9-Point Plan to Ignite Economic Growth and Create Jobs

02 November 20151

Introduction Medium-term Strategic Framework (MTSF) target is 5% inclusive growth by

the end of the current term of Government;

Current growth rate is below 2%;

Jobs are being created but level and content of growth is insufficient to address challenges of unemployment, poverty and inequality;

SA economy is facing a number of external and internal constraints;

More than that we face the need to create a new structural basis to achieve higher levels of inclusive growth;

2

Introduction In the 84 quarters between December 1993 and December 2014, 5% growth

was achieved in only 17 quarters. That growth was driven by (i) consumption and import-intensive sectors, and (ii) the commodity ‘super-cycle’;

Neither of these are available to drive 5% inclusive growth. We need to move up the value-chain, through a strategy that can be summed up as the 6 i’s –industrialisation, infrastructure, innovation, investment, inclusion and integration; and

The NDP makes the case for diversifying the SA economy so as to promote a more inclusive and faster growth trajectory.

3

Economic Outlook The global outlook remains uncertain and IMF has repeatedly revised down

global growth forecast.

Our dependence on commodity investment and exports has been severely impacted by the end of the commodity super-cycle.

The challenging conditions in Mining have spilt over into our Metals and Engineering sectors which supply the mining sector.

China’s slowdown and the changing structure of China’s growth trajectory hold both opportunities and dangers for SA. The global glut in steel production is an example of the latter.

The domestic energy challenge is clearly now holding back economic development.

4

The global economy grew by a lower than expected 2.2% in Q1 2015. This is substantially lower than the IMF’s April 2015 forecast of 3%.

Significantly weaker growth in US, Mexico, Canada, and UK.

Marginally stronger growth in the Eurozone.

Magnitude of slowdown in China disputed but looks substantial.

Big story is the plunge in commodity prices.

5

6

-

20

40

60

80

100

120

140

160

180

200

220

240

260

280

300

320

340

360

380

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Ap

ril 2

01

5 =

10

0

iron ore coal gold platinum

7

-4

-2

0

2

4

6

8

10

12

-4

-2

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

pe

rce

nta

ge g

row

th

Real Gross Domestic Product

OECD South Africa Australia

Canada Chile New Zealand

Source: OECD stats and IFS

8

480

500

520

540

560

580

600

620

640

R b

illio

ns

SA Annual Real GDFI 2009-14(Rb 2010-Prices)

Source: SARB, 2015, Quarterly Bulletin

-

10

20

30

40

50

60

70

80

90

R b

illio

ns

SA Annual FDI 2009-14(Rb Current-Prices)

Source: SARB, 2015, Quarterly Bulletin

The causes of the weaker GDP performance are well known:

• Plummeting commodity prices,

• Electricity supply challenges,

• Global steel glut,

• Drought condones in KZN and North-west, and

• Spillover effects from mining into manufacturing.

Hard to over-exaggerate impact of the current commodity price shock…

9

The Nine Point Plan

Government’s immediate response to address these challenges and begin implementing the NDP is the 9-Point Plan announced in SONA February ’15.

Drivers:

① Revitalisation of the Agriculture and Agro-processing value-chain,

② More effective implementation of a higher impact IPAP,

③ Advancing beneficiation (adding value to our mineral wealth),

④ Unlocking the potential of SMMEs, co-ops, township and rural enterprises,

⑤ Growing the Oceans Economy,

Enablers:⑥ Resolving the energy challenge,

⑦ Managing workplace conflict,

⑧ Scaling up private-sector investment,

Cross-cutters:⑨ ICT, Transport infrastructure, Science and Technology, and Water.

10

9-PP Drivers focus on key productive sectors...

① Revitalisation of the Agriculture and Agro-processing value-chain:

1. Market Access & Trade Development

• Trade Development Strategy

• Agri-Parks

2. Fast Tracking Land Reform

• 50:50 policy framework piloted

3. Producer Support

• Financial support (DAFF & DRDLR)

• Capacity building

4. Production

• 9 value chains

11

2019 GROWTH

TARGETS

2015/16

GOVERNMENT

INVESTMENT

ARE WE ON TRACK?

