ATC230913: Report of the Portfolio Committee on Trade, Industry and Competition on the Department of Trade, Industry and Competition’s Fourth Quarter Financial and Non-Financial Performance for the 2022/23 Financial Year, dated 6 September 2023

Trade, Industry and Competition

Report of the Portfolio Committee on Trade, Industry and Competition on the Department of Trade, Industry and Competition’s Fourth Quarter Financial and Non-Financial Performance for the 2022/23 Financial Year, dated 6 September 2023

The Portfolio Committee on Trade, Industry and Competition, having assessed the service delivery performance of the Department of Trade, Industry and Competition (DTIC), against its mandate and allocated resources, in particular the financial resources for the period 1 January to 31 March 2023, on 13 June 2023, reports as follows:

1.Introduction

For the 2022/23 financial year, the DTIC had set three strategic priorities, namely (i) Industrialisation by drawing the link between interventions and patterns of production, investment, exports and job creation; (ii) Transformation by connecting interventions to empowering black South Africans, women and workers; and (iii) Capable state by reporting on improved performance and deeper partnerships. During the fourth quarter of the 2022/23 financial year, there had been a 1,4 percent increase in overall manufacturing production amidst the ongoing electricity challenges. However, South Africa’s exports of commodities and manufactured products have been facing challenges due to global recessionary pressures. Despite this economic context, the DTIC had achieved 97,4 percent of its targets in the fourth quarter and spent 98,9 percent of its projected budget at the end of the 2022/23 financial year.

1.1.Mandate of the Committee

Section 5 of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009) requires the National Assembly, through its committees, to annually assess the performance of each national department over an 18-month period. This culminates in a committee submitting a report of this assessment known as a Budget Review and Recommendation (BRR) Report. The overarching purpose of the BRR Report is for the committee to make recommendations on the forward use of resources to address the implementation of policy priorities and services, as the relevant department may require additional, reduced or re-configured resources to achieve these priorities and services. This Act gives effect to Parliament’s constitutional powers to amend the budget in line with the fiscal framework.

The current process forms part of ongoing oversight of the DTIC’s financial and non-financial performance. This will inform the next BRR process. Furthermore, Parliament’s Annual Performance Plan (APP) requires submission of reports on departments’ quarterly performance.

1.2.Purpose of the Report

The purpose of this report is to monitor the financial and non-financial performance of the DTIC against its predetermined objectives and quarterly milestones as part of the Committee’s ongoing budgetary oversight. This report assesses the non-financial and financial performance for the fourth quarter of the 2022/23 financial year, namely from 1 January to 31 March 2023.

1.3.Method

The Committee was briefed by the DTIC on its fourth quarter performance for the 2022/23 financial year on Tuesday, 13 June 2023.

1.4.Outline of the contents of the Report

Section 1 of the report provides an introduction to the report including its purpose, and method. Section 2 outlines the DTIC’s strategic objectives, assesses its financial and non-financial performance against its APP for the 2022/23 financial year from 1 January to 31 March 2023 and Section 3 outlines the key issues raised by the Committee during deliberations. Section 4 provides the Committee’s concluding remarks followed by a note of appreciation in Section 5.

2.DEPARTMENT OF TRADE, INDUSTRY AND COMPETITION

2.1. Strategic Goals

The DTIC’s performance was in line with its strategic objectives, which guided its work and was aligned to its programmes. The strategic goals were as follows[1]:

Promoting structural transformation, towards a dynamic industrial and globally competitive economy;
Providing a predictable, competitive, equitable and socially responsible environment, conducive to investment, trade and enterprise development;
Broadening participation in the economy to strengthen economic development;
Continually improving the skills and capabilities of the department to effectively deliver on its mandate and respond to the needs of South Africa’s economic citizens;
Coordinating the contributions of government departments, state entities and civil society to effect economic development; and
Improving alignment between economic policies, plans of the state, its agencies, government’s political and economic objectives and mandate.

2.2.Overview and assessment of the financial and non-financial performance[2]

This section provides a comparison between the DTIC’s fourth quarter non-financial performance targets as outlined in its APP against its fourth quarter performance report for the 2022/23 financial year and outlines its financial performance for the period under review.

2.2.1.Non-Financial Performance

The DTIC had 151 targets for this quarter, four of which had not been achieved. This represented a 97,4 percent achievement of targets during the quarter. This was an improvement from the 93 percent achievement of targets in the third quarter.

The four targets that had not been achieved were:

The publishing of three draft regulations on anti-dumping, safeguard measures and on tariff investigations. While the three draft regulations had been prepared, these had not yet been approved for publication.
The submission of the draft bill on patents and its full explanatory memorandum to the Executive Authority and taking it through the Economic Sectors, Employment and Infrastructure Development (ESEID) Cluster. While the draft Bill had been submitted to and approved by the ESEID Cluster, it had not yet been approved for publication.
The submission of the draft bill on designs and its full explanatory memorandum to the Executive Authority and taking it through the ESEID Cluster. While the draft Bill had been submitted to and approved by the ESEID Cluster, it had not yet been approved for publication.
The publication of the National Energy Vehicle (NEV) roadmap. The draft roadmap had been presented to the ESEID Cluster and was undergoing ongoing engagement with the National Treasury on a funding model.

