Economic, Investment, Employment Cluster media briefing

Q: The Minister was asked if he was concerned that the general increases in prices were going to impact on the building of structures for the 2010 FIFA World Cup.

A: The Minister replied that the 2010 preparations and the increase in prices were always under review. Some of the budgets in different departments had already been revised; however, the challenge was to ensure that there were no “runaway” costs. It was important that there was scope for adjustments within various budgets. He could not answer the question with any specifics. However, the country was ready to move forward with 2010 preparations. 

Q: The Minister was asked how South Africans, specifically the poor, could be assisted in light of the increases in biofuels.

A: The Minister stated that the government would have to look at what actions could be taken to lighten the impact on poor people. The government would be able to comment on this once the Inter-Ministerial Committee had completed its work on this particular issue. 

Q: The Minister was asked what South Africa’s stance was on anti-dumping now that Indonesia had launched a trade dispute against South Africa at the World Trade Organisation (WTO) accusing the country of continuing to impose duties on imports of Indonesian paper.

A: The Minister was not really sure about this issue. The delay in removing anti-dumping measures from Indonesian paper could be due to administrative issues.

Q: The Minister was asked to provide an update on the Motor Industry Development Program (MIDP).

A: The Minister stated that the program was on track and would meet its commitments.

Q: The Minister was asked to explain what a “Centre for Competence for titanium” was.

A: The Minister explained that titanium was one of the minerals that South Africa was beginning to explore. The aerospace industry was looking at more uses for titanium. This would allow for industrial opportunity.

Q: The Minister was asked about the WTO Doha Round. A journalist noted that high subsidisation of agriculture in places such as the EU and US seemed as if they were not going to be resolved. He asked if there were alternative farming methods that South Africans could use.

A: The Minister answered that the Doha Round was the key to unlocking subsidies. High food prices would provide the opportunity for developing countries to ensure that developed countries reduced their subsidisation of agricultural products. Countries did not want to engage in a tariff war, as the world was moving towards a free trade strategy. The Doha Round would ensure that the trade market was levelled for both developing and developed countries, and would therefore provide developing countries with more trade opportunities. He also advised developing countries to trade amongst themselves, as this caused shifts in trade patterns.

Q: The Minister was asked how the Ministry would ensure that banks and high bank charges did not exploit people.

A: The Minister stated that banks were to assess fully the enquiries made into the figures that they charged people for various transactions. However, he was sure that a great amount of research was put into the decision to charge the various amounts. Banks had to look at bank costs as well as protecting the consumer. The Consumer Protection legislation was currently being considered by Parliament. The Ministry of Finance was responsible for regulatory actions; therefore it was the Ministry’s responsibility to look at initiatives and policy changes that the Ministry would have to undertake.

Q: The Minister was asked to comment on the completion of the tariff review.

A: The Minister commented that the tariff review would be discussed at the Lekgotla in July.

Q: The Minister was asked why scrap metal exports were limited while other exports were not.

A: The Minister answered that scrap metal was an important and cheap source of input for “downstream” manufacturers. The limit that was placed on exporting scrap metal was to ensure that there was enough supply for “downstream” manufacturers. Limiting exports was dealt with on a case-by-case basis; there was no blanket approach. The Ministry needed to limit the export of scrap metal to ensure availability for domestic purposes.

Q: The Minister was asked if he was confident that the Doha Round would be concluded in July. The journalist noted that South Africa was pegged as a developed country during negotiations in the Uruguay Round.  South Africa had argued for a 6% tariff at the industrial negotiations. He asked if South Africa would not sign on to the Doha Round negotiations if this condition was not met.

A: The Minister replied that South Africa occupied a unique position in relation to other developing countries. During the Doha Rounds, South Africa was treated as a developed country, which meant that the country had to take on some restrictions. This set South Africa apart from other developing countries and the country had to draw attention to this. There were many factors that would influence negotiations in the Doha Round, therefore if South Africa did not get the 6% tariff that was requested, it did not mean that the country would bow out of the negotiations. The government would deal with the situation in the context of the negotiations. 

The briefing was adjourned.

Economic, Investment and Employment Cluster’s Programme of Action (Cycle Two Report)
Briefing By: Minister of Trade and Industry, Mandisi Mpahlwa

01 July 2008

Introduction

The Economic Cluster continues to implement its three-year programme of action (POA) focused on facilitating conditions to enable the achievement of government’s 2014 vision. Generally, good progress has been made in implementing Cluster priorities, however, the Cluster is taking stock to consider emerging challenges to enable progress going forward. Cluster departments have, in the six weeks since the last report, been engaged in intense work on legislation given the parliamentary requirement to submit all Bills for consideration by 2 June 2008, this includes the amended Competition Bill which is relevant to the Cluster.

While the Cluster’s work is broad ranging, this media report will focus on areas of progress in the implementation of the Cluster’s POA approved by Cabinet in January and some consideration of emerging challenges that we are currently addressing.  

