Trade and Industry: Minister's Budget Vote Speech & Responses by ANC and DA

Minister of Energy, Mr Rob Davies, gave his Budget Vote Speech on the 15 May 2013

____________________________________________________________
Chairperson
Members of the Portfolio Committee
Deputy Ministers
Director-General and officials of the Department Trade and Industry and the Council of Trade and Industry Institutions (COTII)
Leaders of organised Business and Labour
Distinguished guests
Ladies and gentlemen
Honourable members.

It is common knowledge that the term of this administration has coincided with the most severe global economic crisis since the 1930s. When we took office in 2009, the SA economy moved into recession which cost us close to one million jobs. 200 000 of these or 20% were in manufacturing, a sector which contributes only 14% to the Gross Domestic Product (GDP), meaning that the impact of the recession was disproportionately severe in manufacturing.

In this context, it was clear that the global economic crisis had put into sharp relief the necessity to transform a number of longstanding structural imbalances and weaknesses to place our economy on a new sustainable and productive growth path. Guided by the resolutions adopted at the ANC’s 52nd National Conference in Polokwane and the manifesto we were elected on in 2009, this administration tabled the New Growth Path, within which the Industrial Policy Action Plan (IPAP) was identified as the manufacturing job driver. IPAP has become the centrepiece of Department Trade and Industry (the dti) work with all our actions being co-ordinated or aligned to it.

Over the course of this administration, we have institutionalised the tabling at the start of the financial year of a new iteration of IPAP covering the financial year in question and the two outer years. IPAP has moved far beyond vision statements or diagnostics to identify Key Action Plans with defined timeframes to be implemented by various entities developed after consultation with industry players.

Last month we released the fifth iteration of IPAP covering this ANC led government’s last full financial year. Accordingly we highlighted a number of key lessons we have drawn from our efforts over the past five years as well as identifying the broad direction we believe a higher impact IPAP would need to traverse in the future.

One of our major conclusions is that where government has acted purposefully to implement programmes developed in consultation with industry players, business as well as labour – concrete positive results have been achieved. Among our significant achievements has been the finalisation of the transition from the Motor Industry Development Programme (MIDP) to the Automotive Production and Development Programme (APDP) which now includes the Medium, Heavy and Commercial vehicle segments of the automotive industry, including SA’s domestic Original Equipment Manufacturer (OEM) in the sector – Bell Equipment.

Providing incentives to promote competitiveness and localisation in this important sector of the South African economy has seen production volumes increasing to 539,424 units and exports reaching 277,893 units in 2012. Furthermore, this change in focus in incentive to support and encourage deepened local component manufacturing, has resulted in 128 projects supporting or sustaining 57,197 jobs.

As a sign of confidence in the steps we have taken and in the future of this sector, private investments of nearly R16 billion have been secured. These have included both new investors and new lines of operation, by existing investors. Among the new investors in the sector, we have welcomed the First Automobile Works of China which is constructing a truck plant in Coega and the Beijing Automotive Works which is building a taxi assembly line and distribution centre are examples of existing investors expanding their operations. We also saw important new investments by long established OEM’s including Mercedes Benz’s new C-class production in East London, BMW’s increased production capacity in Rosslyn, Ford in Silverton and GM in Port Elizabeth.

The Clothing, Textiles, Leather and Footwear industry experienced a remarkable turn-around, directly attributable to a radical change in our incentive programme with the introduction of the Clothing & Textile Competitiveness Programme 12,205 new permanent jobs have been created in companies benefiting from this programme. A pleasing new development has been key local retailers committing to local procurement in support of manufacturing companies. Over 469 companies were assisted under the CTCP with R1.5 billion worth of applications approved. Approximately 49,888 existing jobs are being retained through the support of the CTCP.

The roll-out of the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) has under-pinned significant investments in renewable energy component manufacture. Significant investments in wind tower manufacturing facilities and solar power plants have been made – including DCD (R300m), Mainstream Renewable Power (R4.6bn) and Sun Edison (R2.6 billion).

Mr Speaker, in 2009 we said that the threat of de-industrialisation loomed large and that we must confront this danger with interventions that will promote industrialisation in a systematic and sustainable manner. We also said that the infrastructure roll out, which is our main countercyclical response, must be a tool of industrial development. Accordingly we have sought to strengthen our procurement system to support increasing local industrial production. In this regard we can point to the designations of sectors for local procurement under the Preferential Procurement Policy Framework Act as introducing a sea change in industrial development in South Africa. The first wave of designations has already seen significant new investments in sectors such as transport and capital equipment, and companies are actively ‘tooling up’ to ensure that they are well positioned to take up the opportunities, which arise from the localisation programme.

Sectors already designated include:

• rail rolling stock (locomotives, wagons and carriages);
• power pylons;
• bus bodies;
• textile, Clothing, Leather and Footwear;
• canned vegetables;
• furniture;
• certain Pharmaceuticals and
• set top boxes.

Furthermore, localisation is now fully entrenched in a number of key procurement programmes such as the renewable energy generation programme and the fleet procurement processes of State Owned Companies (SOCs).

Moving ahead, work has already begun on assessments of sectors and products for designation including the designation of Valves, Manual and Pneumatic actuators; Power and Telecommunication Cables; and Components of Solar Water Heaters.

In addition to the strategic use of localisation in government procurement, the dti also uses a variety of incentives to support and encourage investment in the manufacturing and value-added services sectors.

A case in point is the Manufacturing Competitiveness Enhancement Programme (MCEP). Grants to 214 enterprises have been approved valued at R1,35 billion; 41, 626 jobs are expected to be retained as a result with a total investment outcome of R5.37 billion.

I am pleased to report that the MCEP is currently operating on an average of 2 months turnaround time. Considering the large numbers of applications and the amounts of funding involved this is an excellent rate and the feedback I am receiving from a range of firms is very positive indeed.

Through the 12i Tax incentive, we have supported 26 projects involving investments valued at R32,6 billion, creating or sustaining 3 326 jobs over the last four years.

Additionally, we can report that the European Outsourcing Association awarded SA its prestigious Offshoring Destination of the Year Award.

