Presentation to Portfolio Committee on Trade and Industry 19 October 2011

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Presentation to Portfolio Committee on Trade and Industry

19 October 2011

An Overview of Performance of The Enterprise Organisation’s (TEO) Incentive Programmes

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Name Designation

Lionel October Director General

Tumelo Chipfupa DDG: The Enterprise Organisation

Tsepiso Makgothi COO: The Enterprise Organisation

Francisca Strauss Chief Director: Incentive Administration

Tumelo Marivate Chief Director: Incentive Administration

Kaya Ngqaka Chief Director: Special Projects

Nonceba Mashalaba Chief Director: Product and Systems Development Unit

the dti DELEGATION

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BACKGROUND

•Follow-up to the Portfolio Committee presentation in July this year •TEOs understanding of the request is to provide incentive comprehensive report that includes the following;

(a)The years/months since implementation(b) the number of projects approved (per Province) (c) the value of projects approved(d) the total cost to the fiscus = amount/claims paid(e) the number of direct jobs created as a result of the incentive programmes (projected/actual)(f)cost per job

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CONTENT

•TEO strategic overview

•Incentive Programmes and estimated number of jobs

•Broadening Participation Cluster

•Manufacturing Investment Cluster

•Services Investment Cluster

•Competitiveness Investment Cluster

•Infrastructure Support Cluster

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TEO OVERVIEW

DTI Support for Industry

• DTI Incentives are focused on investment, job creation, competitiveness and broadening participation.

• Five programmes accounted for most of the reported job creation; automotive support under AIS, enterprise support under EIP, infrastructure support under CIP and IDZs as well as export promotion support under EMIA.

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Programme Number of Jobs supported

Critical Infrastructure Programme

31 778 direct permanent jobs

Enterprise Investment Programme

3134 direct full-time equivalent job

Automotive Investment Scheme (AIS)

15 014 direct full-time equivalent jobs

Business Process Services Incentive

3944 direct full-time equivalent jobs (projected jobs based on approvals until March 2011)

12-I tax allowance (from Sept 2010)

370 direct jobs (projected jobs based on approvals until March 2011)

FILM No estimate availableCo-operative Incentive Scheme


Export Marketing and Investment Scheme


Black Business Supplier Development Programme

Assisted enterprises employ between 8 & 20 employees

Industrial Development Zones

41,229 direct jobs (projected jobs for construction jobs and investor jobs combined)

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BROADENING PARTICIPATION CLUSTER

AIM• To promote broader economic participation in the economy through provision of incentive

support measures

OBJECTIVES• Increase participation in the economy by historically disadvantaged individuals• Stimulate economic activity in marginalized regions

STRATEGY• Facilitate the development of cooperatives• Promote the growth and development of black-owned business• Promote the growth and sustainability SMMEs• Promote a wider geographic spread of economic activity

INSTRUMENTS• Black Business Supplier Development Programme (BBSDP)• Co-operative Incentive Scheme (CIS)

STRATEGIC FOCUS

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OUTLINE OF PROGRAMMES

PROGRAMME PURPOSE TARGET OFFERING BUDGET 11/12

MAX FUNDING PER ENTERPRISE

Black Business Supplier Development Programme (BBSDP) 2002 to date

Broader participation of black-owned SMMEs through provision of business development services

• Majority black owned entities

• R250k to R35m turnover

• 1 year trading

• 80:20 cost sharing grant for business development services• 50:50 cost sharing grant for tools, machinery and equipment

R88m R1 000 000

Cooperative Incentive Scheme (CIS) 2006 to date

Broader participation by promoting the development of cooperatives

• Registered co-operative

• Operate in the emerging sector

• Manufacturing, retail & services

90:10 cost sharing grant for machinery, equipment & business development services

R44m R350 000

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BLACK BUSINESS SUPPLIER DEVELOPMENT PROGRAMME: PERFORMANCE

• 2002 to March 2011:

• 10 761 projects approved across all nine provinces

• R458,189,045 funds committed

• R303,889,103 total cost to fiscus

• Assessment of BBSDP in July 2010 showed that the incentive programme was successful in reaching its targeted beneficiaries: majority (82%) of sampled beneficiaries were small businesses (turnover less than R1million)

• Majority of BBSDP enterprises employ between 8 & 20 employees. 67% of Network Facilitators employ less than 4 people. Service Providers employ more than 7 people per enterprise.

