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JPF Briefing on the Africa Programme
Prepared by : Africa Project Team, Department of Public Enterprise
11th June 2008
0
Agenda
• The Africa Project Concept Paper
• The Regional Supplier Development Programme
• The Regional Benchmarking Programme and DPE’s
Partnership with UNIDO
1
South Africa is committed to playing a lead role in promoting economic and
social development across Africa
Why should South Africa get Involved?
1. Government is committed to the realisation of the socio-economic development
goals articulated in Nepad and MDG – Hence action and rhetoric must be linked
2. Government is committed to support fellow African states in the realisation of their
socio-economic goals through
a. Promoting and developing key regional integration projects and initiatives
b. Lending key managerial and technical assistance
c. Promoting good governance and effective state intervention and regulation in
the economy
3. South Africa is well placed to play an enabling role in converting increased investor
interest in Africa to direct FDI which is critical to boost lagging economic growth on
the continent
4. Leverage investment opportunities for SA Inc (i.e, Private Sector and SOE’s)
across the continent for the benefit of the South African economy
Involvement on the continent will contribute to the integration and
industrialisation of African economies and countries and will benefit South
Africa’s economy and build her image as a good continental and global citizen
2
Engaging with Africa will not only assist South Africa in achieving its own
growth aspirations but will also provide a basis for sustainable growth and
competitiveness beyond 2014
Preliminary
Hypothesis
How can South Africa Get Involved?
South African Strengths
• The leading SOE’s have relatively large operational
and capital project procurement spend i.e.,
– Creates the opportunity to build industries on the
back of stable, repetitive, high value and high
volume demand
• Relatively large SOE dominated industries with a
relative advanced supplier base
• Government has high levels of respect and
credibility amongst fellow African States
• Development finance institutions with funds
earmarked for investing on the continent
• High private sector interest and involvement on the
continent
• Significant technical and managerial expertise have
been built up due to size and sophistication of
industry and economy
Africa’s Opportunities
• Opportunity to import from Africa due to lack of
capacity to meet demand from current build
programmes
• Opportunities for South African firms to collaborate
with African Countries with under utilised capacity
and hence minimise capacity expansion costs
• Countries with similar infrastructure build
programmes (especially in energy) face the same
problems of been crowded out by China and India’s
orders from global suppliers.
• African countries are potentially more competitive
than local suppliers for certain spend categories,
hence sourcing from these countries will reduce
costs in the long run
• African countries offer a host of investment
opportunities which will become more viable as their
economies continue to grow
South Africa has the economic strength, industrial capability and the inter-governmental
respect to assist fellow African States to unlock key growth opportunities on the continent
3
Achieving sustained and shared growth in the long run will be critical for
reducing and maintaining low poverty rates on the continent
Key African Growth and Poverty Level Statistics
Growth between 1960 to date has been slow…
• African income grew at about 20% of the
average for all developing countries (i.e., 0.5%
p.a. vs. 2.5% p.a)
• Despite income parity in 1960, per capita
income in Africa is now 20% of the per capita
income in East Asia
• Factoring purchasing power parity, African
Whilst poverty has increased
• Africa is home to 10% of the world’s population
but home to 30% of the world’s poor
• Extreme poverty reduced by two thirds globally
but increased by up to 40% in Africa between
1970 and 2000
• 1 in 2 Africans are poor, spending less than $1
per day. This is twice the world average and
twice as high as the 1970 figure.
income used to be 67% of East Asian income
and are now less than 25% of East Asian
Income
Accelerating economic growth rates is key to reducing poverty levels on the continent.
