We also welcome the commitment to meet the basic needs of the citizens, as well as the acknowledgement that government should lead the market, especially where the market is failing. In other words, the progression from the earlier view that government is not responsible for a broader developmental agenda towards the acceptance that government should lead the developmental agenda, as well as lead the market is a positive development, indeed.

Despite, these commendable improvements from the previous document, the second draft document suffers from a number of shortcomings, which we would like to draw attention to. These limitations vary from the suggested process towards some of the detailed content of the document itself.

Broadly speaking, the process of engagement as outlined by the document is relatively sound. But the main problem we have with regard to the process is the adopted "consultation approach". We are of the view that it is narrow and carries with it a tendency of promoting an asymmetrical relationship between stakeholders in the process of engagement. To put it differently, this conception promotes government unilateralism. It allows the government to decide willy-nilly when to consult other parties. This is not a conducive way of engaging each other, especially, in such a critical process as developing an industrial strategy for the country. It also carries with it dangers where government may consult other parties merely to inform them about what she has done and subsequently project this as full participation of all parties. Contrary to this narrow conception, we would like to propose a broader approach (i.e. participatory approach), which will promote full and effective participation and encourage symmetrical relationships between parties.

We are also a bit concerned that this consultation approach is a bit vague, especially with regard to formal participation, which must be binding on all stakeholders. Although informal discussions are useful, they should not however, supersede formal negotiations that must take place in formal structures. Negotiations and engagements of all stakeholders on the strategy must take place in structures that would allow agreements that are binding on all parties to be reached collectively. In this regard, for us it is important that all parties participate as equal partners to produce a final document that will be acceptable to all.

With regard to structures for full participation of all stakeholders to reach binding agreements we would like to emphasize the importance of NEDLAC, and other tripartite structures for engaging with the process of developing an industrial strategy. Similarly, we would like to emphasize the importance of the sector job summit to deal with the nitty-gritties of the issues affecting the sectors.

Whilst we welcome the DTI second draft on the formulation of the industrial strategy, we do think though that in some critical areas the draft lacks details. The lack of detail can be seen clearly with regard to connecting or coordinating the intergovernmental departments concerning the policies, especially this one. We believe that to drive the formulation the overarching industrial strategy must fall within the ambit of five government departments. These include trade and industry; finance; labour; public enterprises and transport. The question with the big Q is where are the other departments? We seem to be seeing the DTI with the others missing in the show. This is not to deny that the DTI should play the leading role here with regard to the manufacturing sector. But this does not mean that others should not be involved. This is strange, indeed.

The documents justifies the strategy because of manufacturing sector’s importance in terms of meeting the needs of all "economic citizens", our people and enterprises, create employment and providing access to safe, competitively priced quality goods and services, is a locus for stimulating growth of other activities (i.e. services), and provide economic empowerment. Although most of these justifications are sound, however, there are few that are problematic that we would like to correct.

We are deeply concerned with use of the concept meeting the needs of the "economic citizens", as articulated in the first page of the document. In the face of approximately 25% level of unemployment rate in the country, utilization of such a concept (i.e. economic citizens) is totally inappropriate. It may be misconstrued to mean that the strategy is only concerned to meet the needs of those that are economically active to the exclusion of the economically non-active citizens (i.e. unemployed). To get around this problematic conception, we would like to propose that it should be changed at least, to state as follows: meeting the needs of all citizens.

The expressed commitment to value addition/ beneficiation in the document is clearly welcomed by NUMSA. But we are deeply concerned with the commitment of the document exclusively and narrowly to "beneficiation". We would like to propose for the inclusion and also prioritization of fabrication, which is critical for the development of the manufacturing sector as whole.

For example, the bulk of the companies in the metal sector are located in the level 3 and 4 of the value chain. These two levels predominantly involve the fabrication of intermediate and finished product. The travesty of our history with regard to the development of the metal industry is that profit realization is taking place largely in the upstream level of the industry, namely level 1 and 2. This historical reality has had a negative impact on the broader development of the sector downstream. In essence, it has stifled the growth of the downstream industry. Level 1 entails the primary industries that supply raw material while level 2 mainly involves the processing aspect of the industry and that is were beneficiation is located including a minute part of level 3.