Over the past three years, we have seen investments in Business Process Services with a value of R1,3 billion supporting 4 500 new jobs. Our change in the support programme for Business Process Services attracted key foreign investors such as Amazon, and SERCO, which opened its International Business Process Outsourcing (BPO) service delivery centre at Newspaper House in Cape Town with 500 seats and plans to increase to 1 500 – 2 000 seats to service a R1 billion contract for Shop Direct in the UK. Significantly, the skills development support provided by the dti has led to a high proportion of young people finding employment in the sector, and we have accepted the target in the Youth Employment Accord of ensuring that at least 80% of new jobs created in the sector go to young people.

Mr Speaker, at the beginning of this administration, we identified the film industry as having significant potential. Our efforts to work with industry to unlock this potential have resulted in an impressive roster of locally shot blockbuster films. They include Chronicle, Safe House, Jock and the Adventures of Zambesia. I recently had an opportunity to see some of the rough cuts of the film “Mandela”: Long Walk to Freedom” and can report that we can be proud to have been associated in supporting what I have no doubt will be one of the very most important films South Africa has ever produced.

Mr Speaker, in short we believe that our record speaks to what can be achieved from industrial policy and that we have laid a basis to strengthening our efforts to reindustrialise our economy in the future. As the current iteration of IPAP argues, industrial development in the future will need to be built on 6 pillars.

These include:

• beneficiation of mineral products;
• regional economic development and industrial integration;
• the steady roll out of the infrastructure development programme;
• developing new export markets;
• local Procurement and Supplier Development; and
• partnerships with BRIC countries.

We believe that what we need in future is a higher impact industrial policy rather than a lighter touch programme called for by some of our critics.

South Africa’s history does not however, allow us to grow the economy, to industrialise, without addressing the legacy of disadvantage, discrimination, and underdevelopment left by Apartheid. However, while one element of economic transformation is consistently about redressing the injustices of Apartheid, it is important to recognise that there are also sound socio-economic reasons for aspiring to a much more inclusive and egalitarian economic model. The dti considers entrepreneurship, cooperatives and SMME development as not only central to broadening economic participation but also as key to efforts to ensure a more vibrant and effective productive economy. In other words, by broadening economic participation to encompass participants excluded in the past, we develop a stronger entrepreneurial base for the future.

It is for that reason that in 2009 all SMME support programmes were reviewed to improve outputs and impact. One result of this exercise was that we decided to prioritise incubation programmes based on the evidence both in SA and elsewhere that such programmes which seek to actively support productive SMMEs in their start up phase dramatically improve survival chances. In line with this new priority and to leverage private investment, the dti introduced the Incubation Support Programme (ISP) in September 2012 with the aim of establishing 250 incubators by 2015/16.

To date 13 projects have been approved with a total project value of R373 million in renewable energy; information and communication technology; agro-processing; chemicals; mining; and clothing and textiles sectors. Currently, the Seda Technology Programme (STP) has 42 Incubation Centres in the nine provinces in different sectors such as biotechnology, mining, agro-processing, construction, jewellery, automotive, metals and renewable energy. To date, 376 new enterprises have been created, 2,247 SMMEs were supported, 28% of which are women-owned and 2 161 jobs were created.

We will in future also encourage universities and science councils to host incubators. These incubators will be used to develop hi-tech and high-growth sectors.

Honourable Members, since 2009, we have made steady but important progress to ensure that the Cooperatives sector receives the attention the potential of this sector deserves. We have reviewed the Cooperatives Development Act and when the new Amendment Bill is signed into law will establish a Cooperatives Development Agency, to provide more focussed development support to cooperatives. We will also establish the Cooperatives Tribunal to adjudicate over conflicts as well as an Apex body to represent the interests of cooperatives.

Honourable Members will be well aware of the efforts the dti has made over time to increase the participation of black people in the economy. In line with the changing landscape, B-BBEE legislation and proposed new Codes of Good Practice were introduced in 2012.

This BEE Bill seeks to eliminate fronting. It will establish a B-BBEE Commission to deal with complex fronting and thus enhance compliance with the legislation.

The Codes of Good Practice have been revised to incentivise stronger performance in enterprise development and supplier development becoming key features of broad based black economic empowerment. The shift to enterprise development and supplier development are intended to support a stronger symbiotic integration of black owned enterprises in key value-chains in the economy. It will ensure that big business plays a key role in developing a viable supplier base that will be able to take on opportunities in both domestic and international markets.

The dti views women empowerment as one of its priorities and it is in the process of developing a National Strategic Framework on Women’s Economic Empowerment.

Honourable Members, in 2009 we said that Industrial Policy requires a supportive regulatory environment to foster more competitive and dynamic industries and businesses, and prevent harmful market domination and abuse, and the exploitation of consumers.

Consequently business regulation and the protection of vulnerable consumers over the last four years has been another area of focus.

A key outcome has been the establishment of the Companies and Intellectual Property Commission (CIPC). We took the decision, which I believe has now been vindicated, to go ahead with the roll out of the new Companies Act despite reservations from some quarters.

The new Companies Act gives SA:

• a forward-looking regulatory framework that provides for simple, easy company registration,
• enhanced governance and clarity on disclosure standards for business, and
• Measures to assist companies facing economic difficulties.

The innovative business rescue provisions have already shown their mettle as a tool to save otherwise viable enterprises facing cash flow problems from the previous inevitable fate of liquidation. 945 companies including Close Corporations were assisted and 6,624 jobs have been saved.

We have also introduced other important legislative changes. These include the Intellectual Property Amendment Bill for the protection of Indigenous Knowledge which was introduced to Parliament and public hearings commenced in May 2010.

Key reforms to the operation of the National Lottery have taken place. We have responded to criticisms and suggestions made in wide consultation and Cabinet recently approved that the Lotteries Policy Framework and Bill be released for public consultation. In addition, we have introduced Regulations and a Directive to improve the accessibility of Lottery funds by needy communities and causes, improve governance structures on Lottery matters and ensure optimal distribution of Lottery funds for developmental purposes.

The Consumer Protection Act was finalised and implemented during this Administration. Despite some initial teething problems, I am pleased to report that there is now overwhelming support for the work of the National Consumer Commission (NCC) especially in poorer communities which is where the worst abuses of consumer rights has been uncovered.

