• Government’s shift from macro-economic stabilisation to micro-economic reform
• Value chain approach adopted in the strategy
• Recent shift from expensive subsidies to supply side measures
• Undertaking that social and infrastructure projects will be integrated
• Need for black economic empowerment to be part of the overall strategy
• View that an integrated industrial strategy can be regarded as the integration of interventions related to competitiveness
• Statement that trade administration will receive greater attention
• Benefits of regional cooperation in production
• Private sector must organise itself better
• Dti assuming a leadership role and to provide broad based products and services
• Development of industry specific customised programmes

• The establishment of a separate voice for black business

• The poor implementation and roll out by government of previous policies and strategies, such as GEAR
• The strategy does not emphasise sufficiently the need for government departments and parastatals to coordinate and synchronise their policy and legislative programmes

• Sound macro-economic strategies must drive growth and FDI
• A clearly defined starting point for the strategy is needed – the term "manufacturing " is inappropriate
• All stakeholders, and particularly business, have to take ownership of the strategy
• Price and currency stability are prerequisites for economic growth and FDI
• There must be good coordination between government departments and between government departments and other stakeholders
• The first responsibility of government is to South Africa, with sub-Saharan Africa benefiting from the spin offs of activities at home
• Chambers of commerce are ideal platforms for integrating black business, youth and women and areas beyond the metropoles

• The policy and strategy must be predictable, explicit and flexible
• A concise implementation plan must be developed in consultation with stakeholders
• Implementation must take place within the framework of macro and micro economic reform policies
• Implementation must be done in a cohesive and responsible manner
• The title be changed by substituting "Industrial " for "Manufacturing"
• Acceleration of privatisation be included as an essential component of the strategy
• A clearly defined research and development policy with government, business and academia taking responsibilities in resourcing and financing is needed
• Concomitant strategies on infrastructure maintenance and development and other support services are needed
• Government departments and parastatals must coordinate and synchronise their policy and legislative programmes as the first objective of the implementation plan
• The Dti should study the benefits that the SAFCOC model for business unity will bring to business and the economy
• A BEE programme based on tax incentives, tax breaks and other incentives should be introduced
• The private sector must be meaningfully consulted on the direction the economy should take
• Government should consider alternatives to the traditional financial institutions for SMME financing
• Government should make of existing infrastructure, specifically chambers of commerce, for its "one stop shops" for advising on access to finance and providing other services and products
• The strategy should take local economic development initiatives into account
• Interventions should be co-ordinated and cohesive to avoid failure of the strategy
• Government should consider the regional benefits of the North American Free Trade Agreement to see if there were any synergies that could be applied to Africa
• Government should not regulate what the private sector should do itself
• Government should not undertake activities that the private sector can perform
• Government should partner with business wherever possible

• Work with government departments, particularly Dti, to ensure an appropriate roll out of the strategy

Taking into account the limited time available to study the document, and notwithstanding the fact that comments were called for on a draft strategy late last year, SAFCOC advises that it has not been possible to obtain a definitive mandate on the strategy. For this reason, SAFCOC may wish to make a supplementary submission to the Department of Trade and Industry in the near future.

SAFCOC welcomes the Government’s shift from macro-economic stabilisation to micro-economic reform. The Chamber believes that the implementation of sound micro-economic strategies must drive sustained economic growth and foreign direct investment. It is thus imperative that South Africa implements an industrial policy that is explicit, predictable and yet sufficiently flexible to accommodate changing circumstances and conditions.

A concise implementation plan should accompany any strategy. SAFCOC trusts that in consultation with stakeholders, the Department of Trade and Industry will draft such a plan so that the good intent of the strategy will be realised. In this regard, SAFCOC emphasises that any strategy is virtually doomed unless all social partners and stakeholders are committed and active participants in the implementation planning and roll out process. Success in this endeavour will contribute substantially to job creation and poverty alleviation, which are two of the most pressing needs facing the South African community today.

SAFCOC believes that any manufacturing strategy should be implemented within the framework of South Africa’s macro economic and micro economic reform policies. SAFCOC believes that that the macro economic fundamentals are in place – our financial, fiscal and macro economic policies are sound. We have strategies to improve the level of skills within the population. However, we fall short on implementation and roll out. In some instances we have introduced systems that make it difficult for business to benefit. In this regard we specifically refer to the complicated systems for accessing grants in terms of the skills levy scheme.

