Janet Wilhelm
Session 9: Unpacking the water-energy-food nexus
Session 10: Sub-national experiences and sustainability
Session 10: Sub-national experiences and sustainability
South Africa through its Industrial Policy Action Plan (IPAP) identifies local content as a strategic industrial policy instrument, which can be used to leverage the power of public procurement; reduce the country’s trade deficit; address market failures; foster infant industries; and increase the governments tax base (the dti, 2016). Although local content is a commonly used industrial policy lever, and much has been done in South Africa to use this policy instrument, a number of constraints hamper its effective use, including the lack of a common definition, procurement processes, effective monitoring and information sharing. This policy brief paper draws on a recent research project undertaken by TIPS to model the economic multipliers of local content and the maximum price premium the state should consider paying in evaluating the benefits of buying local versus buying imported products. It assesses the key challenges and lessons of local content policies in South Africa. In particular, it analyses the economic rationale driving the argument for the use of local content policies. Furthermore, the brief highlights the reasons why local content policies are not resulting in the desired level of local procurement, and suggests possible measures that could be implemented.
Agro-processing: Manufacturing Circle input to the dti regarding opportunities for transformation and growth through an APSS solution - Philippa Rodseth
Aro-processing: An opportunity for manufacturing growth - value chains - Neva Makgetla and Mbongeni Ndlovu
Manufacturing Circle Investment Tracker (MCIT) Q1 & Q2 findings: Xhanti Payi
Since 1998 food processing has tended to move against the grain of the rest of manufacturing, which is dominated by metals and auto production. During the commodity boom, which lasted from around 2002 to 2011, its sales grew more slowly than other manufacturing industries. From 2007 to 2009, during the global financial crisis and the start of the 2008-2016 electricity shortage, most of manufacturing saw a 15% fall in output. In contrast, food processing maintained fairly steady growth in sales until the drought in 2015 and has again picked up in Q1 2017.
In South Africa, the desired outcomes of industrial policy are ultimately sustained, sustainable and increasingly inclusive growth. Can agro-processing contribute to these outcomes through accelerated investment and employment creation? What contribution can it make to government's objectives of support for smaller producers and black industrialists, maintaining food security, and enhancing productivity, competitiveness and industrial diversification? What obstacles does it face?
The Manufacturing Circle Investment Tracker (MCIT) is a quarterly survey of investment taking place by businesses in the manufacturing sector. It is an indexed survey that highlights the growth or contraction in the level of investment by firms. The data on the findings from Q1 & Q2 2017 will be presented.
Presenters
Neva Makgetla is a senior economist at TIPS. Makgetla has published widely on the South African economy and worked for many years in government, most recently as Deputy Director General for Policy in the Economics Development Department, as well as in COSATU.
Mbongeni Ndlovu: Mbongeni is an economist at TIPS. Prior to working at TIPS he worked at Genesis Analytics and the South African Reserve Bank. He has Master of Science Degrees in African Studies and Development Economics from the University of Oxford. He also holds a BSC in Economics from the University of KwaZulu-Natal.
Philippa Rodseth is the Executive Director of the Manufacturing Circle. She has previously worked at Spoke Consulting and FNB. She has an MBA and a B.Arch from Wits.
Xhanti Payi is the MD at Nascence Advisory & Research, a strategy consulting and research outfit. He has worked as an analyst at Investec Wealth & Investment, an Economist at Stanlib Asset Managers and at Standard Bank Corporate and Investment Banking. Payi has academic training from UCT and the University of London.
Date: Thursday 17 August 2017
Time: 9h30 – 12h00
Business Day - 18 July 2017 by Neva Makgetla (TIPS Senior Economist)
Or read here as a PDF
Cutting coal use needs smart thinking
Business Day - 20 June 2017 by Neva Makgetla (TIPS Senior Economist)
Or read here as a PDF
Engineering News - 14 June 2017 by Terence Creamer.
Read online at Engineering News.
RESPONSE
Transnet denies claim that no CSR locomotives made in South Africa - Engineering News 21 June 2017
Responses to the electricity oversupply
Since 2011, Eskom has experienced a sharp decline in demand, while the electricity intensity of the South African economy has fallen by a quarter from 2005 to 2017. This briefing note analyses the factors behind the fall in demand and, on that basis, a range of strategic responses. It concludes that it would be unsustainable in economic, environmental and social terms to fall back on the historic solution of boosting demand by subsidising new investment in metal and coal refineries.