Mr Speaker, as we look beyond South Africa and our immediate challenges we must not lose sight of the changing global economy. This Administration foresaw the importance of broadening developmental integration in Africa as well as of the emergence of new global powerhouses such as China, India and Brazil.

Negotiations for a T-FTA between the SADC-EAC-COMESA countries are proceeding, but we have said that our efforts in this regard must be complemented by the promotion both of infrastructure development and cooperation to transform productive sectors and industrialise the continent.

Infrastructure development has focused on the North-South Corridor with significant progress on upgrading road links. Projects have been identified for rail, border posts and port development.

The T-FTA will combine the markets of 26 countries with a population of nearly 600 million people and a combined GDP of US$1 trillion. In summary, this key initiative will provide market scale that could launch a sizeable part of the continent onto a new industrialisation trajectory. The T-FTA will also form part of an Africa-wide FTA, which will create a market of US$2.6 trillion.

Speaker the election of Roberto Azavedo of Brazil as the next Director-General of the World Trade Organisation creates an important new opportunity to advance a multi-lateral trade agenda informed by the mandate agreed at the 2001 Doha Ministerial to the place the needs and interests of developing countries at the heart of the work programme. We know Mr Azevedo well and actively supported his candidature particularly after the unfortunate elimination of the AU endorsed candidate in the first round. We congratulate Mr Azevedo and look forward to building a strong working partnership in advancing the WTO’s work.

South Africa’s participation in the BRICS grouping, is a significant component in this diversification strategy as it provides important opportunities to build South Africa’s domestic manufacturing base, enhance value-added exports, promote technology sharing, support small business development and expand trade and investment opportunities.

It is for this reason that a key priority for us is to develop a work programme that will promote more value-added exports among the BRICS Members.

In the coming year, we will focus on strengthening SA’s relations with BRICS and other fast-growing emerging economies. In addition, the National Export Plan will shift to the implementation phase as we seek to develop a new layer of emerging exporters to lead SA export diversification.

Mr Speaker, in conclusion, are all these efforts bearing fruit or are the pessimists right? Let me just say that in one week last month, I participated in 3 key investment announcements, by Proctor and Gamble in Gauteng, Johnsons Controls in East London and Tellumat in Atlantis. Investment announcements by these three companies amount to R2,4 billion. In fact over the period from 2010/11, the dti has facilitated investments of R125,5 billion. In the 2012/13 financial year, the department attracted R53,5 billion in investments, with the potential to create 20,000 jobs.

However of greater significance than the value of the investment is the strong vote of confidence that these companies’ have provided in the SA economy. These are not investments that were made on the spur of the moment; these companies have rigorously assessed the SA market, considered the potential risks, and compared SA to other potential investment destinations. After considering all these factors, these companies - and many more like them – have chosen to invest and create jobs in the SA economy. These investors have not been put off by our challenges but recognise that Africa is the next growth frontier and that South Africa as the most industrialised country on the continent is of key strategic importance. They have accepted the necessity for broad based black economic empowerment, for them to be active in responding to our skills challenges, and they have not been put out by our industrialisation and localisation programme. In fact many of them have embraced these challenges and our initiatives as necessary developments that will lead to a stronger economy.

Mister Speaker, in closing, I do not believe that we could have made these advances without the support of the people in the dti and its family of institutions. I am proud that what we have achieved, we have achieved with a staff that has a much more diverse profile than the dti of 1994. This new profile, so much more reflective of the demographics of South Africa is emerging as a strength that will lead us into the future. Thank you to the Deputy Ministers and the Director-General.

Speech by Hon Joseph Selau during the National Assembly Debate on Trade and Industry

Hon Chair, Hon Minister and Hon Deputy Minister, Hon Members, distinguished guests, ladies and gentlemen. I dedicate this speech to all our comrades throughout South Africa and beyond.

It is once more this great moment for me to address this August house before you chairperson, on the developmental issues of energy within the industrial space in our country South Africa. I have been asked by the ANC to focus on IPAP and the Green Economy.

Allow me Hon chair to start by saying that the ANC support budget vote 36 of the department of Trade and Industry- 2013/2014. Let me also take this opportunity, Hon chair, to congratulate the department of Trade and Industry for the job well done on one of the Department’s major programmes, the Manufacturing Competitiveness Enhancement Programme (MCEP). This programme was launched in May 2012. To date a total number of 189 enterprises have been approved for grants with a value of R992.2 million and 33 551 jobs are expected to be retained.

This is a remarkable achievement- Hon Chairperson

Introduction

With your permission Hon chairperson let me focus in the beginning on Clean Energy on the manufacturing perspective on the country. Industrial Policy Action Plan (IPAP II) outlines that for the development of the economy, there is a need for investment into the manufacturing sector to ensure an increase in employment creation. These are value-adding industries which create the highest opportunities for employment.

However, high indirect input prices, especially electricity tariffs, are adversely contributing to South Africa’s relative lack of competitiveness in international markets. South Africa’s electricity tariff hikes, together with the global economic environment and domestic inefficiencies, represent impediments to the growth of the manufacturing sector.

There is an inter-linked relationship between the increasing cost of existing energy sources, the current demand for energy and future global demand for energy. This requires innovative ways of ensuring that there is a reliable, sustainable supply of energy. In this regard the decreasing cost of alternative cleaner energy is seen as a global solution .

The DTI’s work in green energy

The South African Government has continuously outlined the need for the country to redirect some of its efforts towards the Green Economy for purposes of job creation and economic growth. In the process of finding innovative ways to transform the country’s manufacturing sector, the Green Economy offers opportunities to work on strategies aimed at ensuring sustainability and resource efficiency to improve the productivity of the manufacturing sector; the benefit of this will be the creation of jobs and opportunities to diversify the export offering as the demand for green goods increases in developed countries.

In the word of the US President Barack Obama "A green, renewable energy economy isn`t some pie-in-the-sky, far-off future – it is now. It is creating jobs – now. It is providing cheap alternatives – now. And it can create millions of additional jobs, an entire new industry, if we act – now."