SAFCOC believes that the starting point for the strategy must be more clearly defined. The title indicates that it is a manufacturing strategy, yet it includes areas of economic activity that are not normally regarded as manufacturing processes. SAFCOC recognises the importance of the value chain in any economic activity, but the addition of industries such as tourism tends to cloud the issue. SAFCOC strongly recommends that the title be changed to reflect the true scope of the strategy by replacing "manufacturing" with "industrial". Alternatively, those areas of economic activity not strategically part of manufacturing could be deleted. SAFCOC believes that the emphasis should be on an industrial or economic rather than a manufacturing strategy.

SAFCOC supports the "value chain" approach adopted in the strategy. Appropriate implementation will ensure that attention is given to those aspects of industrial activities which are often neglected, but which are critical to success. It will facilitate identification of those aspects in the value chain where improvements and/or adjustments are required to ensure and enhance global competitiveness.

SACFCOC supports the principles contained in the macro-economic stabilisation programme, Growth, Employment and Redistribution (GEAR) of 1996, as well as the Integrated Economic Action Plan of 2001 and the Microeconomic Reform Strategy outlined by President Mbeki at the beginning of 2002. However, SAFCOC is concerned that the roll out and implementation of the programmes have been very poor. SAFCOC urges that the strategy under consideration be refined according to comments received and implemented in a cohesive and responsible manner so as to avoid further criticism relating to the inability of government to implement its admirable policies.

On page 5 of the document the statement is made that "the strategy has to be that of the government as a whole even though Dti will have primary responsibilities in many areas."

SAFCOC believes that unless business and labour take ownership of the strategy as well it will have little chance of success. Thus all stakeholders must be engaged in a meaningful way. This may necessitate a change to the composition and operation of NEDLAC.

The economic restructuring that has taken place since 1994 has prepared a good foundation for a comprehensive industrial strategy. Manufacturing exports have increased, productivity has improved and domestic enterprises have faced international competition. We have a new labour dispensation and a skills development programme, which have the potential to improve the economic environment, despite the reservations we have concerning them. Our fiscal and financial environment is sound. Yet the levels of foreign direct investment are disappointingly low. It is therefore clear that our current industrial policies are not having the desired effects.

Furthermore, the strategy will have to be implemented in an environment where, inter alia:

• Job creation and poverty alleviation are national priorities.
• Employment equity and black economic empowerment are imperatives.
• Consumer awareness is increasing and consumer rights are increasingly being exercised.
• Global competitiveness is increasing.
• International environmental standards and quality and service requirements of trading partners are compounding the difficulty of trading internationally.
• High levels of protection of industries previously regarded as strategic have been reduced.
• Public investment in infrastructure has been neglected for many years.
• South Africa has a commitment to progress NEPAD.

This poses a challenge for business, labour and government. SAFCOC believes that the negative impacts resulting from this environment can be alleviated by acceleration of the privatisation of state assets. SAFCOC therefore recommends that privatisation be incorporated into the strategy as an essential component.

SAFCOC also points out that economic growth also requires price and currency stability, and the recent events in this regard have been detrimental to the country’s ability to attract investment.

SAFCOC recognises and supports the shift from expensive subsidies to supply side measures such as the improved South African competition policy. SAFCOC also recognises that geographic interventions must be placed on a more commercial footing. In this regard SAFCOC believes that much can be learned from the experience of the North American Free Trade Agreement (NAFTA), specifically the integrated industrial activities along the USA-Mexico border.

However, there are areas where interventions, which in the longer term may be beneficial for growth, in the short term cause concern and constitute impediments to business. In this regard specific reference is made to the complex procedures that have to be applied in order to access grants in terms of the Skills Development Act. It has also been reported that the complex labour relations regime in South Africa could be one of the factors contributing to the poor direct foreign investment in South Africa.

An important facet of any industrial policy must be the resources allocated to research and development (R and D). Currently a large proportion of R and D is funded by corporates, with much less coming from academic institutions and government.

SAFCOC believes that there should be a clearly defined R and D policy in South Africa, with government, academia and business taking responsibility for resourcing and financing. Ideally, generic research should be financed through a national structure, with departments such as Arts, Culture, Science and Technology, and institutions such as universities and technikons, the National Research Foundation and the Council for Scientific and Industrial Research playing a leading role. Product specific research should be the responsibility of the corporate world.

