Transcript South Africa`s industrial policy - International Economic Association

South Africa’s industrial policy:
progress and constraints
Economic Association (IEA) /
World Bank Roundtable
New Thinking in Industrial Policy
22-23 May 2012
Context
• Apartheid industrial development trajectory (pre1994)
– Industrialisation built on ‘Mineral Energy Complex’
(MEC) sectors: Mining + capital and energy intensive
mineral processing sectors (steel, petro-chemicals,
aluminium etc.)
– Unstrategic / incoherent approach to development of
‘downstream’ manufacturing sectors
– However, important capabilities were developed in a
range of sectors, e.g. autos, agro-processing, metal
fabrication, capital goods
2
Context
• Orthodox reforms (post-1994)
– Monetary policy: inflation targeting, high real interest rates
and capital account liberalisation
– Fiscal policy: debt reduction, weak infrastructure
investment, increasing social expenditure
– Widespread tariff liberalisation with narrow pockets of
sector support: Automotives, Clothing / Textiles
– Commercialisation of state assets, weak oversight and
regulatory mechanisms to discipline monopoly pricing
– Skills: weaknesses in education and skills development
institutions
– *Black Economic Empowerment: narrow transfer of
ownership stakes in existing sectors and companies
3
SA’s industrialisation policy evolution
Average industrial tariff, 1990 - 2006
4
Source: ITAC
Industrial Policy Approach
• National Industrial Policy Framework (NIPF): 2007
– Emphasises need for economy-wide policy coherence
• Annual Industrial Policy Action Plan (IPAP)
– Three year rolling plan, updated annually, ten year outlook
– Cross-cutting / transversal constraints, levers and policy proposals
– Sector strategies
• High global growth and intermediate barriers to entry
• “Self discovery” processes with sector stakeholders
• Policy levers
• Reciprocity requirements
• Review / adaptation
– Capacity building
– “Voice” in relation to intra-governmental co-ordination / “state failure”
• Implementation overlapped with large external (currency, global crisis)
and internal (electricity price) shocks
5
Diagnosis: employment
Tradable sectors critical in context of high unemployment and skills constraints
Ratio of semi- and unskilled labour in tradable and non-tradable sectors, 1970 - 2010
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2010
2009
2008
2007
2006
Manufacturing
2005
2004
2003
2002
2001
2000
Public non-tradeable
1999
1998
1997
1996
1995
1994
1993
1992
Private non-tradeable
1991
1990
1989
1988
1987
1986
1985
Source: Quantec RSA Standardised Industry Database
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
Tradeable
6
Diagnosis: role of manufacturing
IPAP: value-added sectors with high employment and growth multipliers
Sectoral growth and employment multipliers
5
Low employment multipliers &
strong backward linkages
High employment multipliers &
strong backward linkages
4.5
4
Motor vehicles, parts &
accessories
Total Backward linkages
3.5
Paper & paper products
3
Basic chemicals
Basic iron & steel
2.5 Basic non-ferrous metals
EGW
Business services
2
6
1
2
3
5
4
7
11
81
9
Leather & leather products
Textiles
Food
14
1
Other manufacturing
Transport & storage
Mining
Financial services
13
Wood & wood products
Excl. medical, dental & vet
Wholesale & retail trade
Wearing apparel
Agriculture
1. Other chemicals & manmade fibers
2. Furniture
3. Plastic products
4. TV, radio and comm equip
5. Electrical machinery and
apparatus
6. Paper and paper products
7. Rubber products
8. Non-metallic minerals
9. Beverages
10. Glass & glass products
11. Professional & scientific
equip
12. Metal products excl.
machinery
13. Machinery & equipment
14. Footwear
Government services
1.5
1
0.5
Low employment multipliers
& weak backward linkages
High employment multipliers
& weak backward linkages
0
0
Source: DTI, CSID
7
Employment multipliers
7
14
Diagnosis: currency
Pervasive currency overvaluation and volatility
Balance on current and financial account, REER 1990Q1 – 2011Q4, R’m / Index (1990=100)
8
Source: SARB
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Diagnosis: currency
Strong correlation with international commodity prices ...
Metals
and Minerals Prices, 1960 – 2011, Index (2005 = 100)
225
200
175
150
125
100
75
50
25
0
9
Source: World Bank
Diagnosis: currency
... despite no real economy commodity boom ...
