The minister of trade and industry Rob Davies launched a R5.75 billion Manufacturing Competitiveness Enhancement Programme (MCEP), an incentive programme aimed at boosting competitiveness of manufacturing enterprises.
Davies said manufacturing and industrialisation are the key to the long term growth and economic well-being of all South Africans. The programme launched last week forms part of the country’s Industrial Policy Action Plan (IPAP).
“One of the key focus areas of the Industrial Policy Action Plan (IPAP) involves providing both encouragement and assistance to our manufacturers, especially in downstream labour intensive sectors to invest in raising their competitiveness,” said Davies.
“All of the developing countries that have been able to make the transition from low income to upper middle and high income status, primarily in Asia, have relied on the manufacturing sector as the main source and engine of growth. Growth in their manufacturing sectors has drawn labour from the less productive sectors such as the informal sector and rural subsistence farming thus raising incomes output, employment and incomes,” said Davies.
He added that South Africa’s problems with unemployment and stagnant growth could partly be explained by the less than satisfactory performance of the country’s manufacturing sector as the contribution of the manufacturing sector to the total output of the South African economy has been in decline since the mid 1970s.
“We are launching the MCEP under difficult conditions in the global economy. The first recession in 2008/2009 resulted in a loss of approximately a million jobs in the South African economy, 200 000 of which was in manufacturing. Since then the manufacturing sector has experienced difficulties arising from increasing domestic input costs in the form of rapid electricity increases and labour costs,” said Davies
“Our observation is that manufacturing entities that had neglected to invest in competitiveness were the most affected by the recession. We recognise the difficulty that the current uncertainty in the growth prospects of both the global and domestic economy places on manufacturers that may be considering investing in modernising their factories. The MCEP is thus aimed at encouraging our firms to make investments in competitiveness now rather than later,” said Davies.
The MCEP will comprise of a range of competitiveness-raising interventions that each manufacturer can apply for in accordance with their needs. The interventions are clustered around the production incentive, which will be managed by the Department of Trade and Industry (the dti), and a working capital facility which will be managed by the Industrial Development Corporation (IDC). .
MCEP should however not be looked at in isolation. Earlier in introducing the IPAP for 2012-2014 we identified a range of other interventions that seek to create greater market access for our manufacturers. Among these interventions is the Preferential Procurement Regulations. We hope that firms will take advantage of MCEP to gear themselves to take advantage of preferential procurement regulations as well as the infrastructure programme announced in the state of the nation, added Davies.
Firms can start applying for both clusters of interventions from 4 June 2012. The intervening two weeks is intended to give the department an opportunity to finalise an on-line application system.