24 May, 2021
Patel says vision for R200bn in additional localisation has top-level corporate backing
|Trade, Industry and Competition Minister Ebrahim Patel
Industry and Competition Minister Ebrahim Patel announced that an
"accord" had been reached at the National Economic Development and
Labour Council (Nedlac) to drive progressive localisation of up to
R200-billion of additional production over a five-year period.
his virtual Budget Vote, Patel said the strategy had the support of
major corporates and that 30 ‘CEO champions' - including Mamongae
Mahlare of Illovo, Mark Cutifani of Anglo American, Vikesh Ramsunder of
Clicks, Fleetwood Grobler of Sasol and Fortune Majapelo of Bushveld -
had been nominated from the private sector to support the localisation
"An initial list of 42 products have been identified for
localisation and R240-million has been raised from the private sector to
appoint technical experts to drive localisation, bringing together
industrial engineers, supply-chain managers, experts in dealing with
illegal imports, and project managers."
The CEO champions would
not only advocate for specific product categories for potential
localisation, but would also highlight the current constraints to
No 'one-size-fits-all' approach would be
implemented and Patel revealed that the pact with business also
recognised that not every product category was suitable for
A ‘Policy Statement on Localisation for Jobs' had also been published to clarify government's overall approach to the issue.
policy statement addressed local product development, cracking down on
illegal imports and under-invoicing and implementing localisation
modalities through a joint effort with the private sector.
will be complemented by integrated efforts with other Ministries to
drive local vaccines development and the use of local components in the
national infrastructure plan.
"Tariff adjustments and rebates are
an important policy instrument available to the State to lower or
increase import duties, but in future will need to be accompanied more
clearly by binding commitments by applicants to improve their
competitiveness, create jobs and price restraint," Patel added.
so-called Nedlac accord had been premised on an analysis showing that
South Africa's import to gross domestic product (GDP) ratio was too
high, with R1.1-trillion in non-oil imports yearly ahead of the Covid-19
"We import goods worth 25% of our GDP - our propensity
to import is out of line with peer countries and developed economies and
more can sensibly and sustainably be produced locally. Compare our 25%
with China at 14%, India at 16%, Brazil 10%, the US at 12% and the EU
at 14%," the Minister said.
The accord was given further impetus
by the progress made in developing local production capacity for
personal protective equipment and medical products since the onset of
"In the past year, we built local production
capacity - often from scratch - with more than R10-billion of local
production of Covid-19 products, ranging from face-masks, hand
sanitisers, ventilators and vaccines," Patel said, reporting that
R2-billion of that production was exported to other African countries.
UNDER THE RIGHT CONDITIONS
response to Patel's indication to Nedlac in December that government
would be aiming to set an import-substitution target of 20% for
non-petroleum imports, Business Unity South Africa (Busa) and Business
Leadership South Africa (BLSA) commissioned Intellidex to research the
practicality of meeting the target.
The research report, which was
published the day before Patel's Budget Vote, indicated that higher
levels of localisation were possible "under the right conditions",
including policy certainty demand consistency.
It also warned that
an overly aggressive import-substitution policy will have negative
consequences for domestic prices, raising them by up to 20%, and could
undermine the country's economic recovery.
"Our quantitative study
shows that under the right conditions, meeting localisation targets
within the next five years is possible for a number of key manufacturing
sectors including paper, wood, motor vehicles, ceramic products, glass,
basic iron and steel, and food and beverages.
manufacturing sectors are highly unlikely to meet localisation targets
without significant policy support and macroeconomic tailwinds. These
sectors include printing and publishing, textiles, clothing, footwear,
rubber and machinery and electronic equipment," the report stated.
and BLSA urged that priority be given to outputs such as cheaper
energy, better infrastructure, improved competitiveness and consumer
choice when pursuing the strategy.
Patel acknowledged that
localisation should be rooted in competitiveness and industrial agility
and indicated that the emerging sector master plans would contain the
details of how to achieve such in the various industries covered.
"Last year we had three master plans in place, covering the auto, clothing and poultry
industries. Since then, we finalised three more, covering sugar, steel and furniture.
These Master Plans cover about 700 000 workers with a combined industrial output of about R300-billion."
Patel said future master plans would seek to support growth in new economic sectors, while consolidating existing sectors.
HYDROGEN & ELECTRIC VEHICLES
extended portfolio will cover global business services, film animation,
the chemical and plastic sectors, green industry, medical products and
Particular attention would be given to green
industrialisation and facilitating a just transition to a more
"We must recognise the urgency of the
situation and take action accordingly. We must not get left behind, with
stranded assets and a carbon-dependent economic model," Patel said,
highlighting the urgent need to build full electric vehicles locally so
as to maintain the country's capacity to export to key markets such as
the EU and UK.
Patel also saw a major opportunity for South Africa
to advance technologies based on green hydrogen, which is produced by
using renewable electricity to split water into hydrogen and oxygen
using an electrolyser.
He reported that Toyota's Johan van Zyl,
who has returned to South Africa following a stint in Europe, would head
a panel on green hydrogen, which would focus primarily on what was
required for South Africa to unlock a large-scale domestic hydrogen
"If the 20th century becomes known as the century of
crude oil and nuclear energy, the 21st century may be known as a century
of renewable energy and green hydrogen.
"South Africa is
well-positioned to become a key player, with our reserves of platinum
group metals used as a catalyst in green hydrogen fuel-cells; as well as
vanadium used in battery storage technologies."
Source: Engineering News