State of Nation Address 2011: Responses by Economic Sectors and Employment Cluster
23 Feb 2011
A media briefing was delivered by Hon Gugu Nkwinti, Minister of Rural Development and Land Reform, on behalf of the Economic Sectors and Employment Cluster. He noted that the work of the Cluster would focus on critical regulatory and policy reform that supported overall growth and meaningful economic transformation, which would be key to job creation. The Cluster was cognisant of the fact that South Africa, like other economies across the globe, was only just showing signs of recovery from the devastating economic crisis. It was, however, realised that true long term job creation had to come from the private rather than the public sector. Funds would be created that supported creative initiatives for job growth and skills development, and to address other structural challenges to inequality. The State would still play a role in creation of jobs, mainly through State Owned Enterprises (SOEs) and Development Finance Institutions (DFIs), which possessed a wealth of resources, investment, skills and experience. The development of different value chains such as mining, agriculture, the green economy and tourism would be prime job drivers, as well as the more basic ones of infrastructure and manufacturing. African regional development, social economy and the knowledge economy would also have their place in the Cluster’s focus on job creation. Finally, regulation would be reviewed in many cases and unnecessary red tape would be cut to streamline bureaucratic processes especially for activities that created jobs.
A: The Minister of Trade and Industry suggested that the infrastructure question was probably better directed at the Infrastructure Cluster. It was assumed that the infrastructure investment programme would be picking up in the very near future. This would be an important driver for the Industrial Policy Action plan’s three year operations. One important theme of the programme would be to ensure local manufacturing for the infrastructure programme, and it was hoped that the concerns of the construction industry would be addressed. The World Cup had sparked a period of high infrastructure build, followed by a drop-off, but it was hoped that there would be a significant improvement.
Q: A question was asked whether government was in a position to provide job boards with housing.
Q: The question was posed whether government would be wiling to revisit amendments to the labour laws and the immigration laws, with a view to their effects on job creation.
A: The Minister of Trade and Industry commented that this had to do with a value-judgment as to whether these legislative proposals were anti- job creation. In most case they were not, as otherwise they would not have passed through Cabinet.
A: The Minister of Labour added that in regard to labour laws, there was an ongoing process before New Economic Development and Labour Council (Nedlac) and so it would be preferable not to discuss them at this point.
A: The Minister of Agriculture, Forestry and Fisheries added that her Department had been particularly concerned about the legislation, and was providing input into the debate.
Q: A journalist asked the Ministers to give an indication of how many jobs were likely to be created over the next three years.
A: The Minister of Economic Development stated that this Department was looking at a fairly modest projection up to 2020. Firstly, the structural and systemic problems that hindered long term sustainable job creation were examined. Following that, the skill interventions made this year would start to make a real and measurable impact in job creation over the next few years. Investment in infrastructure, particularly the big energy projects, would make available additional power that would attract large industrial projects two or three years later. The goal was to focus on laying a solid foundation now, instead of focusing on short term job creation and neglecting the underlying basis for sustained and strong job creating potential in the future. The second approach was that every minister had been asked to integrate job creation into his or her vision and programmes, and outline not only how many jobs would be created, but how this would be achieved. This did not necessarily mean department-created jobs, but could opportunities that departments facilitated, and that was in line with the President’s aim for co-ownership of job creation right across Cabinet, moving beyond mere rhetoric to full integration.
A: The Minister of Agriculture, Forestry and Fisheries said that her Department was convinced it had the potential to address rural unemployment. She realised that rural unemployment was a volatile subject and, if not addressed, could cause serious problems for South Africa. The current unemployment development could only be arrested if inequalities within rural and urban employment were addressed. The current profits of agriculture came from riding on exchange rates, but the Department was working on issues around commodities and competitiveness and how to become more profitable without relying on exchange rates.
Q: The Ministers were asked to give some details on the R9 billion job fund announced by the President, and especially the issue of private-public participation.
A: The Minister of Trade and Industry stated that this fund would be available to private and public entities that were able to create employment. It was too early to go into any details about what matching cash commitments might be required.
A: The Minister of Economic Development added that this fund relied on open architecture, so instead of being bound by detailed regulation it would rather have a broad framework that embraced projects that enhanced job creation. Examples were projects that helped young people in the transition from school to work, or rural youth brigades.
Q: A question was posed as to what methodology was used when the jobs targets were specified for the different projects and how it would be determined whether they were attainable and realistic, with specific reference to the key issues in the mining value chain.