• BBSDP assisted beneficiaries to improve service quality, increase revenue and turnover, leverage marketing opportunities, increasing the skills and competency of management and introduction of new products

• Recommendations from the study have resulted in the following developments within the revised BBSDP which was launched in September 2010:

• Cost-sharing of grant revised

• Integrated Information Management System

• Training for Network Facilitators compulsory

• Monitoring and Evaluation framework developed

Approvals: 658 6%

•Approval:5849 54%

Approvals:139 1%

•Approval: 606

•6%

•Approval: 530

•5%

•Approvals: 1216

•11%

•Approvals: 880•8%



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BROADENING PARTICIPATION CLUSTER BLACK BUSINESS SUPPLIER DEVELOPMENT

PROGRAMME: PERFORMANCE

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BROADENING PARTICIPATION CLUSTER COOPERATIVES INCENTIVE SCHEME:

PERFORMANCE

Approvals: 225%

Approvals: 100

22%

• 2005 to March 2011

• 455 projects approved over all nine provinces



• A study commissioned in June 2011 aims to determine why the majority of co-operatives assisted by the CIS to date are still performing poorly and to investigate challenges faced by the co-operatives (being finalised).

• 293 out of 360 co-operatives were interviewed implying that 81% of supported enterprises are still operating.

• Interviewed co-operatives created 1 426 jobs.

• Estimated average cost to the dti per job created is R64,883.

Approvals: 184%

Approvals: 358%

Approvals: 51%

Approvals: 7516%

Approvals: 6915%

Approvals: 255%

Approvals: 10623%

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BROADENING PARTICIPATION CLUSTER COOPERATIVES INCENTIVE

SCHEME: PERFORMANCE

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COOPERATIVES INCENTIVE SCHEME: CASE STUDY

MakQs Marketing and Supply Primary Co-operative

•Operate from Mthwalume under Umzumbe Municipality in Kwazulu Natal Province

•3 men and 2 women.

•Water purification bottling and branding.

•Employ extra 5 people

•Approved = R 199 014

•.Supply hotels, catering companies, municipalities and supermarkets

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Dinatla Primary Co-operatives

•Established in Galeshewe, Northern Cape

• 6 Women

• Bake bread and supply to local schools.

•Approved = R244 985

•Baking equipment and delivery van.

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Marchand Primary Co-operative’s

• 10 Co-operatives from Marchand, Northern Cape Province

• 50 members

• Compost manufacturing.

•Approved = R2,7m

•. Compost Turner Equipment, Landini Rex, Chip Machines and Digi Line platform Scale

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MANUFACTURING INVESTMENT CLUSTER

STRATEGIC FOCUS

AIM• To promote additional investment in the Manufacturing sector.

OBJECTIVES• Job Creation• Value addition• Investment in additional capacity

STRATEGY• Promotion of labour absorbing activities• Facilitation of increased value addition and beneficiation• Provision of world class and competitive infrastructure• Focus on priority sectors

INSTRUMENTS

• Manufacturing Investment Programme (MIP)• Foreign Investment Grant (FIG)• Automotive Investment Scheme (AIS)• Strategic Industrial Projects (SIP)• Investment and Training Allowance (12I)

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MANUFACTURING INVESTMENT CLUSTER OUTLINE OF PROGRAMMES



EIP: Manufacturing Investment Programme (MIP) - May 2008 to 2014

To promote investment in the manufacturing sector

Manufacturers with emphasis on lead sectors with investment up to R200m

•15-30% grant for qualifying investment in land & buildings, machinery & equipment and customised commercial vehicles•15% transportation costs for imported machinery & equipment by FDI

R674m R30m for the investment grant and R10m for the Foreign Investment Grant

Foreign Investment Grant (FIG) – linked with MIP (SMEDP 2000)

Promote foreign investment.Increasing foreign direct investment.Contributing to the country's economic growth.

Small, medium and large manufacturing enterprises

Foreign manufacturing enterprises.Approval of FIG grant is subject to the project being approved for SMEDP or EIP.

