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The role of innovation in the industrialization of the SADC region Dr Thulani Dlamini VP: Strategic R&T Sasol Historical Perspective on Industrialization 86 99 47 Key Drivers • • • Increase in local demand for goods and services Changes in income levels, quality of life and education etc. Availability of skilled labor Maintaining momentum Confidential • • • Creation of new trade networks Availability of relevant resources including capital Culture of innovation and entrepreneurship 2 Copyright ©, 2016, Sasol SADC vision for Industrialization 2015 SADC produced a report “SADC industrialization strategy and roadmap – 2015 2063” ● Regional integration as a driver for industrialization and economic growth ● Competitiveness at industrial, country and region level, ● Economic and technological transformation ● Accumulation and dissemination of knowledge, ● Development modern infrastructure and human capital Strategy viewed as a modernization strategy of the region Science and technology are important enablers of the strategy Higher levels of growth and deeper structural transformation required, due to poor initial development conditions Maintaining momentum Confidential 3 Copyright ©, 2016, Sasol Global Competitiveness of SADC countries SADC GDP at $580 bn, with a growth of 5.14% (2011) GDP per capita of the region at $2157, compared to India and Brazil at $1719 and $8587 respectively. Services accounts for 51% of GDP, Industry at 32% and Agriculture at 17% Except for South Africa and Mauritius economies of most SADC countries are factor driven and depend on quality of: (WEF, GCI 2012 – 2013) ● Institutions ● Infrastructure ● Macro economic environment ● Health and primary education Shift to efficiency driven and later innovation driven economies necessary for global competitiveness. Maintaining momentum Confidential 4 Copyright ©, 2016, Sasol SADC Industrialization an imperative Average human development index for the region is 0.5 indicative of ● Low Life expectancy ● Low years of schooling ● Low income levels 57.4 % of the population lives on ≤ $1.25/d (2009) ● Anyone living on ≤ $ 2 / d considered poor Gini co-efficient for most SADC countries above 0.5 Exports dominated by resources – coal, ferrous metals, copper, manganese, platinum, gold, diamonds etc. Intra SADC trade only 10% of total exports from the region, although SADC population over 270m. 75% of workers in ‘vulnerable employment’ – poor working conditions, low productivity and inadequate earnings SADC industrialization needs to move from academic discussion to real implementation Maintaining momentum Confidential 5 Copyright ©, 2016, Sasol Barriers to industrialization Low productivity levels ● Declaration of productivity in 1999. Infrastructure deficit ● Regional Infrastructure Development Master Plan (RIDMP) Scarcity of skills – especially advanced skills High cost of doing business Availability and cost of capital Energy deficit Access to state of the art technologies Water scarcity Maintaining momentum Confidential 6 Copyright ©, 2016, Sasol Industrialization: Role of government South Korean example: ● Build capability – mainly human capacity development at all levels and infrastructure ● Accelerated introduction of foreign technologies; local development and export ● Implement legislation that supports science and technology Introduce and implement policies and strategies that support industrialization ● Provide a secure foundation for scientific and technological growth ● Prioritize the development of industrial technology ● Create a favorable climate for science and technology through legislation Maintaining momentum Confidential 7 Copyright ©, 2016, Sasol Using foreign technology to drive innovation: Sasol Anglovaal acquires rights to use FT in SA Sasol 2 and 3 based on locally developed technologies First product produced using fully imported technology <1937 1950 1955 1979 International acquisition to grow chemicals business 1980s 1990s 2001 Sasol is privatized and listed in the JSE Sasol Incorporated as a state owned entity Maintaining momentum Confidential 2003 Gas from Mozambique 2nd GTL plant in Nigeria 2004 2007 2014 Listing in the NSE Launch of local and international chemicals business from FT 1st GTL plant in Qatar 8 Copyright ©, 2016, Sasol Challenges to be addressed by state interventions vis a vis SET & Industrialization: Develop strong policy foundations that will address public perception and interest in SET Develop strong institutional organizations as well as research & development systems to attract and retain the right talent for SET and drive for excellence Address the limited scientific manpower with skewed distribution – limits possibility for multidisciplinary R&T Move beyond heavy reliance on imported technologies – limited ability for localization Deal with lack of research equipment and information resources Develop the ability to fully /properly assess economic impact of R&D leading to an optimal innovation portfolio Improve co-operation between “producers” and “consumers” of technology. Maintaining momentum Confidential 9 Copyright ©, 2016, Sasol Human Capital Development : A key enabler Increased spending in education at all levels – what are current spending levels for SADC Refocus education systems to create a balance between technical and vocational training Tertiary education to produce the correct number and quality graduates in STEM education Closer working relationship between HEIs and industry to produce graduates that are relevant to the economy Create regional quality standards to facilitate movement / application of human capital in the region Maintaining momentum Confidential 10 Copyright ©, 2016, Sasol Possible Growth Pillars for the SADC economy Domestic demand increase Export maximization Agriculture economy Service industry development Natural resource utilization Domestic, regional and global value chain participation Maintaining momentum Confidential 11 Copyright ©, 2016, Sasol Opportunities to create a comparative advantage for the region Create symbiotic relationships between feeder and leader industries Introduce technology that is appropriate for the level of development Diversify and broaden the industrial base Address the industrial and technological gap, through targeted catch up mechanisms Develop viable regional value chains to access global markets Focus on youth and women Shift from factor accumulation growth – employing more labour and capital to total factor productivity – efficiency of deployed resources Maintaining momentum Confidential 12 Copyright ©, 2016, Sasol Public / Private Sector Engagement – the missing Link! Private sector must be involved in the development and implementation of industrialization strategies Create platforms for regional dialogues between state, private sector and society on industrialization State policies to be informed by private sector requirements in order to improve alignment and ease of doing business in the region and globally SADC states to provide mechanisms and incentives for the training and development of entrepreneurs and SMMEs Maintaining momentum Confidential 13 Copyright ©, 2016, Sasol Conclusions The development of human capital at all levels is an absolute necessity for any industrialization endeavor. Investment in infrastructure and state of the art technologies, relevant to the regions level of development, must be prioritized. A conducive SET policy environment must be created to support scientific excellence, innovation and entrepreneurship. Significant improvements in factor efficiency and regional integration are required to achieve global competitiveness A two pronged balanced approach must be considered for industrialization based on: ● Maximum value addition of local resources ● Importing foreign technologies to drive diversification, import substitution and export expansion Maintaining momentum Confidential 14 Copyright ©, 2016, Sasol