Lionel’s October revolution

2011-04-30 10:12

What did your job in Brussels entail?
I was doing trade and investment facilitation between the European Union and South Africa. I covered Western Europe, the Netherlands, Belgium, Spain, Portugal and I was also helping out with Eastern Europe.

It was interesting because I got to travel through Europe.

What can the country expect from you now that you are the DTI’s director-general?
When I left for Brussels a few years ago, we were in policy- making mode. The current administration is now focusing on implementation and it has adopted the industrial policy action plan.

After the recession, things went into a major lull on the black economic empowerment and industrial policy fronts.

The economy is picking up and we can now accelerate the implementation of the industrial policy action plan.

Business can expect us to facilitate massive investment in the manufacturing sector.

We have a window of opportunity to expand manufacturing and move away from being a minerals-based economy.

That’s what I will be committing myself to doing over the next five years – to encourage substantial growth and expansion in manufacturing.

We also need to incentivise the private sector to invest in manufacturing and we also need to expand BEE in that sector.

I think, in the past, BEE tended to focus on ownership and shareholding, which is important, but we must create opportunities for black entrepreneurs in the manufacturing and production side of the economy.

We want to expand the number of industrial development zones from the existing four into other provinces like North West, Limpopo and Free State.

The DTI has in the past been criticised by the business sector for being bloated and too big, and lacking efficiency in assisting businesses. Has the hiving off of five agencies that used to fall under the DTI into the economic development department made things better or worse?
We had 21 agencies that used to report to us. Five of those, like the Industrial Development Corporation and Khula, are now reporting to the economic development department.

I think passing over these five agencies to the department has been very good because they are now getting special attention.

We are also giving special attention to the 16 agencies that are left at the DTI.

What role will the DTI play in the implementation of the New Growth Path economic policy?
The lesson learnt from the financial crisis is that unless you have a strong industrial sector, your growth path is not sustainable because you can’t always rely on imported products. If you don’t make it yourself, you end up with a trade deficit.

The only nations that are growing are those with strong manufacturing sectors like Germany, China and India.

In South Africa, we need to deepen the industrial sector. We can’t have an economy where consumption overrides production and one that relies on credit-fuelled demand to grow, as we had before the recession.

We need to have a growth path similar to those of Germany and South Korea, which are based on manufacturing and value addition.

Within South Africa’s growth path, we have identified job drivers such as the mining value chain, agricultural value chain and manufacturing value chain.

Obviously, the DTI will be the key driver behind the manufacturing value chain while the mineral resources department will drive the mining value chain.

Under the administration of former president Thabo Mbeki, the DTI was seen as less influential in economic policy formulation and living under the shadow of the National Treasury. Has this changed under the current leadership of President Jacob Zuma?
We had a hard time selling the industrial policy before the recession. When the DTI tried to introduce an industrial policy for South Africa, we were initially shot down by many people inside and outside government. We were told to open up our economy and focus on free trade. Our government was reluctant to fund an incentivised industrial policy.

We were asked why we were passing all these handouts to the private sector?
The dominant paradigm or the so-called Washington consensus was that industrial policy does not work... We were told to focus on financial services and expanding our stock exchange.

We were told to follow the Irish model, we must rely on financial services and real estate. Look at where the Irish economy is now, it has nowhere to go and will not grow.

After the economic crash, the debate has swung in our favour.

Now they can see the only economy growing in Europe is Germany. Why? The Germans kept their industrial and auto sector, and massively exported capital goods to China.

Is the acceptance of South Africa to the Bric (Brazil, Russia, India, China) bloc going to bring benefits?
If you look at a small country like South Korea, which we studied when we drafted the industrial policy, it has the same population as South Africa, roughly 48 million people.

It managed to defeat poverty and industrialise in about 20 to 30 years... it went from being a fishing country into an industrial giant that produced companies such as Samsung and Hyundai. Part of her success can be traced to their easy access to the American market during the Cold War.

Through the Brics initiative, we hope to get preferential access to the markets of Brazil, Russia, India and China.

We can repeat South Korea’s model, but we must sell value added products.

Currently we are selling raw materials like iron ore and coal to these markets.

What do you think of the calls by the ANC Youth League for the nationalisation of mines, banks, and the expropriation of land without compensation?
The key challenge facing our country is how to grow our economy faster, especially manufacturing. If we don’t change the structure of our economy, we will stay poor.

China had state ownership under Mao Tse-Tung, but no industrialisation, and it stayed poor. It is only getting richer now because of industrialisation. Russia had state ownership, but she industrialised.

The lesson from economic history and international experience is that industrialisation is the route to solving problems.

The question of whether it is private- or public sector-owned is a talkshow issue for me.

In any society, only a small percentage of the population benefits from profits, but the majority benefits through wage labour.

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