(SMEDP-linked)May 2008 (MIP-linked) R10 million

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Automotive Investment Scheme (AIS ) – July 2009

To grow the automotive sector through investment in light motor vehicle and components manufacturing that increases plant production volumes and strengthens the auto supply chain

•Light motor vehicle manufacturers producing 50,000 units per plant within 3 years•Component manufacturers that are part of light motor vehicle manufacturer supply chain

20-30% grant for qualifying investment in machinery & equipment, tooling & buildings.

R947m N/A

SIP – July 2001 to July 2005

Contribute to development and competitiveness of enterprises

Large scale industrial manufacturing enterprises

Investment in qualifying assets, brought into use for the first time within four years from date of approval, which are equal to or exceed R50 million in costs.

N/A30% of taxable

income

12 i (Investment and training allowance)- July 2010

To promote industrial upgrading and new investment in manufacturing

Medium to large manufacturers with investment between R30m and R1.5bn

• Training allowance: max R36 000 per person

• Max 55% of qualifying investment costs in machinery & equipment

N/A Investment allowance of R900m and training allowance of R30m

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Approvals: 182%

Approvals: 250

30%

• 2008 to March 2011


• R2,292,008,317 funds committed


• 23 996 projected direct jobs

• 2851 direct jobs supported

• Average cost per job supported is R69,583

• MIP figures above includes the Foreign Investment Grant figures.

• A macro-economic impact assessment of the EIP (MIP and TSP), was completed in January 2011 at the national and provincial levels using the Social Accounting Matrix model to measure the economic and socio-economic impact that will result from the EIP

• A total of 623 projects analysed, 395 from MIP and 228 from TSP

• The results summary presented on the next slide:

Approvals: 81%

Approvals: 22727%

Approvals: 152%

Approvals: 9812%

Approvals: 16319%

Approvals: 283%

Approvals: 395%


MANUFACTURING INVESTMENT PROGRAMME: PERFORMANCE

Overall National Macroeconomic Impact for the EIP (Constant 2009 prices), Total Approved Projects

Direct Impact

Indirect Impact

Induced Impact

Total Impact

Impact on Gross Domestic Product (GDP) [R millions]

16 022 26 125 26 273 68 420

Impact on Capital Formation [R millions] 16 737 56 118 53 329 126 184

Impact on Employment [Numbers]: 22 112 154 662 163 334 340 108

- Skilled Impact on Employment 8 323 34 710 38 877 81 910

- Semi-skilled Impact on Employment

7 864 65 276 65 333 138 472

- Unskilled Impact on Employment 5 925 54 676 59 124 119 726

Impact on Households [R millions]: 44 455

- Low Income Households 7 520

- Medium Income Households 9 154

- High Income Households 27 781

Fiscal Impact [R millions]: 20 959

- National Government 20 435

- Provincial Government 126

- Local Government 398

Impact on the Balance of Payments [R millions]

32 274 20

•The average annual impact of the EIP on SA’s GDP amounts to R68.4b. Thus each year R68.4b of GDP will be generated consisting of remuneration of employees, and returns on capital invested due to the construction and operation taking place with regards to EIP projects.•A R126b of capital is required on an annual basis to sustain all EIP projects.•The EIP sustains 304 108 job opportunities annually (41% of which is for semi-skilled labourers)•The total impact on household income amounts to R44.5b (17% of which goes to lower income households).• Annual fiscal impact amounts to approximately R20.9 billion per annum through direct and indirect taxes (which will be used to improve the quality of life of the average South African citizen.

EIP IMPACT STUDY

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GDP: R2251m5.4%Labour: 121714.9%

GDP: R20899m50.3%Labour: 12637350.8%

PROVINCIAL IMPACT OF EIP STUDY

GDP: R107m0.3%Labour: 11340.5%

GDP:R 6507m15.7%Labour: 3443113.8%

GDP: R718m1.7%Labour: 40071.6%

GDP: R3952m9.5%Labour: 195387.9%

GDP:R 5655m13.6%Labour: 4157816.7%

GDP: R1096m2.6%Labour: 48391.9%

GDP: R343m0.8%Labour: 46391.9%


MANUFACTURING INVESTMENT PROGRAMME: PERFORMANCE

Provincially, EIP impacts the most on Gauteng’s GDP and Labour.

