New plan to encourage procurement of local goods

Tuesday, November 17, 2009

Cape Town - A new Industrial Policy Action Plan being developed by the Department of Trade and Industry aims to boost job creation by encouraging the procurement of more locally-produced goods and services for the government's infrastructure-spend programme.

Speaking to BuaNews recently, Minister of Trade and Industry Rob Davies said the new industrial plan, which is expected to come before the cabinet in January, would focus on encouraging contractors to produce or procure locally-made goods and services when they partook in infrastructure development projects.

The government has already earmarked R787 billion for infrastructure projects between this year and 2011.

At the same time, the plan would clamp down on contractors who after winning a government contract simply resorted to importing a product rather than buying or producing it locally, he said.

The new industrial plan would also include a range of support measures targeting specific economic sectors.

Davies said in the first Industrial Policy Plan released in 2007, the department had focused on some of the "easy to do things" and that the new plan would be a step forward.

"The problem is if you always choose the easy to do things, you may not do some of the things you need to do," he said.

Davies said the department was also taking a closer look at the Industrial Development Zones (IDZs) as part of a bigger review on industrial decentralisation.

The review was being done by the Minister of Economic Development Ebrahim Patel in partnership with the provinces.

Davies admitted that while the IDZs had achieved some successes, they still fell "below their potential".

He said the example of Coega had shown that the IDZs would have to reconceive their roles and move away from simply encouraging major energy-intensive anchor projects which had low employment bases.

Along with the review of IDZs, the government was also reviewing the current tax incentives that were in place for Special Economic Zones.

Davies said companies that set up in rural areas could already score some points which they could use towards claiming a tax incentive, but he admitted that these were probably not enough to affect a location decision and that the department would have to have a second look at the incentives in place.

"There is a fairly substantial discussion and review of all our efforts to promoting economic decentralisation, and also the new ministry of rural development is critical," he said.

He pointed out that rural development would not just focus on farming, but at rural development "in a much more holistic way", and at a whole series of activities that can take place in rural areas.

He said examples in history from the days of the principality of Venice, had shown that no one country had been able to grow their economy without some kind of active industrial policy.

To this end, the South African government was learning a lot about industrial policy from the examples of India, China and Brazil, he said.

"We need to influence the growth trajectory of the country in a qualitatively different way, but these things are going to take some time".

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