TRADE AND INDUSTRY CHAMBER

Terms of Reference

The Trade and Industry Chamber seeks to reach consensus and make agreements for placingbefore the Executive Council on all matters pertaining to the economic and socialdimensions of trade, industrial, mining, agricultural and services policies, and theassociated institutions of delivery.

Overview

The Trade and Industry Chamber sees its specific objectives as being the considerationand development of policies that will result in:

• Improved trade performance.
• Increased competitiveness and enhanced productivity.
• A democratisation of ownership and increased worker participation in decision- making within enterprises.
• The addressing of the social dimensions of restructuring.

To address these objectives, the chamber has developed a very comprehensive agenda,with discussions in most areas being far advanced.

Negotiations with the European Union (EU) and on the social clause have dominated thetrade aspects of the chamber's programme. Business, labour and government have agreed onan approach to the social clause, and have committed themselves to developing amultifaceted strategy to promote human rights and worker rights internationally. Thechamber has also identified the economic development of the southern African region andtrade relations with the region as a key focus area for discussions.

With regard to industrial policy, the chamber has focused on the development ofsupply-side measures to support industrial development in South Africa, addressing both anoverall framework and individual components, mostly through a series of investigations,which include studies into the financing of training, regional industrial development, andspecific clusters/sectors. The social consequences of industrial restructuring are alsobeing addressed in a social-plan task group. The need for increased and productiveinvestment has so far been addressed through agreement on the formation of Nipa, which iscurrently being established.

Small business development has been another focus area. The chamber agreed to theformation of a competitiveness fund to improve technical and marketing support for SMMEs.The governing body of the fund has been constituted, and implementation will proceedfollowing the promulgation of the Small Business Enabling Act, consideration of which isabout to be finalised in Nedlac.

The Work Programme

TRADE POLICY

1. Market access and trade relations

On an ongoing basis, the Trade and Industry Chamber receives regular updates fromgovernment on South Africa's trade negotiations, particularly with respect to the EU, theIndian Ocean Rim Initiative, the Southern African Customs Union (SACU), and the SouthernAfrican Development Community (SADC). The chamber's attention has so far been focusedprimarily on the EU/South Africa negotiations. Constituencies have also emphasised theneed for the development of a clear economic perspective to guide negotiations for marketaccess and trade relations with other countries.

Trade negotiations with the EU, and the technical sectoral liaison committee

A technical sectoral liaison committee has been set up to support governmentnegotiators in preparing South Africa's mandate for negotiations with the EU on a free-trade agreement, and to evaluate EU proposals with respect to their impact on the SouthAfrican economy. The committee serves as an information channel, and as an instrumentthrough which the negotiators can consult the business and labour constituencies atsectoral level.

2. Social clause

The Trade and Industry Chamber's deliberations on the link between labour standards andtrade followed a commitment by business, labour and government in the NEF to explore thesocial clause in the context of trade liberalisation in South Africa and the GeneralAgreement on Tariffs and Trade (Gatt) Uruguay Round trade negotiations. Following a periodof extensive debate in the chamber, in a special working group and at senior-leadershiplevel, on the appropriateness of a social clause in the context of trade relations, it hasbeen concluded that a multifaceted strategy is required to promote human rights and workerrights in the international context, and a framework agreement on the social clause is inthe process of being concluded.

In discussions the social partners have acknowledged that the liberalisation andglobalisation of trade and investment are accompanied by pressure for the harmonisation ofeconomic and social regulatory regimes, including labour standards. In terms of therelationship between trade and worker rights they have agreed that increasedliberalisation should be accompanied by the harmonisation of labour standards, and theobservance of core ILO conventions. This would allow a process of greater integration tobecome one of levelling up rights and conditions of workers, rather than levelling themdown to the lowest prevailing standards.

The social partners have committed themselves to developing a comprehensive tripartitestrategy to promote labour standards at bilateral, multilateral and regional levels.

INDUSTRIAL POLICY

1. Supply-side measures

In reaching consensus on South Africa's offer to the Uruguay Round of Gatt negotiationsin 1993, business, labour and government were also at one on the notion that a coherentindustrial policy needed to complement trade reform, including the reduction of protectiveduties and the phasing out of unacceptable export subsidies, with a series of supply-sidemeasures.

All constituencies have tabled submissions on this issue, beginning with the tabling bygovernment in November 1995 of a policy document entitled "Support measures for theenhancement of the international competitiveness of South Africa's industrialsector".

Critical supply-side areas identified by the constituencies include human resourcedevelopment and training incentives; promotion of domestic and foreign investment andinvestment incentives; and work organisation, technology enhancement and productivityimprovement. As reported elsewhere, many of these areas are separately underinvestigation, and the concept of supply-side measures is also being considered in a rangeof cluster studies being conducted by the Industrial Development Corporation (IDC), theDepartment of Trade and Industry, and Nedlac.

Besides the specific investigations underway, the chamber is also working onconsideration of support programmes to be funded in the 1996-97 financial year, for whichR181 million has been allocated in the budget of the Department of Trade and Industry. Theareas that have so far been emphasised in chamber discussions as requiring urgentattention are training, investment incentives, and immediate interventions for threatenedindustries (those affected by tariff reform and others facing structural change).

Developing and upgrading the skills of the South African workforce have long beenidentified as important elements of a strategy for accelerating economic growth anddevelopment in South Africa. Key to this is the development of a coordinated nationaltraining strategy, on which substantial work has already been done, beginning with thedevelopment of a proposed national training strategy via a tripartite process under theauspices of the National Training Board (NTB). This strategy took work on a nationaltraining system a long way, but an area still requiring investigation is theidentification of mechanisms for the financing of training.

It was against this background that the JGF started a two-phase investigation into thefinancing of training. The conclusions of the first phase, completed in late 1995,included recommendations on a preferred model for financing training. This model is basedon a national coordinating mechanism for training and the financing of training in SouthAfrica. Such a mechanism would include the informal sector in its scope, and would adapttraining to meet the changing needs of the economy.

The second phase of the investigation-which is well-advanced-is examining the viabilityof the preferred model regarding the technical aspects of a levy or taxation scheme, aswell as governance structures. A series of investigations is being conducted to this end.These studies are scheduled to be completed in time to make an effective input into thedevelopment of a white paper on human resource development, which will be released inJuly, with legislation expected by October 1996.

3. Regional industrial restructuring: evaluation of the Regional IndustrialDevelopment Programme

In May 1995, at the request of the Minister of Trade and Industry, the JGF approved thebrief for an initiative to re-evaluate regional industrial policy, specifically anevaluation of the Regional Industrial Development Programme (RIDP). The RIDP consists of aseries of incentives to industry in non-urban, underdeveloped areas.

The investigation also includes an assessment of provincial-government legislativepowers, capacities and requirements with regard to industrial development, an account ofnational support measures for manufacturing, and an account of comparative regionalindustrial development policy. The South African counterpart group overseeing theinvestigation comprises not only business, labour and government representatives, but alsorepresentatives from the country's nine provinces.

The RIDP study complements other policy initiatives on industrial development, mostnotably supply-side measures and an investigation being coordinated by the IDC intoregional industrial location strategy. The RIDP investigation is scheduled for completionby mid-1996.

4. Cluster studies

While the initial focus of the JGF was on cross-cutting studies, attention has nowshifted to sectoral/cluster studies. These studies are looking at improvingcompetitiveness by fostering sectoral/cluster coherence. The studies will identifystrengths, problems and inefficiencies with a view to developing sectoral strategies. TheJGF is conducting six such studies, while the Department of Trade and Industry and the IDCare conducting two and four studies respectively. Recommendations from all 12 studies areexpected in January and February 1997.