It is important to contextualise the work that we are undertaking as a Cluster. Our economy has been growing steadily since 1994 and underwent truly significant growth over the last decade. Most recently, the economy grew by 5, 4 % in 2006 and at 5.1% in 2007. Fixed investment has grown dramatically from 15% in 2004 to 21% in 2007. Real income per capita (average income per person) rose at around 4% per person annually since 2004. The rate of unemployment fell from 31, 2% in March 2003 to 23% in September 2007. This translates into an increase of approximately 1, 8 million employed people in South Africa, a significant development that shows that the economy has turned the corner on unemployment. The work of the Cluster is to reinforce positive trends where they exist and actively respond to challenges that may arise.

Increase Economic Efficiencies
The Cluster has considered the Revised National Human Resource Development Strategy (NHRDS) and is ready to submit the Strategy to Cabinet for its consideration. The Strategy will replace the current HRD strategy with an updated and refocused version that has been jointly worked on by relevant departments. The revised strategy will address shortcomings in the current strategy and optimise the efficacy and outcomes of human resource development in respect of South Africa’s development agenda. The revised NHRDS is explicitly aligned to existing strategies such as the Medium Term Strategy Framework, the National Industrial Policy Framework and other relevant strategies and policies. It is proposed that the Strategy has both long and medium term objectives focusing on the next five and the next twenty years. Once processed by Cabinet the draft NHRDS will be gazetted for public comments and input from our social partners.

Regarding ICT infrastructure, in particular the submarine cable initiatives, Nigeria has joined the UHURUnet initiative and the participation of Kenya is being finalised. Infraco has reserved manufacturing slots with prospective suppliers to ensure timely deployment of the African West Coast Cable. Both initiatives are due to be completed in the first half of 2010. To facilitate this process, guidelines for rapid deployment of electronic communications facilities have been published and a new policy covering security and prioritising SA and African investment in cables has been developed.
On the roll-out of the Sentech wireless broadband network, which is essential for improving broadband capacity and access particularly for rural communities and public facilities such as schools, courts, post offices and Thusong Service Centres, the Department of Communications has concluded the collection of topographic data. This data is aimed at planning the connectivity for the 235 most needy Dinaledi “maths & science” schools. R500 million has been allocated to Sentech to provide this roll-out of wireless broadband.
In May 2008, the Competition Amendment Bill was approved by Cabinet and has been introduced into Parliament, including a briefing to the Portfolio Committee for Trade and Industry. This Cluster intervention is crucial if we are to address market failures resulting from uncompetitive behaviour and outcomes.

The National Maintenance Implementation Plan was officially launched in Cape Town on the 21 May 2008. The Plan will seek to ensure that maintenance of vital infrastructure is linked to opportunities to maximize employment, thereby fulfilling two important objectives of the Cluster.

Public Transport is a strategic focus of the Economic Cluster with the key focus being the development of an integrated rapid public transport network and the Cluster will be considering the industrial policy opportunities that arise from investment programmes in this sector.

With regard to the implementation of the reformed Public Transport System, the development of an integrated transport network design has commenced in all the Metros.
On the Taxi Recapitalisation Programme, a turnaround strategy has been developed for the Operating Licensing Board focused on improving operational efficiency and service delivery. In addition the Department of Transport is engaging the Transport Education and Training Authority to discuss taxi industry training needs.

Simultaneously, DHA is focusing on improving mechanisms to fast track high skill immigration to South Africa for specific categories, twenty new Large Accounts were selected on 21 May 2008 and DHA staff and immigration specialists from outside DHA have started the process to service these. This initiative is crucial to address short-term skills shortages as government and SOEs scale up their infrastructure projects. By October 2008 it is envisaged that service delivery will be improved to the extent that work permits will be issued to highly skilled foreigners within 15 workings days. A system to monitor compliance with this target will be installed before the end of 2008.

The energy emergency is being addressed, not only by government, but by all relevant stakeholders. The NEDLAC Energy Summit in May was a success that demonstrated the commitment of all stakeholders to address areas requiring action. Some electricity savings target have been achieved, however, it is important to register that residential areas are still lagging behind industry. Our current savings through demand side management is 100 MW, however, our target is 600 MW in this financial year.

In terms of progress, the NERT is proving effective in developing an integrated response to the emergency including Demand Side Management. In addition cogeneration tariffs and rules have been determined and published and Eskom’s coal stockpiles have improved. The following regulations have been developed and published for comment: (1) Rationing of power consumption in support of Power Conversation Programme (2) Building standards (3) Limiting use of incandescent lightbulbs (4) Quality of power supply (5) Pricing for liquid petroleum gas

The Cluster is also considering the industrial policy response and opportunities that arise out of the electricity emergency. This includes:
Roll-out of solar water heating and other energy efficiency devices
Promotion of more electricity-efficient / relatively more labour-intensive industries
Industrial policy / technological potential of renewable electricity generation, e.g. solar
Promotion of energy-efficiency of existing industry

 Promoting Dynamic Growth Sectors
It is almost a year since the launch of the Industrial Policy Action Plan and progress has been made in the implementation of key actions in lead sectors as well as sustained implementation of plans in Asgi-SA priority sectors.

Implementation of sector agreements reached with industry stakeholders at NEDLAC in both the metals and engineering and chemicals sector has begun.