AG

RI-P

AR

KS

• Establish Agri-Parks

in 44 districts

• Create 89 340 jobs

through the Agri-park

programme

(production, farmer

support, and

processing) by 2019.

DRDLR committed R2bill

for 2015/16 financial year;

Completed: Site analysis alignment to

dominant commodities as identified in the

APAP (socio-economic, market,

commodity), consultation and sign-off

completed for 43 of the 44 District

Municipalities.

Completed: Draft Business Plans

completed for 6 districts [Chris Hani,

Ngaka Modiri Molema, Mopani, Xhariep,

Thaba Nchu, and Thabo Mofutsanyane].

5 August: Complete Production plans for

2015 planting seasons. Draft production

plans submitted for EC (all), FS (all), LP

(all), NW (all), KZN (all), GP (1), WC (1)

and NC (1); MP (all)

30-Sep-15: Complete remaining Business

Plans

LA

ND

RE

FO

RM • Acquire 2mill ha of

strategically located

high-value

agricultural land

acquired for key

APAP commodities.

• Finalise 50:50 Policy

Framework

DRDLR committed R 978.1

mil for 2015/16 financial

year.

Completed: 18 proposals have been

received from farmers and farming

organizations,

30-Aug-15: Commence implementation

Completed: 24,157 ha allocated to

smallholder farmers; an additional 16,557

ha have been approved for acquisition.

12

How far are we in meeting our targets?

2015/16

GOVERNMENT INVESTMENT

PROGRESS IN THE SECTOR AGAINST SET

GROWTH TARGETS

SU

GA

R

Hectares put under production = 2 957

Total number of jobs to be created: 954

Estimated Investment: R 34.6 million

• Sugar: Produced = 2.1 mill tonnes in 2014/15,

representing a decrease of 233 100 tonnes since

2013/14; Set against our annual target, it represents

a shortfall, worth R 783 million.

FR

UIT

AN

DV

EG

Hectares put under production=13 982

Number of jobs created: 13 751

Estimated Investment: R456.5 mil

Markets opened: China (apples, table

grapes, citrus), India, Thailand (citrus),

Japan (table grapes, citrus),USA

(citrus, deciduous, table grapes),

potential jobs: 73,701

• Fruit: Production was 268 563 tons (7 988 ha),

worth R 1.1 mill, representing an increase of R

685mill , & potential to create 1 868 jobs. This far

exceeds our annual growth target of 10 898 ha p.a.

• Vegetables: Production amounted to 11 000 tons

(748 ha), worth R42mill. This falls short of our annual

target to grow by 3514 ha p.a.

WIN

E

Estimated Investment: R11.3 mill

Markets opened: USA market by 6%,

China by 5%; Africa by 5%

Potential Job creation, 100,000

Wine: The sector will plant 2 000 hectares of new

plantings, and about 1.5 million tons of wine grapes,

worth R 2.2 million and 1 525 jobs.

This far exceeds the annual target to grow by 941ha

per annum.

WH

EA

T

Number of hectares put under

production = 150 hectares

Total number of jobs created: 147

Estimated Investment: R16. 2 mill

• Wheat: The sector will plant 481 000 hectares in

2015/16, producing 1.7 mill tonnes of wheat,

representing an increase of 0.2 % ( 4 730ha, R 9,6

billion).

• Set against our annual growth target it represents a

shortfall of -35 800 tonnes, and -7 470 ha13

How far are we in meeting our growth targets?

SUMMARY OF

INTERVENTIONS

PROGRESS IN THE SECTOR AGAINST SET

GROWTH TARGETS

FO

RE

ST

RY

EC TUP in Cat B & C: 1 825ha

New Afforestation in the EC of

7000ha, creating 541 jobs.

Re-commissioning of 21 500ha in WC

• The 825ha in 2015/16 covers only about 20% of the

annual target.