IPAP II calls for the following in order to effectively address the required structural change effectively from a manufacturing perspective:

"Electricity and capital-intensive resource processing sectors should introduce new cutting-edge alternative technologies and processes and make additional investments into green technologies and sectors;
Increase the share of value-adding, labour-intensive and decreasing the share of energy-intensive sectors to GDP; and
Promoting accelerated growth that will be sustained in the green and energy efficient sectors".
The success of projects as identified by IPAP relies on how well the various departments work together. The Department of Trade and Industry, working together with other Departments, specifically with the Department of Energy has embarked on the following programmes to ensure the transformation of the manufacturing sector through green technologies;

The DTI is in the process of developing a comprehensive Solar and Wind Sector Development Strategy. Approved in May 2012 in principle and still has to be finalised, the Strategy identified seven Key Action Programmes, namely, market facilitation, local manufacturing and industry upgrading incentives, local content requirements, technical and physical infrastructure, trade and investment support and facilitation, research demonstration and skills development.
The DTI support of the development Energy-efficiency products and services in a competitive local manufacturing industry.
As part of the Manufacturing Competitiveness Enhancement Programme (MCEP), the DTI provides, the Green Technology and Resource Efficiency Improvement incentive. An incentive programme to support projects with green technology upgrades and business development activities that will lead to cleaner production and resource efficiency.
The Department of Trade and Industry (DTI) is also funding an industrial sustainability programme that is managed by the National Cleaner Production Centre of South Africa (NCPC-SA). The objective of the programme is to strengthen market access of South Africa’s industry, by developing networks and transferring resource efficiency and cleaner production technologies and services (RECP). Therefore, the department is contributing to the sustainability of industry value chains, and delivering measurable economic, environmental and social impacts.
Let me elaborate on the industrial sustainability programme, The NCPC-SA is aimed at promoting the implementation of RECP principles to assist the industry to lower costs through reduced energy, water and materials usage, and waste management. The main target sectors include the agro-processing; automotive; chemicals, plastics fabrication, cosmetics and pharmaceuticals; clothing, textiles, footwear and leather; pulp and paper; metals fabrication, capital goods and transport equipment; green industries and waste management; and tourism and hospitality sectors.

In conclusion I wish to quote the Minister of Energy Hon Dipuo Peters at the Declaration of Intent that was signed in the South African city of Durban, which was hosting the United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties, COP 17/CMP7. "The South African Renewables Initiative (SARi) aims to mobilise domestic and international funding, and sector expertise, to support South Africa to implement its ambitious plans for the scale-up of renewable energy.

South Africa’s Minister of Energy, Minister Dipuo Peters, noted that: South Africa has a large potential for renewable energy, with over 18 GW already included in the current Integrated Resource Plan. South Africa already benefits from international partnerships in the energy field, but this is different: The South African Renewables Initiative will not only contribute towards the growth and deployment of renewable energy, the reduction of greenhouse gas emissions, and enhanced energy access, but, equally importantly, it will also enable South Africa to boost the development of new green industries, and new green jobs in renewable energy and its value chain. "Together with Hon Minister Dipuo Peters, was the Minister of Trade and industry, Hon Rob Davies.

I thank you

Speech by Hon Beki Radebe during the National Assembly Budget Vote Debate on Trade and Industry

Chairperson, ministers and deputy ministers, and members of this August house, this debate takes place when we will be celebrating the gold jubilee of the OAU next week. This organisation was instrumental in mobilising the international forces which waged a continental and global assault on the apartheid regime. As the founding members like Kwame Nkrume believed that the fight against colonialism involved the unification of Africa politically and economically. In the 1964 summit of the OAU he said the following "by far the greatest wrong the departing colonialists inflicted on us, and which we continue to inflict on ourselves in our present state of disunity, was to leave us divided into economically unviable states which bear no possibility of real development". This clarion call of President Kwame Nkruma was to agitate the African states to have common policies on development, trade and industrialisation.

It is a remarkable achievement that the ANC led government is involved in the programmes that promote industrialisation, intra Africa trade and continental unity and Africa wide developmental institutions. This sterling work of this government realise the dreams of the founding fathers of the OAU. The department of trade and industry through its programme of industrial development is ensuring that the South African companies are able to add value to our natural resources and try to minimise the export of raw materials.

Chairperson, since the department of trade and industry is the custodian of the industrial policy plan of the ANC led government; important strides are being made every day in ensuring that the agricultural goods and mineral resources are beneficiated. In 2009 the ANC made the clarion call that working together we can do more, this was evidenced by the fact that national departments, provincial department, local municipalities are working together to fight the triple challenge of unemployment, poverty and inequality.

Chairperson, when the farmers had a surplus of 5 million tons of maize, the co-op VKB in the Free State worked together with the provincial government, three municipalities and IDC to launch a R624 million broiler project known as Grainfields chicken project. This project was divided into three sub-programmes where and abattoir was created in Reitz where 160 000 chickens will be slaughtered a day. This led to the creation of 622 jobs in the town of Reitz. In the town of Vrede the chicken field factory was opened to process maize into chicken feed. In the town of Villiers, Vrede, Frankfort and Reitz 65 broiler houses were erected which supplied the chickens to the abattoir. These broiler houses are mainly managed by black farmers where the provincial government provided R10 million to help them set up these houses. The IDC provided R15 million for the workers trust at the abattoir in Reitz.

The IDC further provided R85 million as a capital injection. And the shareholders of VKB provided the rest of the capital. The provincial government also improved the road infrastructure between the towns at the cost of more than R300 million. The municipalities ensure that the water and electricity supply is uninterrupted. This unity in action between the various stakeholders in this sector ensures that a 5th largest chicken enterprise was established to satisfied 6.5% of the chicken market in the country.

Chairperson, this project actually proves that the economic policy of the ANC of creating a developmental state which is based on the mixed economy was correct. And the Polokwane resolutions which state that the state must lead an industrial and developmental trade policy were correct. This very project also has a sister project in Namibia where the IDC, the bank of Windhoek and Namibian development bank partnered in a similar project which is known as Namib chicken. This project has sourced R150 million worth of equipment from South Africa, R20 million worth of raw materials and 20 000 tons of maize annually. This chairperson has turned a rural project into a regional project. This could not have been possible without the coordination of policies in the region and Africa as a whole. Where the DTI is leading in the alignment of these policies in the continent.

Chairperson, the economist of the 27th April to 3rd May 2013, had a bold front page title "generation jobless".

