Impact of government-industry partnership on the South African automotive policy. Martin Kaggwa

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1 Impact of government-industry partnership on the South African automotive policy Martin Kaggwa Institute of Technological Innovation, University of Pretoria, South Africa Conducted under AIDC Internship

2 Outline Context Changing role of private sector under RDP and GEAR in South Africa The MIDP MIDP delivery on social objectives BEE in the auto sector Automotive industry progress towards global competitiveness Social policy insights from South Africa s MIDP

3 Context Addressing social and economic disparities of apartheid was a priority Employment creation provided the most sustainable means Government employment creation potential was limited; partnership with the private sector was critical Government came up with national development frameworks cognisant of the role of the private sector Room was provided for the private sector to influence national policy but it varied

4 Changing role of private sector Under Reconstruction and Development Programme (RDP) RDP objective: Redistributive economic growth Room was provided for private sector to participate in RDP implementation but not enough to influence the policy framework

5 Changing role of corporate sector Under Growth, Employment, And Redistribution (GEAR) programme GEAR objective: Macroeconomic stability for higher economic growth Role of government redefined to the creation of conducive environment than direct participation in socio-economic activities Room was provided for private sector to participate and to influence the national policy framework

6 The Motor Industry Development Programme (MIDP) Policy dispensation aimed at making industry competitiveness in a liberalised environment. Provides industry with export and investment-based incentives plus duty free allowances. MIDP Objectives: To provide high-quality and affordable vehicles and components to domestic and international markets To provide sustainable employment through increased production To contribute to economic growth of the country by increasing production To improve industry trade balance Source: South Africa: Current Developments in the Automotive Industry:2004 Department of Trade and Industry

7 Industry performance under the MIDP Investment and Employment 45,000 OEM Investment 4,000 40,000 OEM Employment OEM Investment trend 3,500 35,000 3,000 30,000 2,500 Headcount 25,000 20,000 2,000 R mil 15,000 1,500 10,000 1,000 5, Year 0

8 Industry performance under the MIDP 140 Production, Export and Employment Export growth index Production growth index Employment growth index % Year

9 Industry performance under the MIDP Vehicle prices and Inflation 8.00 Inflation Vehicle price Index 6.00 Index (%) Year

10 Black Economic Empowerment (BEE) BEE objective: Fast track of previously disadvantaged black into main stream economic activities Private sector lobbying lead to government s allowing of sector specific BEE Charters Automotive industry undertook to formulate an industry specific BEE Charter, but no automotive BEE Charter as yet

11 Automotive industry progress towards global competitiveness Competitiveness indicators are inclusive as to whether the automotive industry is on a global competitiveness trajectory Year Domestic market share of locally produced vehicles (%) Vehicle export - Annual growth rate

12 Social policy insights from South Africa s MIDP Government-private sector partnership is key in meeting socio-economic challenges of developing countries in globalisation era There is a risk that socio-economic priorities of governments may be relegated in the process of implementing consensus-based development models Reactive government response to such situations is likely to lead to policy instability instead Acquiring competencies to rigorous interrogate development models proposed by private sector is critical in keeping socio-economic objectives on the countries development agenda