Mining country growth, 2001-2008, real US$
10
Source: Global Insight
Diagnosis: currency
... exacerbated by high real interest rates and quantitative easing
SA short term real interest
ratesterm
versus
developing
countries,
2000
- 2011, %
SA real short
interest
rates vs
Developing
Countries
7.00
6.00
5.00
4.00
3.00
2.00
1.00
-
2000
2001
2002
2003
2004
2005
Mean
Source: SARB
Median
2006
SA
2007
2008
2009
2010
2011
11
Diagnosis: manufacturing
Manufacturing has borne brunt of currency overvaluation and global crisis
Trade balance by sector 1995Q1 - 2011Q3, Rm
15000
10000
5000
0
-5000
-10000
-15000
-20000
-25000
Agriculture, Forestry & Fishing
Source: Quantec RSA Standardised Industry Database
Mining
Manufacturing
12
Diagnosis: manufacturing
Manufacturing has borne brunt of currency overvaluation and global crisis
Employment in the manufacturing sector, 2008Q1 - 2011Q4, ‘000
1350
1300
1250
1200
1150
1100
1050
q1 08
Source: StatsSA
q2 08
q3 08
q4 08
q1 09
q2 09
q3 09
q4 09
q1 10
q2 10
q3 10
q4 10
q1 11
q2 11
q3 11
13
Diagnosis: industrial financing
Rapid growth of private credit extension ... but not into fixed investment
Private credit extension, 1990 - 2010, R’m (2005)
2 250 000
1 750 000
1 250 000
750 000
250 000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-250 000
Investments
Source: SARB
Bills discounted
Installment-sale credit
Leasing finance
Mortgage advances
Other loans and advances
14
-40,000
Business services
Water supply
Paper and paper products
Other manufacturing
Building construction
Excluding medical, dental and veterinary services
Machinery and equipment
Food
Wood and wood products
Catering and accommodation services
Other chemicals and man-made fibers
Civil engineering and other construction
Excluding medical, dental and veterinary services
Source: Quantec RSA Standardised Industry Database
Motor vehicles, parts and accessories
Medical, dental and veterinary services
Non-metallic minerals
Basic chemicals
Electricity, gas and steam
Wholesale and retail trade
Communication
Transport and storage
Other mining
Finance and insurance
Civil engineering and other construction
Catering and accommodation services
Other chemicals and man-made fibers
Printing, publishing and recorded media
Coal mining
Glass and glass products
Printing, publishing and recorded media
Paper and paper products
Wood and wood products
Machinery and equipment
Agriculture, forestry and fishing
Metal products excluding machinery
Other producers
Water supply
Food
Glass and glass products
Coal mining
Gold and uranium ore mining
Basic iron and steel
Coke and refined petroleum products
Basic non-ferrous metals
Beverages
Textiles
Wearing apparel
Other transport equipment
Footwear
Furniture
Rubber products
Tobacco
Leather and leather products
Television, radio and communication equipment
Plastic products
Professional and scientific equipment
General government services
Finance and insurance
Business services
Other mining
Transport and storage
Wholesale and retail trade
Communication
Electricity, gas and steam
Basic chemicals
Medical, dental and veterinary services
Non-metallic minerals
Motor vehicles, parts and accessories
Building construction
Other manufacturing
15
100,000
0
80,000
20,000
60,000
40,000
40,000
60,000
20,000
80,000
0
100,000
-20,000
-20,000
General government services
Change in capital stock between 2000 and 2009 across all economic sectors R’m (2000)
-40,000
Real 2000 prices
Diagnosis: industrial financing
Fixed investment sectorally concentrated in consumption-driven sectors
Real 2000 prices
Diagnosis: industrial financing
Industrial financing constrained not just by cost but by term
Nedbank distribution and term of loans, 2009, R’m
Rm
2009
% of Total
Home loans
149229
32%
Commercial mortgages
76364
17%
Properties in possession
887
0%
Term loans
68321
15%
Credit cards
7334
2%
Overnight loans
12420
3%
Overdrafts
11093
2%
Other loans to clients
45382
10%
Leases and instalment sales
64128
14%
Preference shares and debentures
16633
4%
Trade and other bills
282
0%
Reverse repurchase agreements
8026
2%
Gross loans and advances
460099