The editor of the Economist stated that in the OECD countries 26 million youths of the age group 15 to 24 were unemployed and out of school. In the emerging economies 262million youths are unemployed and are economical inactive. The same reports indicate that this youth unemployment has increased by 30% worldwide since 2007. This shows that the unemployment problem amongst the youth is an international phenomenon. The issue of the youth unemployment and poverty was eloquently summarised by the former president of South Africa Dr Nelson Mandela when he said "every country in the world faces challenges. One of our challenges here is to ensure that we deal with poverty, unemployment and lack of education". The ILO study and the OECD report indicated that the youth which is having a university qualification in the fields of natural science and technology is less likely to be unemployed.

This issue of fighting unemployment is better handled when the state and the private sector work together to create opportunities for the youth to be entrepreneurs.

Chairperson, the department of trade and industry, the Metsimaholo municipality in the Free State and the company Sasol worked together to establish the ChemCity Eco Industrial Park where a mixed-use business incubator was established. The DTI provided R26 million to support youth entrepreneurs and the Sasol group matched that with the sum of R80 million. This park support 480 enterprises in the chemical, energy and related industries. The municipality of Metsimaholo has provided incentives of special tariffs for rates, water and electricity. In the process 5700 jobs were created where the sustainability rate is above 70%. The same partnership between Sasol group and 52 emerging small enterprises which employ 4100 workers are supported by Siyakha development trust which provide loan financing for Broad Based Black Economic Empowerment businesses.

Chairperson, 75% of the budget of the DTi goes to incentives which enhance the competitive advantage of the South African enterprises. With this budget we shall expect the department that it ensures companies like the Sasol group remain South African companies so that they can make their contribution in fighting the triple challenges of unemployment, poverty and inequality. We shall expect that this company continue to invest in South Africa and the region instead of far flung states like Louisiana in the USA. That investment of $9 billion could have been better used in developing the gas and petroleum sector in the SADC region, where the rate of unemployment is high.

Chairperson with all these achievements the ANC will give an over whelming support for this budget.

I thank you.

Speech by Hon Joanmarrie Fubbs during the National Assembly Budget Vote Debate on Trade and Industry

Mr Chairman
Honourable Members
Colleagues and Compatriots
Ladies and Gentlemen

A DTIs budget drive`s employment through an enabling environment, industrialisation underpinned by strategic trade with an expanding footprint in our region Africa.

1. Fighting against the headwinds of a continuing European economic crisis the DTI`s R9.6bn budget is geared to drive industrialisation and broaden economic participation underpinned by a strategic trade policy. These objectives are supported by technical infrastructure such as standards and quality assurance which with our fellow African States is bringing about regional integration. This budget is built upon a strategic plan of realistic output based action and is closely aligned with the ANC led government`s vision. Consequently Budget Vote 36 Trade and Industry is expected to achieve its foremost outcome of restructuring the economy and creating an enabling environment for the private sector to create employment.

2. Yes Mr Chairman this is a realistic, robust and results based budget. It is a budget for a developmental State. A State that has through a series of interventions, such as incentives, infrastructure build, strategic tariff structures, beneficiation and strategic skilling turned South Africa into the economic engine of Africa.

3. Through its flagship mandate captured in the Industrial Policy Action Plan which is aligned with the National Development Plan and as the primary pillar of the New Growth Plan the DTI in this budget with all its financial constraints has brought about allocative efficiency and established a expenditure platform for effective and equitable service delivery.

4. Industrial Development and incentive administration gets 58% (R5.5bn) and Industrial Policy Development 17% (R1.6bn) giving a healthy a 75% boost to industrialisation, Broadening Participation which includes SMMEs and Regional Development get 10% (R9.68.3m) while Trade, Investment, International Trade and Economic Development receives 5%, and you the people of South Africa and business is protected through the Consumer and Corporate Regulation at 3%, while 7% goes to Administration. The Companies and Intellectual Property Commission & Export Credit Insurance Corporation of South Africa are self-funded, while the technical infrastructure institutions receive a proportion of their budgets from the DTI. The integrated budget ensures that technical infrastructure no longer lies below the radar.

5. In 2009 South Africa under the impact of the global economic crisis experienced one million job losses the previous year but following on the creation of 200 000 jobs the first IPAP was proving that it was a sharp instrument to turn around our economy in particular through manufacturing. The declining clothing and textile sector was hit with massive job losses, local companies in distress from outdated equipment, outdated and non-competitive practices, new technologies and the need for upgrades on capital equipment, systems and product lines.

6. Relative to GDP incentives had been sharply falling except in the motor Industry with its AIS and the Manufacturing Competitiveness Enhancement Programme (MCEP) launched in 2012. These turned around the drop in incentives. To avoid rent seeking the incentives come back to back with conditionalities. For example take the Grant Disbursement Incentive which is only given on the completion of each activity such as plant and equipment and upgraded or new production lines.

7. Transfers at 92% took the greatest share of this programme budget. A breakdown reveals that: (115 words use if time allows)

Clothing and Textile Production Incentive administered by IDC: R758.3 million (47.2 per cent)
Research Contribution to the South African Bureau of Standards: R 205 million (12.8 per cent)National Regulator for Compulsory Specifications: R103 million (6.4 per cent)National Metrology Institute of South Africa: R85.9 million (5.3 per cent)
National Metrology Institute of South Africa for infrastructure: R60 million (3.7 per cent)
Customised Sector Programmes administered by IDC: R68 million (4.2 per cent)
Intsimbi National Tooling Initiative: R54.4 million (3.4 per cent)
National Cleaner Production Centre administered by the Council for Scientific and Industrial Research: R43.7 million (2.7 per cent)
South African National Accreditation System: R33.5 million (2.1 per cent)
8. We welcome the DTIs marketing of its programmes, incentives and support to rural areas in partnership with Contralesa. Concrete support for the youth feeds into a Youth Enterprise Development Strategy. Women are recognised as a critical resource agent that can transform boards, inject fresh thinking into the value-added production ranging from agro industry and manufacturing to crafts, arts and research. The Technology and Human Resources for Industry Programme (THRIP) complements the department`s commitment to human capital.

Strategic Regional Trade, Intra-African Trade Investments and Exports

South Africa, as part of the continent, is deepening regional integration, which has also reduced the impact from the European Union economic decline, which has led to the decline of South African exports.