On the other hand, part of level 3 including level 4 involves fabrication and it is where the majority of the firms in the metal industry are located. And where profit realization must take place, if we are to succeed to grow the industry and create quality jobs.

There is no single aorta of doubt in our mind that the potential for growth in the metal sector is squarely located in the two latter levels involving fabrication. In other words, these levels have potential to create massive employment and provide avenues for SMME’s and Co-ops to grow. More importantly, these levels require less capital investment as compared to the upstream sectors of the industry (i.e. primary sector and processing industry). It is for these reasons and more, why we would like to press hard on the DTI the importance and necessity to prioritize and focus more attention on this critical dimension. This is not to say that beneficiation is less important. But beneficiation must be intertwined or interlinked with fabrication so as to complete the value chain.

There is clearly more room for further beneficiation and fabrication in the metal sector. The IDC has correctly pointed out that there exists a limited development of an intermediate component industry. This also includes the limited development of the finished product industry. This is mainly caused by the preference of imports by most companies vis-a-vis the internal products, which are viewed as cheap. Graph 1 above somehow captures the essence of this fact. It shows that there are more goods being imported inside the market and most of these imports have taken place in the downstream sectors. An imported metal product means a loss of South African manufacturing production and lower demand for South African steel. In addition, figure 2 below clearly demonstrates that there has been recently a negative development from the positive one that was achieved around the 1970s with regard to value addition, especially downstream. As should be obvious, this clearly demonstrates the existing potential for further beneficiation and fabrication.

Figure 2. Average Annual Rates of Growth of Value Added in South African Downstream Metal Industry at Constant (1995) Prices by Sector (%) [[PMG note: not included here]

Source: South African Iron and Steel Institute

Besides the rising protectionism, worldwide iron and steel is experiencing global over-capacity of supply, which has resulted in the decline of steel prices and put pressure on companies. Iron and steel producing companies are being relatively buttressed from this harsh international reality because 60% of their products are still sold in the domestic market, while a mere 40% is for export. The vagaries of the international price fluctuation of steel prices may be avoided effectively if we make it a priority to develop / expand the domestic market including the regional market.

So for NUMSA developing the domestic market is a priority to be coupled, of course, with export growth. In the context of metal industry, expanding and developing the domestic market means emphasizing further beneficiation and fabrication of the downstream industries. It also means increasing the public investment (i.e. infrastructure investment) substantially to ensure the "crowding in" of private capital. Recently, structural steel, pipe and tube and other sub-sectors of the metal industry have been constrained in terms of development by the decline in infrastructure investment from parastatals and government. Undoubtedly, government should lead investment in the local market so that it can also send positive signals to private capital, which can follow suit. The development of the local market also requires in principle adopting a developmental state that can intervene in the economy to promote fabrication and beneficiation including the establishment of new industries downstream, where the market is failing or a bit shy to engage because of concerns about low rates of returns and high risks in those industries.

Foreign direct investment, while providing the prospect of substantial benefit, should be treated with a great caution. NUMSA is totally opposed to Foreign direct investment that is speculative and intended to convert manufacturing capacity/facilities into warehousing that are geared to be nothing else but a conveyor belt for cheaper imports from other countries. The consequence of such kind of investment, which is widespread in the metal industries, is that it destroys local production. For example, Tedelex Johannesburg, which use to produce brown goods was converted into warehousing for cheaper imports from Tedelex Japan. Fridge master Johannesburg was also converted into a warehouse for housing imports produced in Swaziland by Fridge master Swaziland. These examples, which are plenty clearly demonstrate the negative impact of investment that is not destructive and undesirable for our industry. Many developing countries that have been successful are those that have been precise about the terms and conditions of foreign multinational company involvement. NUMSA proposes that South Africa should definitely regulate investment through investment codes that will ensure that the country only allow FDI’s that will contribute to the building of local production, ensure skills transfer, and technological transfer.

The DTI document to our surprise is totally silent on procurement, a critical area for developing local industries and increase domestic production via the vehicle of supporting local content. While government has already promulgated the National Preferential Procurement Policy Framework Act, there are a number of flaws in it that requires alterations. We are hoping as NUMSA that this process would allow this to happen. The problem with the current policy act is the doctrine of "voluntarism’ that allows all tiers of government structures and parastatals to unilaterally decide their procurements. What this has done is that it has allowed procurement departments in all tiers of the governance and parastatals to awarded tenders to foreign companies to the detriment of local ones. Most of the procurement policies of the tiers of governance and parastatals do not support the local content and local industries.