The DTIC reported on the various areas of its work. Highlights of its performance in this regard are outlined below:

2.2.1.1.Energy interventions

In terms of the DTIC Group’s energy interventions, the Minister reiterated that they would be supporting the wider effort to address the energy challenges. During the quarter under review, they had:

Supported new energy generation projects by implementing measures such as unblocking and promoting investment, as well as addressing regulatory challenges;
Assisted firms with adaptation strategies such as the energy resilience scheme;
Promoted longer term energy efficiency in the economy through technical standards work; and
Promoted industrialisation to ensure that South Africa could develop security of supply of components and create jobs in the process.

2.2.1.2.Industrialisation

The DTIC mobilises incentives through the fiscus and partnerships with the private sector to enable structural transformation and support to firms to enhance their competitiveness. In addition, it has a range of non-financial support schemes, ranging from rebates on duties, to trade tariff support and actions by the competition authorities and development finance institutions to support firms.

In the automotive sector, 140 455 units, including passenger cars, light motor vehicles and medium and heavy vehicles, had been produced during the quarter. This was a decrease of 2,2 percent compared to the previous quarter. This was attributed to a decline in new domestic vehicle sales and exports in the previous quarter, as well as the loss of units by Toyota due to flooding. However, overall vehicle production from April 2022 to March 2023 had increased by 10,6 percent with 548 536 units being produced compared to 495 860 units in the previous year.

In terms of investments, R107,4 billion in new investment pledges had been secured against a target of R120 billion for the 2022/23 financial year. The DTIC Group had also received commitments and/or achieved R20,9 billion worth of additional local output from industry.

In terms of local public procurement, a Constitutional Court judgment had set aside the 2017 Preferential Procurement Regulations (PPRs). Subsequently, the 2022 PPRs do not make local content a compulsory tender requirement and leave it to the discretion of organs of state. In response, the DTIC has had ongoing engagements with key organs of state procuring products designated for local content to ensure that the policy is not discarded in their tenders. The key outcomes of this advocacy during the fourth quarter have been the issuing of the following Request For Proposals (RFPs) and Request for Information (RFI) with local content requirements:

Transnet Freight Rail’s (TFR) RFPs for the maintenance of their staged locomotives;
TFR’s RFP for manufacture and supply of rail fastening system for a period of two years; and
Airport Company of South Africa’s RFI requesting information on local industrial capacity and capabilities to manufacture and supply 955 steel airport luggage trolleys and 4 roll tainers.

Furthermore, the Export Credit Insurance Corporation (ECIC) has enabled the procurement of R54,6 million worth of South African goods and services during the fourth quarter. This was linked to four insurance cover projects where the ECIC has minimum local content requirements for goods and services that applicants must meet to receive insurance coverage. South African products procured included Electrical Materials and Equipment; Building Materials, Tools and Equipment; Steel Products; Surveying Equipment; Jointing Materials; Air conditioner and Ventilation Equipment; and Steel Covers.

In terms of Special Economic Zones (SEZ), the Minister reported on progress made at the Coega SEZ, Richards Bay Industrial Development Zone (RBIDZ) and East London IDZ (ELIDZ). Coega SEZ had secured investors with a combined capital investment of R892 million against a target of R110 million. This was largely attributed to the following Agro processing, Manufacturing, and Logistics investment projects, namely:

CEMZA, a cement product manufacturer, would be investing R100 million for its expansion. The expansion of the current facility would include a warehouse, plant and equipment, which would create an additional 25 operational jobs and 50 construction jobs.
San Miguel had signed a Lease Agreement for a ready-to-occupy facility for the processing of citrus. It would be investing R492 million. Further development of the processing facility would include refrigeration and freezing facilities, which would create 112 operational and 50 construction jobs.
Vanguard had signed a Lease Agreement for a storage and repairs facility within Zone 2 of the Coega SEZ. The project’s investment value was estimated at R300 million.

The RBIDZ had attracted two key investments, namely:

Wilmar Processing SA (Pty) Ltd, which had been a pledged investment. It has operationalised phase 1 of its Palm Oil Processing Plant, which was valued at an estimated R1,2 billion creating 21 new permanent jobs in the fourth quarter. A total of 202 permanent jobs were expected to be created once the plant is fully operational.
ProStar Export Paint is a 100 percent black-owned project, with a total investment value of R141 million. The project was at construction stage with piling having been completed and the foundation being finalised. The DTIC had approved top-structure funding of R41,2 million in this regard.

The ELIDZ had operationalised two investment projects namely: Bushveld Electrolyte (Chemicals Sector) with an investment of R400 million and Permalox Pepkor (Logistics Sector) with an investment of R70 million. The total value of operational investments in ELIDZ is R5,8 billion. These new investments have created 885 new direct jobs bringing the cumulative jobs to 4 663.