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SMEDP PERFORMANCE DATA FROM INCEPTION (2000) TO MARCH 2011

ProvinceApproved Projects Funds Committed (R) Projected Investment (R)

Eastern Cape 705 R 256 344 231 R 2 221 756 910

Free State 277 R 88 120 082 R 619 231 114

Gauteng 2464 R 1 125 372 593 R 13 311 351 084

Kwazulu-Natal 1565 R 650 943 406 R 7 423 017 080

Limpopo 435 R 150 574 359 R 1 008 966 243

Mpumalanga 552 R 202 575 794 R 1 539 678 125

North West 146 R 45 541 533 R 381 566 502

Northern Cape 322 R 123 070 193 R 1 001 132 807

Western Cape 2386 R 940 722 710 R 7 865 015 221

TOTAL 8852 R 3 583 264 901 R 35 371 715 086

MANUFACTURING INVESTMENT CLUSTERSMALL AND MEDIUM ENTERPRISE DEVELOPMENT PROGRAMME

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Approvals: 13%

Approvals: 4

11%

• July 2009 to March 2011



• R 249,252,065 total cost to fiscus

• 15014 supported direct jobs

• Average cost per projected job is R143,579.

Approvals: 617%

Approvals: 1747%

Approvals: 822%

MANUFACTURING INVESTMENT CLUSTERAUTOMOTIVE INVESTMENT SCHEME- :

PERFORMANCE

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Approvals: 25%

Approvals: 14

35%

• July 2001 to July 2005


• R15,559 million value of projects

• R6.9 billion committed funds

• R 2,529 million tax forgone

• 7 977 supported direct jobs

Approvals: 25%

Approvals: 410%

Approvals: 923%

MANUFACTURING INVESTMENT CLUSTERSTRATEGIC INDUSTRIAL PROJECTS :

PERFORMANCE

Approvals: 38%

Approvals: 38%

Approvals: 38%

2525

AIS


STRATEGIC INDUSTRIAL PROJECTS

ProvinceCost to Fiscus (Tax

Forgone)Number of Approved

ProjectsDirect Jobs supported

Eastern Cape R270m4

2673

Free State R358m 392

Gauteng R492m 14 457

Kwazulu-Natal R711m 9 3492

Limpopo R230m 3 0

Mpumalanga R221m 3 135

North West R211m 2 78

Northern Cape 0 0 0

Western Cape R36m 2 50

Grand Total R2,529m 40 7977

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PURPOSE OF THE STUDY - conducted in 2004

• The key strategic question that this evaluation sought to address was “ Is the programme attracting the right projects?”.

• For the purpose of this study, right projects were defined by reviewing what constitutes a strategic project in the context of investment promotion and what are the objectives of the programme.

• Consequently the right projects were viewed to be projects that upgrade local industries, enable the higher value manufacturing and generally improve the overall cluster competitiveness.

MANUFACTURING INVESTMENT CLUSTERSTRATEGIC INDUSTRIAL PROJECTS

SIP STUDY

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KEY FINDINGS

There is a strong indication, that the level of awareness of the SIP programme and its complementary incentives is low amongst industrialists.

The awarding of the SIP allowance has played a decisive part in the investment decision for only a third of the respondents with approved projects.

The majority of the SIP-approved projects are forecasted to have positive impacts on their clusters. However, the level of direct job creation from the projects is forecasted to be low.

SIP is predominately attracting applications from existing companies who are expanding their South African operations.

The extra tax revenue enabled by the SIP incentive will more than pay for the cost of the incentive.

There is a paucity of applicants with focused labour intensive projects as well as a paucity of applications from foreign direct investors.

The key issue with regards to the administrative process is the time taken to process applications.

LESSONS

Generally, South Africa is struggling to attract the mega-million Rand investments which are also labour-intensive, due to its inferior competitive advantages compared to other regions.

The present criteria and design of SIP have resulted in the Adjudication Committee approving projects which pass the criteria, but which are not necessarily aligned to the specific development of sector objectives.

The key weakness with the SIP administration processes is the long processing time for applications. Secondly the process followed to assess applications from foreign applicants needs to be streamlined

MANUFACTURING INVESTMENT CLUSTERSTRATEGIC INDUSTRIAL PROJECTS

SIP STUDY

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INVESTMENT AND TRAINING ALLOWANCE (12i)

AIM

• To promote industrial upgrading and new investments in manufacturing

Objectives

• Improved energy efficiency with emphasis on cleaner production technology

• Innovative: focus on projects that will utilize processes of innovation, thereby changing pre-existing techniques

and the use of plant, machinery or equipment and these processes will materially improve production time,

reduce production costs, improve product quality or improve product longevity.