A: The Minister of Economic Development answered that at the moment South Africa was not benefiting nearly enough from its mineral base, with coal, catalytic converters and iron ore being cases in point. A number of different Departments were looking at different ways of increasing the beneficiation. For instance, the Department of Science and Technology was looking at the technology for use of titanium, whilst the Department of Trade and Industry was looking at incentive schemes. South Africa had a large and extensive range of mineral resources, and there were a number of projects on the table. The Industrial Development Corporation (IDC) had identified a number of projects with beneficiation potential. One example would be the world’s first integrated metals plant, which had the potential to create more than 7 000 jobs. In regard to the methodology around jobs, he said that an integrated way of measuring the impact of programmes would be found, using a standard that was transparent and clear and that cut across Departments. This would replace the current system of different definitions and standards.
A: The Minister of Trade and Industry added that the benefit for the titanium/zirconium project was substantial. At the present moment one ton of titanium sand would exported, for $400. If the project worked as envisaged, and it could be turned into titanium alloy, the export value would rise to $100 000. South Africa participated in the Council of African Ministers of Industry, which cooperated on issues of mineral beneficiation as well as issues of negotiation and export with outside parties. He spoke about the complexities of the illicit economy and the damages posed to industry and jobs by illegal imports. Other criminal activities which damaged the economy were also mentioned, including company hijacking, which was a form of corporate identity theft, and intellectual property piracy, which damaged both film and music industries. These were being carried out by increasingly sophisticated international crime syndicates. This resulted in the decision being taken to establish intensive interaction between the Economics Cluster and the Justice Cluster, which would give a better understanding of the nature of the challenge. This was also linked to immigration issues, as a good many of these criminal elements were probably also illegal immigrants. If departments worked with industry they could become smarter and more efficient in combating the menaces, which would act to the detriment of South African jobs if not checked.
Q: The question was asked how this Cluster would deal and interact on issues around rural safety for farmers, farm workers and dwellers, to ensure that they were both protected and played a part in the growing economy. Furthermore, it was asked whether the Green Paper with regulation or guidance on land reform was likely to be issued soon.
A: The Minister of Agriculture said that government was particularly concerned with the safety of the rural communities, especially farm owners. Government held the view that even one death was one too many. The Department had already and would continue to meet with organised agriculture and was also looking into the possibility of partnering with Agri-Security to unfold a more comprehensive security strategy for farmers, farm workers and farm dwellers. The Cluster was working with the Safety Cluster to enforce and implement an integrated and comprehensive security plan, which encompassed all aspects of rural safety. There was also a concern on how the illicit economy thrived and impacted on rural safety. This Department, in conjunction with the Department of Labour, was working on the rights of farm workers and implementation of labour regulations to avoid a break down in relations between farmers and farm workers, a situation that often resulted in crime and violence. Security of tenure for farm tenants was also being addressed.
A: The Minister of Economic Development added that it was important to lay the ground work for investment, expand production and deployment in the agricultural sector as well as dealing with the social challenges.
Q: Another question was asked as to what had happened to the Green Paper, given the focus on the agricultural value chain and the green economy, and whether it could impede the progress with jobs. The journalist also asked what had happened to the Integrated Energy Plan.
A: The Minister of Rural Development & Land Reform said that the Cabinet had looked at the Green Paper about a week ago, but felt that land reform and rural development should be separated, so there were likely to be two Green papers emerging from this process.
A: The Minister of Energy believed that security of energy supply would really unlock economic growth. In order to further grow the energy infrastructure, the Department’s future strategy would allow for participation of the different independent power producers within the energy sector. Another aspect that would be added to the Integrated Resource Plan was the ability of industry to generate its own power if the grid could not supply.
Q: A journalist asked for comment about the latest outcry against gas exploration in the Karoo.
A: The Minister of Energy said that whilst it was known that South Africa had the potential for gas, it was also aware of the environmental challenges that the process would generate. The exploration would allow South Africa to assess the extent of its gas reserves and whether these were substantial enough for power production or any other exploitation. However, she appealed to environmental groups to understand that South Africa’s need for natural gas exploration was influenced by its wish to reduce greenhouse gases. Finally, she hoped the environmental groups would also understand South Africa’s need to develop and create the necessary jobs, bearing in mind that this would be done in full compliance with the National Environmental Management Act (NEMA).
Q: The Minister of Trade and Industry was asked to comment on the statement by the Organisation of Economic Development and Cooperation (OECD) that the trade barrier had risen to seven times higher. He was also asked to outline plans for improving North-South trade.
A: The Minister of Trade and Industry responded that in the South the tariffs were higher, because the countries were industrialising, whereas the developed countries had high tariffs on their agricultural goods because they were uncompetitive in that sector. When it came to South-South trade there would have to be some industrial trade tariffs, but recognition would also be given to the fact that since all countries were developing, they must find some complementary areas on trade. This would be the way for South Africa to move forward. When it came to comments about bureaucracy, it was necessary to make the distinction between red tape and necessary regulation. One way to reduce the red tape and bureaucratic regulations would lie in the new small business requirements for registration, which would be much less onerous than they had been until now. The Consumer Protection Act could be an example of necessary regulation, as it would stimulate economic activity in the country whilst also protecting the consumers and the economy from low quality products.