During the quarter, the DTIC Group enabled R6,1 billion worth of incentives, cumulatively R30,3 billion worth of incentives for the financial year. It had disbursed R4,1 billion during the fourth quarter and a total of R26,2 billion over the financial year. The funds directly administered by the DTIC Group had benefited projects in 49 of the 52 municipalities, of which 41 had been largely rural district municipalities.

Finally, there had been R178 billion worth of manufactured exports during the quarter. The DTIC noted that exports to the rest of Africa for the 2022/23 financial year, as well as exports to non-traditional export regions beyond Southern Africa, had increased significantly. In the third quarter, these included ferroalloys (R24,8 billion); light trucks (R18 billion); cosmetics (R3,2 billion); and steel bars and rods (R2,2 billion).

The DTIC programmes and/or entities had supported R24,34 billion worth of exports in the fourth quarter. This was attributed to the (i) provision of import duty rebates and drawbacks of customs duties for local manufacturers (R18,8 billion); (ii) provision of industrial financing for industrial projects, including manufacturers that exported their products (R1,2 billion); (iii) exhibitions and missions funded by the DTIC (R9,4 million); (iv) orders secured as a result of insurance risk cover provided for export transactions and outward investment projects with South African local content procurement requirements (R54,6 million); and (v) services exports supported through the financing of Global Business Services (projects, including call centres) (R2,8 billion).

2.2.1.3.Jobs, ownership and transformation

According to Statistics South Africa, employment in manufacturing declined by 2 000 jobs during the fourth quarter, and the total employment in manufacturing was 1 654 000 persons, which was an increase of 75 000 year-on-year. The DTIC highlighted that an estimated 614 457 workers were covered by the seven masterplans coordinated by the DTIC. In addition, about another 383 000 new or existing jobs had been supported by its incentive programmes.

One of these programmes was the Social Employment Fund (SEF), which is overseen by the DTIC and administered by the Industrial Development Corporation (IDC) and forms part of the Presidential Employment Stimulus launched in October 2020 as part of the Economic Reconstruction and Recovery Plan. At 31 March 2023, the SEF had created 65 033 jobs against a target of 50 000 jobs as set by the President. This was due to more applications having been received than anticipated, as well as a low drop-off rate of participants.

In terms of worker ownership in approved mergers, six mergers had been approved in the fourth quarter where the Minister’s intervention had advanced worker ownership. This had affected 9 509 workers. A further 542 workers had benefited from worker ownership in other mergers approved by the Competition Commission.

Furthermore, of the 52 merger notifications received in the quarter, there had been 12 mergers that the DTIC had participated in based on public interest considerations and 13 large and intermediate mergers decided on by Competition Authorities.

2.2.1.4.Innovation and Technology, Skills Development and Competitiveness Enhancement Programmes

The DTIC develops and implements policies and instruments that support technology development, commercialisation and industrial innovation for competitiveness. This was done through providing a platform for innovators to get support, share knowledge and best practice from the different role players in the National System of Innovation. For the period under review, two Innovation workshops had been held in the Free State Province (Bethlehem and Ficksburg) on 14-15 March 2023. The objective of the workshop had been to share information about the programme and the incentives of the DTIC. Participants included entrepreneurs, science and technology students, and existing innovators/inventors. In addition, the Grassroots Innovation Facilitation Project targeted Rural and Township designated groups to uncover innovation and facilitate pipeline development for the incentives. The first targeted province had been Limpopo.

Furthermore, the fourth Intellectual Property and Technology Commercialisation Colloquium had been hosted on 28-29 March 2023 in partnership with the North West University, the Companies and Intellectual Property Commission (CIPC) and the National Intellectual Property and Management Office (NIPMO).

The DTIC also partners with the private sector and Sector Education and Training Authorities (SETAs) to promote more responsive skills and competitiveness to support and advance employment, industrialisation, economic transformation, trade and investment. In this regard, it has a number of skills development programmes, such as the:

Itukise Internship Programme: A flagship internship programme for unemployed graduates. It provides unemployed graduates and in-service trainees with relevant work experience through a 12-36 months’ internship in DTIC-supported companies to promote placement into permanent jobs. The programme is mostly funded by the National Skills Fund, which is part of the Department of Higher Education and Training. The DTIC sources internship placements for unemployed graduates in companies and pays the stipend of placed graduates. In the 2022/23 financial year, the programme had been accessed by 45 female interns out of a total of 78 participants.
Textile Centre of Excellence (TCOE): The DTIC set up a textile state-of-the-art laboratory for the Council for Scientific and Industrial Research (CSIR) to conduct textile and materials research, host doctoral students and fund undergraduates at tertiary institutions specialising in textile and clothing research to improve the pipeline of graduates.
Fashion Design Innovation Centre: It is a sub-project of the TCOE with a fully-fledged training workshop to develop the design capabilities of fashion design graduates from institutions in the Eastern Cape and to train on the latest computer-aided software The TCOE also provides quality assurance training on materials for fashion designers. For the 2022/23 financial year, 75 students and youth had received financial support (51 students, nine fashion designers and 15 seamstresses).
Intsimbi Future Production Technologies Initiative (IFPTI): This is a national, multi-stakeholder initiative, established under the DTIC and Industry through the Production Technologies Association of South Africa. The Programme is industry-driven, and designed and implemented through a partnership model that meets the requirement for integrated On-the-Job Training in industry-based factories in close cooperation between training institutions and the factory floor. Qualification accreditation is based on a two-pillar approach where qualifications are built, based on industry needs in a matrix structure of employable skills competencies which can lead to international and/or South African registered and accredited qualifications. The initiative has four state-of-the-art training facilities in four provinces with advanced manufacturing training capacity and accredited Trade Assessment centre capacity. There had been 163 students in the Tooling Machinist and/or Toolmaker Apprenticeship Programme in the fourth quarter, of which 87 percent were African and 45 percent were female.

