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PORTFOLIO COMMITTEE: 31 October 2007 National Industrial Participation Programme
(NIPP)
Division :EIDD
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CONTENTS
• Introduction and Background
• Performance of NIPP
• Industry Impact of NIPP
• Key Projects for 2006-2007
• Summary of EIA
• IS NIPP Working?
• Challenges
• Recent Developments
• Way forward
• Questions
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INTRODUCTION & BACKGROUND
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• To leverage economic benefits and support the development of South African industry by effectively utilizing the instruments of Government Procurement
• NIPP became obligatory in September 1996.
• Applicable on all Government and State Owned Enterprises
• Obligation value: 30% of the imported content – equate to economic activity
• Principles: Additionality, Causality, No Increase in price, Sustainability
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PERFORMANCE OF NIPP(US$)
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•Encompasses Invest, local sales, exports, tech transfer, SMME, BEE, R&D, training with NIP multipliers
OBLIGATIONS OBLIGATION
VALUE NIP CREDITS AWARDED
OUTSTANDING OBLIGATION
DEFENCE $13,765,167,611 $7,721,945,577 $6,043,222,034
NON DEFENCE $2,267,148,037 $1,271,723,191 $1,321,464,288
TOTAL NIP $16,032,315,648 $8,993,668,768 $7,364,686,322
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INDUSTRY SECTOR SPREAD OF
THE 173 NIPP Projects
Industry Sector Spread NIP Projects
2334
67
131314141415
2639
0 10 20 30 40
Tourism
Recycling
Energy (solar & nuclear)
Jewellery manufacture
Computer (IT)
Wood & wood products
Electrical
Engineering, training and consulting
Radio, Telecomm, Medical Equip
Agro Processing, textiles, leather
Other (health, R&D, financial
Chemicals, Plastics and Rubber Prodts
Metals, Mining & Capital Equip
Transport Sector
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GEOGRAPHIC SPREAD
Geographic Spread of NIPP Projects
172
262
243 4
100
Eastern Cape
Free State
KZN
Gauteng
Limpopo
Western Cape
North West
Mpumalanga
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INDUSTRY SECTORS OF NIPP
• Manufacturing Sector accounts for 90% of NIPP projects. Aligned with Integrated Manufacturing Strategy & National Industrial Policy Framework.
• Key sectors: Basic metal manufacturing, manufacturing of transport equipment and chemicals. (In line with global offset trends)
• High tech sectors: Energy, telecommunication, medical equipment
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HIGHLIGHTS 2007
• Rock Bolt – wire and wire products BEE JV• Mechatronics – integrated mechanical and IT skills
development - 400 students/year• Novara – plastic recycling• ALC: Global supply of leather seats -250 jobs• Flextech – localisation and global supply of
automotive cables -155 jobs• Offshore Oil and Gas Fabrication Centre – 700 jobs• Avalloy – Niche super alloys for aeronautical
industry. Accredited RR supplier• Denel SAAB – Design and production
aerostructure components
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ECONOMIC IMPACT ASSESSMENT (EIA)OF NIPP- BACKGROUND
• An EIA was commissioned in March 2007• Input - output model used (SAM) using multipliers• Input provided by the dti was on key NIPP objectives: FDI,
exports and local sales & jobs created
Result: Key macroeconomic indicators: GDP, Employment, BOP, Fiscal and capital effectiveness of NIPP projectsEconomic Effectiveness Criteria: whether NIPP waseffectively utilising capital as a scarce resource?
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SUMMARY OF EIA
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• Positive Impact on GDP: Direct average annual value added contribution to GDP is R3billion
• Positive impact on Balance of Payments (Exports > Imports – on average for NIPP projects)
• Government to receive an additional R3.9 billion in taxes due to sales generated by NIP projects
• 15689 direct jobs created and/or sustained50308 direct and indirect jobs (66% semi skilled and skilled whilst 34% is for unskilled jobs)
• Medium to high tech and skilled to semi skilled focus of NIP projects
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CONCLUSION OF EIA:
Average of R16 billion of capital required on an annual basis to sustain all NIPP projects. (Covers - initial investment + capital costs required by other
sectors across economy to sustain increased levels of economic activity on account of NIPP)
Hence Effective use of Capital:NIPP is effective in utilising capital (investment) as a scarce resource as NIPP projects contribute a greater portion to GDP as compared to other capital projects of a similar nature.
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GOVT SPEND VS BENEFITS DERIVED FROM NIPP
1. IMPORTED CONTENT OF PURCHASESTotal: Approx: US$11.3bn Defence: US$3.8 bnNon Defence: US$7.5 bn
2. Actual FDI’s, EXPORTS AND LOCAL SALES: FDI: US$ 424m from obligorsExports: US$ 2.9 bn -market accessLocalisation: Local investment and import
replacement
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CHALLENGES/ LESSONS LEARNT
• Project failure due to lack of competitiveness and ability to sustain projects locally
• Project failure due to market dynamics
• Project failure due to mismanagement of funds by local supplier
• Milestone deadlines are in most cases over optimistic – challenges within the operating business environment
• Limited support for development of BEE’s and WEE’s
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RECENT DEVELOPMENTS
DIRECT NIP:• Use tool of NIPP to extend beyond its current scope and also
allow for offsets directly associated with the procurement and its associated industry.
• Contribute towards building local capacity and local content through Government procurement
OTHER:• Alignment with key Government initiatives such as B-BBEE,
SMME’s and Skills Development
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WAY FORWARD
• Incorporate Direct NIP into existing NIPP Guidelines
• Communication of Direct NIP to applicable Purchasing Entities – workshops, bilaterals
• Increased focus on labour intensive projects(e.g. Magwa Tea), skills development and other key strategic sectors
• Alignment between NIPP and the Competitive Supplier Development Programme (CSDP), B-BBBEE, Customer sector Programme initiatives.
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Thank you????