Indeed, growth rates of up to 7% are needed to realise the UN Millennium Development Goals
Eventually the tortoise out runs the hare, hence sustained growth should be the ultimate goal
4
Thus the Rest of Africa Project has a vision to contribute to the shared and
sustained economic growth through increased trade, investment and industrial
upgrading
Proposal
Vision, Goals and Focus Areas for the Rest of Africa Project
Overarching
Vision
Sustained and Shared Economic
Growth
Increased Investment
Key Success
Indicators
Increase Trade
Industry Capability Upliftment
Trade Related initiatives
Key Development
Initiatives
Investment Related Initiatives
Industry Building Initiatives
5
The project is envisaged to manage a number of initiatives falling within three
broad categories
Nature of Initiatives
Proposal
Objectives
Increasing trade between participating countries e.g.,
Trade
Related
• Identification of goods and services that can be sourced from each country and matchmaking
relevant suppliers and customers with a special emphasis on SOE’s and their supplier base
• Infrastructure and process related initiatives targeted at reducing costs and slowness of trade
between two countries with an emphasis on projects involving SOE’s from participating countries
and/or where state exerts significant regulatory control
Facilitating the implementation of key infrastructure investment projects which will promote regional
integration and/or remove obstacles to accelerated economic growth and development e.g.,
Investment
Related
• Participation of SA based entities on key investment projects on the continent. Participation will
range from technical assistance, through to commitments to purchase and/or actual provision of
capital
• Collaboration between procurement entities in two countries involved in similar infrastructure
projects to build critical mass to negotiate prices with world suppliers and/or leverage demand to
build an African based supplier pool
Industry
Building
Developing a competitive African supplier based through targeted supplier and cross border cluster
development initiatives e.g.,
• Development of the capability of African suppliers to provide goods and services currently sourced
outside of the continent . Long term aspiration will be to achieve self reliance for key components by
developing globally competitive suppliers who export on the continent as well as to global markets
Project is seeking win-win ventures rather than
nuisance/charitable ventures
6
The project will be deemed a success if it contributes to increased Intra-Africa
trade, investment and industry co-operation within SOE dominated industries
and to firms within the economy at large
Proposal
Overarching Project Goals
1. Increase Intra-Africa trade and investment flows between entities within SOE dominated industries
with a particular emphasis on the energy, transport and ICT sectors
2. Build globally competitive suppliers to service lead firms within SOE dominated industries i.e.,
a) African suppliers are suppliers of choice for their local or continental entities
b) African suppliers leverage the capability and networks of South African manufacturers to access
South African and global markets
c) African suppliers can access global markets directly or through the production networks of global
leaders
3. Increase co-operation between entities in SOE dominated industries to optimise operational and
capital expenditure and increase value to users through reducing transaction costs and minimising
barriers to Intra-Africa trade, investment and industry co-operation e.g.,
a) Pooling of resources during the project conceptualisation and feasibility stage
b) Creation of critical mass to lobby for more competitive prices and better service from global capital
goods suppliers
c) Sharing of technical expertise on a case by case basis to improve the effectiveness and efficiency
of expenditure
d) Standardisation and streamlining of processes, documentation, technologies and standards used
by users to facilitate and complete cross border transactions
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Implicit in the design of the programme is the view that South Africa as the
strong regional economy needs to consciously put the region on a mutually
beneficial growth path
Overview of Flying Geese Development Model
• The strong regional economy assumes leadership for leading development in the
region
Interpretation
in terms of
Regional
Integration
and
Development
– The lead country and its followers, exploit access to a huge export market which
the lead country has opened access.
– The lead country co-currently exports to the less developed countries (i.e., tier I)
to develop their domestic markets, then invests in local manufacturing to
strengthen their production networks and exploit shifting comparative
advantages
– The Tier I countries in turn do the same and export to the lesser developed
countries (i.e., Tier II) and strengthen the regional production network.
• Hence the countries fly in formation.
• At a national level the lead country
Interpretation
in terms of
industrial
development
– identifies “sunrise” industries to “import” from advanced economies and
invests heavily to build up their global competitiveness whilst…
– it withdraws its support from “sunset” industries where it is losing comparative
advantage and exports them to less developed countries
– In some cases these sunset industries are supply industries to sunrise
industries but the products are becoming increasing commoditised
South Africa can exploit its links to global value chains to upgrade its industrial base
and maintaining its competitiveness by developing its regional markets and production
networks
8
The project will be executed in collaboration with key government and nongovernmental stakeholders
Role of Various Stakeholder Groups
Stakeholder
Proposal
Possible Role
• Assist with generic trade and investment facilitation roles (i.e., Lead generation and match making)
DTI
• Play a broader industry development role (i.e., aligning South Africa’s industry strategy with joint
economic development plans)
• Participate in trade related initiatives as buyers or sellers
SOEs and
SOE supplier
base
DFI’s
Other e.g.,
DFID,
UNIDO etc.
• Participate in investment related initiatives either to lend technical assistance, commit as a potential
customers or investor
• Ultimately act as project financiers but will also assist in lead generation and assessments of country
risks
• Provide technical assistance as and when required
• Provide assistance in capability building initiatives as well in lead generation activities
• Involvement of organisation will vary on a case by case basis
The principle of SA Inc “Hunting in Packs” will be key
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Agenda
• The Africa Project Concept Paper
• The Regional Supplier Development Programme
• The Regional Benchmarking Programme and DPE’s
Partnership with UNIDO
10
To effectively address its high poverty levels, Africa needs to build its
industrial base
Africa’s Development Challenge
Resource
Extraction
E.g. Mining,
Agriculture
Primary
Manufacture
E.g. Smelting (steel
and metal
production)
Africa has a comparative
advantage
Secondary
Manufacture
E.g. Forgings,
castings,
specialised alloys
Design,
Assembly
Fabrication
E.g. Structures,
Components, Subsystems
E.g. clothes, capital
equipment,
aerospace
How do we
convert our
comparative
advantage?
“Real long term poverty reduction requires private wealth creation based on robust
economic transformation and rapid economic growth driven by manufacturing,
production diversification and trade” UNIDO, Director General
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This can be achieved by leveraging the investment and procurement
expenditure of SOE’s and MNC’s in Africa’s infrastructure and resource sectors
to build local supplier industries
Africa’s industrial
development will stall if……
…its anchor investments are not used to create investment
opportunities in the manufacturing sector
Investment opportunity
in resource or
infrastructure sector
Establishment of a local
enterprise which
imports all its
requirements
Limited industrial
development, wealth
and job creation
Establishment of a
local enterprise
which develops a
local supplier base
Creation of new
investment
opportunities outside
of the resource and
infrastructure sector
Investment opportunity
in resource or
infrastructure sector
Establishing of local
industries to support
new investment
Acquisition of new
skills and
technologies to
support new
industries
12
Developing local supplier industries will be beneficial to firms and national
economies
•Firm,
Xx National and Regional Benefits of Strong Local Supplier Industries
1. An increase in the quality and number of local suppliers leads to;
• Increased local content
• Reduced imports
• Public license to operate
• Increased responsiveness of suppliers leading to shorter order lead times, more cost savings,
high availability and plant utilisation etc.
2. Increased efficiencies and sophistication throughout the local economy
• Generate spill over effects for the broader economy as new skills, technologies and
management practices are absorbed into non-resource or infrastructure related industries
through other buyer–seller relationships, industry clusters and staff turnover.
3. Maintain the cost competitiveness of goods manufactured in the region by encouraging the formation
of regional production networks, exploiting each countries comparative advantages.
13
However, supplier development on the continent requires collaboration
between countries and the public and private sector
Potential Areas of Collaboration
Benefits of Collaboration
• Consolidation of demand,
creating a critical mass to attract
new investors
• Joint supplier development
initiatives
• Standardisation of plant and
equipment designs
• Joint skills development initiatives
• Pooling of resources to focus on
generic supplier development
activities which buyers are not
geared to do
• Enables the build of regional
production networks, exploiting
the comparative advantages of
each country. .
