Chairperson, colleagues, ladies and gentlemen, it's a pleasure to be sharing this Budget Vote debate with our colleagues from the Ministry of Small Business Development. This particular Budget Vote debate is taking this format because a number of the programmes that will be transferred to the Ministry and Department of Small Business Development still fall under Budget Vote No 36.
The new Ministry will give dedicated focus to small business and co- operative development, areas that are fundamental in bringing about economic transformation. As soon as we heard the announcement of the new Ministry, we in the Department of Trade and Industry worked very closely with the newly appointed team and have already transferred parts of the DTI and some of the institutions of the DTI family to the new Ministry. We want to assure that Minister and Deputy Minister that this close co-operation between our sister departments will continue and, undoubtedly, together we can do more.
I will not be able, in the time allocated to me, to cover all the ground I would have liked to, and I therefore circulated a written version of this input which, together with the similar document that will be circulated in the NCOP tomorrow, represents a consolidated statement that we wish to convey in relation to Budget Vote No 36.
The rationale for placing industrial development at the centre of the DTI's work has already been shared in a discussion with the portfolio committee. Achieving the target of 5% sustainable growth by the end of this administration requires bringing about structural changes in the economy, including placing productive sectors at the forefront of the growth process and moving higher up the value chain.
We have also argued that our experience in the past administration, when we tabled and implemented successive iterations of our industrial policy action plans, shows that where we have acted purposefully in pursuit of well-defined industrial policy objectives we have achieved successes and demonstrated that industrial policy does indeed work.
However, hon members know that the President has called on us to implement the central task of this administration, namely to bring about radical economic transformation. This has a number of dimensions, but requires, among other things, that the impact of our industrial policy is increased to the point where industrial policy becomes a key driver of higher levels of growth along a qualitatively different, higher value-added and more job- creating growth path.
We discussed with the portfolio committee some of our thinking on the elements of a higher impact by industrial policy. They include building and expanding the infrastructure development programme; implementing a number of mineral beneficiation projects; pursuing active development integration on the African continent; and repositioning South African manufacturing on a continent that is itself seeking to industrialise and creating a platform for more granular engagements with dynamic and leading companies, based on a higher level of support against greater conditionalities.
Hon members, allow me now to be more specific regarding some of our plans in the current financial year. Firstly, we anticipate an acceleration in the automotive sector, where the Automotive Production and Development Programme, APDP, has already supported significant new investment. Projected capital in expenditure for 2014 is anticipated to reach a record level of R7,9 billion. As the National Association of Automobile Manufacturers of South Africa puts it, and I quote:
The relatively high levels of capital expenditure in recent years may be attributed in large part to investment projects by manufacturers as part of the Automotive Production and Development Programme.
Moreover, adjustments to the APDP and the designation of buses in terms of the Preferential Procurement Policy Framework Act, PPPFA, have resulted in Mercedes-Benz, Volvo and MAN winning tenders to provide locally assembled buses for metros' commuter bus expansions and for the production of the uniquely South African S'esfikile taxi.
In the coming year, the APDP will undergo an early review, which will allow us to take stock of efforts and determine what more can be achieved in growing the industry in South Africa. In addition, the Automotive Supply Chain Competitiveness Initiative, launched in 2013 to enhance localisation, and to raise productivity and supply capabilities, is proving to be successful and we will continue to expand the programme.
Also, the Automotive Export Manual report of 2014 shows that vehicle and component exports increased by 8,2% from R94,9 billion in 2012 to R102,7 billion in 2013. This is the first time that the industry has exceeded the R100 billion export mark. [Applause.] Hon members, this is a sector that employs in excess of 100 000 people. It is an important sector and we will continue to support it.
Secondly, the clothing, textile, leather and footwear sector, an important labour-absorbing sector that many have written off a few years ago, has now been successfully stabilised through the introduction of a number of interrelated measures. These include improved monitoring of imports to ensure compliance with customs and excise regulations and to reduce unfair and illegal imports; the designation of products from this sector under the PPPFA, and collaboration with key retailers to encourage local procurement; the introduction of the Clothing and Textile Competitiveness Improvement Programme, which has succeeded in a number of cases to attract investments to the sector; and the creation of two regional footwear clusters. These clusters have revitalised the previously moribund footwear sector in KwaZulu-Natal and the Southern Cape, leading to a new production of more than 150 000 pairs of shoes per month, with the creation of 700 sustainable jobs.
In the coming year, the department will continue to roll out the Clothing and Textile Competitiveness Improvement Programme, CTCIP, to reach more companies within the sector and I will announce in the near future details of a significant programme to increase value addition in the exotic leather and animal hide industries through the national exotic leather cluster.
Chairperson, the metal fabrication, capital and rail transport equipment sectors are the bedrock of a modern industrial economy. The DTI has been active and instrumental in unlocking these sectors' potential and we can now expect significant expansion to take place.
A combination of the designation of locomotives in terms of the PPPFA, and the work of the National Tooling Initiative and the Gauteng Foundry Training Centre has been pivotal in securing substantial local content commitments in Transnet's and the Passenger Rail Agency of South Africa's rail rolling stock investment plans.
