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South Africa: Economic sectors and employment cluster briefings
2 March 2010

Acknowledgements: FANRPAN acknowledges South Africa Government as the source of this article


Media briefing for Economic Sectors and Employment Cluster presented by Minister of Rural Development and Land Reform G Nkwinti and Minister of Science and Technology N Pandor, Chair and Co-Chair of the Cluster


Introduction

The President has declared this year, The Year of Action. The mandate of the cluster is very clear, grow the economy and create jobs. We recognise that there are structural constraints which have skewed the development trajectory of the country. These include:
  • Persistent high levels of unemployment, inequality and poverty
  • Insufficient finance for investment in productive sectors and job creation
  • Low investment in research and development (R&D) and limited contribution of technology-based or knowledge sectors
  • Uncompetitive and volatile exchange rate
  • Low savings rate
  • Long-term decline in agricultural and mining employment
  • Lack of economic diversification, by sector and by location
  • Limited progress in broadening participation
  • Abuse of dominance and uncompetitive behaviour in key input industries
  • Bottlenecks in logistics and energy infrastructure with often high and rising costs
  • Skills shortages to support growth.
We are ready to attend to these structural constraints and have determined that there are areas where we can stimulate real growth to ensure job creation. Our response forms the basis of what we call a new growth path which we are still working to further refine. We have, as a beginning, identified areas where we believe there is real potential. These were considered by the January 2010 Cabinet Lekgotla to constitute a new growth path. They are the following:
  1. Implementation of Phase II of the Framework Response to the International Economic crisis targeted at accelerating the recovery of jobs and of economic growth. As the President said in the State of the Nation Address, government will continue its support this year. The following priority steps are being taken:
    • Government (in collaboration with the social partners) will accelerate the implementation of the Training Lay-off Scheme; the scheme is intended to minimise job losses and facilitate re-training of workers to improve their skills and employability.
    • Funds will be disbursed annually through the Industrial Development Corporation (IDC) to companies in distress as loans or working capital. Stronger conditionalities will be put in place for companies accessing this support (which include limits on executive or management remuneration, payment of dividends and job losses).
    • Also, we will intensify the campaign to clamp down on illegal imports in order to protect our industries and consumers and address under-invoicing.

  2. Industrial policy that puts manufacturing, services and other productive sectors as the engine of sustainable growth. Minister Davies has adequately outlined the Industrial Policy Action Plan 2 (IPAP2) which reflects scaled-up interventions to support industrialisation and deliver on the decent work outcome. We are ready to implement.

  3. Science and innovation are critical for South Africa’s long-term competitiveness in a knowledge-intensive global economy. South Africa needs to build on its historical strength in scientific research, to exploit new technologies, and to discover new knowledge. South Africa’s investment in the Square Kilometre Array (SKA) and SumbandilaSat reflect our commitment to large-scale projects that promise social and economic rewards well into the future. In the 2010 Medium Term Economic Framework (MTEF), we will intensify our emphasis on innovation in our five identified areas of research. This means that we will accelerate long term R&D led industrial development opportunities in biotechnology, information and communications technology (ICT) and electronics, bio composite materials, renewable energy, titanium beneficiation, high-value chemicals, advanced batteries, agro-processing, and high-value agricultural products.
    • It means: Improved exploitation of large-scale science-based initiatives to support local manufacturing and skills development. This week the Department of Science and Technology (DST) launched its Technology Assistance Packages to manufacturing companies successfully benchmarked in the foundry industry for participation in the Competitive Supplier Development Programmes of both Eskom and Transnet.
    • A bio-economy strategy will be on the outcomes of the research and development in the biotechnology. The aim will be to develop bio-pharmaceuticals, recombinant vaccines, new plant varieties and industrial enzymes. This will require ever closer links with the relevant industry sectors, other ‘line function’ departments, and the promotion of South African capabilities abroad.


    The Cluster will also continue to implement initiatives to reduce the cost of retail communication services by 30% to enhance ICT application in business development and domestic use. Both the Electronics Communications and Independent Communications Authority of South Africa (ICASA) Act will be amended to support this objective. In addition the local manufacture of set top boxes will be promoted.

