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MYTHS AND REALITIES; SOUTH AFRICA’S IP TIPS – WORLD BANK WORKSHOP 27 OCTOBER 2011

MYTHS AND REALITIES; SOUTH AFRICA’S IP

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MYTHS AND REALITIES; SOUTH AFRICA’S IP. TIPS – WORLD BANK WORKSHOP 27 OCTOBER 2011. MYTH NO. 1 : SOUTH AFRICA IS UNDERGOING DEINDUSTRIALISATION. THE DECLINE IN MANUFACTURING AS A SHARE OF GDP IS (A) EXPECTED (B) IS NOT A GENERAL PHENOMENON OF ALL SECTORS. Manufacturing Pattern:. - PowerPoint PPT Presentation

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Page 1: MYTHS AND REALITIES; SOUTH AFRICA’S IP

MYTHS AND REALITIES; SOUTH AFRICA’S IP

TIPS – WORLD BANK WORKSHOP27 OCTOBER 2011

Page 2: MYTHS AND REALITIES; SOUTH AFRICA’S IP

MYTH NO. 1 : SOUTH AFRICA IS UNDERGOING DEINDUSTRIALISATION

• THE DECLINE IN MANUFACTURING AS A SHARE OF GDP IS (A) EXPECTED (B) IS NOT A GENERAL PHENOMENON OF ALL SECTORS

Page 3: MYTHS AND REALITIES; SOUTH AFRICA’S IP

SOUTH AFRICA INDUSTRY STRUCTUREIN RELATION TO GDP IS HIGH

Below “Normal” At “” Above “”

Non metallic mineral products

Tobacco products

Apparel and Footwear

Textiles

Electrical machinery and apparatus

Machinery and equipment

Medical, precision and optical instruments

Printing and publishing

Wood Products

Rubber and plastic products

Fabricated metal products

Paper and paper products

Motor vehicles

Coke and refined petroleum

Furniture and other manufactures nec

Chemical and chemical product

Basic metals

Manufacturing Pattern:

Page 4: MYTHS AND REALITIES; SOUTH AFRICA’S IP

SOUTH AFRICA PERFORMS POORLY IN LABOUR INTENSIVE SECTORS

• SA WELL BELOW “NORMAL”

Page 5: MYTHS AND REALITIES; SOUTH AFRICA’S IP

Ethiopia KenyaSouth AfricaSudan

Tanzania

Nigeria

Cameroon

Cote d'Ivoire

Gabon

Madagascar

Malawi

Mauritius

Senegal

Uganda

ZimbabweMongolia

0

0.01

0.02

0.05

0.14

0.37

1

2.72

7.39

Sh

are

of M

VA

in G

DP

403 1,097 2,981 8,103 22,026 59,874GDP per capita (US$)

Textiles

Page 6: MYTHS AND REALITIES; SOUTH AFRICA’S IP

Ethiopia

Kenya South Africa

Sudan

Tanzania

Nigeria

Cameroon

Cote d'Ivoire

Gabon

Madagascar

Malawi

Mauritius

SenegalUganda

ZimbabweMongolia

0

0.01

0.02

0.05

0.14

0.37

1

2.72

7.39

Sh

are

of M

VA

in G

DP

403 1,097 2,981 8,103 22,026 59,874GDP per capita (US$)

Wearing apparel and footwear

Page 7: MYTHS AND REALITIES; SOUTH AFRICA’S IP

MYTH NO. 2: IP IS THE ANSWER

• SECTORS ALREADY ENJOY:• HIGH RATES OF PROTECTION• SUBSTANTIAL SUPPORTS.

Page 8: MYTHS AND REALITIES; SOUTH AFRICA’S IP

CONCLUSION: WAGE AND LABOUR MARKET REFORM

• FOCUS ON IP TAKES AWAY FROM THE FOCUS ON LABOUR MARKET

• RAISES A MUCH BROADER QUESTION: WHAT SHOULD THE OBJECTIVES OF IP BE?

• THE END OBJECTIVE OF ALL ECON. POLICIES IS GREATER OUTPUT AND EMPLOYMENT, BUT…

Page 9: MYTHS AND REALITIES; SOUTH AFRICA’S IP

THE OBJECTIVES OF IP: SA AND THE NICS

• INDUSTRIAL POLICY METRICS ARE OUTPUT, EMPLOYMENT AND EXPORTS.

• THE IPAP (AND THE GROWTH PATH) ARE EMPLOYMENT

Page 10: MYTHS AND REALITIES; SOUTH AFRICA’S IP

EXAMPLES OF HOW THIS CAN LEAD TO WRONG POLICIES

• FIRST QUESTION FOR IP – WHAT ARE THE BINDING CONSTRAINTS.

WHAT IS THERE THAT GOVT. CAN DO TO IMMEDIATELY RAISE OUTPUT AND EXPORTS?

Page 11: MYTHS AND REALITIES; SOUTH AFRICA’S IP

THE INFRASTRUCTURE PROGRAMME: LOCAL PROCUREMENT

• HIGHER COSTS; DELAYS; RECONFIGURATION. • TIGHTENING THE BINDING CONSTRAINTS• A TAX ON BUSINESS IN GENERAL.

• AND IT WILL NOT WORK!!

Page 12: MYTHS AND REALITIES; SOUTH AFRICA’S IP

CHEAP FINANCE FOR LABOUR INTENSIVE ACTIVITIES

• LOWERING COST OF K ENCOURAGES LABOUR SAVING INVESTMENTS

Page 13: MYTHS AND REALITIES; SOUTH AFRICA’S IP

TARIFFS

• RAISING TARIFFS IN PURSUIT OF EMPLOYMENT

• TARIFFS ARE A TAX ON EXPORTERS

Page 14: MYTHS AND REALITIES; SOUTH AFRICA’S IP

MANY IP INTERVENTIONS ARE K INTENSIVE

• AUTOS• DEFENCE• NUCLEAR.

• INCONSISTENT EVEN IN ITS OWN TERMS

Page 15: MYTHS AND REALITIES; SOUTH AFRICA’S IP

HORSES FOR COURSES

• IP WILL MAKE A POSITIVE CONTRIBUTION TO EMPLOYMENT IF IT RAISES THE RATE OF INVESTMENT AND PRODUCTIVITY AND INCREASES EXPORTS.

• THE GROWTH IN EMPLOYMENT WILL BE LARGELY OCCUR IN THE NON-TRADED SERVICES SECTOR

Page 16: MYTHS AND REALITIES; SOUTH AFRICA’S IP

POLICIES TO CREATE EMPLOYMENT

• EMPLOYMENT POLICY – LABOUR MARKET REFORM

• PROMSISING JOBS VIA THE IPAP AND THE GROWTH PATH OBFUSCATES THE NEED FOR THIS DISCUSSION