Environmental Goods & Services (EGS) News

Launch of the South African Environmental Goods and Services Forum - Mr Sipho Zikode, Deputy Director General - Enterprise and Industry Development - 3 September 2007

MADAME CHAIRPERSON, honourable ENVIRONMENTAL PARCTITIONERS and members of the PRESS

Introduction

Since the attainment of democracy in 1994, the democratic government has achieved substantial economic policy successes. These include the stabilisation of key macroeconomic variables, as well as opening up the economy to increased levels of global competition. The latter was supplemented by a wide range of industry-level supply side measures, to assist the economy in adapting to the stronger winds of international competition. It is evident that South Africa’s economy is capable of even higher levels of economic performance. Government aims to push purposefully towards its 2014 vision to achieve six per cent gross domestic product (GDP) growth from 2010 onwards and to reduce unemployment and poverty by half. The Accelerated and Shared Growth Initiative of South Africa (ASGISA) clearly expressed these objectives and gave rise to the National Industrial Policy Framework (NIPF) and action plans. The NIPF identified lead sectors targeted for fast tracking, including: (1) Capital/Transport equipment and Metals, (2) Automotives and Components, (3) Chemicals, Plastic fabrication and Pharmaceuticals, and (4) Forestry, Pulp and paper, and Furniture

The NIPF’s Industrial Policy Action Plans - another business opportunity for EGS

The SA capital goods, metal fabrication and transport equipment sectors in 2005 accounted for 216,263 manufacturing jobs (18% of South Africa’s total). This comprises 2% of GDP. The existing strength of this sector is seen as a major opportunity to achieve further growth through the current mining and mineral-processing and exporting boom. Automotives and components is SA’s leading manufacturing sector, contributing 8% to GDP. Domestic vehicle production grew from 388,442 units in 1995 to 615,000 in 2006 and new vehicle exports grew from 15,764 units in 1995 to 179,869 in 2006. Employment (OEMs, components and retail) grew from 277,400 in 1995 to 306,500 in 2006. The sector in addition generates strong backward linkages from other sectors, particularly metals, leather, textiles and plastics. An opportunity is envisaged to double the production of vehicles to 1.2 million units by 2020 with corresponding deepening of local content.

The Sector Action Plan for the chemicals, plastic fabrication and pharmaceuticals sector looks at a chemical sector comprising a well-developed capital-intensive upstream industry and a more labour-intensive downstream plastics industry. Collectively these industries contributed 2.8 percent to GDP in 2006. Basic and Other Chemicals employed 64,285 people and Plastics 39,893. The pharmaceutical industry employs 10,000 people with local production of R9.5bn The Action Plan identified an opportunity to leverage fluoro-chemistry expertise through increased beneficiation of fluorspar, increase the local beneficiation of polypropylene for automotives and packaging industries and leverage state procurement for locally produces pharmaceuticals.

The baseline for the Sector Action Plan for the forestry, pulp and paper and furniture sectors comprises a forestry sector that contributed R14 billion to GDP in 2006 and employs more than 170,000 people. It has the potential to bring jobs and income to poor rural communities. Aforestation opportunities include: 100,000 ha in the Eastern Cape over the next 10 years with a potential to contribute R215 million to GDP and job creation of 26,000 at plantation level and 1,700 at primary processing level; 40,000 ha in KZN over the next 10 years with potential to contribute R500 million to GDP and job creation of 15,000 at plantation level and 429 at primary processing level. Challenges to be met include water licensing procedures, technical and financial support for emerging small growers, transport infrastructure, skills and transformation.

There is a clear advocacy and facilitation role for environmental services, which would contribute to the feasibility and sustainability of the above Sector Action Plans. A variety of environmental equipment and services will be required to meet environmentally responsible best practice and standards.

With the lowering of tariff barriers potential exporters increasingly face technical barriers to trade (TBT), of which environmental requirements allowed by Section XX of the GATT are the most common. The concepts of life cycle assessment (LCA) and the cradle-to grave approach to some extent explain the complexity of environmental TBTs. Our exports are required to be environmentally friendly, from mining/cultivation of raw materials through cleaner manufacturing and even cleaner generation of the energy that was used.

The TBT challenge applies to all manufacturing sectors identified for fast tracking. With the recognition of industry’s contribution to climate change and endorsement of the Kyoto Protocol by South Africa’s key trade partners, a high premium is placed on mitigation of greenhouse gases, which makes energy intensive sectors such as the capital goods, metal fabrication and transport equipment particularly vulnerable to environmental TBTs.

Against this backdrop the role of the EGS sector becomes clear – EGS facilitates legal compliance as well as TBT conformity and sustainable development. A strong, cohesive and organized domestic EGS sector significantly contributes to the competitiveness of a country’s manufacturing sectors. The alternative would be dependency on foreign supplies of environmental goods and services, which would add to costs and would lack an understanding of South African circumstances. Environmental services supplied by our own EGS industry have the potential to stimulate tailor-made solutions and manufacture of environmental capital goods and environmentally sound technologies.

Export opportunities for the Environmental Goods and Services Sector

In order to contribute towards the goals of halving unemployment and poverty by 2014, the National Industrial Policy Framework (NIPF) is focused on the challenge to grow and diversify manufacturing exports and tradable services. In addition to skills development and training an informed and structured Industrial Policy Action Plan (IPAP) to grow the South African EGS sector would advance global competitiveness.

Environmental services have the potential to position itself as a significant export product. The 2006 Environmental Goods and Services (EGS) study pointed out that the SA EGS industry has a clear potential to grow its employment capacity by utilising export opportunities. Countries in the southern hemisphere and the African and Southern African regions could become a profitable export destination for EGS. Our knowledge and technologies in resource management are on par or even more advanced than the capacity of some of our trade partners. With a concerted and coordinated approach it would be possible to fast track the flow of SA EGS exports to regional and southern export destinations thus making a measurable contribution to South Africa’s economic growth.

A vast and predominantly under-utilised pool of donor funding is made available annually to African governments. Dedicated exclusively to sustainable development challenges, these donor programmes maintain a substantive demand for environmental projects in even the poorest countries. South Africa’s competitive advantage in this regard is that the market acknowledges the gainful combination of South African EGS skills and our keen understanding of African cultures and development objectives. A dedicated effort should be made to cash in on this advantage, and position South Africa as a springboard for EGS partnerships between South African and developed-country suppliers.

Way forward

The NIPF has through the concept of Sector Action Plans set the scene for a structured approach to supporting sectors. The EGS Sector Forum in partnership with the dti and key government entities would take up the challenge to formulate an EGS Sector Action Plan and take into account: