Restructuring of the Department: Minister’s briefing

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Trade and Industry

18 September 2000
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE; ECONOMIC AFFAIRS SELECT COMMITTEE: JOINT MEETING
19 September 2000
RESTRUCTURING OF THE DEPARTMENT: MINISTER’S BRIEFING

Chairpersons: Dr R Davies,  Mr M Moosa

Relevant document:
Briefing document from the Ministry of Trade and Industry [see Appendix 1]

SUMMARY
The Minister said the reason for the restructuring of the Department of Trade and Industry had been the unbalanced deployment of resources to various units within it. The Minister identified the Department’s three major targets as
- increasing the level of investment,
- increasing the market access for South African products and
- achieving a fair, efficient and competitive market place.

Trade and Industry had to manage its various institutions like a multi-national corporation. Unfortunately DTI did not have the managerial support to effectively deal with the different problems encountered by the different institutions. The ten chief directorates have been rearranged into six units:
- International Trade and Investment Development Division is responsible for policy formulation and programme management.
- Enterprise, Commerce & Industry Development Division is responsible for policy and strategy development, programme development, monitoring and evaluation, consultation and relationship building in the areas of black economic empowerment.
- Trade and Investment South Africa would be a service delivery agency incorporating the current functions and staff of Investment South Africa. 
- Enterprise and Industry Development Agency would also be a service agency and
- Group Systems and Support Services would set the standards for administration and governance.

Two regulatory and administrative institutions which would administer functions currently performed by the Department are the: Commission for International Trade Administration (CITA) and Companies and Intellectual Property Registration Office (CIPRO). Staffing, with 505 female representation in senior posts, is targetted for completion by March 2001.

A wide-ranging discussion followed on such issues as the National Lottery, the Foot and Mouth disease outbreak, the Department’s efficiency loss during restructuring and SMME and provincial support.

MINUTES
The Minister, Alec Erwin, began by stating the reasons that the Department of Trade and Industry had embarked upon this exercise. At the end of the first five years of democratic governance, the department needed to undergo a thorough analysis. The deployment of staff did not coincide with the managing policies that were considered important by the DTI. There were very few people working in what were considered important sectors, the budgeting finance did not match up and the resources for implementation of the policies were also minimal.

Consequently the DTI needed to know what resources were necessary for effective implementation and also needed to define what should be expected from DTI. The department had thus embarked on an intensive reorganization exercise and had set itself three major targets to increase employment and access to economic growth:
· increasing the level of investment,
· increasing the market access for South African products and
· achieving a fair, efficient and competitive market place.

He noted that working towards these targets would result in the achievement of major advances in the promotion of the development of Small, Medium and Micro Enterprises (SMMEs) and would increase the opportunities for black empowerment while contributing to the reduction of inequality and poverty and strengthening the international competitiveness of South African business. It would also result in the development of the
Southern African Development Community region and adding value to the economy. 

The Minister stated that substantial progress had already been made in the reorganization of the Department.   So far the previous ten Chief Directorates which dealt with both policy and implementation had now been transformed into six focused units. These were:
· Executive Management Unit (EMU),
· International Trade and Investment Development Division,
· Enterprise, Commerce and Industry Development Division,
· Trade and Investment South Africa,
· Group Systems and Support Services Division 
· Enterprise & Industry Development Agency (also known as Enterprise South Africa)

He noted that there was a family of institutions that reported to Trade and Industry, which had a varied and diverse background. Trade and Industry had to manage these institutions like a multi-national corporation. He noted that the total amount of assets was in excess of R20 billion. Unfortunately DTI did not have the managerial support to effectively deal with the different problems encountered by the different institutions. He said it was analogous to putting square pegs in round holes. This problem was to be alleviated by carefully defining the role of the units in terms of policy, service delivery, administration and regulation.

The EMU would provide policy direction and co-ordination to the Department and its associated institutions. The International Trade and Investment Development Division would be responsible for policy formulation and programme management. The Enterprise, Commerce and Industry Development Division would be responsible for policy and strategy development, programme development and monitoring and evaluation, consultation and relationship-building in the areas of black economic empowerment. Trade and Investment South Africa would be a service delivery agency incorporating the current functions and staff of Investment South Africa.  The Enterprise and Industry Development Agency would also be a service agency and the Group Systems and Support Services Division would set the standards for administration and governance.

The Minister spoke of the establishment of two regulatory and administrative institutions, which would administer functions currently performed by the Department.  - The Commission for International Trade Administration (CITA) is to be responsible for the administration of tariffs and trade remedies.  This function was currently performed by the Board of Tariffs and Trade.  He added that these functions would be further linked to structures in the South African Customs Union.
- The Companies and Intellectual Property Registration Office (CIPRO) will be responsible for the registration of companies, closed corporations, patents, designs, copyright and trademarks. This would mean that the South African Companies Registration Office and the South African Patents and Trademarks office would be combined into a service delivery unit.

