Hon Chairperson, hon Ministers and members of Parliament, the 2010 January 8 Statement of the ANC identified strategic development priorities which must be attained in 2010. These are speeding up growth and creating more jobs, decent work and sustainable livelihoods. To attain the objectives of creating more jobs, decent work opportunities and sustainable livelihoods, an inclusive economic growth path based on a comprehensive industrial strategy was agreed upon. This inclusive growth path was anchored on the following four programmes: the expenditure of the budgeted R787 billion on improving public infrastructure; tailoring fiscal and monetary measures in a way that complements trade and industry policies; preserving as many jobs as possible; and ensuring that funds meant to assist companies in distress flow to deserving enterprises.
The ANC also noted that the global financial crisis opened up space for a fundamental transformation globally and domestically. It is recognised that the unfettered free-market system does not have the capacity to address the serious social and economic inequalities in the world. The ANC recognises that the state must play an active role in the economy. The state must address the pressing challenges of unemployment, poverty and inequality.
During his Budget Speech, the Minister of Finance called for a growth path that envisaged the following key actions: creating youth employment; developing labour-intensive industries; maintaining public and private investment; generating an inclusive economy; striving to achieve low inflation and a stable exchange rate; and increasing productivity and competitiveness and attracting foreign direct investment. All these actions point to a government committed to creating a new industrial policy which deals with issues of equity, poverty and underdevelopment.
During the public hearings, the monopolistic pricing of key inputs in the steel industry was identified and the consequence thereof was quantified. For example, ArcelorMittal always received cheap iron ore from Kumba at cost plus 3%. This exclusive deal was meant to provide cheap steel for domestic consumption. Instead local consumers were slapped with an import parity price, which did not take into consideration that steel is a strategic industry. This led to increased costs for motor, canning and manufacturing industries.
Kumba also undermined the economy by exporting ore instead of processing it so that value-added products could be created. During public hearings, Prof S Roberts and Cosatu were of the view that all monopolistic firms which were involved in uncompetitive behaviour must be dismantled and additional competition enforcements enhanced. The committee is of the view that the Competition Act should be strengthened and capacity should be increased to give greater power to the implementing agency.
Since the ArcelorMittal and Kumba fight is bleeding the economy, we call on the Minister of Trade and Industry to revisit the principles which underpin the privatisation of Iscor, which are to ensure the viability and cost- competitiveness of local steel production and to ensure a competitive steel- pricing regime to support the development and deepening of value-added manufacturing products in downstream industries. The interdepartmental task team of the Ministers of Trade and Industry, Economic Development and Mineral Resources must conclude its work so that the economy can be spared. This is because when two elephants fight it is the grass that suffers.
The other issue that came out during public hearings is the leveraging of public procurement. Both business and organised labour have called for the overhaul of the Preferential Procurement Policy Framework Act and further called that procurements should be used as an instrument of industrialisation. This means that there must be a change from ad hoc procurement practices to fleet-type purchasing arrangements. For example, when Transnet purchases locomotives, it should purchase 50 of them instead of purchasing just five so that it can ensure that the majority of the parts that go into locomotives are locally sourced so as to ensure that more jobs are created in the value chain industries.
Business Unity SA, or Busa, and Cosatu have also called for the alignment of the National Treasury regulations with the broad-based black economic empowerment, BBBEE codes. Since the current BBBEE legislation does not have industrialisation and the creation of employment as its primary objectives, this legislation should be subordinated to the imperatives of industrial policy. This demands a legislative change.
The other challenge identified during the public hearings is the issue of high costs and limited allocation of capital. The lack of private capital investment within production sectors of the economy was highlighted in Ipap2. The acknowledgement that the cost of capital is high relative to our trading partners requires an approach that will allow government to be a catalyst to unblock financial impediments to growth and employment creation. This means that development finance institutions should promote a developmental agenda and not be as risk-averse as commercial banks. The development finance institutions must be able to provide financing at rates below the market. This means that institutions like the IDC should be regularly recapitalised so that they can attain their developmental mandate on a larger scale. This also calls for changes in the legislative framework of the IDC.
One of the fundamental problems which undermine our industrial policy and economic growth is the volatility and the overvaluation of the exchange rate. Dr E Wessels is of the view that a strong currency is not necessary to reduce the cost of imported capital goods in developing countries. He also stated that the inflationary consequence of depreciation has been exaggerated because the overall impact on the economy is determined by the ratio of nontradable prices to tradable prices.
The National Treasury is of the view that the exchange rate must depreciate in the long term and still advocates the reduction of dissaving and the inflation-targeting framework. The SA Reserve Bank is in favour of the gradual accumulation of foreign reserves and the facilitation of the development of hedging instruments which will assist in smoothing excessive rand volatility over suitable timeframes.
The committee is of the view that issues of volatility of the exchange rate, the interest rate and its impact on manufacturing should be addressed at the highest level of government. This high-level government engagement must be followed by a national indaba to promote the objectives of Ipap so as to secure increased participation by all stakeholders, for example all spheres of government, organised business and labour, civil society and academics.
Resources needed to fund Ipap2, like the R20 billion incentives made available by the Treasury over five years, must be used together with other funds, amounting to R787 billion spent on infrastructure.
The ANC has called upon the people of South Africa to work together to fight poverty and underdevelopment. Ipap2 calls upon us to put aside our political differences and work together as a cohesive force as we did during the Fifa World Cup. Hon Minister, President Zuma said during the national executive committee lekgotla:
The defining feature of this administration will be that it is a government that knows where the people live, which knows what the people think, and which acts fast on the issues they raise.
Hon Minister, the tribe has spoken. Let the chief's administration act accordingly. Thank you. [Applause.]