In terms of building enterprise productivity and competitiveness, the DTIC facilitates the implementation of workplace transformation initiatives by training managers and their employees to adopt world-class productivity enhancement best practices. The Workplace Challenge is administered by Productivity South Africa in this regard. During the 2022/23 financial year, 57 women out of a total of 101 participants accessed the Programme.

2.2.1.5.Masterplans

The DTIC is implementing seven Masterplans through the deployment of various industrial policy tools and industry commitments to develop industry capacity, increase investment and localisation, expand exports, and preserve and grow jobs. These are for the following sectors and/or industries: (i) Retail Clothing, Textiles, Footwear and Leather (R-CTFL); (ii) Sugar; (iii) Poultry; (iv) Automotive; (v) Steel and Metal Fabrication; (vi) Global business services (GBS), and (vii) Furniture.

In terms of the R-CTFL Masterplan, the following achievements had been recorded in the fourth quarter, namely:

Pledged investments of R369 million and approvals disbursed to 36 CTFL industry clients to the value of R210 million.
Sixteen black-owned businesses supported with R191 million, eight women-owned businesses supported with R79 million, and three early-stage start-ups supported with R14 million.
197 jobs had been created.
38 Customs Duty Rebate Permits had been issued for Woven Fabrics worth R375 million to produce garments with a value of R1,1 billion.
SARS had seized 207 consignments with a value of R142 million in support of customs fraud prevention efforts.

In terms of the sugar industry, the following achievements had been noted:

The South African Sugar Association had reported sugar sales of 1 563 228 tonnes in the 2022/23 financial year, an increase of 315 946 tonnes, which exceeds the Masterplan’s targets of an additional 300 000 tonnes sourced from the local market.
The interim sugar rebate mechanism has been extended to 24 November 2023 pending a long-term solution. This is a transport rebate granted to importers in Botswana, Lesotho and Namibia to reduce the burden of transport costs from producers in South Africa and eSwatini.
A Premium Price Payment had been developed as an interim measure, to stabilise Small Scale Growers, with a minimum premium of R60 million per annum being allocated for the 2021/22, 2022/23 and 2023/24 financial years. The last tranche had been allocated to growers in January 2023.
R1 billion had been allocated over a five-year period towards the Transformation Fund and had been disbursed as follows: for the 2022/23 financial year, R215 million had been allocated as at the end of March 2023.

In terms of the poultry industry, the following achievements had been noted:

The three-year target to increase the production of broilers by 1,7 million birds per week or 20,4 million birds per quarter had been exceeded. The industry had produced 2,8 million birds per week or 33,6 million birds per quarter in the fourth quarter.
The three-year target to increase the amount of Broiler Feed consumed by 300 000 tonnes or quarterly feed consumed of 74 122 tonnes had been exceeded. Broiler feed consumed had increased by 380 564 tonnes from 2 674 204 tonnes in the 2019/20 financial year to 3 054 768 tonnes in the 2022/23 financial year.
The IDC had approved funding of R525 million since inception in 2021. It had approved R179 million in the 2022/23 financial year with R332,5 million of approved funding having been disbursed in the 2022/23 financial year and R182,8 million had been disbursed in the fourth quarter.

In terms of the automotive industry, the following achievements had been noted:

140 455 vehicles had been produced in the fourth quarter;
84 774 vehicles had been exported in the fourth quarter; and
The Automotive Industry Transformation Fund had approved two transactions and supported the entities with capacity building. The approved transactions were upstream (logistics and lubricants) with a combined value of R54 million in loans and 140 jobs had been created and retained.

In terms of the steel and metals fabrication industry, the following achievements had been noted:

A number of Trade Measures had been concluded in the fourth quarter including (i) Anti-dumping duties on various garden tools (spades, shovels, forks, picks and racks) from China and India; (ii) An anti-dumping duty application on welded link chains had been rejected due to insufficient evidence; and (iii) SARS had imposed provisional duties of 35,9 percent against imports of coated steel coils from China for six months, while the investigation was being finalised.
The IDC had administered the Downstream Steel Industry Competitiveness Fund. It had approved R138 million in industrial financing support for investments of R149 million, supporting 374 existing jobs and creating 52 new jobs. It had disbursed R40 million to previously approved projects worth R128 million.
The private sector Steel Fund was being administered by the South African Iron and Steel Institute. This was established to be capitalised by a R2 per ton levied on locally produced steel from local steel mills.

