitical and trade fallouts. In order to adjust the South Africa economy to these dramatic changes in the global economy, our strategy is deliberately framed around three pillars: Diversification, Decarbonisation, and Digitalisation.
Diversification
Diversification has a number of elements;
- It is about reducing dependence on a narrow network of export markets, and deepening trade with faster-growing economies- especially on our own continent and middle income countries.
- Shifting our export profile towards more value-added products. The benefit in terms of jobs, taxes and economic growth are much higher when we export a car made from local steel compared to exporting a ton of iron ore.
- Transforming industrial ownership and leadership. Many of our established industrialists are nearing retirement. We need to empower a new generation, young, skilled, and black, to lead reindustrialisation.
- Our economy is highly concentrated and we have a relatively small SMME sector; whereas SMMEs of all types are required to add dynamism to our economy and to introduce innovation and competition in products and services markets so as to reduce prices.
Digitalisation
- We are a youthful nation and must optimally use this demographic profile to stake our claim in the global technological frontier. Our digitally savvy population, combined with existing pockets of high-quality IT resources, gives South Africa a natural advantage in the digital economy. As the President recently noted:
- “The next generation, Generation Beta, will be immersed in tech and AI from birth, and will enter a world of work that is light years away from what it is today. Building a robust AI talent pool is therefore critical.”
- In this regard, we are already working to future-proof our citizens and workers for the digital environment through specialised training programmes and strong partnerships between academia and industry.
- To unlock this opportunity, we are prioritising specialised training, ramping up investment in digital infrastructure, and partnerships between industry and academia. Countries like the UK, US, and Germany are seeing double-digit growth in their ICT sectors. South Africa must be part of this global surge. The AfCFTA Protocol on Digital Trade, recently adopted, offers us a platform to grow our digital exports across the continent.
Decarbonisation
- Global growth is also increasingly influenced by the imperative to reduce greenhouse gas emissions in order to arrest climate change. The green transition presents both a threat and an opportunity.
- Major markets for South African exports such as the EU and the United Kingdom are adopting Carbon Border Adjustment Measures. These measures in part limit access into those markets for foreign goods produced with a high carbon footprint. To be sure, we are negotiating exemptions with these markets but we have to build our national capacity to meet these changing market conditions in the long run.
- Our mineral wealth especially in minerals that support the ‘green transition’ place us at the forefront of potential beneficiaries of this transition. However, we have seen that beneficiation will not happen without Government interventions that actively make beneficiation investments commercially attractive. The dtic is driving this through the designation of Special Economic Zones (SEZs), such as Boegoebaai in the Northern Cape, which are customised to support investments in the battery value-chain, renewable energy components, and green hydrogen.
Madam Speaker,
Our goal is very ambitious and to see progress we need the kind of consensus-driven approach that we will see unfold in the National Dialogue that the President has announced. We expect to see a real Social Compact in which citizens, political leaders, trade unions, social movements, businesses, and public institutions put their proverbial shoulders to the wheel to agree on concrete actions that will bind all of us around a Growth Agenda.
[Now, Honourable, Gama, as I had suggested in our Portfolio Committee two months ago, I think you and I must still have a discussion about whether- as a general ruler- all private sector collaboration with the State, under all conditions, amounts to the grand scandal of Neo-liberalism that you are bemoaning. In our chat, we will have to seriously reflect on what the experience of the Asian Tigers teaches us about this concept, in practice, measured against their story of rapid industrial development].
The President has set a clear target for us to meet. R2 trillion in new investment during this administration. This can be achieved and indeed exceeded (as we did with the first investment target). For many enterprises, especially new and black-owned enterprises, access to capital and the cost of capital remain major barriers. We are continuing to assess the extent to which we are appropriately incentivising investment in sectors like manufacturing, construction, mining, and agriculture.
This is not unusual for developing and developed countries, many of whom use Development Finance Institutions (DFIs) to correct market failures. South Africa has such DFIs, with the Industrial Development Corporation supporting viable businesses run by women, black industrialists, and youth entrepreneurs.
For the 25/26 Financial Year, the IDC has approved and committed funding of just over 12 Billion Rands in line with its mandate to transform our economy. This funding will be supported by youth empowerment programs such as the Youth Pipeline Development Programme, and the GRO-E Youth Scheme, as well as non-financial support for Black Industrialists, Women, and youth entrepreneurs.
But the need is so great that we as government cannot resolve this on our own. We are working towards finding effective and practical solutions that will enjoin South Africa’s financial sector to allow more capital to be invested in real industrial activity. At the same time, to encourage investment in manufacturing we are carefully reviewing the cost-base of the manufacturing sector; particularly the costs of logistics and electricity.
We know that the competitiveness of South African manufacturing has been eroded by the rapid rise in electricity prices. This cost-base of course is exacerbated by other costs administered at municipal level. We have started coordinating with other departments, such the departments of Energy and Electricity as well as Transport, to develop effective ways to support re-industrialisation by lowering this cost-base of manufacturing, especially in strategic sectors of the economy where the state administers prices.
In this regard, last month, Cabinet as led by the President, approved our joint proposal for discounted electricity tariffs for the ferrochrome and alloys sub-sector to support beneficiation industries to become more cost-competitive.
Honourable Members,
The need to grow exports while reducing import leakages across the economy is not a theoretical exercise, rising imports directly undermine our growth targets. It is for this reason that we are working to ensure that the R1 trillion infrastructure build programme announced in the Budget Speech and reaffirmed by the President must help to re-build the capacity of our domestic industries across the steel, polymers, manufacturing, construction, and mining sectors.
To do so we will use the Public Procurement Act to ensure that the major portion of procurement for the infrastructure-build programme is localised so that it contributes to domestic demand, job creation and economic growth.
In conclusion, Speaker,
The Constitution calls on us to advance equality. Our Industrial Strategy is our roadmap. Through digitalisation, decarbonisation, and diversification, we are rebuilding a productive economy. One that works for the many, not the few.
Let us place our collective shoulders to the wheel, and reindustrialise South Africa in the interest of all its people.
I thank you.
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