The decision to find new markets in the South and the East can be commended, notwithstanding the imbalance in some of these trading relationships, in particular with the export of raw minerals and other primary products. The Department`s strategic trade policy developed in 2010 has facilitated the goals of job creation, industrialisation and to further economic development. The DTI`s Trade and Investment South Africa Programme (TISA) has facilitated the strengthening and renewing economic ties and relationships within the African Union, the Southern African Development Community (SADC) and the Southern African Customs Union (SACU); nurturing South-South cooperation specifically relationships with India and Brazil; and increasing South Africans` understanding of the BRICS formation.

Trade, Investment and Exports

BRICS: Participated in the 3rd Contact Group on Economic and Trade Issues (CGETI) meeting in Delhi, India to refine Terms of Reference (ToR) and action plans for the BRICS work programme on economic and trade issues.
Trade promotion: Organised 22 National Pavilions, most of which were on new high growth markets such as Asia, Africa, South America, the Middle East and large markets such as Europe and North America. Organised five International Trade Initiatives (ITIs) in Brazil, Russia, India, Democratic Republic of Congo and Zimbabwe.
National Exporter Development Programme (NEDP): The NEDP was presented and endorsed by the Economic Sectors and Employment Cluster (ESEC) of Cabinet.
Investment promotion: Recorded R53.5 billion in the pipeline of investments in sectors such as manufacturing, automotives, agro-processing and mining; steel and cement, renewable energy as well as services in particular business process outsourcing (BPOs).
Export Market and Investment Assistance (EMIA) scheme:
Assistance was provided to 1 084 enterprises.

9. We wish to congratulate the World Trade Organisation designate DG Mr Roberto Carvalho de Azevêdo currently with the Permanent Mission of Brazil to the WTO. We look forward to a deepening appreciation of the development objectives of DOHO getting fresh life and a believe he will bring an informed understanding of the role of emerging economies, developing countries and countries currently classified as MIC such as South Africa with a glaring gap between the poor and those who enjoy a huge wage.

10. According to the Minister of Finance Mr Pravin Gordhan South Africa`s trade performance is holding us back with export growth at about 1.1% in real terms and an increase of 7.2% in imports. This is rooted in the unproductive character of our economy which Minister Davies and his team are driving to transform through IPAP 2 and strategic trade. Lack of productivity is reflected in the deficit of the current account of the balance of payments standing at 6.1% of GDP. This without a doubt is one of the legacies of the last years of apartheid and crept silently into our democracy in its first few years. However the current strategic trade policies, commitment to regional integration and intention to shift spending to capital investment eg infrastructural commitment of more than R827bn is set to change.

11. Through the DTI the minister championed a polity of manufacturing led growth using a set of interlocking sector specific interventions that drove the economy in a fresh direction. Competition is been pursued by the ANC as a policy instrument to dilute the concentration of ownership and control and breakdown the barriers to equal opportunities that often protect incumbent elites. It is also using competition to create an enabling environment for accelerated industrialisation through the Industrial Policy Action Plan. So Competition is being used as a key instrument to transform our economic environment and one that will support the creation, and retention of jobs.

12. Other measures pursued by the DT which have born fruit are the strategic setting of tariffs so that eg in the case of steel lowering the tariffs so that it overcomes the current parity pricing model used by Accelor Mittal so that tje domestic price of steel is lower. Then increasing tariffs in the case of the Clothing and Textiles industry and enable it to enable it to rebuild itself. Of course this was underpinned by the Clothing and Textiles Competitiveness Programme (CTCP). More than 400 companies were assisted in this regard and once again the opportunity to create decent jobs. We can never forget that both the EU and the USA protect their agriculture and other strategic industries through subsidies and the provision of huge incentives. Yet another illustration of innovation on the part of DTI has been in the Enterprise Investment Programme which includes Manufacturing is set to support the retention of more than 20 000 jobs and create about 14 000 jobs.

13. However the catalytic role industrialisation backed by strategic export driven trade plays in our developmental economy relies upon 18 departments working more closely together to ensure a cohesive implementation in an integrated National Industrial Policy Framework. We keep on saying no more silo mentality let us implement this in the words of Ben Okri:

Turn on the Light
The new era is already here:
Here the new time begins anew....
Will you be at the harvest,
Among the gatherers of new fruits
Then you must begin today to remake
Your mental and spiritual world.

Kwame Nkrumah`s Vision of Africa is captured in this phrase `Our independence is meaningless unless it is linked up with the total liberation of the African continent` we as the relatively recently politically liberated say our political freedom is not complete without economic freedom.

14. Included in the Recommendations of the Portfolio Committee is the call for the establishment a single board responsible for all technical infrastructure institutions to enhance co-ordination among these institutions. Secondly the need to consider increasing the allocation to the Consumer and Corporate Regulation Division programme, particularly to the National Consumer Commission, and the possibility of new agencies being created in the near future. Thirdly a proposal for an increase in the budget of the Trade Investment South Africa Programme to establish and fund a presence in strategic foreign missions.

15. The ANC supports this budget that seeks to shift our economy from a consumer driven one to a productive economy that creates an export driven and employment economy to ensure an equitable economic benefit for all the people of our country South Africa.

16. The important catalytic role industrialisation plays in our developmental economy relies upon 18 departments working more closely together to ensure a cohesive implementation in an integrated National Industrial Policy Framework. This overview provides the economic platform for the committee`s budget oversight to ensure the accountability of the Executive and the Accounting Authorities within a good governance framework that serves the people.
 

Wilmot James, Shadow Minister of Trade and Industry
 

The year ahead is the last and final one for ministers in President Jacob Zuma’s administration, as it is for those of us giving the annual budget ripostes.

It is the year that will define the legacy of the Executive with Minister Robert Davies’ under scrutiny today, as it defines my contribution as representative of the Official Opposition. 

It is the year that defines two decades African National Congress (ANC) government since Uhuru in 1994, as it does the political character of the opposition as a whole.

Where to begin? In 1994 we inherited a bankrupt Fiscus, a sputtering economy, a nation damaged by apartheid and a people traumatised by the violence.