In terms of GBS the following achievements had been noted:

52 000 jobs had been created in the sector.
29 000 jobs had been created or retained by the GBS projects which is an increase of 7 000 new jobs from the last financial year for GBS incentivised projects.
82 percent of jobs supported were for youth.
63 percent of jobs supported were for women.
R7,9 billion services exported to the European Union, United Kingdom, United States of America (USA), Australia and New Zealand.

In terms of the furniture industry, the following achievements had been noted:

The FX Group had commissioned a 4,5 megawatt woody biomass-fed steam turbine power plant in October 2022 to run its particle board, sanding, and melamine lines. The plant was in production in the fourth quarter.
In 2022, the IDC and the DTIC had committed R400 million towards the Furniture Challenge Fund. In the quarter, 44 applications had been received, totalling R620 million and were at various stages of review. The DTIC was in robust engagement with the IDC on the need to considerably accelerate the pace of processing and disbursements under the fund.
To address the shortage of raw materials in the Furniture sector, PG Bison’s eMkhondo plant was expanding to provide an additional 800m3 per day of Medium Density Fibre to the market. R217 million had been spent on civil works which commenced in the quarter. 355 construction jobs had been created and employed from the community. 17 permanent jobs have been created.

2.2.1.6.Regulation

The Minister highlighted the following regulatory activities conducted by the DTIC:

Gazetted the greylisting regulations for public comment in March 2023. The regulations are aimed at knowing who the shareholders of companies are. In this regard, the CIPC would be monitoring the beneficial ownership data from companies.
The Minister had approved the publishing of The Cape Flora, a logo application to protect a wide range of fynbos species as uniquely South African, in February 2023.
The Minister had gazetted for public comment the application made by the South African Reserve Bank (SARB) to prohibit the use of images of certain pre-Reserve Bank era coins in terms of the Merchandise Marks Act in February 2023. Currently, these images on the coins are unprotected. This matter concerns national heritage and would give the SARB rights to prevent the replication of these coins. A report in this regard was expected to be finalised in June 2023.
In terms of public outreach, there had been education and awareness programmes in 11 local municipalities in North West, Northern Cape, Western Cape and Kwazulu-Natal provinces. This had been a collaboration between the CIPC, the National Gambling Board, the National Lotteries Commission, the National Consumer Commission, and the National Credit Regulator to educate communities on consumer, companies, credit, lotteries and gambling laws. There had been 578 community participants in these programmes.

2.2.1.7.International trade and investor engagements

The Minister had either hosted or participated in the following bilateral engagements during the fourth quarter:

South Africa-Uganda State Visit and Business Forum in February 2023;
South Africa-Tanzania State Visit and Business Forum in March 2023;
Belgium Business Forum and Bilateral Meeting in March 2023;
The United Arab Emirates (UAE) Ministerial and Business Forum;
Tenth Session of the Joint Economic Committee between Switzerland and South Africa;
Fifth South Africa Philippines Bilateral Consultative Forum; and
Seventeenth Session of South Africa Russia Inter Governmental Committee on Trade and Economic Cooperation.

The Minister and/or the DTIC had either hosted or participated in the following multilateral engagements during the fourth quarter:

The 11th Meeting of the African Continental Free Trade Area Council of Ministers held in Gaborone, Botswana on 11-12 February 2023.
The 36th Ordinary Session of African Union Heads of State and Government held in Addis Ababa, Ethiopia on 18-19 February 2023 (African Union (AU) Summit).
World Economic Forum in Davos, South Africa hosted the South African Country Dialogue Session: The South African Investment Case. This was attended by over 100 Global and South African Chief Executive Officers. Furthermore, Bilateral Meetings were held with Saudi Arabia, Mozambique, the USA and the United Arab Emirates, and several private sector meetings were hosted. A World Trade Organisation Ministerial Meeting also formed part of the itinerary.
The 2023 Investing in Africa Mining Indaba, which included bilateral meetings with the USA and Japan, and investor meetings.

2.2.2.Financial Performance

The DTIC’s budget had been adjusted during the Adjusted Estimates of National Expenditure from R10,87 billion to R10,91 billion. By the end of the fourth quarter, the DTIC had spent R10,8 billion of its R10,9 billion adjusted budget. This translated to an expenditure of 98,9 percent for the financial year.

Overall under-expenditure had therefore been R115,1 million (1,1 percent) of the total budget. As shown in Table 1 below, under-expenditure had mainly been in the following programmes:

Programme 6: Industrial Financing (R48,4 million or 0,89 percent),
Programme 1: Administration (R35,4 million or 4,4 percent),
Programme 8: Invest South Africa (R12,9 million or 18,6 percent), and
Programme 3: Spatial Industrial Development (R6,7 million or 4,4 percent).

