Offset programme reviewed


The Department of Trade and Industry is undertaking a major review of its national industrial participation programme (NIPP), which obliges contractors supplying goods to the state valued at US$10 million or more to invest in the local economy.

Since 1998 the bulk of these obligations related to the multibillion-rand strategic arms procurement package. Critics of the NIPP scheme cast doubt on whether the arms suppliers fulfilled their obligations but the department has always been emphatic that they did do so, Business Day reported Friday. Democratic Alliance defence spokesman David Maynier called the offset programme “a monstrous political fraud”.

He said he had documentary evidence that an arms-deal supplier obligated for offsets worth €3 billion had fulfilled only €63 million. Nimrod Zalk, the department’s deputy director-general for industrial development, yesterday told Parliament’s trade and industry committee the policy review of the programme was almost complete and a project performance review would be undertaken in the 2012-13 financial year. This review would involve examining each project to determine whether the obligations had been fulfilled and how successful they were. Remedial action would be taken if discrepancies were found.

Zalk told Business Day the government wanted to amend the scheme to ensure obligations were discharged in the sector that the contract related to. The absence of this requirement was one of the weaknesses of the NIPP. Monitoring and evaluation would also be strengthened.

In his briefing to MPs, Zalk said only 12% of the estimated R900 billion in capital expenditure between 1998 and 2009 had been subject to the NIPP. “Since the NIPP has been the predominant policy tool for leveraging public procurement, the vast majority of public capital expenditure over recent years has not been subject to any public procurement lever,” Zalk said. He said that since the programme began in 1996, obligations valued at US$16.5 billion had been monitored. Of these 80% related to the arms deal. More than 220 projects had been implemented by suppliers in compliance with NIPP obligations, 21 393 jobs created, and US$11.5 billion in export credits and US$21.4 billion in investment credits achieved.

Zalk told MPs the industrial policy action plan’s next round, to be launched in April, would include new sectors, among them the green and agro industries, and the metal fabrication, transport and capital equipment sector. In green industries, the aim was to achieve local content for renewable energy equipment. Incentives would be given to lure new entrants into component manufacture.

The manufacturing competitiveness enhancement programme, which will receive funds in the 2012-13 budget, would be used to build the capacity of the metal fabrication, transport and capital equipment sector.

Zalk believed the industrial policy action plan had been a success. The strategy and incentives for the automotive industry had attracted major investments, and the programme for the clothing, textile and leather industry had helped stabilise employment. Business process outsourcing had benefited from incentives.

The incentive in section 12 of the Income Tax Act had so far supported large manufacturing investments worth R7 billion, Business Day reported.