The clusters being studied are as follows:

• Mining capital goods, brass: Department of Trade and Industry.
• Pottery, electronics, footwear, jewellery, wool and mohair, petrochemicals and plastics: JGF.
• Aluminium, stainless steel, carbon steel, and forestry products: IDC.

5. Sectoral workshop facility

Nedlac and the NPI have established a joint project called the sectoral workshopfacility, for which the NPI has set aside R1 million. The main purpose of the sectoralworkshop facility is to provide a resource to employers and unions operating at industrylevel for joint workshops which could be held at various stages in the development ofsectoral strategies. It is envisaged that the workshops could be an integral and dynamicpart of the development of sectoral strategies, and that they will provide an opportunityfor capacity-building.

6. Social plan

A task team has been set up under the auspices of the Trade and Industry Chamber todevelop possible options on a framework for assisting workers in situations where therehave been large-scale retrenchments. A research report, summarising internationalexperience and exploring various options for social plans, has been developed by theNedlac secretariat as a basis for task-team discussions. These discussions will also takeaccount of the findings of the Comprehensive Labour Market Commission report, expected bymid-year.

The report being considered by the task team covers the following areas:

• Globalisation, competitiveness and democratisation.
• Macroeconomic policy and its effects on employment.
• Avoiding retrenchments and redundancies.
• Anticipating and preparing for retrenchment and redundancy.
• Employment or income-generating opportunities available to those to be retrenched or made redundant.
• Advice and assistance for those to be retrenched or made redundant.
• Institutions.

7. Small business development and the small business bill

Nedlac is in the process of finalising its consideration of the National Small BusinessEnabling Act in draft bill form. The bill provides for:

• The setting of standards to define SMMEs.
• The establishment of the National Small Business Council, which will represent and promote the interests of SMMEs.
• The establishment of the Ntsika Enterprise Promotion Agency, which will provide non-financial support to SMMEs, for example, information, advice and training.
• The creation of a regulatory framework to assess the impact of laws and policy on SMMEs.
• The parameters for the relationships between small-business promotion functions at provincial and national levels.

THE YEAR AHEAD

In addition to the work already in progress in the Trade and Industry Chamber, otherissues to be considered in the year ahead will include:

1. Public-sector procurement

A government consensus report on public-sector procurement reform, detailing aframework of in-principle recommendations for the formulation of revised procurementlegislation, has been submitted to Nedlac for negotiation.

The government report emphasises strategies which improve the access of SMMEs toprocurement activities funded by the state. This is consistent with broader strategies topromote SMME development, and complements discussions on the small business bill currentlybeing conducted in the Trade and Industry Chamber.

2. Competition policy

It has been agreed that substantive discussion on competition policy will take place inNedlac. Once government has developed its proposals on competition policy, these will betabled in Nedlac and discussed at a senior-leadership meeting. A process for consideringthe proposals in Nedlac will then be developed, as well as mechanisms for liaising withthe parliamentary portfolio committee on trade and industry.

3. The southern African region: the SADC and Sacu

The chamber has identified the economic development of the southern African region ascritical to economic growth in South Africa, and has argued for greater participation bythe social partners in the policy processes in the SADC and the SACU. A work programme toaddress this area is to be developed after a special discussion session on the region atthe end of May 1996.

4. Tourism development: national strategy for the development and promotion oftourism in South Africa

Nedlac has been briefed on and has discussed the draft white paper on the developmentand promotion of tourism in South Africa, and will consider the final white paper prior tothe legislative process.

5. Liquid-fuels industry

A process aimed at reaching finality on a strategy for the restructuring of theliquid-fuels industry is underway. Flowing from an agreement in Nedlac's LFITF that anevaluation committee should be established to consider proposals from constituencies andpublic submissions on the restructuring of the industry, the Lambrecht's Commission wasappointed by the Department of Mineral and Energy Affairs to prepare a report forsubmission to the department and for consideration in Nedlac by the end of May 1996.

The report will consolidate constituency positions and public submissions on therestructuring of the industry, evaluate them and make recommendations. Government isexpected to draw up a policy document following this process.