Instead, Eskom has to develop a new business model that takes into account current reali-ties – in particular the decline in metals refining due to higher electricity costs and the end of the commodity boom, as well as efforts to reduce greenhouse gas emissions. These realities mean Eskom will have to adapt to more or less stagnant electricity demand for the foreseeable future. To that end it should adopt smaller-scale and more flexible genera-tion technologies.
To promote future growth also requires that electricity supply be far more closely aligned with industrial policy. That would entail substantial modifications in current processes for determining tariffs and the allocation of electricity. The aim would be to prioritise projects that support industrial deepening and inclusive growth, which in turn would sustain Eskom over the longer run.
The Real Economy Bulletin - First Quarter 2017
Main Bulletin: The Real Economy Bulletin - First Quarter 2017
In this edition:
GDP growth: South Africa entered a technical recession with a second quarter of contraction in a row. Investment emerges as the primary drag on economy growth, as confirmed by the decrease in mining production and the sectoral slowdown in utilities and construction. While manufacturing returned to growth over the past year, sales were still depressed, showing a slight decline. Read more.
Employment: Employment reportedly climbed 500 000 in the year to the first quarter of 2017, reaching 16.2 million. Business services, manufacturing (primarily wood and paper, and food and beverages) and construction drove the growth on a year-on-year basis. Mining employment stagnated while the metals industry returned to growth. Read more.
Trade: South Africa confirmed its positive trade performance in the first quarter of 2017, running its fourth trade surplus in a row. The further strengthening of the rand over the first three months of the year led to both imports and exports decreasing in rand terms but increasing in dollar terms. Notably, mining exports picked up sharply over the last year. Exports from manufacturing, supported by chemical and metal products, also performed well over the last year. Read more.
Investment and profitability: The past year saw an improvement in profitability in the real economy. Nonetheless, total investment decreased sharply in 2016, primarily in the private sector. State investment stagnated largely due to the onset of fiscal consolidation. Read more.
Major new projects: This section summarises major new foreign direct investment (FDI) projects, drawing on a new TIPS database, as well as domestic initiatives in the real economy. Read more.
Briefing note: South Africa's credit downgrade - A commodity story: While not negating the role of internal political turmoil, South Africa’s credit rating history seems to provide other important angles of analysis. The country’s credit ratings have been mainly determined by GDP growth, in turn underpinned by global commodity prices. Considering South Africa’s rating in the light of commodity prices, this shows that South Africa’s credit rating has been closely linked to international dynamics. Read the briefing note online: South Africa's credit downgrade - A commodity story.
Briefing note: Industrial policy and the locomotive procurement - corruption undermines industrial development: The procurement by Transnet of 1 064 locomotives was hailed as a boon for industrial policy. Transnet consolidated several years of procurement and sent the market signal that there was sufficient demand in South Africa for a major investment by locomotive producers and their suppliers. It also promised to stimulate local manufacturing firms to become suppliers into this global industry and support an export base in these products. Read the briefing note online: Industrial policy and the locomotive procurement - Corruption undermines industrial development.
Briefing note: The electricity oversupply - Implications for economic policy. Since 2011, Eskom has experienced a sharp decline in demand, while the electricity-intensity of the South African economy fell by a quarter from 2005 to 2017. A TIPS briefing note (available at Responses to the electricity oversupply) analyses the factors behind the fall in demand and, on that basis, a range of strategic responses. Read the briefing note online: The electricity oversupply - Implications for economic policy.
Briefing note: What's going on with the employment data? The Quarterly Labour Force Survey reported a strong increase in formal non-agricultural employment in the first quarter for the first time since the survey was initiated nine years ago. Informal employment accounts for around 17% of all jobs and is more volatile. The survey found that, on average, informal employment declined by 2,2% in the first quarter of the year, each year from 2010 to 2016. For the first quarter of 2017, in contrast, it reported that informal employment dropped just 0,5%. If the economy were booming, this kind of jobs growth would not be exceptional. GDP growth has slowed, so the findings appear anomalous. Read the briefing note online: What's going on with the employment data?