14
DPE would like to share the tools and methodologies developed for South
Africa’s competitive supplier development programme with countries/firms
looking to build their local supplier base
The Regional Supplier Development Programme
Type of
Interventions
Supply Side
Local
Programme
1. Supplier industry development plans
2. Skills development programmes
Demand Side
1. Standardisation strategy
2. Integrated procurement training
3. Supplier benchmarking programme
Proposed
African
Programme
• Regional benchmarking programme
being co-developed with UNIDO
• Procurement Training developed by
CIPS and IPSA – DPE will play a
supporting role
To roll out these programmes across the continent, DPE would like to enter into a
partnership with fellow African governments as well as private and public sector
institutions with an interest in regional supplier development
15
It is seeking to create value for its SOE’s and other South African firms as well
as assist countries to develop their industrial base.
Benefits to South Africa include...
• Import goods to
– Minimise impact of domestic capacity
shortages due to build programmes
– Reduce costs of build programme if
suppliers are more cost competitive
• Strengthen production networks of South
African based firms by increasing
collaboration between South African and
regional firms
• Position South African firms for future
investment opportunities as African
economies continue to grow
Benefits to the Rest of Africa include…
• Leverage tools and methodologies
developed for South Africa’s own
competitive supplier development
programme to
• Develop their own local supplier base
by learning gaps between their own
performance and key buyer
requirements
• Integrate into the supply chains of
South African and global buyers
• Showcase potential investment
opportunities to financiers
16
DPE is in the process of identifying potential areas for collaboration with
targeted countries
We are
here
Confirm
High Level Implementation
Path for RSDP
Conduct Preliminary
Assessment of
Targetted Countries or
Private Sector Buyer
Organisation
• Identify key project
Objectives
•
Deliverables
backers in targeted
countries/buyer
organisations
Identify priority
products and
supplier industries
to develop
Assess non-firm
level constraints to
supplier
development in
each country
• Country / Buyer
•
Organisation fact
base to inform
detailed project
document
•
•
and
define
Priority
Interven
tions
Per
Country
/ Buyer
Organis
Confirmation
of
appropriateations
interventions per
country with key
stakeholders in
each country
Develop detailed
project documents
outlining
implementation
plans, costs etc. for
• Detailed project
document to serve
as basis of cooperation
agreements
•
Mobilis
e
support
and
funding
for
priority
interven
tions for
Raising of funds
the priority
interventions
• Formal sign off of
co-operation
agreements
including
commitment of
funds
Implem
ent
specific
interven
tions
• As per detail
country level
agreements
• As per detail
country level
agreements
17
Appendix 1: Overview of the Regional Supplier Benchmarking Programme
18
The regional supplier benchmarking programme is a regional component of
South Africa’s Competitive Supplier Development Programme
The Regional Supplier Development Programme
Type of
Interventions
Local
Programme
Proposed
African
Programme
Supply Side
1. Skills development programmes
Demand Side
1.
Supplier industry development
plans
2.
Standardisation strategy
3.
Integrated procurement training
2. Supplier benchmarking programme
• Regional supplier benchmarking
programme being co-developed
with UNIDO
• Procurement Training developed by
CIPS and IPSA – DPE will only play a
supporting role
The programme is a part of broader set of initiatives supported by the DPE to
promote regional collaboration in supplier development
19
The benchmarking programme is being implemented in the framework of
UNIDO’s Africa Programme to promote synergies with ongoing initiatives
Key Components of Proposed Programme
Component 1:
Component 1b:
The local and domestic investor
survey to provide IPA’s and their
intermediaries key facts and figures on
investor’s needs and behaviours
enabling the formulation of appropriate
investor targeting strategies
Component 3:
The development of an investment
monitoring platform offering interactive,
web-based reporting system, based on the
datasets of domestic and foreign investor
survey
The Integrated Programme
for Investment Promotion
and Industrial
Development In Africa
The capacity building of national and
regional institutions involved in supplier
development and investment promotion.
