DA proposes free trade, cost and regulatory reductions to stimulate manufacturing

7th August 2018 By: Schalk Burger - Creamer Media Senior Contributing Editor

Political party, the Democratic Alliance (DA), on Tuesday proposed increased free trade and reducing regulatory burdens and energy costs to stimulate manufacturing in South Africa.

In its policy proposal, ‘Manufacturing a new economic future’, the party states that “an effective trade policy trumps industrial policy”.

Free trade must be increased; however, the party recognises that some measures must be deployed to protect local industries against dumping in line with World Trade Organisation rules, it said.

“Our focus is not on interventionist regulatory measures and fiscal incentives, but rather on facilitating higher-value addition through improving skills and public-private sector collaboration. This methodology has assisted in moving Malaysia from a low-growth to high-growth path.

“South Africa should be looking for growth in regions such as Asia, South America and Africa, as well as increasing exporting partners and enhancing and expanding South Africa’s existing trade deals.”

The party added that “[i]nnovation can be enhanced by allowing easier access for foreign skilled workers to attain visas in South Africa. This will require revisiting the current regulations on visas and raising the strategic importance of visas linked to scarce skills.”

It added that, to increase the share of the manufacturing industry’s contribution to gross domestic product and create more jobs, the party’s rescue plan focused on value addition, skills development and fair competition for local industries.

Focus should be “on industries where we have competitive, comparative and absolute advantages.

“South Africa has a large resource base. The DA would focus on using this resource base to build a strong value chain in South Africa which could be used to export and use for local demand,” it said on Tuesday.

“South Africa needs to develop a skilled labour supply to grow into a globally competitive manufacturing hub focused on high-value-added categories such as automotive, processed metals, industrial machinery and equipment and chemicals,” the party said.

Further, South Africa’s high technology exports need to be prioritised.

“A review will be conducted to look at gaps in the value chain for these strategic industries and how South Africa can develop them,” the DA said.

Meanwhile, with a multiplier of 10.5 jobs for every R1-million invested and an output increase of R1.79 for every R1, agriculture and agroprocessing will be a key priority area for incentives and incubation, the party stated.

Additionally, it also adds that “[e]nergy costs need to be drastically reduced”. It proposes that breaking up the energy sector will go a long way to reducing the cost of energy.

Manufacturing [must have] access to cheap and reliable power supplies to lower the cost of manufacturing. Directly sourced renewable energy can reduce energy costs for manufacturers.

Bulk and long-term deals with heavy industries must also be implemented, the DA said.

The party also advocated unfreezing the budget for the Manufacturing Competitiveness Enhancement Programme. It proposed lowering corporate taxes for manufacturers to 15% conditional on re-investment in capacity to expand production, skills training and corporate social investment (CSI).

Similarly, it proposed reducing the regulatory burden on small businesses.

“Red tape removal will unlock numerous opportunities for new manufacturers to move into the market by making it easier to do business,” it said on Tuesday.

The party’s policy proposals bemoan the “generally slow response to competition from highly subsidised imports”.

“There needs to be a review of tariffs on imported steel to keep prices competitive for local suppliers and build a competitive downstream sector.”