For example, the Johannesburg Metro Council has purchased public busses from Brazil at the expense of the local bus manufacturers such as Durabuild and Dorbyl Busaf Bower, who have enough capacity to produce quality busses for the city. The Telkom tender to a South Korean company is a clear example of another tendering awarded to foreign companies to the detriment of local companies. In the past few years, a South Korean company won a tender with Telkom, resulting in that company capturing 30% or more of the local market. The tenders were awarded to this company at the expense of Aberdare and Malisela companies. Aberdare, ATC, TEMSA and SIEMENS, who are all local companies, with the exception of SIEMENS previously used to supply 100% products to Telkom. As a result of the deregulation in procurement this has lead TELKOM to award tenders to the foreign companies with devastating consequences to local companies. Aberdare plant in Rosslyn, north of Pretoria was closed. Other companies, which may be affected in the future, include ATC, and TEMSA.

What these examples demonstrates is a need to ensure that all procurement policies of all the tiers of government including parastatals should be aligned to the National Preferential Procurement Policy Framework Act and the "voluntarism" must be removed. These policies should be made to adhere to the promotion of local content, labour standards, ILO conventions, free of corruption, transparency, etc. NUMSA wonders how did the Korean company came to be awarded the tenders, while it is well known that Korean companies record with regard to labour standards are appalling?

Finally, NUMSA is of the view that the drive by OECD countries to include procurement policy under the WTO rules should be resisted at all cost. This new development holds grave dangers for developing nations and is a threat to NEPAD. We hope the S A government would resist including it in the WTO.

The acknowledgements by the DTI document that Casualisation, Subcontracting as well as Formalization is the challenge that requires effective addressing is welcome indeed. In the past few years the metal industry has witnessed the development of the dual labour regime (i.e. full time workers and casualised, informalised and contract workers). Undoubtedly, there is rapid growth of non-standard employment, including temporary or part-time workers and subcontracting, independent contracting in the metal industries. These new employment practices marked a turning point in the history of employment in the industries. Sub-contracting is designed by the management to reduce the size of the workforce directly linked to the company, which is undertaken to reduce input cost. This new labour practice is informed by the doctrine of "core and non-core" business function. For NUMSA, the notion of dividing the business in terms of "core and non-core" is a fallacy that should be combated. What capital regard as non-core (i.e. cleaning, transport, canteen and security, etc) is in fact inter-linked directly to the production process and therefore cannot be relegated to the so-called non-core.

In addition to subcontracting and outsourcing, ‘flexibility’ also shows up as a general increase in part-time and temporary employment. In contrast to temporary employment, women still predominantly hold part-time jobs in the sector. Temporary employment seems to have become the normal mode of entry into the industry for young people without any prospect for better working conditions. These new employment practices have resulted in the deterioration of the labour standards. This has even led some commentators to assert that these labour practices are instruments of exploitation because of the very low wage rates and the denial of basic conditions of employment to workers. Workers in the new conditions are denied paid leave, retirement fund, medical aid, and living wage. More critically, the introduction of flexible labour regime is undermining the unions and has made the prospect of training workers difficult.

Capital implemented the flexible labour regime in the sector with the anticipation that this would raise high productivity levels in the plants. But, a number of researches have found that the flexible labour regime is contributing to the low level of productivity precisely because of the instability nature of such labour practices and the fact that most of these workers are denied skills and training. Most of the workers working under such conditions are experiencing higher levels of fatal accidents, their overworked and suffers from high fatigue which result in high absenteeism and low morale. These are definitely bad signs for high productivity.

The document also recognises the continued job losses as a critical problem that must be addressed. In the past few years the metal industry has witnessed a disastrous decline in employment. Figure 4 below clearly shows the job losses that this sector has experienced over the past few years and the trend is still continuing unabated. Last year the engineering sector has lost approximately 2643 workers in the first term alone. This factor alone must make the question of holding the engineering sector job summit an urgent matter, indeed.