Rm
<3 months
Cash and cash equivalents
(including mandatory reserve
deposits with central bank)
16 382
Other short-term securities
13 715
Derivative financial instruments
3 569
Government and other securities
537
Loans and advances
83 758
Other assets
2 261
Assets
120 222
Total equity
Derivative financial instruments
2 917
Amounts owed to depositors
338 632
Other liabilities
8 780
Long-term debit instruments
Liabilities and equity
350 329
Net liquidity gap
-230 107
>3 months >6 months >1 year
<6 months <1 year <5 months
1 261
834
2 020
16 463
1 501
2 070
7 607
31 070
65
2 073
3 792
18 660
153 354
>5 years
Nondetermined Total
1 928
2 445
7 159
165 656
20 578
42 248
177 944
175 260
898
50 084
1 103
57 810
3 037
19 888
3 596
2 941
32 523
34 451
44 984
15 949
50 982
-30 404
500
59 413
-17 165
9 184
32 109
145 835
10 400
16 937
158 323
60 933
-26 482
18 375
18 550
12 710
35 983
450 301
34 784
570 703
44 984
11 551
469 355
24 729
20 084
570 703
16
Source: Letsema (Nebank)
Diagnosis: infrastructure
Large and rapid electricity price increases
Eskom tariff increases, 1996 – 2011, %
17
Source: Eskom
Diagnosis: infrastructure
Port charges amongst the highest in the world
Average cost per vessel, US$
$600,000.00
$500,000.00
$400,000.00
$300,000.00
$200,000.00
$100,000.00
$0.00
Terminal Handling Charge
Source: AIDC Port Benchmarking Study, 2007
Cargo Dues
Sea Side Costs
18
Diagnosis: infrastructure
Infrastructure investment scaling up but de-linked from manufacturing
Public investment and trade balance: metals and machinery1990 – 2009, R’m (2000)
200000
150000
50000
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
1990
R millions ( 2005)
100000
-50000
-100000
-150000
General Government Gross Fixed Investment
Public Corporations Gross Fixed Investment
Trade Balance: Metal fabrication, Machinery, Transport Equipment
Source: SARB, Quantec
19
Diagnosis: manufacturing
Auto’s and machinery major diversifiers since 1994
MVA annual average growth:1994-2011 and share 2011, R’2005 prices
Sector
Furniture
Other chemicals and man-made fibers
Basic chemicals
Machinery and equipment
Motor vehicles, parts and accessories
Basic iron and steel
Coke and refined petroleum products
Food
Electrical machinery and apparatus
Basic non-ferrous metals
Professional and scientific equipment
Paper and paper products
Plastic products
Metal products excluding machinery
MVA
Growth
1994-2011
9.2%
9.1%
6.9%
6.8%
6.6%
5.8%
5.6%
5.3%
5.0%
3.3%
2.5%
2.2%
1.7%
1.5%
MVA
Share
2011
1.1%
6.9%
5.8%
6.6%
8.0%
5.4%
7.5%
12.5%
2.9%
2.8%
0.6%
3.3%
2.5%
5.1%
Sector
Rubber products
Television, radio and communication equipment
Wearing apparel
Other manufacturing
Wood and wood products
Glass and glass products
Non-metallic minerals
Printing, publishing and recorded media
Textiles
Tobacco
Other transport equipment
Beverages
Footwear
Leather and leather products
MVA
MVA
Growth Share
1994-2011 2011
1.4% 0.9%
1.3% 0.9%
1.2% 2.0%
1.2% 6.8%
1.0% 2.2%
1.0% 0.6%
0.7% 3.1%
0.7% 3.0%
0.2% 1.3%
0.2% 0.7%
0.1% 0.9%
-0.3% 5.6%
-1.1% 0.4%
*
0.4%
20
Source: Quantec RSA Standardised Industry Database
Diagnosis: economy
Two speed economy: consumption vs production driven sectors
Growth in production and consumption- driven sectors and trade balance, 1994 – 2010, R’m (2005)
800 000
700 000
600 000
500 000
400 000
300 000
200 000
100 000
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-100 000
-200 000
Agriculture, Foresty and Fishing
Manufacturing
Construction (Contractors)
Transport, Storage and Com m unication
Balance on Current Account
Source: Quantec RSA Standardised Industry Database
Mining and Quarrying
Electricity, Gas and Water
Wholesale and Retail Trade, Catering and Accommodation
Finance, Insurance, Real Estate and Business Services
21
IPAP: Progress – Transversal KAPs
• Leveraging Procurement
– Amendments to procurement regulations: designation of
‘fleets’ for local production
•
•
•
•
•
Rail coaches, wagons, locomotives
Electricity pylons
Buses
Clothing / Textiles / Footwear
Further designated sectors to follow
– Designation methodology and research
• Industry capabilities and competitive structure