Table 1: Fourth Quarter Expenditure by Programme as at 31 March 2023

Programme (R’000)	Adjusted Budget 2022/23	Year-to-date
Programme (R’000)	Adjusted Budget 2022/23	Actual Expenditure	% Variance
1: Administration	795 278	759 928	4,44
2: Trade Policy	227 645	222 660	2,19
3: Spatial Industrial Development	153 623	146 927	4,36
4: Industrial Policy	1 734 126	1 730 513	0,21
5: Consumer and Corporate Regulation	332 001	331 513	0,15
6: Industrial Financing	5 411 439	5 363 087	0,89
7: Trade and Investment South Africa	398 232	397 830	0,1
8: Invest South Africa	69 180	56 293	18,63
9: Competition Policy	1 742 951	1 741 447	0,09
10: Economic Research	49 078	48 237	1,71
Total	10 913 553	10 798 435	1,05

Source: DTIC (2023)

2.2.3.Fourth Quarter Expenditure by Economic Classification

In terms of economic classification, the largest under-expenditure item had been for incentive payments with an underspending of R48,3 million or 0,9 percent of its budgeted amount. Compensation of employees had also incurred an underspending of R35,2 million or 3,3 percent of its budgeted amount.

Table 2: Fourth Quarter Expenditure by Economic Classification as at 31 March 2023

Description (R’000)	Budget 2022/23	Year-to-date
Description (R’000)	Budget 2022/23	Actual Expenditure	% Variance
Current payments	1 684 110	1 639 376	2,66
Compensation of employees	1 081 666	1 046 433	3,26
Goods and services	602 444	592 943	1,58
Transfers and subsidies	9 214 868	9 153 748	0,66
Incentive Payments	5 249 361	5 201 069	0,92
Department Entities	2 005 744	2 005 744	0,00
External Programmes	1 748 516	1 742 164	0,36
Non-Profit Organisations (Partnerships with business associations, NEDLAC)	159 801	159 801	0,00
Membership Fees (International Organisations)	41 173	35 009	14,97
Households	10 273	9 961	3,04
Payments for capital assets	13 074	4 119	68,49
Payments for financial assets	1 501	1 191	20,63
Total	10 913 553	10 798 435	1,05

Source: DTIC (2023)

3.Issues raised during the deliberations

The following issues relating to the performance of the DTIC were raised during the Committee’s deliberations:

Mergers and the impact on employment: The Committee welcomed the recent Mediclinic Merger, and the Heineken, Distell, and Namibian Brewery Merger. The merger of Heineken, Distell, and Namibian Brewery secured significant investment, resulting in 80 percent of input sourced locally, as well as investment in a new greenfield brewery and maltery, among others. In addition, to promote agriculture, research and development (R&D), and black-owned, women-controlled businesses, it shall support and invest in Small and Medium Enterprises, including Historically Disadvantaged Person controlled suppliers. In relation to the Mediclinic Merger, it led to investment in skills development of training nurses, as well as providing medical grants to support development at different Mediclinics. Additionally, it would result in a R5 billion spend on procurement from black-owned business, of which R2,5 billion would be used to procure from black-owned Exempt Micro Enterprises. Furthermore, both mergers resulted in the establishment of Employee Share Ownership Plans. Notwithstanding these achievements, the Committee enquired whether any of these mergers had resulted in job losses. The Minister informed the Committee that regarding mergers, South African Competition Law diverged from international competition law. In general, employment is not covered under competition law internationally. Globally, opportunities to bring synergies to increase efficiency and a company’s overall performance drive mergers. However, the South African Competition Act provides a broader framework that includes the impact on employment. According to the Minister, job losses had been minimal during mergers, however, this was dependent on whether a failing company was involved. In circumstances like that, the Competition Authorities would be more concerned with preventing the company from going out of business completely and less concerned with the number of retrenchments. In light of this, they might allow a merger without imposing stringent employment conditions, but such mergers are uncommon. However, the majority of mergers in South Africa include very strong job protection measures. The presentation reflected that 178 000 jobs had been covered by competition measures. Companies would not be permitted to reduce the total number of employees in the business, as a result of a merger. For example, if after a merger a company had two chief financial officers (CFO), one of the CFOs might be promoted to another Senior Level position; or if one CFO resigns, a company may employ someone at a lower level. The Minister informed the Committee that given South Africa’s unemployment challenges, few merger agreements had very specific retrenchment clauses.

Fronting: Although fronting has been made a criminal offence in terms of the Broad-Based Black Economic Empowerment (B-BBEE) Act of 2013, the practice of fronting still prevailed. As government had been a major procurer of goods and services, the Committee enquired what steps had been taken to address this, and what consequence management had been implemented in this regard. The Minister indicated that fronting was a concern for the DTIC. With the strengthening of the B-BBEE Commission, it would be able to flush out examples of fronting. According to the Minister, the challenge was with ensuring enforcement of the Act rather than the regulatory side, thus more enforcement was also necessary to complement the work of the Commission.