In order to complement the industrial strategy, concomitant strategies on infrastructure and other support services must be implemented. These strategies must take into account impacts that actions may have on the very industries they are aimed at supporting. It is thus appropriate here to refer the restructuring of Portnet into the National Port Authority and Port Operations. This has resulted in an increase in tariffs far greater than anticipated. Such occurrences result in substantial increases in transport and production costs, which ultimately impacts negatively on South Africa’s global competitiveness.

The role of technology and the manner in which it is used to improve competitiveness also has to be considered. The Electronic Communications and Transactions Bill currently under discussion, for example, should be drafted in such a way that it complements the industrial strategy. It should also be considered in the light of the benefits and obstacles it brings to the overall industrial strategy, whether it relates to business-to-business or to business to consumer/consumer to business activities.

SAFCOC supports the undertaking that social and economic infrastructure projects will be integrated in order to overcome dislocations of the past. SAFCOC also points to the need, however, to ensure that under spending on infrastructure, such as on roads is redressed.

SAFCOC believes that for any strategy to be successful, there should be co-ordination between government departments and between government departments and other stakeholders. Areas where there has been poor co-ordination include:

• Customs: Increasing emphasis on revenue collection and compliance rather than trade facilitation. Whilst we can understand this emphasis, particularly on compliance, which is borne out by our co-operation with Customs on many issues, it is essential that the measures used to ensure compliance do not hinder or shackle legitimate operators.

• Spoornet:  The change in emphasis on individual route and service classification profitability has resulted in dramatic rate increases, some up to 30% that have impacted negatively on input costs to importers and exporters.

The reduction in available rolling stock has also impacted negatively on the international trading community, thus encouraging a further move to road haulage with the potential increased cost to the State and the private sector alike in road maintenance, enforcement, the balance of payments as a result of increased fuel usage, increased road accidents, etc.

• Ports:   The ongoing problems at the port of Durban are increasing user costs, which were not budgeted for. They are impacting on the reliability of delivery undertakings to foreign customers and consequently damaging our reputation as a reliable trading partner.
• Labour:  Sunday premium payments and the extension of bargaining council agreements to previously uncovered parties create unexpected cost increases.  
• Home Affairs: Continuing problems with the issuing of work permits for skilled labour has necessitated the installation of new equipment and processes. This coupled with the transfer of knowledge inhibits the development of our workforce and industries.
• Telkom:  Lack of competition aggravates the expansion of new ICT thus impacting negatively on the private sector’s ability to exploit an area of substantial potential for South African companies and products.

In another area, Dti has proposed that access to their products and services should be through local government structures. This comes at a time when the majority of local councils are struggling to deliver existing service requirements. This serves to highlight Dti’s reluctance to embrace the private sector as a partner not only in growing exports but in assisting to develop strong local economies that will benefit all participants.

In August 2002 the Chamber movement offered to work with Dti in this area. We repeated this offer in October 2001. The dti has not yet acted on it. We stand by this offer, and reiterate that we would like to assist the department to roll out its products and services at local level.

SAFCOC acknowledges that in many economies, the state plays a significant role in advancing the competitiveness of the manufacturing sector. The role of the state, however, should be confined to that of providing an enabling environment for business to grow and prosper. SAFCOC, therefore, does not support the proposal in the strategy document that the state should establish new public sector institutions. SAFCOC subscribes to the philosophy that "the business of business is business, and the role of the state is to govern".

Of additional concern to business is the fact that the strategy does not emphasise sufficiently the paramount need for government departments and parastatals to co-ordinate and synchronise their policy and legislative programmes to develop the environment in which a strategy aimed at economic growth can succeed. This needs to done so that the private sector can fully exploit the increasing opportunities presented by trade liberalisation. This should be the first objective of the implementation plan that must follow the adoption of the strategy.

SAFCOC endorses the need for empowerment to be part of the overall industrial strategy. However, the chamber does not support a regulatory regime within which empowerment should take place and does not believe that regulation and legislation aimed at mobilising investment in BEE will achieve real empowerment of the majority of black persons in South Africa. On the contrary, SAFCOC believes that Black economic empowerment presents a unique opportunity for South Africa to break the cycle of underdevelopment and continued marginalisation of the majority of black people from the mainstream economy, thereby launching the country onto a course of sustained rates of economic growth, that will compliment the positive impacts expected from the industrial strategy.