A group of leaders - among them Tito Mboweni, Derek Keys, Trevor Manuel, Minister Robert Davies and others  - came together at Mont Fleur in 1992 and emerged with scenario-representing iconic birds:

·         Ostrich, representing the white government, which kept its head in the sand to avoid a negotiated settlement with the black majority;

·         Lame Duck, who anticipated a prolonged transition under a weak government because it sought to satisfy everyone but satisfied none;

·         Icarus, a constitutionally promiscuous government that came to power on a wave of populist support embarking on a unsustainable public spending programme crashing the economy; and

·         Flamingo, which in flight made ‘hope and history rhyme’, uniting the country in a successful transition, with all citizens rising slowly and together.

Pippa Green tells the story of Trevor Manuel, Derek Keys, Alec Erwin, Mario Ramos, Andre Roux, Iraj Abedien and others in reforming what was an economy in a pathological state of decline.

This economic leadership laid responsible foundations for recovery, defined a stable route out of debt and kept us out of exacting hands of the World Bank and the International Monetary Fund.

Under apartheid trade and industry was about protecting vested interests. Under Manuel, it became, at least initially, the vanguard of economic freedom, trade and tourism. Protectionist tariffs fell, export subsidies came down, barriers to small business were identified and anti-competitive ideas mooted.

Flamingo started to rise, but not in formation and, as time went by, as unsolved challenge followed unsolved challenge, the poor bird began to stall.

First, mesmerized by beneficiation, we did not do more of what we were already doing, such as taking more from the earth and shaking more trees for low hanging fruit.

Second, we failed to turn the HIV/AIDS crisis into an opportunity to develop our health biotechnology industry; and we to transform our arms – and steel - industries into complexes for peacetime.

Third, what started as a people-centered Reconstruction and Development Programme (RDP) descended, by way of the arms deal and the opening round of black economic empowerment, into a cycle of history characterized by elite self-enrichment on the back of corruption, tender fraud and consumption-led debt.

The result was the crowding out of unrelenting caring for the poor, the jobless and the unhoused, which is why former President Nelson Mandela pleaded for an RDP of the Soul at the time.

And it is in this spirit that the Democratic Alliance identifies five issues requiring resolution so as to up our game and free the energy latent in our economy:
 

·         Empower our citizens with quality education. Only by having skills and knowledge may citizens master their environment, push new ideas, get a job, start a business and refuse to put up with incompetence, inferior service and big brothers who think they know everything, presume what is good for you and have the nerve to act on our behalf without being asked;

·         Remove all the barriers to starting and running a small business. Business Day’s Peter Bruce once said that South Africa is not a nation of shopkeepers. He is wrong. Scratch below the surface, look behind the formal sector and go on a ride with the South African Revenue Service (SARS) in search of greater revenue lines and you will find a nation teeming with small business men and women desperate to come up for air under the weight of the over-regulation;

·         Investors need policy certainty: Under the ANC the direction of national policy changes depending on the machinations of different factions within the party and its alliance partners. The absence of policy certainty and stability continues to plague the ANC lead national government as it struggles to reach consensus around the National Development Plan (NDP), especially difficult being the discord with some key trade union partners;

·         South Africa needs to be proactive about identifying potential investors and trading partners, and actively lobby them to invest. To do this successfully, we will need a coherent and focused strategy; properly trained diplomats who can promote South Africa as a reform-minded and business-friendly destination; a redesigned, modern and combined foreign affairs and trade footprint located where it matters (On the question of trade, I recommend that you read Tony Leon’s book The Accidental Ambassador to understand what needs to be done in the area of trade and diplomacy reform.  Leon would know. He and his talented Embassy staff almost doubled our exports to Argentina in one year, reaching a record of R1,3 billion by 2011); and a welcoming domestic institutional set-up to help investors integrate into the South African economy.

·         The government needs to create the right environment for business to flourish so that both domestic and international players receive good returns on their investments. This requires that tax rates are competitive relative to other developing countries, and that the South Africa’s physical infrastructure is upgraded and expanded to meet the needs of a vibrant and growing economy. Again, the Western Cape Government is single-mindedly committed to maintaining our infrastructure, providing excellent service-delivery and a public transport network to connect every citizen to opportunities to work and run a business.

Our trading position has never been as bad as it is today. Between 1994 and 2000 our trade balance rose from a positive R18 to R48 billion, the highest ever. By 2012 it was in deficit by R78 billion, worsening since. Our trade account over the last 18 years is a function of the state of our mining industry which today is in a crisis this government seems incapable of solving. 

We have not developed diversified export lines and have remained reliant on imports for a range of consumer products. Our deficit has been financed by foreign capital that, in turn, aggravated dividend and interest deficits. The reliance on foreign capital makes us extremely vulnerable, raising the spectre of Icarus, where an unfocused and paralysed government that tries to satisfy everyone and satisfied no one, breaks the economy in the process.

We have to trade ourselves out of trouble, but DTI is not enough of a trade ministry. The department spends a mere 5,3% (R508 million), the second lowest figure in his budget for 2013/2014, on advancing trade objectives. It should spend significantly more on aggressively championing our products and companies - and our many world-class CEOs - in the markets that matter globally. The same advice can be found in the NDP.

In the DA-run Western Cape, there is a concerted effort by the Department of Economic Development and Tourism in marketing the province as a trade destination. In the last year alone, the Province’s trade promotion agency, Wesgro achieved R1.8 billion of new investments into the Western Cape, far exceeding their targets. If the DTI devoted the same energy to marketing South Africa as a desirable trade destination, the same could happen for South Africa. An increase trade means an economy that grows and creates jobs.

Minister Davies is an industrialization Minister. His department spends 72% of budget (R6,9 billion) promoting industrial development. Spending money on infrastructure, economic development zones, incubators for small business development, incentive programmes for niche areas like agro-processing and ship building and, in hard times, providing some measure of relief to the troubled like textiles make sense. We are not opposed to IPAP, only those projects that does not meet John Maynard Keynes’ wise injunction that: ‘The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which are not done at all.’

Accordingly, we can see no compelling reason why we must nurse so many projects part of the automobile sector. What the car companies require is to trade freely in the South African Development Community (SADC).

Since its inception Industrial Policy Action Plan (IPAP) has contributed to creating some jobs and, during the tough times of the global economic downturn, preserved many family livelihoods. For that we acknowledge the unrelenting devotion of hard-working Minister Davies, his Deputy Minister Elizabeth Thabethe and the civil servants led by Director-General Lionel October.