New public procurement legislation: National Treasury has indicated that it would be tabling the Public Procurement Bill that seeks to regulate and prescribe a framework within which preferential procurement must be implemented. The current public procurement system is fragmented, decentralised and open to corruption, hence, the bill seeks to establish a single regulatory framework, with a single point of authority in a Public Procurement Office. In light of the new draft legislation, the Committee enquired how it would impact the Black Industrialist Programme. The Minister informed the Committee that the DTIC has an interest in the proposed legislation as it relates to transformation. Therefore, it would continue to collaborate with National Treasury to ensure that the proposed legislation does include provisions that would ensure effective transformation.

Status of implementation of the National Credit Amendment Act (NCAA): In the previous Parliament, the Committee had adopted the National Credit Amendment Act of 2019. This Act seeks to provide additional protection to low-income consumers from being over-indebted by either re-arranging, suspending or cancelling (partially or wholly) their unsecured credit debts within a period of four years from the commencement date, which can be extended. The Committee enquired about the status of the implementation of the NCAA. With regard to the implementation of the National Credit Amendment Act, the Minister informed the Committee that it would engage the National Credit Regulator to ascertain how far along the implementation process was.

Provision of requisite skills for industrialisation: There was a need for greater collaboration between the relevant educational institutions to guarantee the development of the necessary skills required for industrialisation. This would ensure that a comprehensive strategy for advancing industrialisation could be developed and implemented. The Committee enquired whether there were any relationships between the DTIC and institutions of higher learning that would ensure the development of the necessary skills for further industrialisation and economic transformation. The Minister highlighted that innovation and new ideas typically emerged in the early stages of industrialisation. This creativity and new innovations could result in the creation of brand-new products, or they might serve to improve existing products. Regarding the DTIC’s partnerships with academic and research institutions, the Minister emphasised the work with the CSIR to establish a cutting-edge textile laboratory for conducting textile and materials research, to host PhD students, and to provide funding for undergraduates at tertiary institutions that specialise in textile and clothing research to increase the pipeline of graduate students. The Minister also informed the Committee that the Colloquium on Intellectual Property and Technology Commercialisation with the theme “Advancing innovation through IP commercialisation for full scale industrialisation” had been held on 28 and 29 March 2023, in collaboration with the North West University, the CIPC, and NIPMO. He further indicated that future quarterly reports would go into greater detail about the DTIC’s collaboration with various institutions on industrialisation. Additionally, the DTIC, through mergers and acquisitions, persuades companies to make funds available to universities, with PepsiCo and the recent Mediclinic merger being an example of such cooperation.

Inter-ministerial approach to unemployment: While the DTIC is not primarily responsible for addressing the challenges of unemployment, it has been facilitating the upskilling and reskilling of workers, which is an important contributing factor to the success of industrialisation, transformation and economic inclusion. In this regard, the Committee enquired whether any inter-ministerial interventions were being considered that would ensure the upskilling of the unemployed. Also, whether the DTIC has a programme similar to the Expanded Public Works Programme (EPWP) of the Department of Public Works and Infrastructure. The Minister informed the Committee that the Human Resource Development Council, chaired by the Deputy President, includes a number of Ministries, as well as the DTIC, seeks to coordinate efforts across the different spheres of government to promote skills development. In addition, the Minister was of the view that there are sectors that could be the catalyst for job creation, such as the energy sector. This sector provides an opportunity for skills development on the supply side of the labour market that would grow the economy to absorb more young people into employment. With regard to a programme similar to the EPWP within the DTIC, the Minister informed the Committee that it has an equivalent programme in place at the IDC, the Social Employment Fund. This programme aims to create part-time jobs, especially for graduates, to afford them an opportunity to utilise their formal training in a practical work setting.

Beneficiation: The Committee enquired what mechanisms the DTIC was considering to mainstream beneficiation beyond the current initiatives regarding batteries and platinum in terms of the manufacturing of catalytic converters. The Minister informed the Committee that one of the biggest challenges in relation to beneficiation is the supply of energy. He also indicated that many countries were exploring what measures they could implement that would ensure beneficiation particularly in the case of rare/critical materials. In the case of South Africa, it would require greater collaboration with the Department of Mineral Resources and Energy as this falls within their mandate. Furthermore, South Africa can learn from other countries that had experienced similar challenges, such as Chile that recently announced a new approach to the processing of lithium. Also, countries on the African continent were exploring mechanisms to use their mineral resources to promote African development. Another example has been Indonesia that developed a stainless-steel industry utilising its nickel resources. Such an approach may elicit resistance from the mining industry, but to drive transformation government must scale up its development. However, the Minister acknowledged that such action requires tough decisions as it may disturb the economic equilibrium and the commercial interests of a few.