Q: The Ministers were asked to explain in what industries the 12I Investment Approvals lay, and what the job creation possibilities were. They were also asked to give some details on proposals for preferential procurement.
A: The Minister of Trade and Industry outlined that the Department had processed applications for just over R6 billion investments. The scheme offered a tax deduction from taxable income. Depending on the priority type of the investment and industry, the deduction could be high or low. Other criteria were also considered, such as whether there were likely to be jobs created in South Africa, whether the country’s industrial capacity was upgraded, whether there was skills development, and the like. He believed the scheme would create an incentive for industrial growth. He could not say much on procurement but attempts would be made to take advantage of competitiveness and working with public enterprises. This would in addition increase infrastructure across the board with a higher local content.
Q: The Ministers were asked to give more detail on the plans for raising commodity prices and agricultural profits, and whether this would not entail market intervention. The journalist also asked how much in rand terms was lost to the illicit economy. Further details were requested on the Iron Ore Pricing Panel.
A: The Minister of Trade and Industry explained that the very nature of illicit operations was that they did not get reported to Statistics SA, and no tax returns were submitted, so it was rather difficult to measure the precise figures. However, he could say that these operations were probably more dangerous than it was thought initially, and therefore stronger action was being taken to counteract them. This did not relate only to illegal imports but also to a whole lot of other criminal activities that were harmful to job creation and economic growth.
In relation to the question of competitiveness he said that South Africa’s enterprises, no matter in what value chain, had to become competitive, so production had to go up. However, it was true that matters were affected by global instabilities. The appreciation of the rand was due to the quantitative easing and slow growth of the American economy. South Africa’s lack of a stable, competitive exchange rate was still an issue that had to be addressed.
The Minister then explained that in regard to the Iron Ore Task Team, a programme of engagement with the key stakeholders was established. The initial mandate was establish a cost effective steel manufacturing industry in South Africa. Although this process had faltered, and was now in a quagmire of litigation and dispute, government wanted to reclaim this as a public and developmental obligation. He stressed that excessive steel production was bad for downstream production, which was where the jobs were found. Anyone who wanted to use South African resources would have to take on some obligations to return something to South Africa.
Q: A journalist asked what agricultural initiatives were likely to be pursued in Sudan. The Minister was further asked whether the Green Paper was still likely to come out in May. A question was posed whether a date had been fixed for the lifting of the moratorium.
A: The Minister of Rural Development and Land Reform said that a reference group had been established, and although a meeting with commercial farmers in January had been cancelled, another would be arranged. Despite the huge debates around land reform, rural development should not be delayed. The Green Paper and White Paper would be concluded later in the year, as Cabinet and Parliament dealt with them. Therefore the previous assumptions of the Papers’ dates were reasonable.
A: The Minister of Agriculture, Forestry and Fisheries said that the situation with Sudan was a little difficult, as South Africa interacted with South Sudan in a different way to interaction with North Sudan. The Minister of South Sudan had met with her and outlined the needs, which ranged from food security, through subsistence farming, smallholder farming and agro processing. The opportunities as well as the challenges in South Sudan were enormous. South Africa was committed to assisting the entire continent of Africa in having food security. That included the development of wheat and maize and other commodities on the continent. The Department was also in discussion with a variety of organisations, including the United Nations (UN) Food and Agricultural Organisation (FAO) to ensure food security in South Sudan.
A: The Minister of Economic Development added that when it came to agricultural production, South Africa wanted to invest in agro processing support, as well as aid rural infrastructure, by connecting small scale farmers to the mass markets, which in turn would aid competitiveness. Lessons from the past would also be taken, especially around the use of cooperatives. He also wanted to cut red tape, for example by speeding up bureaucratic processes and increasing coordination of investment. He also wanted to create easier access to funding for small businesses. Regulation must be simple, clear and limited to whatever was necessary.
Q: A journalist asked what could be done to allay the fears of white farmers about reform, and how would the vision be promoted to them.
A: The Minister of Rural Development and Land Reform said that the race issue was difficult and fears posed a challenge to South Africans every step of the way. The President had called for separation of land reform and rural development so that adequate time could be given to both. People needed time to engage on the issues of land reform, and a sensible and balanced solution had to be found to address both the fears of workers on the farms and the commercial farmers, and get them to move forward. This would be a difficult and tense process, but South Africa had to do it both for the sake of the whole country and to ensure stability in the rural economy.
A:The Minister of Agriculture, Forestry and Fisheries agreed that this was a debate that was needed, but believed that because South Africans had already proceeded so far with reconciliation, this should not pose serious concerns.
The briefing was adjourned.
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