But the problem is much bigger than and the job challenge dwarfs IPAP. According to the Quarterly Labour Force Survey (QLFS) between 2008 and the beginning of 2013:

·         595,000 jobs were lost in our economy;

·         487,000 more joined the 4,114 million army of the unemployed; and

·         1,25 million more simply gave up looking for work.

Other comparable middle-income countries like Mexico or Turkey, notwithstanding a similar exposure to the global economic downturn, performed nowhere as badly as we have.

Members, we will not solve poverty without jobs, there are no jobs without growth and no growth without a prosperous private sector. 

Mont Fleur’s Flamingo was set to fly at a 6% annual economic growth rate; Treasury talks of 7%; in the DA’s Plan for Growth and Jobs we talk of 8%.

We urge the DTI to push the growth envelope by investing more in trade promotion and less on bailing out flagging businesses.

Let Flamingo be a reminder of the nation’s hope from our democracy’s golden days.

Geordin Hill Lewis, Shadow Deputy Minister of Trade and Industry
 

The Minister of Trade and Industry has one of the biggest and most important mandates of any minister in the government. This Department is responsible, more so than any other department, for setting South Africa’s economy on a path of job-creating growth.

It is against this mandate that the Minister must be measured. 

From the outside one would be forgiven for thinking that the Department of Trade and Industry, and its Minister, was doing everything right. Unqualified audits, on time payments, no significant under-spending, and a generally available and responsive Minister and Director General – all laudable. 

However, when we consider the Department’s progress in the achievement of the core mandate of job-creating growth, the picture is quite different. 

Instead of unlocking new investment, growing trade, positioning South Africa as the biggest exporter to the continent and driving growth, the Minister seems to be preoccupied with extending the control he personally exerts over the economy. He has amassed vast power to make new rules and issue reams of new secondary legislation. 

In his own words, speaking at the release of the latest iteration of the Industrial Policy Action Plan, the role of the state in the economy is to "steer but not to row". In other words, a model of state capitalism in which the state must determine the direction and priorities on behalf of the private sector, which must then just follow. 

Except, this government cannot steer. It cannot even follow the map. 

We have a map for how to fix our economy and unlock growth – it is the National Development Plan. 

If the Minister was making a real effort to implement the sections of the NDP which relate to his department, we may be more complimentary. 

But he is not doing so. In fact, he seems bent on following a policy course directly and deliberately opposed to the NDP. 

Let's consider just one example - small business. The Finscope survey details how 90% of new jobs in South Africa are created in small, medium and micro businesses. That is, jobs are created by entrepreneurs, who have a good idea and who take huge risk to turn that idea into something saleable. Jobs are not created by bureaucrats or by new government commissions or committees. 

Given that context, it should alarm us all that South Africa is ranked 53rd out of 185 economies in terms of the ease of starting a business (World Bank, Doing Business 2013), which is ten positions lower than our ranking in 2012. 

The World Economic Forum Competitiveness Report, 2013, ranks us 37th out of 38 countries on the burden of government regulation. 

Most worryingly Chairperson, entrepreneurial activity in South Africa is currently about half of what it is in competitor developing countries. 

That is why the National Development Plan repeatedly and correctly emphasises the need for the government to create an environment in which it is easier and cheaper to start and run a small business. It calls for a quick and easy process for starting a new business and transferring property. 

The NDP envisions a state which cuts unnecessary red tape, streamlines administrative processes, and which supports business to invest, grow, and hire more staff. It sees a relationship not of one party steering and the other rowing, but of the two rowing together, in partnership. 

In this context, Minister Davies' gazetting of the Licensing of Businesses Bill belies his stated commitment to implementing the NDP. The Bill runs counter to everything the NDP calls for. 

It requires every business in South Africa, no matter how big or small, to apply for a license to operate from their local municipality. The local municipality must keep a comprehensive database of information on every business that it licenses. The penalty for operating a business without a valid license could be up to 10 years in prison. 

The NDP specifically says that we should be doing everything to simplify the regulatory burden, not add to it. As a first step, it calls for the establishment of an expert panel to conduct a comprehensive regulatory review for small businesses to see which regulations can be cut and which can be simplified. Why has the Minister not established such this commission? 

This is something simple and tangible that he could do now to implement the NDP and really help small businesses succeed. But he has not done it. Why not, I'd like to know? 

The Bill does not help to solve any particular problem. Minister Davies has never told us why he wants this Bill passed, but he has said in a brief quote here or there that there are too many businesses that trade in counterfeit or stolen goods, and there is not enough recourse for businesses that contravene the law. But none of those things are solved by this Bill, and other legislation allows the government to police these offences already - they just don't do it. 

In any case, I'd like to ask the Minister whether he really believes, really, that any business that is trading in stolen goods is going to stop doing so because they don't have a license. Is he serious? 

This is excessive, unnecessary regulation that slows down new business formation and hampers entrepreneurs from getting on and creating jobs. 

Here's an idea for the Minister. Bring us a Small Business Regulatory Reform Bill that unties the regulatory knots that currently hamstring our economy. That's a Bill we could support.

Make sure other departments pay their suppliers on time. This should be a standing item on the Cabinet agenda. You should be hounding any Minister whose department doesn't pay their suppliers within 30 days. 

Here's something else you could do: launch a Red Tape to Red Carpet campaign that allows entrepreneurs to identify the regulations that hold them back, and then commit to getting rid of them. 

Start a government red-tape challenge involving all DTI employees being encouraged to innovate ways of reducing red-tape.

These are all things the DA is already doing where we govern. In the Western Cape the Province has allocated R9 million to a red-tape reduction programme which includes setting up a small business support helpline, spearheading specific indicators to measure how the province is making it easier, cheaper and faster to do business and involving all western cape government employees in a ‘red-tape challenge’ to find innovative and new ways of reducing red tape. That's why where the DA governs, small businesses are starting up, investment is flooding in, the economy is growing faster than before and jobs are being created. Productive, self-sustaining, prosperity-generating jobs. 

This Department needs a fundamental reassessment of the role it perceives itself playing in the economy. Our economy wants to get moving, but it keeps hitting up against a wall - a wall called government. South African entrepreneurs are being held back by your actions.