• Set against our annual target it represents a shortfall of -3

375 ha . 2015/16 Jobs = 600, and a turnover R6,2 million.

However, 20% is way above the industry norm of only 3%

TUP

AQ

UA

C

ULT

UR

E

Current production is 5000 tonnes

Employment is 2000 jobs

Estimated Investment : R100mill

(Gov.)+ R300mill (Private)

• The year on year growth between 2013 and 2014 was

25% which exceeds the global growth of 7% average

• Small scale policy in place and process to register and

verify fishers has started

PO

ULT

RY

Hectares transferred = 1 536;

Hectares under soya bean:= 2 017

Jobs to be created = 5 608

Estimated Investment : R193.9 mill

Markets opened: Middle East Qatar

(open), Saudi, Arabia (still to be

opened); potential jobs=16,000

• Soya: Sector will plant 687 300 ha of soya beans,

producing 1 041 600 t, representing an increase of 36,7%

, 184 400 ha, 93 600t, and R438.2 mil. It exceeds the

annual growth target of 75 240ha p.a. and can create 3

088 jobs.

• Poultry: The sector is set to produce 1.7 mill tonnes of

poultry, representing an increase of 100,000t (worth

R686.7 mill), however barely short by -32 700t set

against our annual growth target 132 700t p.a.

RE

DM

EA

T

Hectares transferred= 11 890, under

production = 1.3 million ha

140 Veterinarians deployed by Q4

Total number jobs = 29 651

Estimated Investment = R 398.4 mill

Markets opened (pork): Russia:

540,000 tons ) , Potential Jobs – 2000

• Cattle: Production increased by 78 100t, worth R189.96

mil, and can create 3 137 jobs. This exceeds our annual

growth target of 56 520t p.a.

• Sheep: Production increased by 18 900t, worth R4.7 mil,

and can create 1 373 jobs. This represented a shortfall of

4 668t against our annual growth target of 23 568t p.a.

14

How far are we in meeting our growth targets?

9-PP Drivers focus on key productive sectors...

② More effective implementation of a higher impact IPAP:

New growth sectors such as in Oil & Gas; Metal Engineering & Capital Equipment, and Agro-processing will be targeted for more intensive support.

Recalibration of industrial finance will aim to strengthen the package of Government and DFI support for the productive sectors (against greater conditionalities).

In view of the severe distress that some parts of the Metals & Engineering sectors are in, R300m has been earmarked from the dti’s MTEF allocation.

Important progress has been achieved in analysing the demand for the infrastructure build programme to maximise localisation, this needs to be built on.

Introduction of the Black Industrialists policy and programme to transform the manufacturing sector and unlock the potential of black entrepreneurs.

SEZ programme is being rolled out.

SA must move up the value-chain, innovate and locate production in high value-added production so as to reduce our dependence on volatile commodities.

15

9-PP Drivers focus on key productive sectors...③ Advancing beneficiation (adding value to our mineral wealth): Beneficiation is a medium to long-term initiative, but need to make decisions

now for us to see the results in the medium to long-term.

Five value-chains are being worked on (1) PGMs including catalytic converters

and fuel cells, (2) Iron and Steel, (3) Titanium, (4) Polypropylene, and (5) Capital

equipment for the mining sector.

Mining Phakisa is in the preparation phase and Business is requested to be a

full and active partner in the process.

④ Unlocking the potential of SMMEs, co-ops, township and rural enterprises:

Public Sector Procurement – implement 30% set-aside policy.

Building Market Access – Supplier Development Programmes.

Access to Finance – developmental DFIs.

Support to Township and Rural Enterprises – through business infrastructure.

Policy and Regulatory environment – Red Tape Reduction, review Small

Business Act.

16

9-PP Drivers focus on key productive sectors...

⑤ Growing the Oceans Economy:Marine Transport and Manufacturing:

Saldanha Bay proclaimed as an IDZ so as to develop the oil and gas hub: Total scope -R9.2 billion investment (public and private).

