COMMISSION ON INVESTMENT, SECTOR STRATEGIES AND PARTNERSHIPS

THEME: SUSTAINABLE DEVELOPMENT- A PLATFORM FOR GROWTH

Chairperson: Fadila Lagadien: Member of the Disabled People of South Africa

Presenter: Themba Pasiwe: General Treasurer, NAFCOC

Respondents:
Labour: Neva Makgetla
Government: Dr. Alistair Ruiters
Community: Mr. Mpho Mojanaga 

1. OPENING AND WELCOME

The Chairperson opened the commission and welcomed those present. She introduced the speaker and the respondents to the commission and explained the procedure to be followed.

2. SUMMARY OF ISSUES RAISED BY THEMBA PASIWE

2.1. Globalisation and the associated restructuring of industries have impacted on the nature and structure of local industries. Increased exposure to international competition has resulted in many industries, both locally and globally experiencing job losses, change in ownership patterns and adopting flexible competitive strategies.

2.2. South Africa's industrial policy (post 1994) is in the process of being restructured. The government's new reform programme was structured to open the economy, enhance competitiveness and improve access to economic opportunities and greater geographic equity.

2.3. The reform programme also intends to provide greater certainty to economic actors and positively influence areas such as economic growth, employment, small business development, black economic empowerment and more equitable geographic spread of investment and economic activities.

2.4. The programme is captured in the government's Integrated Economic Action Plan (2001) and the Microeconomic Reform Strategy (2002).

2.5. Although macroeconomic policies are considered to be the cornerstone of economic development, they are not enough by themselves. Parallel improvements in microeconomic foundations are necessary.

2.6. There has been a growing dissatisfaction lately with generic business promotion strategies. The emphasis has shifted to sector-focused approaches.

2.7. Business accepts that such a shift is necessary.

2.8. The development of sector strategies are important for job creation, job retention, upscaling marginalised workers such as those in the informal sector and thereby raising the standard of living of the majority.

2.9. Sectoral strategies needs to be creative, inspirational, motivational and within the context of globalization. However these strategies must be must be home grown and based on the realities that exist in our country

2.10. As part of targeted approach to economic sectors, the government has identified five sectors that have immediate potential to contribute towards growth, employment and export growth. These are:

• Agriculture
• Tourism
• Metals
• Export sectors, including
• Clothing and textiles

2.11. Key aspects of a sectoral strategy include:

• Productivity
• Human resource development;
• Appropriate infrastructure/support mechanisms;
• Technology and innovation;
• Access to finance; and
• SMME development

2.12. The need for partnerships

• Partnerships form a key component in the execution of sector development strategies. These are usually forged between business and labour, business and government and between businesses themselves.
• Partnerships also ensure collective strengths that address issues such as duplication and the associated wastage of resources.

2.13. Conclusions

The private sector has a number of challenges that it would like to put to government, provincial, local, and to parastatals. These are the following:

2.13.1. Business operators, business chambers, sector associations and others that negotiate at Nedlac between government and business, labour and other stake holder are in future going to focus vigorously on sector strategies.

2.13.2. The DTI and support agencies would have to expand their sector-focused teams. They must also communicate their expertise to all centres and regions so that the shift to sector focus can be taken seriously.

2.13.3. The incentives framework must be aligned to the new approach.

2.13.4. Statistical coverage of sector performance must bebroadened.

2.13.5. Training programmes must be aligned to sector-focused strategies.

2.13.6. As was the case in the mining sector, BEE strategies, Affirmative Action strategies and SME support strategies have to be tailored to the particular needs and sensitivities of each particular sector.

2.13.7. Similarly, efforts to attract foreign direct investment should as far as practically and financially possible be adapted to particular sector support in this area.

2.13.8. With access to venture/capital finance being critical to the needs of firms, there should also be scope for differentiated sector support in this area.

2.13.9 Export promotion efforts must also, as far as practically possible be sector differentiated.

3 SUMMARY OF ISSUES BY NEVA MAKGETLA

3.1. Concerns

3.1.2. While Gross Domestic Product (GDP) has been stable, per capita GDP has been decreasing in the last ten years.

3.1.3. Unemployment has increased from 16% to around 30

3.1.4. Labour sees these factors as a direct result of low levels of investment and the structure of investment that is taking place.