Status of the African Growth and Opportunity Act (AGOA): The AGOA is a preferential trade programme that allows countries in sub-Saharan Africa to export products to the USA duty free. This Act makes provision for the establishment of a US-Sub-Saharan Africa Trade and Economic Cooperation Forum (AGOA Forum). South Africa has been scheduled to host the AGOA Forum, however, there had been recent calls by prominent figures in the US Congress to have the forum moved to another African country, in lieu of South Africa’s perceived support for Russia. The Committee enquired what the Minister’s position was regarding this request, as it might be viewed by some as a threat to South Africa’s sovereignty. The Minister informed the Committee that he had responded to the AGOA matter as part of an oral reply. He noted in his response that about 18 to 20 percent of South African exports to the USA was either through one of two preferences: AGOA or the Generalised System of Preference. He further acknowledged that it is in South Africa’s interest to retain access to these trade preference measures/programmes because of its contribution to job creation. It should be noted that AGOA is not a trade agreement, but a trade measure adopted by the US Congress. Therefore, it is the US Congress that determines which countries on the African Continent should have preferential access subject to a range of requirements, including their economic and political environments. Once a country has shown sufficient economic progress it may no longer require access to AGOA. With regard to the letter from the US Congress representatives, the Minister indicated that he would engage with the US Congress members and reiterate South Africa’s position around the Ukraine/Russia conflict. He reiterated that 80 percent of South African trade with the US was covered under the WTO rules, with just 20 percent covered under the preferential trade access unilaterally granted by the US.

BRICS Development Bank: The New Development Bank is a multilateral development bank founded by the BRICS nations of Brazil, Russia, India, China, and South Africa. It aims to mobilise funding for infrastructure and sustainable development projects in emerging and developing economies. The Committee enquired about the number of South African companies, including black-owned companies, currently receiving loans from the bank. In addition, whether any of these companies were participating in any infrastructure projects on the African continent. The Minister informed the Committee that the Development Bank’s major focus was on infrastructure development hence the majority of the loans would be related to infrastructure. These loans were mostly provided to state-owned companies or utilities which fall under the National Treasury. He endeavoured to seek the relevant information regarding the private sector but was of the view that most of the loans would be granted to public entities for infrastructure projects.

Movement of people: In 2018, the Protocol to the Treaty Establishing the African Economic Community Relating to the Free Movement of Persons, Right of Residence and Right of Establishment (AU Free Movement Protocol) had been adopted. The Committee enquired about the role of the DTIC in the inter-ministerial forum regarding the free movement of people. According to the Minister, the matter of the Protocol and the free movement of people falls under the championship of other ministries, including the Minister of Home Affairs. The DTIC dealt with the movement of goods and capital with the Department of Home Affairs and National Treasury responsible for the wider issues around the Protocol on free movement of people. At least 51 countries have signed with 47 countries having ratified the Agreement, however, there were a number of countries that were still hesitant about ratifying the Protocol, hence there was ongoing discussions.

4.Conclusions

Based on its deliberations, the Committee drew the following conclusions:

The Committee welcomed the approach to mergers to ensure job retention as far as possible given the high level of unemployment in South Africa, as well as other socio-economic factors being considered.

The Committee remained concerned about the prevalence of fronting and its negative impact on economic transformation. It encouraged the Department and the Broad-Based Black Economic Empowerment Commission to continue working with the relevant law enforcement authorities to strengthen the enforcement of the B-BBEE Act in this regard.

The Committee was concerned by the slow implementation of the National Credit Amendment Act of 2019. It encouraged the DTIC in conjunction with the National Credit Regulator and the National Consumer Tribunal to finalise the implementation of the Act.

The Committee welcomed the DTIC’s initiatives to facilitate greater collaboration between the relevant educational institutions and industry to develop the necessary skills required by industry.

The Committee noted that the Industrial Development Corporation was administering the Social Employment Fund, which creates part-time jobs, especially for graduates, to gain on-the-job training. It was of the view that such programmes were critical to enable graduates to obtain much needed work experience.

The Committee welcomed the beneficiation initiatives regarding batteries and platinum in terms of the manufacturing of catalytic converters, however, it was of the view that more could be done as beneficiation might be the catalyst to address unemployment.

The Committee supported the government’s position in terms of the United States’ African Growth and Opportunity Act and sought a speedy resolution of the negotiations to retain South Africa as a beneficiary.

The Committee welcomed the establishment on the New BRICS Development Bank and its focus on offering financial support for infrastructure projects.

The Committee supported South Africa’s accession to the Protocol to the Treaty Establishing the African Economic Community Relating to the Free Movement of Persons, Right of Residence and Right of Establishment, as it would facilitate greater and easier trade in terms of the African Continental Free Trade Agreement.

5.Appreciation

The Committee would like to thank the Minister, Mr E Patel, and the Acting Director-General of the Department of Trade, Industry, and Competition, Ms M Mabitje-Thompson, as well as their team, for their cooperation and transparency during this process. The Committee also wishes to thank its support staff, in particular the committee secretary, Mr A Hermans; the researcher, Ms Z Madalane; the content advisor, Ms M Sheldon; and the committee assistant, Ms Y Manakaza, for their professional support and conscientious commitment and dedication to their work. The Chairperson wishes to thank all Members of the Committee for their active participation during the process of engagement and deliberations and their constructive concluding remarks reflected in this report.

References

Department of Trade, Industry, and Competition (2023) Fourth Quarter Report for the 2022/23 Financial Year.

Department of Trade, Industry, and Competition (2022) Annual Performance Plan 2022/23.

[1] DTIC (2022)

[2] DTIC (2023)

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