Update on progress with respect to distressed sectors identified in the February National Economic Development and Labour Council (NEDLAC) framework agreement
27 August 2009
The Department of Trade and Industry has been intensively engaged with other social partners in crafting and implementing responses to the distressed manufacturing sectors identified in the National Economic Development and Labour Council (NEDLAC) framework agreement, namely: automotives; clothing and textiles; capital equipment, transport equipment; and metals fabrication.
In general, the Industrial Development Corporation (IDC) has, since April 2009, made R6 billion available, over a period of two years, to assist firms across a broad range of sectors that find themselves in distress as a result of the economic crisis. To date, the IDC has approved loans to 11 companies, to the value of R644 million and is evaluating another 49 applications.
In the automotives sector, the Department of Trade and Industry has facilitated agreements amongst stakeholders on a set of measures to help weather the current crisis in the industry, which has seen a loss of 40 000 jobs in the industry since October 2008. The industry has committed to providing all firms receiving state support with reasonable sustainability strategies, as well as an undertaking to do everything possible to save jobs; promote the affordability of motor vehicles, relative to other developing countries; boost environmental protection; and maintain modest executive and shareholder remuneration.
Specific crisis related assistance that has been agreed upon includes the following:
* Bridging and investment finance from the IDC, to assist with cash flow constraints and ensure that the current pipeline of automotive investments is not jeopardised by the lack of finance
* Extension of the validity period of the Import Rebate Credit Certificates (IRCCs) on a case by case basis, to assist with cash flow constraints, through the International Trade Administration Commission (ITAC), the latter of which is already considering applications
* The Department of Trade and Industry is currently in discussion with National Treasury, in the context of the budget process, with respect to the acceleration of investment support measures
* The Department of Trade and Industry is engaging National Treasury with respect to the deferment of the shift from ad-valorem to CO2 taxes on vehicles, pending a comprehensive roadmap for the oil industry to produce and supply cleaner fuels in South Africa. Following the supply of cleaner fuels in South Africa, the industry wishes to leapfrog the implementation of Euro II to Euro IV standards.
Stakeholders have committed all firms receiving crisis related assistance to specific conditions aimed at the preservation of employment in the industry. These include a moratorium on retrenchments for the duration of the assistance period, unless these are essential for firm survival, in which case an agreement must be struck between management and labour at firm level, pertaining to the level of such retrenchments. The same process will apply, as regards material changes in conditions during the assistance period.
In addition, companies receiving crisis related assistance have committed to ensuring that no excessive, extraordinary and/or unacceptable executive bonuses or dividend payouts will be made during the assistance period. A further commitment has been made to an independent quarterly benchmarking of prices of major passenger and light commercial vehicles (both locally produced and imported) distributed in South Africa, relative to comparable developing countries, to provide transparency regarding vehicle affordability in the domestic market.
In the clothing and textiles sector, the Industrial Development Corporation (IDC) and the South African Revenue Service (SARS) are currently engaged in a clamp down on customs fraud, round tripping, counterfeiting, as well as the abuse of instruments, such as duty credits, rebates and quotas. Five companies have since been charged, while a number of others are subject to investigation. A tariff application is under consideration by the ITAC, to increase tariffs to the bound rate on 35 articles of clothing and reduce tariffs on three articles of textiles. The clothing textile competitiveness programme is up and running at the IDC. Department of Trade and Industry is at the final stages of consultation with industry stakeholders, concerning a production incentive. The department is also engaging National Treasury on this instrument, within the context of the budget process.
In the capital equipment, transport equipment and metal fabrication sectors, the Department of Trade and Industry and IDC are in the process of designing a dedicated incentive scheme to assist firms in relation to the public infrastructure development programme. The programme will be canvassed with stakeholders and finalised for implementation by January 2010. Business and labour are currently engaged in lodging an application to the ITAC for possible tariff increases on products with substantial potential for the creation or retention of decent jobs and recapturing of domestic market share. Measures to strengthen enforcement are being considered, in relation to products that do not meet mandatory safety standards, particularly in respect of electrical and other inputs in the building industry.