  4. Increasing concerns in relation to carbon emissions and climate change will have a profound impact on the number of green jobs in a South African “green economy”. Green jobs will grow both directly and indirectly in the transport, energy, building, manufacturing, agriculture and forestry sectors. Directly, there will be jobs in producing specific greener goods and services. There will be employment in the manufacture, installation and operation of clean energy for people like wind turbine engineers, insulation installers, recycling sorters and photovoltaic cell salespeople. Indirectly, there will be jobs in the greener-goods supply chain – from solar cell manufacturers to green building materials retailers to wind farm maintenance firms to recycling haulers to energy auditors. And most importantly there will be battery manufacturers with distribution centres at home and on the road.

    Already government is supporting clean energy research at a number of universities, has invested in an electric car, and is soon to launch the prototype of an e-bike. Last December, Pierre Terblanche, the world famous South African-born designer of leading motorbikes, began to design a South African hybrid electric bike. The Systems Integration Centre of Competence from the DST’s Hydrogen Programme is currently - together with the Tshwane University of Technology-based Institute for Advanced Tooling - working on the power system for the bike.

    By July 2010 the Cluster will finalise a ‘green economy’ plan to be presented to Cabinet.

  5. Rural development including agriculture and agro-processing that is integrated and supports mainstream economic activities. The successes in the pilot programme show us that we are on the right track to transform rural economies and livelihoods. We will scale up the Comprehensive Rural Development programme to include over 150 wards across the country.

    A “Job Creation Model” has been developed to ensure that one person per participating household is trained and placed on two year employment contract. As part of the contract, each person employed will contribute at least 50% of the income to the household. Key to this will be creating an enabling environment through construction and rehabilitation of economic infrastructure like agriparks, road networks and access to ICT; organising communities into cooperatives and establishment of small enterprises.

    In addition, resuscitation plans will be developed for farms under distress, which government acquired through land distribution and restitution since 1994. The plans will include on-off farm infrastructure, mechanisation, skills training and extension support and other much needed operational inputs, through various strategies such as mentoring, co-management and share equity. This investment is vital in ensuring that these farms produce much needed food and incomes for land reform beneficiaries, their families and society as a whole.

    Support will also be provided to black farmers who are indebted to the Land Bank and face the prospect of losing their farms, thereby rolling back the limited gains we have made in land redistribution. A review of the Land Tenure Systems Reform, to bring about a more effective system of land tenure will be undertaken.

  6. Leverage public sector for employment and creation of employment opportunities. The Cluster will continue implementing the public sector employment programmes (i.e. Expanded Public Works Programme [EPWP] II). This is targeted to provide employment and income generation opportunities for those who are unemployed. It is estimated that two million jobs opportunities will be created through this programme by 2014. Government will also increase the number of people with disabilities in Sheltered Employment Factories.

  7. Enterprise development - SMMEs play a critical role in the creation of jobs and innovation and support for their development will continue to be a focus of the Cluster. Funds will be set aside for lending by Khula to small enterprises. Further work will be undertaken to redirect a series of financial and non-financial support, to improve income generation and quality of production of enterprises in the informal economy. Recapitalisation of Khula and Samaf will be considered. A new cooperatives model will be developed to strengthen support given to cooperatives both financial and non-financial. This will include the establishment of the Cooperatives Development Agency.

  8. Tourism sector
    The tourism sector is an essential contributor to gross domestic product (GDP) growth, creation of decent work and job opportunities. The World Cup is a test of our organising ability and tourism infrastructure. The intention is to increase the number of domestic and international tourist. The diversification of the sector is expected to realise new rural based products by 2014 /15 as well as new niche products.

    The cluster will coordinate work in other areas in order to deliver decent jobs and inclusive and diversified economic growth. Particularly regarding
    • Provision of efficient and cost effective infrastructure
    • Implementation of measures to support the development of skills for sustainable economic growth
    • Regional integration
Conclusion
The budget tabled by Minister Gordhan indicates a strong commitment to government’s priorities which we have outlined above. The current economic context and growth trajectory necessitate that we expand our interventions to deal with the structural constraints which have inhibited the economy from producing the employment and poverty reduction outcomes that we expect. The key priority for the Cluster is therefore to restructure the economy and set it on an employment and growth generating path.

We are going to examine other opportunities which we believe are in the economic sectors for positive employment outcomes these includes, mining, mineral beneficiation support for agriculture. The Cluster intends to finalise all elements of this Growth Path for consideration by Cabinet during its mid-year Cabinet Lekgotla.

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