• General business linkages: acquiring goods and services from small, medium or micro enterprises

• Location in industrial development zone

• Direct employment creation and Skills development

Performance• Projects recommended by the Adjudication committee as of 31 march 2011: 4• Total investment: R4.1 billion• Investment allowance: R1.3 billion• Training allowance: R13.3 million• Direct Jobs: 370

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SERVICES INVESTMENT CLUSTER

STRATEGIC FOCUS

AIM• To promote additional investment in the Services sectors.

OBJECTIVES• Job Creation• Growth in tradeable services

STRATEGY• Promotion of labour absorbing activities• Growth of new service sectors

INSTRUMENTS

• Business Process Outsourcing and Offshoring (BPO&O)• Film & TV Production Incentive Support Programme• Tourism support Programme (TSP)

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BPS (Business Process Services) Incentive –January 2011

Encourage the creation of employment opportunities from the offshore market

Enterprises offering Business Process Services to the offshore market

• Operational Incentive of R112,000 per job created in 2011/12; R104,000 per job created in 2012/13 and R88,000 per job created in 2013/14.

R143.1m Unlimited

Film & TV Production

2004 to date

To grow the film industry to create jobs and to transfer skills

Local and foreign film producers

•15% of qualifying South African Expenditure for foreign films

•25-35 of qualifying South African Production Expenditure for local films

R260m R20m

EIP: Tourism Support Programme May 2008

To promote job creation in non traditional tourism clusters

Tourism businesses •15-30% grant for qualifying investment in land & buildings; furniture, fittings & equipment; and tourism vehicles

Part of MIP budget

R30m*

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Approvals: 211%

Approvals: 5

28%

Approvals: 16%

Approvals: 633%

Approvals: 16%

Approvals: 211%

Approvals: 16%


BUSINESS PROCESS OUTSOURCING & OFFSHORING: PERFORMANCE

• December 2006 to March 2011:

• 18 projects approved across all nine provinces




• R35,851 average cost per job

• A review and benchmarking of the government assistance and support (GAS) that is currently offered by the BPO sector was conducted in 2010.

• The objective was to analyse performance of and benchmark SA incentives, and make future recommendations

• SA’s current incentives were compared with established offshore locations’ (India and Philippines) and Tier 2 competitors (Egypt, Malaysia and Kenya)

• A key finding was that countries attempt to address most elements of the BPO cost structure in their incentives and most provide significant incentives that address operational expenditure (opex) in addition to capital expenditure (capex).

• The benchmarking also shows that the total value of incentive per Full Time Job Equivalent (FTE) provided by South Africa is comparable to established destinations but lesser than that of emerging destinations.

• SA’s incentives should include opex and offered for new offshore jobs, in order ensure competitiveness and achieve maximum impact.

• The dti should continue to market SA’s value proposition globally for foreign direct investments through missions.

• Following the study, the dti launched a revised BPS incentive programme effective 1 January 2011.• the dti developed a targeted Value Proposition targeted to economic distress areas.

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SERVICES INVESTMENT CLUSTER BUSINESS PROCESS OUTSOURCING & OFFSHORING: PERFORMANCE

BPO &O STUDY

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Approvals: 110%

Approvals: 1

10%

Approvals: 550%

Approvals: 330%


BUSINESS PROCESS SERVICES INCENTIVE: PERFORMANCE

• January 2011 to March 2011:



• 3 944 projected direct jobs

• R40 000 estimated average cost per job

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FILM & TELEVISION PRODUCTION INCENTIVE PROGRAMME: PERFORMANCE

Shooting weeks:

WC – 189 (59%) Gau – 94 (30%)

Mpu – 0 (0%) NW – 0 (0%)

KZN – 15 (5%) NC – 3 (1%)

EC – 6 (2%) Limp – 5 (1.5%)

FS – 5 (1.5%)

•169 films approved

•R704,165,844 funds committed

•R377,620,856 total cost to fiscus

Various box office hits supported:• Spud, Invictus, Jock and Oh Shucks it’s 2010.• Chanda’s Secrets/Life - which was filmed in Limpopo and tells the story of a 12 year old girl whose family is struck by illness and she becomes the head of the family - was nominated within the best nine films for an Oscar.