• Appropriate level of local content
• Modalities to avoid excessive price premia/ promote
dynamic competition
• Scaling up over time
22
IPAP: Progress – Transversal KAPs
• Industrial financing
– Re-orientation of Industrial Development Corporation (IDC)
funding
• R102bn ($82bn) for IPAP and New Growth Path sectors over five
years
– Manufacturing Competitiveness Enhancement Programme
(MCEP)
• R5.7bn ($725m) additional funding to upgrade existing
manufacturing capacity, new investments and expansions
• ‘Matrix’ incentive with various access windows
–
–
–
–
–
Investment: new, expansions, technology upgrades
Interest make-up and working capital
Firm and cluster competitiveness upgrading
Standards and conformity assessment
Feasibility studies
23
IPAP: Progress – Transversal KAPs
• Tariffs and standards
– Strategic rather than “high”or “low”tariff regime
• Informed by sectoral analysis
• Tariff reductions / rebates: intermediate inputs, especially in
sectors with market dominance
• Tariff increases: sectors with potential for employment and valueadded improvements
– Green, energy and water efficiency standards
• Required to create / facilitate new sectors: biofuels, renewable
energy, solar water heating
• Increase energy efficiency in context of supply constraint and rising
electricity prices
– Stronger enforcement
• Customs fraud
• Non compliant products
24
IPAP: Progress – Transversal KAPs
• Competition policy
– Focus of competition authorities on intermediate
inputs to production sectors and goods and services
for poor and working class households
– Particular problem with import parity pricing of
intermediate inputs due to lack of regional competition
and high logistics costs
– Removed / reduced duties on most intermediate
inputs: steel, chemicals etc.
– Priority to introduce greater competition into steel
sector
25
IPAP: revamp major sector strategies
• Automotives
– Inheritance of a deeply uncompetitive automotive industry in 1994
– Motor Industry Development Programme (since 1995)
• Import Rebate Credit (IRCC) for exports, with declining tariffs (80% - 1994 to 25% - 2012)
• IRCC useds: investment, import vehicles / components, sell to other importers
– Key achievements
• Vehicle production increased from 388,442 in 1995 to 534,490 in 2007
• Vehicle exports increased from 15,764 in 1995 to 239,465 in 2010
– Automotive Production and Development Programme (from 2013)
• Investment Allowance (on budget) + IRCC earned against production / value added
• Minimum volume requirement, targetting 1.2m vehicles per annum by 2020
• Broaden scope to mini-bus taxis, buses and trucks
– Key challenges
• High import penetration and intensity of production
• Insufficient number of domestic Tier 1 component suppliers – MNC dominance
26
IPAP: revamp major sector strategies
• Clothing, Textiles, Leather, Footwear
– Duty Credit Certificate Scheme (1995-2009)
• Substantial decline due to fierce global competition (especially end of MFA in 2005), currency
strength and volatility, illegal imports and insufficient competitiveness
• DCCS did not work – only applicable to small pool of exporters and promoted imports through
duty credits
– Clothing Textiles Competitiveness Programme (from 2009)
• Priority to recapture domestic market share through leveraging ‘economies of proximity’
• Production credits earned which can only be redeemed against specific competitiveness
enhancing investments
–
–
–
–
Machinery and equipment
Process and product improvements
Skills upgrading
‘Cluster’ initiatives e.g. IT systems linking retailers and manufacturers
– Key achievements
• Arrested employment losses with modest increases by 2011
• Buy-in of a number of domestic retailers
– Key challenges
• Currency overvaluation
• Illegal imports
27
IPAP 2012: Key sector focus
• Green industries and industrial energy efficiency
– Solar and Wind generation componentry
• Leverage Renewable Energy Independent Producers Programme (REIPP) –
procurement of 17.8GW by 2030
• Minimum and rising levels of local content with each round of procurement (approx.
