Lionel October - DTI's new director-general

by Chris Barron
If any public servant can make a fist of the Department of Trade and Industry's latest industrial policy, IPAP2, unveiled this year by minister Rob Davies, then it is the department's new director-general, Lionel October.

A trade union leader of the late '80s and early '90s, and an MSc economics graduate of the University of London, the department's 47-year-old former deputy director-general was always the most accessible of its officials and one of the few who seemed to know what he was talking about.

Now he has arrived all bright-eyed and bushy tailed from a three-year stint as the country's trade and investment representative at the EU in Brussels.

He says the two biggest lessons he learned there were the huge benefits of regional economic integration and, with reference to Germany, the role that a successful industrial policy can play in boosting production, economic growth and employment.

"The EU has created one common market of 300million people. No trade barriers between the different countries, no transport or tariff barriers."

There's no reason why East and Southern Africa shouldn't form a common market of similar benefit to its member countries, he says. Such a market would have 700million people. It would boost profits, production and jobs in SA, and attract mega foreign direct investment from abroad.

His department hosts a conference of the three trade blocs comprising the Common Market of Eastern and Southern Africa (Comesa) next month.

"There's a higher level of African solidarity around idea of a common market than there was in Europe," he says.

Africa is good at expressing solidarity, less good at making things happen. The Southern African Development Community's inability to do anything constructive about Zimbabwe is not a good omen.

"We, SADC, have agreed to start small," he says. With trade in goods and the development of railway lines, roads and ports.

Sounds a lot easier said than done, of course. We don't appear to have the capacity to develop these things in South Africa, so what makes him so confident we can do it across half the continent?

"Our construction companies showed with the World Cup that they're the best in the world," he retorts.

This is not about technological capacity, however. That's the easy part. He agrees that the biggest challenge will be to get political buy-in from all the countries.

"That is forthcoming now. They've agreed for us to host the summit. African Union heads of state have endorsed it. So it's on the road already." Now's the time for implementation, he says.

As for Zimbabwe, "just look at the latest IMF report. Zimbabwe's growing at 7.3%, SA at 3.4%, so growth is taking place in Africa. We've got to wake up, actually, as SA, because many African countries are growing faster than us.

"Politicians will take forever to get things sorted out, but as economists our job is to get trade going, to get the roads built, rather than constantly moaning about the political situation and so on."

Another of his priorities will be implementing IPAP2. This has been on the national agenda in various guises for many years and nothing much has come of it if the number of jobs created is any guide. But October takes heart from what he saw in Germany, which used industrial policy to emerge victorious from the global recession.

What particularly struck him was how business and government work together there and "complement each other" to create an economic powerhouse that is pulling other EU members along "in its slipstream".

"The German government has a big stake in their private companies. There isn't that antagonism between public and private sector."

If industrial policy can work in Germany it can work here, he says. Germany, though, has a highly sophisticated and knowledgeable government bureaucracy, which we do not. It enables them to make more effective interventions in business than is likely here.

October concedes that "in Germany there are skilled government officials, who can do complex economic activities, which we don't have".

But implementing industrial policy is "actually not rocket science", he says. "Government's role is not to do business, it's to incentivise business, to give them subsidies and so on, as long as they employ people and invest and so on."

Another key element in Germany's successful industrial policy is the high level of mutual trust between government and business.

You have only to listen to tripartite alliance politicians routinely denouncing local business to know that closeness does not exist here.

October agrees. "Historically there's been a problem," he says. "There hasn't been that closeness. But at the presidential business summit in April the president called for a team SA approach.

"We hosted that conference. We worked with Busa (Business Unity SA) to say, 'let's repeat what we did during the World Cup'."

He accepts that the World Cup was the success it was because politics was not allowed to get in the way.

"I think that's absolutely right. We mustn't let ideology or politics get in the way of our Industrial Policy Action Plan."

What about the perception - created recently by what many see as the department's attempt to sabotage Walmart's acquisition of Massmart and block Japan's Kansai Paint's takeover of Freeworld Coatings - that it is hostile to business?

"That is a misinterpretation. At DTI the private sector is the life blood of the economy. Our whole industrial policy is focused on helping the private sector. Our entire industrial policy is premised upon creating a robust domestic private sector."

Walmart's history is one of "displacing domestic manufacturers", he says. The department has taken them to the Competition Tribunal to get a guarantee that it will not follow that practice in SA.

In the case of the Japanese paint company, it wanted to ensure it would "produce the stuff here" and use local research and development capacity. "All we want to do is protect our capacity."

All it succeeded in doing was seemingly to contradict IPAP2, which specifically recognises the role of foreign direct investment in creating jobs.

"This is not FDI. They're not going to build a plant here, they want to take over an existing company."

October admits that when he left for Brussels he was "frustrated" by the lack of political will to get the industrial policy up and running. But he feels it is a very different department, and government, today.

"There's a new mood with implementation now. We've passed the debate stage," he says.

"When I left we were all having policy debates all the time. Now there's movement."

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