•Skoonheid won the Queer Palm award at the 2011 Cannes International Film Festival.

•Winnie, Lucky, Skoonheid premiered at the Toronto International Film Festival 2011.

• Liefling with a full South African cast was the first Afrikaans musical to be made in South Africa in more than 20 years.

• The co-production, Judge Dredd with a budget of R263 million is the first film production to be made at the Cape Town Film Studio.

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• Findings of the study by the Independent Production Organization (IPO), The Production Alliance (TPA), Documentary Filmmakers Association (DFA) and the South African Screen Federation (SASFED) on the impact of the global financial crisis on foreign productions made in South Africa dated 25 June 2009.

• QSAPE ratio – QSAPE attracted for each R1.00 of incentive paid– South African 4.21– Co productions 3.39– Foreign 7.91

• Economic multiplier of 2.5• Fiscal returns – Report dated 2009 indicate that an amount of R338m in incentives generated

taxes of R413m

Challenges• Economic downturn- fewer movies, smaller budgets• Fierce competition between countries to attract film “dollars”

Amendment to guidelines• Milestone payments for South African films• Removalof the capped incentive amount

FILM AND TV STUDY

SERVICES INVESTMENT CLUSTERFILM & TELEVISION PRODUCTION INCENTIVE

PROGRAMME: PERFORMANCE

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Winnie

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Approvals:328%

Approvals: 105

26%

• 2008 to March 2011





• Average cost per job supported is R226,289

Approvals: 154%

Approvals: 54%

Approvals: 318%

Approvals: 5514%

Approvals: 4010%

Approvals: 297%

Approvals: 4010%


TOURISM SUPPORT PROGRAMME: PERFORMANCE

COMPETITIVENESS INVESTMENT CLUSTER

STRATEGIC FOCUS

AIM• To promote industrial upgrading and the growth of South African export of goods

and services in the global economy.

OBJECTIVES• Increase exports and value addition

STRATEGY• Promote access for South African goods and services to export markets • Promote quality and efficiency of South African goods & services

INSTRUMENTS• Export Marketing & Investment Assistance (EMIA)• Sector Specific Assistance Scheme (SSAS)• Capital Projects Feasibility Programme (CPFP)

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Export Marketing and Investment Assistance (EMIA ) 1997 to date

To develop export market for SA goods and services and recruit FDI

Export ready manufacturers

Cost sharing grant for exhibition costs, marketing material & research in foreign markets

R17,5m N/A

Sector Specific Assistance Scheme (SSAS) 2007 to date

To develop export market for SA goods and services and recruit FDI

Non profit business organisations (export councils, Business Associations, Joint Action Groups) in priority sectors

Cost sharing grant (max 80%) for developmental projects

R4m N/A

Capital Projects Feasibility Programme 2005 to date

Promote the export of SA capital goods and services

Capital goods sectors and consulting engineers

Cost sharing grant (max 55%) for feasibility study costs

R9.8m R5m

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EXPORT MARKETING & INVESTMENT ASSISTANCE: PERFORMANCE

Approvals: 631%

Approvals: 3573

49%

Approvals: 260%

Approvals: 211429%

Approvals: 1122%

Approvals: 2644%

Approvals: 95413%

Approvals: 1592%

Approvals: 300% • August 1997 to 31 March 2011




• 10 545 jobs supported

• Average cost per job supported: R33,273

• Promote greater participation of smme, hdi and large companies

• On-going training on export readiness

• Focusing on exhibition , makert research, fdi and mission participation (local & international)

• Eligible applicants are manufacturers and service oriented companies.

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EMIA & SSAS/Emerging Exporters Provincial Spread

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HDIs & EE: % of Exporters Assisted by EMIA

Period: 2002 - 2011

HDIs and SSAS/Emerging Exporters

• 22 Feasibility projects approved, 3 projects are bankable.

• Total commitment: of R67,272,343

• Total cost to fiscus: R32,219,901

• Sectors: Agro-processing, mining & infrastructure.