1GW per round)
• Target componentry in Solar PV, Wind and Solar CSP
• Develop financing mechanism for ‘lateral migration’ of companies with relevant
engineering, fabrication, casting capabilities
• Develop financing mechanism for testing and certification to meet OEM standards
– Solar Water Heaters
• New building regulations require most new buildings to install SWH or similar
technologies
• Designation of SWHs purchased by public entities
• Work with insurance industry to
– Industrial energy efficiency
28
IPAP 2012: Key sector focus
• Metal Fabrication, Capital and Transport Equipment
– Rail
• Leverage large rail upgrade capex
• Designations related to key componentry into loco’s, wagons and
coaches
• Appropriate pre-shipment financing
– Electricity
• Leverage large coal and nuclear upgrade capex
• Designations in range of areas
• Appropriate financing mechanisms
– Mining
• Linkages to major mining company procurement chains
• Beneficiation strategy / Mining obligations
29
IPAP 2012: Key sector focus
• Agro-processing
– Biofuels
• Drive technical work related to mandatory feed-in of minimum levels of
biofuels into national fuel stock
• IDC financing for farming and refining operations
– Food-processing, Beverage and Confectionary
• Identification of export opportunities in net food-importing countries
• Product development
• Standards
– Import replacement opportunities
• Soybean meal and oil
• Furniture
• Processed food products
30
IP as “voice”: intra-governmental coordination / “state failure”
• “Voice” for co-ordination / remedial action within the state
• Accelerated progress with respect to industries requiring
complex multi-departmental co-ordination, driven by
Minister’s IPAP forum and through the Economic Cluster,
such as
– Renewable energy
– Biofuels
– Water licences for forestry, paper and pulp and agriculture
• Port tariff rebates for Manufacturers of R1bn
• ‘Moderation’ of recent electricity price increases from 25%
to 16%
31
Capacity building
• Recruitment
– Hire best senior management possible
– Hire young Master’s graduates and ‘incubate’ with capable
mentorship
• Dedicated university programme in economic development
for internal capacity improvement / recruitment pool
– Certificate
– Honours
– Masters
• African Programme on Rethinking Development Economics
• Learning by doing / ‘economies of scope’ with respect to
sector strategy development
• Dedicated internal training programme to be developed
32
Political economy considerations:
can South Africa live rent-free?
• Rents are pervasive in SA economy (as elsewhere)
• Currency overvaluation rents
–
–
–
–
Currency speculation
Importers / retailers
Consumption boom fed by short term inflows
Rodrik: currency undervaluation rent linked to high growth
• Financial sector rents?
– Puzzle of massive growth without corresponding increase in investment and
savings
– ‘Internal Dutch Disease’ relative profitability of financial vs real investment
• State as site of accumulation
– Corruption
– ‘Tenderpreneurship’
– Limited development of black entrepreneurs
• Industrial policy rents
33
Conclusions
• Significant progress with development and implementation of industrial policy,
but serious constraints
– Coincided with two major external and mutually re-inforcing external shocks:
currency overvaluation and global crisis; and
– One internal shock: massive increases in energy and other prices based on ‘bunchedup’ user pays approach to infrastructure finance
• Mobilisation of key transversal policy instruments
– Industrial financing: IDC + on-budget
– Procurement
– Trade policy
• Capacity and experience for economies of scope in further sector strategy
development / implementation
• Need policy macro / economy-wide policy alignment
– Monetary policy and exchange rate
– Fiscal policy, especially sustainable infrastructure financing
• Need to promote Black-owned and managed value-adding manufacturers
34
35
Appendix: Micro vs Macro explanations of
manufacturing and economic underperformance
• Micro explanations
–
–
–
–
Manufacturing is over-protected
Weak education and skills system
Infrastructure constraints
Wages are too high, labour productivity too low
• Macro / economy-wide explanations
–
–
–
–
Orders of magnitude
Average tariff has declined by 71%: to 8%
Persistent currency overvaluation exerts a capital and skills bias
Short term capital inflows feed short term lending for consumption,
not directed to long term investment
– Manufacturing relatively less skill intensive than non-tradable private
services