In metals and engineering, the Cluster is investigating mechanisms that can be used to limit the exportation of scrap metal to allow for sufficient supply in the domestic market.
 
In chemicals, the proposed land for the Halogen project has been identified in Enseleni and negotiations have been initiated to explore other suitable areas. The Chemicals Sector Expert Advisory Committee is planning an outward mission focusing on plastics. The purpose is to attract investors to locate these labour-intensive industries in South Africa.

In forestry, DWAF has initiated a process to develop a sawlog strategy for South Africa and important progress has been made in the prioritisation of the process to finalise the use of General Authorisations for water use for specific areas in KZN and Eastern Cape for small scale forestry. This process will enable the fast tracking of water licensing in those areas that are not water-stressed.  

In consultation with industry stakeholders, the dti has developed a comprehensive package of proposals that will take work beyond the CSP for the clothing and textiles sector.

In the BPO sector, the first 1000 graduates of the BPO Monyetla Work Readiness Programme were all employed during May achieving 100 percent absorption rate of the learners. The training of a further 2000 unemployed youth is planned for the current financial year. Within the 2^nd Economy Strategy, 4 call centres have been launched creating 315 jobs. On finalising the Telecommunication Developmental pricing, the Ministers of Trade and Industry and Communications will soon pronounce BPO a strategic sector for advancing developmental goals.

The licensing criteria have been finalised and DME is in a process of finalising the financial mechanisms of the biofuels implementation plan. The issuing of some biofuel licenses is planned for the end of 2008. As part of the National Industrial Participation Programme work on a major pilot to produce biodiesel for the European market is underway in the Eastern Cape.

DEAT and the Tourism Grading Council of SA is embarking on a comprehensive review of the awareness grading system that will ensure that quality is maintained in tourism establishments. DEAT has also begun the implementation of the Universal Accessibility framework that seeks to ensure that all establishments are accessible to individuals with disabilities The Tourism Human Resource Development strategy and its implementation plan have been drafted and stakeholders will be consulted for further inputs. The strategy will be finalised by August 2008 and will be launched in September at the Tourism Career Fair.

The work on other sectors such as creative industries has also progressed. A Blue Print for provincial craft hubs has been completed and business plans completed for Eastern and Western Cape and Kwa Zulu Natal.

The establishment of the Technology Innovation Agency (TIA) and integration of other agencies into TIA is on track. The Legislative processes for establishing the space agency by August 2008 are also underway. An interdepartmental task team approved the establishment of a proposed Centre of Competence for titanium. This is currently being scoped for implementation in the 2008/09 financial year. A centre of competence for information security is in place, and the process of operationalising its detailed outputs is currently underway in consultation with key government departments.

On Finalising the Long Term Mitigation Scenarios (LTMS), a second meeting with industry CEOs to discuss the LTMS was held on 22 April 2008. The proposed plan for the finalization of the LTMS process has been drafted and will be presented to the July 2008 Cabinet Lekgotla.

Regarding the process to improve design and administration of industrial incentives, the Enterprise Investment Programme’s which replaced the SMEDP was gazetted in May and is to be launched on 3 July 2008. The establishment of the IT system to increase operation efficiency on the disbursement of incentives is underway and the training of staff on the system commenced in May 2008. A draft discussion document on the tax incentives in support of the implementation of industrial policy is being discussed within the Cluster.  

Cabinet resolved on the 19th April 2008 that an Inter- Ministerial Committee be established to review the food prices and come up with short, medium and long term interventions to alleviate the impact of escalating food prices. The outcome of the process has potential implementation implications for a number of POA items and these will be considered by the Cluster as the process unfolds.

Integration of small and micro-enterprises
On rolling-out the ten products for government procurement from small business, provincial consultations in North-West, Gauteng, Mpumalanga, and Western Cape have been completed. A National Indaba will be held during October 2008 to complete the consultation phase.

An integrated framework for SMME support has been presented and approved by the Trade and Industry MinMec and the process of aligning PGDS and IDPs has been initiated. This process will ensure that support for small enterprises is prioritised in PGDS and IDPs.

The Tourism Enterprise Programme has been institutionalised into a Tourism Enterprise Partnership. The strategy for enterprise development has been approved and will focus on delivering on sustainable jobs, sustainable enterprises and transformation. Nine areas have been identified as having a potential to enhance competitiveness of South Africa as a destination. A decision has been taken to pilot implementation in the Eastern Cape and Kwa-Zulu Natal. The focus would be on developing new products and training enterprises.

On promoting communication on 2^nd economy initiatives, the printing of the economic opportunities publication and all the provincial pullouts has been completed. Of the 12 SABC language stations that are broadcasting the economic opportunities programme, 7 have completed the series.

Conclusion
While it is true that the economy faces challenges such as the shifts in macro-economic variables, the downturn in the global environment and energy and food price challenges it is important to note that government’s interventions in the real economy, such as the National Industrial Policy Framework and Action Plans and the work on infrastructure investments are correct, and will in time mitigate against these challenges that we face. The Economic Cluster will utilise the opportunity provided by the July Cabinet Lekgotla to take stock of both progress and challenges and will report back on relevant outcomes in August.