SAFCOC argues in favour of a BEE programme based on tax incentives, tax breaks, etc. to local and foreign investors that actively participate in BEE. SAFCOC advocates positive government intervention through adopting a policy of incentives and rewards that will entice business, locally and internationally, to actively involve themselves in substantive BEE.

SAFCOC notes that it is the intention of Dti to motivate what it considers a credible voice of Black business. This is of concern to the chamber as it was under the impression that government was committed to encouraging a de-racialised business representative body. SAFCOC is strongly committed to strengthening de-racialisation in the business community. SAFCOC does not believe that separate voices for black and white business will result in economic growth. SAFCOC therefore does not support the establishment of separate voices as that will exacerbate and possibly widen the divide that already exists between them. SAFCOC therefore calls on Dti to explain and motivate what it means by a "credible voice of black business", and to study the positive benefits that will result from the unity process on which it has embarked.

SAFCOC recognises that government has a strategic role to play and has to make choices about the direction the economy should take. SAFCOC also recognises that Government has to develop policies and initiate programmes to ensure that appropriate fundamentals are in place for growth and development to take place. However, we caution that unless the private sector is meaningfully consulted during the process, and unless the private sector supports the policies and programmes, the likelihood of achieving success is scant.

In this regard we cannot ignore the fact that access to finance for small business development remains a challenge. It is stated that government envisages a "one-stop shop" for entrepreneurs to access finance for productive activities. This "one-stop shop" should offer other services as well. It is not necessary that such facilities be confined to Trade Points either.

SAFCOC urges government to consider alternatives to the traditional financing methods through the banking industry. The appropriateness of a "stokvel" system, or a Grimeen Bank (Pakistan) system, for example, should be investigated. If is found that such systems can be successfully applied to small business financing, they should be applied.

SAFCOC also strongly urges government to make use of existing infrastructure for "one stop shop" activities. Chambers of commerce are ideally situated and resourced to assist government in this task, and repeats its offer to work with Dti in this regard.

SAFCOC understands the need to concentrate on specific sectors to spearhead growth. The Blue IQ Innovation Hub can be quoted as an appropriate project in this regard. However, in determining which sectors should be identified, cognisance has to be taken not only of global demand, but also of the domestic resources and expertise available to meet the demand.

The strategy should also be sufficiently flexible to adjust to changing global demands and domestic capacity.

Many countries and regions within countries have benefited from concentrating on one industry, with both downstream and upstream benefits. The success of the Indian "silicon valley" has proved that such an approach can be successful. Thus it would be appropriate for the implementation plan that must follow the strategy to identify areas where such clusters could drive growth. An agro/food-processing cluster in the Western Cape should be considered in this context. Again SAFCOC would call for the chambers of commerce to be consulted on the plan and involved in implementation.

The strategy should also take into account local economic development programmes, an area where local chambers of commerce have been particularly active.

SAFCOC strongly supports the view that an integrated industrial strategy can be regarded as the integration of interventions related to competitiveness. In the integration of the six identified interventions - market access, beneficiation and value addition, regional production, equity and economic participation, knowledge intensity and services integration and the development of integrated matrices – cognisance must be taken of the need to ensure that there is cohesion between the interventions, and that should any one (or more) not be properly integrated the result will be less than optimal.

SAFCOC welcomes the statement that trade administration will receive greater attention. SAFCOC trusts that a part of the improvement will entail simplified and improved documentation and procedures and that electronic transfer of documents will be introduced as soon as possible, as well as improved co-operation between the government departments involved in trade facilitation and clients. Better co-operation between Dti and business will also be necessary if the objectives of the strategy are to be achieved.

SAFCOC also points out that the chamber of commerce movement through SACOB has been engaged in productive dialogue and partnerships with SARS and Customs that we are seeking to continue and improve. It has been somewhat more difficult to establish relationships with Dti and TISA. SAFCOC urges the Department to accept that SAFCOC is a significant representative body that needs to be included in its activities.

Whilst an underlying emphasis on the Sub-Saharan region is understandable, the first responsibility of government should be to South Africa and to the development of opportunities whereby the region will benefit from a vibrant and expanding South African economy. It is therefore essential that the South African "brand" is not lost in the minds of potential customers around the world to a more vague "Africa" brand. Australia’s identity within the Asian region is a good example of brand management.

