DRAFT REGIONAL INDUSTRIAL DEVELOPMENT STRATEGY PRESENTATION TO TRADE AND INDUSTRY

1. DRAFT REGIONAL INDUSTRIAL DEVELOPMENT STRATEGY PRESENTATION TO TRADE AND INDUSTRY PORTFOLIO COMMITTEE 2 AUGUST 2006 CAPE TOWN

2. STRUCTURE OF PRESENTATION • PROBLEM STATEMENT • Spatial distribution of Gross Value Added • Growth disparities • Unemployment trends • WHY THE REGIONAL INDUSTRIAL DEVELOPMENT STRATEGY • Composition and growth of economic activity • Growth in Gross Geographic Value Added • RATIONALE FOR RIDS • STRATEGIC INTENT • PRINCIPLES FOR RIDS • BROAD APPROACHES TO REGIONAL DEVELOPMENT • GENERIC VS TARGETED INTERVENTIONS • Targetered interventions “our approach” • BUILDING SYSTEMIC COMPETITIVENESS • RIDS SUPPORT MEASURES

3. PROBLEM STATEMENT • Sharpest regional disparities at present are between the three main metropolitan complexes and the rest of the country • Three broad categories of regions are considered, these will be applied in determining potential impact scenarios for the RIDS: • the three metros • middle-order regions – combinations of magisterial districts selected because they contain main service hubs of a wider functional region or macro-region • main production complexes of a cluster or corridor of inter-related industries

4. PROBLEM STATEMENT (cont.) • RIDS recognises the inequalities still present within the country’s most successful economic regions, and thus seeks to promote the consolidation and improvement of the economicpotential of these regions • Creation of what were often unsustainable industrial development points, will require concerted efforts to redress economic and perceptual imbalances and pursue more balanced development

5. SPATIAL DISTRIBUTION OF GVAper 50km MesozoneThe map below shows the heavily biased distribution of economic activity in South Africa with the majority of Gross Value Added (GVA) clustered around three major metropoles

6. GROWTH DISPARITIES…(%GDP)

7. UNEMPLOYMENT TRENDS

8. WHY THE REGIONAL INDUSTRIAL DEVELOPMENT STRATEGY (RIDS) • Inequalities within the space economy • Restructuring the apartheid regional industrial policy • Overhaul of top-down regional development planning-that exclusively focused on manufacturing • “Space” or regions increasingly becoming a factor of production • Growth in industrial poles not trickling down • Create partnerships to promote regionally-based economic • development strategies in the systematic and formalised manner • Create convergence in investment programming and development planning between different local actors

12. RATIONALE FOR RIDSVision: to ensure all regions attain their full economic potential, by addressing blockages and barriers to the effective operation of the market The RIDS is intended to: • achieve the national industrial development objectives (taking into account National Spatial Development Perspective (NSDP) • further the goals of the Accelerated and Shared Growth Initiative for South Africa (ASGISA), through accelerating growth development in regions • enhance and build capacities and potentials as identified in the NSDP • address spatial economic growth constraints and deal with market failure related to industrial development in municipalities, • close the gap in the contemporary policy framework • build regional competitive productive capabilities, that enhance regional economic performance

13. STRATEGIC INTENT • Localised direct support to the SME sector using technical assistance funds • Creating a predictable regional investment and business climate to attract private sector investments • To increase production in, and improve competitiveness and diversification of,regional markets with potential for export and employment creation • Strengthen appropriate infrastructure support to regions • Build effective industrial, trade and productive capacity • Encourage all regions to attain their full economic and development potential • Encourage the enhanced growth and development of already succesful regions

14. PRINCIPLES FOR RIDS The RIDS is informed by the following: • Principle of an activist state • Principle of a developmental state – promoting developmental industrialization • Principle of reciprocity – support of sectors that will help achieve governments developmental agenda

15. BROAD APPROACHES TO REGIONAL DEVELOPMENT

16. GENERIC VERSUS TARGETED INTERVENTIONS • An important issue in RIDS relates to whether government should target either: • Generic Approach i.e. trying to improve the overall investment conditions for private companies. They include geographic location, availability, quality and cost of factors of production, taxes and incentives or, • Targeted Approach, i.e. addressing limited number of industries

17. TARGETED INTERVENTIONS “OUR APPROACH • Generic interventions are generally covered in the existing macro and micro-economic strategies • With the success of a number of generic interventions, the RIDS will focus strongly on targeted interventions • Targeted interventions typically address two elements, namely, production factors and market failures • A targeted intervention under the RIDS umbrella would aim to: • Build and upgrade advanced and specialized factors for a local sector or cluster focusing on skills development, technology extension and metrology

18. Building Systemic Competitiveness Meta level Developmental ability to formulate orientation of society strategies and competitive pattern of policies economic organization Macro level collective learning- and memory change-friendly Stable macroeconomic, political value attitudes social and juridical framework cohesion competition policy budgetary policy Meso level monetary policy fiscal policy Targeted policies to strengthen currency policy trade policy the competitiveness of certain sectors industrial structure environmental Micro level import / export technology regional education Technological infrastructure Organizational Inno- labor vations Social Simultaneous engineering Collective efficiency and Efficient firms innovation networks

19. Build Partnerships Economic Decline Funding (Rm) Iinterventions • Outcomes Themes* • Regional Growth Coalitions • Regional Industrial Road Maps • Regional Indicative Business Plans • Regional Growth Protocols • Investment Packages • Regional Development Plans RIDS SUPPORT MEASURES • Business Retention and Expansion Strategy • Local beneficiation strategies • Local Government Industrial Analysis Capacity Building • ISRDP and URP project support facility • Rural Contact Centres • Early warning systems • BRE Capacity Building Facility • URP & ISRD Project Diagnostic tool • Training programme for municipalities • Capacity building programmes for municipalities * subject to authentication and confirmation by the feasibility report Source: Team analysis

20. Building Regional Agglomerations Funding (Rm) • Outcomes Interventions Themes* • Regional Industrial Infrastructure Backlogs (Research) • Industrial Clustering Strategy • Special Economic Zones • Industrial Development Zones • Industrial Parks • Logistics / Supplier Parks • Industrial Estates • Innovation Hubs • Spatial Development Initiatives (SDIs) • Primary and Secondary Corridors • Industrial Complexes • Industrial Clusters • Regional Development Fund • Industrial Clustering Capacity Building Fund • Dedicated Incentives • Legislation • Institutional Framework RIDS SUPPORT MEASURES * subject to authentication and confirmation by the feasibility report Source: Team analysis