3.2 Capital outflows and investment

Net figures in foreign investment have been decreasing. At the same time outflows of profits have been increasing. In the seventies foreign companies were reinvesting profits in the country.

3.3 Labour's position

3.3.1. Labour supports and agrees with the need for sector growth strategies as a way of increasing economic growth and redistribution and to grow exports.

3.3.2. However it is concerned that these strategies would be undermined by the strict fiscal discipline pursued by the government. Studies show that investors are concerned with.

3.3.3. However it is concerned that these strategies would be undermined by the strict fiscal discipline pursued by the government. Studies show that investors are concerned with underlying inequalities in an economy, even if the fundamentals are good

3.4 Conclusion and challenges

3.4.1. Labour lacks the capacity to engage and contribute effectively to sector strategies, especially to implementation processes. Government should take a leading role in these processes. One of the things the government could do is to provide research on implementation.

3.4.2. Business should provide strategic leadership. Labour is concerned about the lack of consensus amongst stakeholders about the need for a sector-focused approach. For instance business is displaying resistance to engaging around sector strategies.

3.5 Recommendations

Sector growth strategies should incorporate four components:

3.5.1 The strategies should be in favour of labour intensive sectors.

3.5.2 Develop strategies to bring more equitable distribution of productive assets in each sector. This should include reform and support for SMME's.

3.5.3 Better coordination of social spending and economic programmes by government. Presently the government seems to be pursuing social spending programmes without looking at how these could stimulate jobs.

3.5.4 Strategies to address HIV/Aids

4. SUMMARY OF ISSUES RAISED BY ALISTAIR RUITERS

4.1. South Africa only one of the few countries to inherit a diversified economy. The government therefore decided to use the countries manufacturing capacity as a basis for growth.

4.2. Government agrees with labour on the need to consider not just growth but its social consequences.

4.3. Government wants to play an activist role and give strategic leadership. It does not want to play an administrative role as was the case with the previous government.

4.4. It recognises the need to have capacity to carry out growth objectives and to give support to stakeholders

4.5. Government is still experimenting with the sector strategies. It is not sure yet what will work.

4.6. Sectors are not defined as they were before. For instance chemicals sector is now talking to DTI about ICT.

4.7. The DTI is urging sectors to think of down stream and upstream value matrix in developing strategies. Increasingly the DTI find itself having to talk to all the actors in the value chain of a particular sector.

5. SUMMARY OF ISSUES RAISED BY MPHO MOJANAGA

5.1 Lack of access to sanitation for most people;

5.2. Shortage of housing; and

5.3. Lack of access to communications

5.4. These in particular affect rural women, youth and children

5.5. Community supports the need to attract investment, both foreign and local. It is reported that the R2.2 trillion cross borders everyday. However 95% of this is finance capital that does not go into productive investment. Therefore this kind of investment does not create jobs.

5.6. Community is also concerned that the government is encouraging foreign investment by way of

5.6.1 Removing subsidies;

5.6.2 Removal of direct taxes;

5.6.3 Removing price controls

5.7. It supports a developmental state.

5.8. Community also appreciates government's' efforts regarding Black Economic Empowerment and the initiatives on cooperatives. It is however concerned by the lack of appreciation by both government and business of how communities could contribute. Therefore community would like to call on government to consider the role of that could be played by communities, NGO's and other social parties

5.9. Community would also like to call on both foreign and domestic investors to play a role in social development.

6. SUMMARY OF THEMES DISCUSSED

6.1. An activist state is one that goes out to seek opportunities, rather than just following rules and regulations. The developmental state concept assumes following rules and regulations.

6.2. In choosing sectors that have immediate potential to create jobs and increase exports, other industries must not be ignored, especially labour intensive sectors.

6.3. The prohibitive effect of huge regulations on SMME's must be looked at6.4. The consensus around sector-focused strategies has to result in decrease in unemployment.

6.5. In some respects BEE in South Africa thus far has perpetuated the historically unequal ownership structure. It has to be broadened. The youth, small entrepreneurs and other marginalised groups must have access to capital.

6.6. Credit bureaus have been the biggest stumbling block for black people in particular to access finance. The financial sector transformation process is dealing with ways to transform them.

6.7. There must be an effort to consider using pension funds as alternative sources of investment instead of relying on foreign direct investment, which has until now not succeeded.

6.8. Government is seriously thinking of ways to encourage domestic savings and to retain portfolio investment.