Indeed, the localisation success in renewable energy, buses and rail rolling stock will become the yardstick against which the localisation of government procurement is measured. To unlock the value of localisation for South Africa, further refinement of procurement legislation will be required, including a focus on ensuring compliance across all tiers of government; improving the transversal procurement process; and utilising the multibillion infrastructure build programme to support local manufacturing, especially in the transport, energy, and construction sectors.
The DTI has already designated a number of products for local procurement, including railway rolling stock; power pylons; buses; canned and processed vegetables; the textiles, clothing, leather and footwear sector; solar water heaters; set-top boxes; pharmaceutical products; furniture products; power and telecoms cables; and valve products and articulators.
I want to take this opportunity to say that in the next round of the designation of products government anticipates designating steel products, conveyance pipes, transformers, building and construction material, and rail signalling and components. To add to this momentum, the private sector needs to buy more from local companies and, indeed, made such an undertaking in the Local Procurement Accord, signed a few years ago.
The President assented to the Special Economic Zones Bill earlier this year. Simultaneously with processing the legislation, we embarked on a process, together with the provinces, of conducting feasibility studies on potential special economic zones.
I will speak about this more in the National Council of Provinces tomorrow. But I want to indicate that, in addition to the Saldanha Bay Industrial Development Zone, IDZ, which was designated last year, in the very near future we will be handing over the operator permit to allow the Dube TradePort to become another industrial development zone.
Public consultations are under way for the Harrismith TradePort in the Free State also to become an industrial development zone, IDZ. Work is well advanced on industrial sector special economic zones, including two potential platinum value chain special economic zones, one in the North West and the other in Limpopo.
We will continue in the year ahead, and in the course of this term, to support investments through a number of incentives. In addition to that, as the President noted in the state of the nation address, South Africa's development finance institutions have an asset base of R230 billion. Over the coming year, we will work closely with the Industrial Development Corporation, IDC, and the Department of Economic Development to upscale IDC support for industrialisation and to achieve greater cohesion with the deployment of DTI incentives and IDC programmes.
Our aim is to seek a stronger developmental conditionality and reciprocal obligations from beneficiaries of state support in areas such as competitiveness upgrading, employment retention and creation, investment and so forth.
We have spoken often of beneficiation, and the case for beneficiating our mineral wealth is unassailable. We can no longer afford simply to remain located at the bottom of global value chains as producers and exporters of primary products and importers of finished goods. Now is the time to move into action.
The DTI has been charged with developing a Minerals Beneficiation Action Plan as a component of the Industrial Policy Action Plan. A good deal of preliminary work has been done to identify potential value chains, and also some of the measures that can be deployed to turn our aim and ambition of beneficiation into a reality.
Government is committed to facilitating broad-based black economic empowerment through targeted interventions to achieve more inclusive growth. In order to facilitate broader participation, the department will begin implementing the BBBEE Amendment Act, which was passed in the last Parliament and signed into law in January this year.
The BBBEE Amendment Act and the accompanying Code of Good Practice seek to increase alignment between BBBEE activities and government's objectives of industrialisation, localisation, skills development and job creation.
Chairperson, South Africa recognises the importance of foreign direct investment. We are, and will remain, open to foreign direct investment, FDI. South Africa accounted for the bulk of new investment projects in Africa, with investments arriving from the USA, EU member states and, increasingly, from China, India, and other Asian countries. The reasons are not hard to find. South Africa offers many opportunities, not only for access to a growing domestic market, but also as a platform to the dynamically growing markets of the African continent.
Allow me to state some recent facts on foreign investment in South Africa. Firstly, in August 2013, the global Financial Times magazine of the UK voted South Africa the overall winner for the best investment destination on the African continent. [Applause.] And this was for both 2013 and 2014.
Secondly, the AT Kearney Foreign Direct Investment Confidence Index ranks South Africa in position number 13 amongst 25 leading economies, and we moved up two places from the ranking we had in 2013. [Applause.] South Africa, in fact, ranks better according to this index than countries like Switzerland, Sweden and the Netherlands.
Thirdly, International Investment Initiative director at the University of Bern's World Trade Institute, Dr Stephen Gelb, says if we look at the number of firms investing in South Africa, and not just at the number of dollars flowing in, we see that over 130 foreign firms either entered South Africa or expanded their investments during 2013 - that is about 2,5 foreign firms per week to announce investment in South Africa.
Finally, our investment team, Trade and Investment SA, Tisa, has developed an investment pipeline which is a very good indication of foreign investment coming to South Africa. The total of potential investment projects for 2013-14, which Tisa is monitoring, stands at R60,5 billion. This is a substantial increase on what it was a few years ago.
These factors have been recognised by leading investors and, for example, this year we are welcoming Samsung Electronics, which will establish a manufacturing hub for Africa at the two newly designated IDZs in Dube TradePort.
It's worth repeating that South Africa's economic development is inextricably linked to the African continent.