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COMPETITIVENESS INVESTMENT CLUSTER:

CAPITAL PROJECTS FEASIBILITY PROGRAMMEPERFORMANCE

APPLICANT PROJECTS LOCATION

PGBI Greenfieids sugar cane Ghana

E+PC Engineering & Projects (Pty) Ltd

Duration Gold Zimbabwe

Kwezi V3 Engineers Chingola Railway Ghana

Kovacs Engineering Residential & resort development

Oman

Netgroup Int. (Pty) Ltd Wind farm Lesotho

Afrinaissance Mining Resources Alluvial gold mine Mozambique

Econologistics Tete industrial park Mozambique

Consulmet Metals Gold beneficiation plant Kyrgyzstan

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INFRASTRUCTURE SUPPORT CLUSTER

STRATEGIC FOCUS

AIM• To promote additional investment in the Manufacturing sector.

POLICY OBJECTIVES• Reduce the costs of logistics and infrastructure• Skills Development

STRATEGY• Promotion of labour absorbing activities• Facilitation of increased value addition and beneficiation• Provision of world class and competitive infrastructure• Focus on priority sectors

INSTRUMENTS

• Critical Infrastructure Programme (CIP)• Industrial Development Zones (IDZs)

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INFRASTRUCTURE SUPPORT CLUSTER CRITICAL INFRASTRUCTURE PROGRAMME

• Critical Infrastructure Programme (CIP) is a 70:30 cost-sharing grant intended to leverage strategic investment projects (green- and brownfields) by financially supporting infrastructure critical to such projects, enabling them to establish. The programme was launched in August 2000.

• Since inception, the programme supported 42 investment projects with an estimated investment value of R88,4 billion.

• The grant has mainly supported investment mining, manufacturing, energy, chemicals, tourism and steel sectors.

• The CIP grant disbursed to projects amounts to R1,147,054,564.

•The approved projects will support an estimated 47 219 direct permanent jobs.

• Total infrastructure development cost by all projects amounts to R5.3 billion.

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7 investment projects worth R15,3 bnSector; mining, manuf.9900 direct jobs

9 investment projects worth R7,5bn

Sector autom,manuf, chemicals, energy. 5700 direct jobs

4 investment projects worth R15 bnSector; mining6300 direct jobs

1 investment project worth R1.1 bnSector; Film300 direct jobs

2 investment projects worth R3.1 bnSector; Manuf, energy3200 direct jobs

10 Investment projects worth R21,9 bnSector; manf., mining, chemicals, Energy, Steel 14000 direct perm jobs

6 Investment projects worth R11,3 bnSector; mining6100 direct jobs

3 Investment projects worth R12 bnSector mining1300 direct jobs

• August 2000 to 31 March 2011



• R1,147,054,564 total cost to fiscus

• 47,219 projected direct jobs

• 31778 jobs supported

• R36,096 average cost per job


Kalagadi Manganese (Pty) Ltd

Kalagadi Manganese (Pty) Ltd is company owned by Kalahari Resources ( Women owned) , IDC and Acerlomittal.Critical Infrastructure Programme supportThe CIP contribution amounts to R50,2 million towards the following infrastructure items:• Bulk electrical infrastructure• Rail connection to the main Railway line• Access roadsThe project has estimated R4, 3 billion worth of investment and will consist of:•An ore preparation facility and sinter plant which will beneficiate the ore into 2.4 million tons per annum of a high grade sinter. •A smelter located in Coega that will produce 320 000 tons per annum of high carbon ferromanganese.•The smelter will consume some 700 000 tons per annum of the sinter leaving 1.7 million tons for export.•The project has already invested R6,1 billion in underground mine in the Northern Cape and further R4,2 billion will be invested towards the smelter at Coega in the Eastern Cape •Kalagadi Manganese project estimated to create 877 direct permanent job opportunities .• To date 56 direct permanent jobs were created


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Impact study of CIP

IMPACT OF CIP TO THE ECONOMY (study done in 2009)• CIP is one of the most effective grant scheme in SA in terms of value for

money. The long term value added to the wider economy for every R1 allocated to the scheme is considerable.

• On average R67 worth of new capital investments is leveraged in the economy for every R1 CIP grant allocated to the project.

• Compared with Municipal Infrastructure Grant (MIG) between 2005/06 to 2007/08, total MIG allocations totaled R5.4 bn and CIP R700m, but CIP has been able to leverage more than 50% of the total MIG funding allocated by National Treasury.

• Compared with Agriculture, Transport and Government Services, CIP performs best in terms of output, leveraging investments to the economy and job creation.