Adoption of a Public- Private -Partnership (PPP) model to finance new Operation Phakisa infrastructure by Transnet National Ports Authority (TNPA) & Transnet- R7 billion committed.

For new port infrastructure (Saldanha Bay, East London, Richards Bay) Transaction Advisors appointed; business case advanced; and funding model: 70% completed.

Working vessels designated for local procurement, for example - public fleet subjected to 60% local content.

Skills and Capacity Building:

DHET has activated the South African International Maritime Institute (SAIMI) as the vehicle to coordinate skills. West Coast TVET College (Saldanha) and Umfolozi TVET College (Richards Bay) to be allocated Marine Industry Learner Programme Specialisation.

17

9-PP Enablers create environment for inclusive growth..

⑥ Resolving the energy challenge: Electricity supply challenges in line with War-room Five Point Plan:

o Immediate Measures (Improve Eskom Maintenance and Operational

Practices), Co-Generation, Gas-to-power, coal and other IPPs, and

Demand Side Management.

Addressing broader Energy Mix issues

⑦ Managing workplace conflict:

Engagement process in Nedlac exploring a range of solutions.

18

9-PP Enablers create environment for inclusive growth..

⑧ Scaling up private-sector investment:• Overall investment level is too low (GDFI is 20% of GDP vs NDP target of 30%)

but SA continues to attract lion’s share of FDI going to Africa and a pipeline of R45bn shows significant numbers of foreign investors believe in the ‘Africa Story’ and see SA as pivotal to Africa’s industrialisation.

• A central nodal operational structure will be established at national level to act as a One-stop Shop.

• Improve the Investment Climate and ease of doing business by identifying bottlenecks, administrative barriers and have a plan of action to improve service delivery. The focus will be on reducing regulatory inefficiencies, setting up norms and standards, turnaround times, coordinate, fast track, unblock and reduce red tape for all investors.

• One-stop Investment Centres will be established in the SEZs.

19

9-PP Cross-cutters reverse erosion of SA Competitiveness...

⑨ ICT, Transport infrastructure, Science and Technology, and Water:

ICTo Phase 1 Broadband roll-out: Aggregation of public sector demand to address gaps

by connecting schools, clinics, police stations and other government facilities in 8 District Municipalities in 7 Provinces.

o Phase 2 Broadband Roll-out: Nominal Planning to cover the entire country has been finalised. SITA’s bandwidth migration roadmap to align government connectivity with South Africa Connect targets will deliver increased bandwidth to 4457 client sites.

Transporto Improve ship register and enhance cargo volumes.

o Establish rolling stock factory in Nigel,

o Maintenance of provincial roads (S’hamba Sonke),

o Develop Infrastructure Funding and private-sector participation framework.

20

⑨ ICT, Transport infrastructure, Science and Technology, and Water:

Science & Technologyo Develop sector innovation funds and improve efficiency of the R&D Tax incentive,

o Provincial/ local government funds to be ring fenced for RDI based service delivery solutions,

o Innovation/ entrepreneurial skills development programmes to be implemented,

o Industrial financing for full scale commercialisation developed.

Watero Maintain and upgrade existing water and sanitation infrastructure,

o Build new dams and develop ground water resources,

o Improve water quality,

o Enhance an integrated regulatory regime (e.g. water use licensing), and

o Implement SMART technologies for water and sanitation information management.

21

9-PP Cross-cutters reverse erosion of SA Competitiveness...

Our partnerships will need to be strengthened further…

Our conclusion as Government is that we have made progress. But much more remains to be done. If we strengthen our partnerships, with Labour, Business and Communities, together we can do more.

On Mining – the Mining Phakisa will attempt to address both mining and beneficiation issues.

Government is committed to supporting the domestic Steel sector and has been engaging intensely with companies in the sector.

To revive the Metal and Engineering sector, further investment support is being considered.

The in-process One-Stop Investment Centre is another opportunity for Labour, Business, Communities and Government to partner.

22

Questions and Discussion

23