Furthermore, we recognise the benefits of regional co-operation in production. International experience should be studied, and the successes and failures in areas such as the North American Free Trade Area (NAFTA) assessed. The application of such arrangements in the region could be particularly beneficial, for example along the development corridors in the SADC region, specifically on the Maputo and Trans Kalagadi Corridors.

SAFCOC recognises that to a degree, the private sector has not organised itself sufficiently well with the result that sub-optimal outcomes have resulted. However, it must be accepted that business has the right, within the confines of the law, to organise its activities as it deems fit. It would be inappropriate, for example, for government to regulate that all consignments have to be consolidated in order to achieve national economies of scale. Such activities should be voluntary.

SAFCOC supports the basis of the dti’s role in implementation as being that of leadership and of broad-based products and customised services, provided that such services that can be provided by the private should be provided by that sector. The dti is urged to work with the chamber of commerce movement in this regard. Chambers can also be the vehicles for the roll out of government support services to the business community.

We welcome the proposal that Dti, in partnership with sectors, will develop customised programmes. However, the representation on industry export advisory councils is in the main confined to larger corporations and exporters. Thus it will be imperative for Dti to engage stakeholders not represented on the councils, but who nevertheless have substantial constituencies, such as chambers of commerce, in the development of these programmes.

SAFCOC notes that the strategy identifies certain industries for customised programmes. Whilst we welcome the inclusion of tourism we point out that tourism does not constitute manufacturing, hence our earlier recommendation that the title of the document be amended. SAFCOC also refers to the Tourism Collaborative Study that was undertaken by NEDLAC a few years ago. The Report on this study could form the basis of the customised tourism programme.

SAFCOC notes that trade agreements are being sought with key markets. In the past Dti has consulted with NEDLAC during the process of negotiation. However, not all industries are represented through the Nedlac structures. Tourism does not have a seat on BSA, nor does the information technology industry, for example. It is therefore very important that the consultation channels be widened to include those industries that do not enjoy NEDLAC participation. The chamber of commerce movement is in an unique position to facilitate such consultation.

SAFCOC cannot stress strongly enough the need for South Africa to have a stable and predictable, fair, transparent, and efficient regulatory environment to encourage foreign direct investment. To this end SAFCOC welcomes Dti’s undertaking to implement projects to address inadequacies in our current system.

Many countries offer international investors benefits to entice them to establish businesses within their borders. South Africa needs incentives comparable to countries with which it competes for investment. SAFCOC is currently drafting proposals in this regard, with specific reference to Industrial Development Zones, which it will share with other stakeholders in due course.

SAFCOC is particularly disturbed to note that the strategy makes no mention of the need to partner with business in any of the proposed initiatives. It is incumbent upon SAFCOC to warn that without consultation with the private sector, any strategy that has as its objective economic growth is doomed to failure.

SAFCOC acknowledges the role played by NEDLAC in development issues. However, not all stakeholders have a platform in that structure. In particular, where development can be promoted in specific areas, representation could be lacking. Thus while NEDLAC will have to play a major role, there is an additional need to use industry specific and local platforms. Chambers of commerce can and will expect to play a constructive role in the dialogue.

Furthermore, the SAFCOC infrastructure and chambers of commerce are the ideal platforms for integrating black business, youth and women and geographic areas beyond the metropoles into the process.

SAFCOC is of the view that the low levels of domestic and foreign direct investment are indicative of a poor investment environment where the costs and risks are too high and thus undermine investment. Perceptions are the driving forces influencing investment decisions. Should potential investors feel that future events would place their share of income streams from a particular investment in jeopardy they will defer their decision or invest elsewhere.

Over the past two decades a majority of countries have introduced measures that promote macroeconomic stability whilst also opening up markets to competition through liberalisation and privatisation. The traditional policies such as sound macroeconomic management, trade liberalisation and market competition are now considered the absolute minimum for generating investment. Increasingly countries are focusing on a second set of policies, which encourage differentiation from a competitive advantage perspective.

New dynamics facing companies include:

• Cost of capital
• Tax rates
• Interest rates
• Human capital and development of human resources
• Information and communication technologies
• Innovation, research and development
• Black Economic Empowerment
• SMME development

The manner in which government addresses these dynamics, and particularly the extent to which business is actively engaged in the process, will determine the success or otherwise of the strategy.