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IMPACT OF CIP TO THE ECONOMY• 36 investments supported by CIP led to 3% increase in investments in the economy –

translating into 1.14% increase in GDP and 2.8% increase in exports (2000 prices).

• From inception to 2009, CIP created 23915 direct jobs abd 64615 construction job opportunities – leading to a 0.3% reduction in national unemployment rate.

• CIP has benefited households, mainly in urban areas where CIP investment projects are located.

CHALLENGESSubdued economic growth that has negative effect on investment demand

SOLUTIONSRevised guidelines for CIP that will lead to accommodation of other sectors of the economy

Improved marketing of the scheme to attract more applications

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Impact study of CIP

Background Background • The South African government approved the Industrial Development

Zones (IDZ) Programme in 2000.

• The main aim of the programme was to improve South African competitiveness through attraction of foreign direct investments and export of value added commodities. This would in turn create jobs and promote linkages between zone and non-zone enterprises.

• An Industrial Development Zone (IDZ) can be defined as a purpose-built industrial estate linked to an international port or seaport that leverages both domestic and foreign fixed direct investment in value-added and export-oriented manufacturing industries and services.

INFRASTRUCTURE SUPPORT CLUSTERINDUSTRIAL DEVELOPMENT ZONES (IDZs)

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Background Background

• So far there are 4 designated IDZs, that is– Coega (designated in 2001 and issued with Operator Permit in 2007)

– East London IDZ (designated in 2002 and issued with operator permit in 2007)

– OR Tambo International IDZ (designated in 2002 and issued with Operator Permit in 2010)

– Richards Bay IDZ (designated in 2002 and issued with Operator Permit in 2009)

– Performance:– Total value of investment: R 15,749,650,000

– Total cost to fiscus: R 4,830,842,000

– Direct projected jobs: 41 229 (construction and investor jobs combined)

– Average cost per job: R117,171

• Potential designations– Saldanha Bay


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•Industry &•Service Area

•Customs•Secured

•Area

•Services•Enterprises

•One •Stop

•Center

•IDZ•An IDZ is located adjacent to a •port allowing importation of raw •materials, plant machinery & •equipment; and the export of

•finished products;

•IDZ’s are considered part of the Customs Territory of South Africa.

•Coega •EL

• RCB

•ORT

•Customs Territory•of

•South Africa

•Customs•Controlled

•Area

Industrial Development ZoneIndustrial Development Zone

•Saldanha

•There are 4 designated IDZs, •i.e. Coega, East London, O.R. •Tambo International Airport •& Richards Bay.•A new IDZ is about to be •designated at Saldanha

East London IDZEast London IDZ______________________________________

•Containerization •Multi-Level Car Terminal

•Auto-Supplier Park •Vehicle Storage Facility

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Coega IDZCoega IDZ______________________________________

•Great office space •Automotives Logistic Park

•Road Infrastructure •Frozen Yoghurt exporter

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Richards Bay IDZRichards Bay IDZ______________________________________

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OR Tambo International Airport IDZOR Tambo International Airport IDZ______________________________________

OR T IDZ Phase 1

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• In line with the Industrial Policy Action Plan and the New Growth Path there is a need to regionally diversify the manufacturing industries in new economic regions in addition to the traditional industrial hubs.

• the dti has through IDZ policy review process undertook to expand the IDZ programme into a Special Economic Zones Programme (SEZ) that will consist of IDZs and other types of specialised zones.

• The SEZ, if effectively managed, can be useful instruments for promoting a regionally diverse manufacturing industry and regional coherence and integration.

• In order to achieve that the following gaps are being address:– Governance model of the industrial zones,– Stakeholder coordination (ports, rail, electricity, customs, permits, etc),– Re-look at the funding and business models,– Strategies to attract more investors to the SEZ (IDZs and others).

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IDZ STRATEGIC DIRECTION

Actions taken to improve the IDZsActions taken to improve the IDZs___________________________________

• New dedicated Special Economic Zones Act

• New Governance Model

• Planning and coordination structures

• Funding mechanisms

• Provision of infrastructure

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59

Thank you

Presentation to Portfolio Committee on Trade and Industry 19 October 2011

Documents

Transcript of Presentation to Portfolio Committee on Trade and Industry 19 October 2011