– Internal ‘dutch disease’ relative profitability of real versus financial
activities
36
Appendix: growth
South African GDP growth relative to high, medium and low income peers
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
South Africa
HIC
1972 -76
Source: World Bank
1977 - 81
1982 - 86
MIC
1987 - 91
1992 - 96
1997 - 01
LIC
2002 - 06
2007 - 10
37
Appendix: finance, investment and savings
Gross Fixed Capital Formation and Savings to GDP versus share of the Finance
sector in GDP, 1970-2008 (%)
35
13.0
12.0
30
11.0
10.0
25
9.0
8.0
20
7.0
6.0
15
5.0
4.0
10
3.0
2.0
5
1.0
-
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
0
GFCF/GDP
Source: SARB
Gross Saving / GDP
Finance/GDP (RHS)
38
Appendix: finance, investment and savings
Ratio of FIRE GDP to non FIRE private fixed capital investment
39
Source: SARB
Appendix: employment
Formal employment by sector
10 000 000
8 000 000
6 000 000
4 000 000
1434809
1466303
1498941
1451851
1387039
1349207
1319141
1292798
1296857
1292247
1308566
2 000 000
1321676
1332199
1321176
1298570
1212049
1170543
2009
2010
0
1994
1995
1996
1997
1998
Agriculture, forestry and fishing
Manufacturing
Construction (contractors)
Transport, storage and communication
Community, social and personal services
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Mining and quarrying
Electricity, gas and water
Trade, catering and accommodation services
Financial intermediation, insurance, real estate and business services
40
Source: Quantec RSA Standardised Industry Database
Appendix: employment
Unemployment and informality rates
50.0%
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Unemployment rate - official
Source:StatsSA
Unemployment rate - expanded
Unemployment rate - expanded plus informal
41
Case Study: Automotives
•
Inheritance of a deeply uncompetitive automotive industry
– Crude tariff protection
– Proliferation of platforms and models
•
MIDP: Motor Industry Development Programme
– Export / import complimentation: import credits earned against exports in a
context of declining tariff s (80% in 1994 to 25% in 2012)
– MNC assemblers and mix of MNC and domestic component suppliers
•
APDP: Automotive Production and Development Programme
– Production / import complimentation plus Investment Allowance:
– Comparable with major competitors and WTO consistent
– Target 1.2m vehicles per annum by 2020
– Production based programme with minimum volume requirements
42
Source: DTI
Case Study: Automotives
Automotive Tariff Regime 2004 – 2020
43
Source: DTI
Case Study: Automotives
Total domestic production versus total exports 1995 – 2013*
44
Source: NAAMSA
Case Study: Automotives
Total domestic market versus total imports 1995 – 2013*
45
Source: NAAMSA
Case Study: Automotives
Competitiveness progress: component manufacturers (2004 to 2007)
KPI
South African auto component firm
International firm
performance levels (n=78)
performance (n=81)
2004
2007
Improvement %
2007
38.8
34.8
10.3
32.5
1,170
400
65.8
579
Internal reject rate (%)
4.1
2.9
29.3
1.9
Internal scrap rate (%)
3.5
3.6
-2.9
1.1
On time and in full delivery
91.9
94.5
2.8
93.2
5.9
4.7
20.3
3.3
4.4
3.4
22.7
4.6
Total inventory holding
(operating days)
Customer return rate (parts
per million)
reliability (%)
Production lost to machine
breakdowns (%)
Absenteeism rate (%)
46
Source: B&M Analysts, SAABC database
Case Study: Automotives
Trade balance
– 2010
SA 2005
Automotive
Trade Balance Rm
2005
2006
2007
Exports
Vehicles
Components
TOTAL
22000 24600
23277 30501
45277 55101
27500
39100
66600
Imports
Vehicles
Original Equipment Components
Aftermarket Components
TOTAL
25800
30600
16000
72400
Trade Balance
2008
2009
2010
50100 33200
44100 27800
94200 61000
38700
30800
69500
32400 38000 31200
35300 40500 48100
20800 23700 29600
88500 102200 108900
24000 35000
30000 37900
25900 27300
79900 100200
-27123 -33399 -35600 -14700 -18900 -30700
Source: DTI, NAAM SA, Economet rix
47
Source: DTI, NAAMSA, Econometrix
Case Study: Automotives
Progress and Challenges
•
Key achievements
– Production volumes / economies of scale
– Consolidation of platforms and models
– Vehicle production increased from 388,442 units in 1995 to peak of 534,490
units in 2007
– Vehicle exports increased from 15,764 in 1995 to 239,465 in 2010
– Increased efficiencies, effort and learning at both assembler and component
levels
•
Key challenges
– Import penetration and import intensity of production
– Insufficient number of domestic Tier 1 component suppliers – MNC dominance
– Vulnerable subsectors: catalytic convertors, leather seats
– Logistics costs
48