Government is aiming to deploy an increasing number of sector-specific incentive schemes, with an initial focus on the creation of new incentives for the agroprocessing and railways industries.
This is in line with new Industrial Policy Action Plan (Ipap 2016), released in mid-May, which highlights the relative successes of tailored incentive programmes in the automotive, clothing and textiles, business process outsourcing and film sectors.
A scoping exercise, Ipap 2016 says, will be undertaken to assess the appropriate structures and funding, with draft funding guidelines, which will be developed in consultation with industry, to be released during the current fiscal year.
Hitherto, the agroprocessing and rail sectors have received support through programmes such as the 12i tax incentives and the Manufacturing Competitiveness Enhancement Programme (MCEP), with Trade and Industry Minister Dr Rob Davies reporting that the agroprocessing industry had been a major MCEP beneficiary.
Cova Advisory & Associates MD Duane Newman, who offers specialist advice to companies seeking to access government incentives, concurs with the Department of Trade and Industry (DTI) that tailored support programmes, such as the Automotive Production Development Programme (APDP), have proved more successful than the broad-based schemes.
However, he also believes that the DTI should initiate wide-ranging consultations with the targeted industries, and their supply chains, to understand the bottlenecks and to optimise the design well ahead of implementation.
“Government needs to engage with business far more and speak to the entire value chain and not just one or two associations,” he argues. Through such a process, any problems with the design of the incentives would become apparent well ahead of implementation.
The relationship that has developed between the DTI and the automotive industry is held up as providing a template for such conversations. Through close collaboration, the APDP and the earlier Motor Industry Development Programme have enabled the domestic automotive sector to survive South Africa’s post-apartheid market liberalisation.
That collaboration is continuing, with a team of technical experts having been established to develop a post-2020 Automotive Master Plan, which would guide support for the sector beyond the current APDP. The team will examine the entire automotive sector, including light, medium and heavy vehicles and motorcycles, which are not currently included under the APDP ambit.
“The DTI has done very well in the automotive sector; they have engaged with business and the incentives are designed collectively. But it’s a journey and you cannot, for instance, design a rail incentive in a month,” Newman asserts.
It is surely worth seeking to replicate that model across other sectors as government aims to maximise incentives returns in the context of increasingly limited resources.