E.g., IPA’s, government ministries, sectoral
agencies, trade organisations and RECs
Component 2:
The expansion of UNIDO network of
Subcontracting Partnerships
Exchanges, incorporating supplier
development and benchmarking
functionality
• UNIIDO have partnered with the AU to implement the industralisation component of
Nepad.
• The integrated programme was endorsed by the Conference of African Minister’s
of Industry and the AU at the AU Heads of State meeting in January 2007.
20
The programme benefits include promotion of local industrialisation and
regional trade by providing a facility to benchmark suppliers and match buyers
to potential suppliers ……
Key Programme Benefits 1/2
S(B)PX
• The benchmarking system is been
developed as part of the CSDP
Local companies
Other
database
BUYERS
Shell
Oil
Companies
BHP Billiton
Anglo
Mining
Companies
Eskom
Power
Companies
Transnet
Transport
Companies
Facilitated selfassessment
Database
Benchmarking
Supplier
mapping
Gap
analysi
s
Need
analysis
COMFAR
Financing
Unilever
Nestle
Agriculture
Companies
Others
ITPOs
Upgrading
plans
Investment
projects
21
…. And the strengthening of local investment promotion and supplier
development capabilities…
Improved Investment Climate
Engaged private sector
Key Programme Benefits 2/2
Policy
Strategy
Services
National
institution
s
Country
specific
information
Transparency
Investment
projects
MONITORIN
MONITORING
G
PLATFORM
PLATFORM
Case studies
Investment
promotion
Analysis of trends
Assessment of impact
Measurement of responses
Comparison of sites
Sectoral analysis
Perception, performance,
impact data
Private
sector
Trend analyses
Identification of inv. opp.
Self Assessment
TA
Prog’s
Development
organizations
Identify
Development
gaps Monitor TA
Programmes and
progress in
diversification
Monitor projects
Inv.
Opportun
ities
Financial
institutions
22
The collaboration with UNIDO creates the potential to cover up to 33 countries
on the continent
Countries
covered in 2008
Survey (9th
EDF)
Countries
covered in
RSBP (DFID)
Countries
covered in 2008
Survey (Austria
and UNIDO)
9th EDF
DFID/DPE
Benin
Burkina Faso
Cameroon
Central African Rep.
Congo (Republic of)
Congo (Dem. Rep.
of)
Cote d’Ivoire
Gabon
Gambia
Ghana
Guinea
Madagascar
Mali
Namibia
Niger
Nigeria
Senegal
Sudan
Togo
Uganda
20 countries
Angola
Kenya
Lesotho
Malawi
Zambia
Mozambique
Swaziland
Tanzania (UR)
Rwanda
Burundi
10 countries
Austria&UNIDO
Cape Verde
Ethiopia
Mauritius
3 countries
• Potential Countries to
be covered through
collaborating with
UNIDO to extend the
UNIDO SPX network
• Country selection still
to be finalised
Total: 33
23
DPE and UNIDO is in the process of finalising funding for key components of
the programme and is still looking for donors to support the roll out of the
Programme Component
#
enhanced SPX network
Expansion of
enhanced
SPX network
Source of Programme Funds*
0
1
Survey Methodology
2
Benchmarking
Methodology
1
Monitoring Platform
1
Investor survey
2
Backward linkages
2
Benchmarking and
supply chain
integration
3
Country coverage
33
20
Italy/UNIDO (€ 0,6m)
South Africa (€ 3,2m)
Microsoft (€ 0,5m)
EU 10th EDF
(€ 2,6m)
EU 9th EDF (€ 2,77m)
Ng, Tz,
Ke, Cam
(€ 0,4m)
France
(€ 2m)
Capacity building and
investment generation
ICF
DFID and
South Africa (DPE)
(€ ??m)
Austria/
UNIDO
(€ 0,6m)
EPA
Secured Funding
Negotiation with donor have started/are imminent but further
specifications and project design still necessary
Potential area for further donor participation
Funding is in principle possible and interest has been
communicated by donor
*Contributions are estimates and will depend on
outcomes of negotiations with Donors
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Questions and Answers
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