The new units are being staffed at the highest levels first. So far two Deputy Director General posts have been filled and it is anticipated that the Group Systems and Support Services Deputy Director General post will be filled by the end of September. A new Chair for the Board of Tariffs and Trade has been appointed and the post of Chief Operating Officer for CIPRO had been advertised and should be filled by the end of September. New Chief Director, CEO, COO and Director posts have been advertised and interviews for ten of these posts had been completed by the middle of September. A target of 50% for women representation in all new posts from director level upward had been set. The filling of all new posts and migration of staff into the new structures should be completed by March 2001.

Discussion
Mr Beukman (NNP) asked if the management at DTI had sufficient experience and whether DTI was sufficiently staffed.

The Minister stated that DTI had been very successful in trade and would continue good work. He referred to the capacity of management to secure trade agreements with SADC and SARS. He was confident of the staffing capacity and their success in the future.

Dr Conroy (NCOP, NNP) asked the Minister to comment on the Foot and Mouth disease that has been spreading and what effect this will have on the export industry and therefore the economy.  He also inquired whether the outbreak of the disease was a reflection on the standard of health of animals.

The Minister stated that DTI was working closely with the Department of Agriculture and the problem had been responded to very quickly.  Every country had such problems and it meant that they needed to tighten up on specific procedures. He said that this matter should not be used by the committee members to score political points and that South Africa had a good reputation as regards animal sanitary matters and it would remain that way due to the effective response to the situation.

Mr Bruce (DP) asked the Minister to clarify whether there was an increase or decrease in the staff complement at DTI. He also asked for a list of the people to be recruited and a summary of their backgrounds. He referred to there being no regulatory fine in place with regard to the National Lottery. He wanted an explanation for the delay in payments of the National Lottery.

The Minister stated that the department would reduce in size but the problem was not the size rather the deployment. He said that the reduction would take place by a process of natural attrition.
- As to the request for the list of people to be recruited to the DTI, the Minister stated very firmly that it was jurisdiction that mattered and he was not going to open the matter to Parliament to decide.
- As to the National Lottery, he said that there had been no delay and that certain procedures were merely being followed. He was adamant that pay-outs should not begin too early or when the market is unstable. He stated that the process was in accordance with the Act and he would not be forced to make pay-outs quickly. It is necessary for the funding causes to receive the funding as well as the money to be paid to the recipients. He referred to the international precedent, which would be Camelot and Texan, and stated that he was advised by experts that he should not be pressured to make payments.  With regard to Ithuba and Viva, Cabinet had agreed that a process of verifying the claims would take place before the actual payment. He stated that the law was unequivocal and clear and stated that South Africa will not have problems such as the problems that were emerging in the Australian gambling industry. He stated that excess machines would not be introduced and there would be a Central Monitoring System that would keep close ties to the machines. He said that he would not allow politicians to force the process and that the procedure will be followed through the Central Monitoring System so that it would be understood by all.

Ms Hajaij (ANC) asked whether there was a target date for the employment of 50% of women in the DTI.

The Chairperson stated that there often is a short-term loss of output efficiency during the restructuring process and wondered how long the Minister envisaged the Department undergoing the short-term loss. He asked for clarification with regard to where Kula and Ntsiki fitted in the SMME policy and service delivery frameworks.

Mr Moosa thanked the Minister for the briefing and wondered what the role of the NCOP would be in this process. He also noted output problems that were highlighted by the Chairperson and expressed concern over the possibility of underspending. He asked the Minister how DTI would manage when the output levels were low. Mr Moosa also inquired about the strong effective leadership in the provinces and what would underpin the structure of the DTI’s influence on the local government.

Ms Ntuli (ANC) asked the Minister to give a short summary of the impact the restructuring would have on rural communities. She also inquired if the DTI was really coping with the handling of the SMMEs since there had been lots of problems encountered so far.

The Minister stated that the target date stipulated for filling 50% of senior posts with women was also March 2001 and he was confident that that it would be reached.
- With regard to the SMMEs, the Enterprise and Industry Development Agency would strengthen the coordination of proposed action and submit reports to that effect. He stated that the DTI had put in the capacity to deal with local government.  He stated that Enterprise Africa was focused on delivery capacity and Ntsika was managed alongside while Kula had an autonomous structure. This all contributed to the delivery capacity. Kula operated along the guideline that it must manage its own finances and the responsibilities will remain wholesale lending and equity funding. He stated that he would speak more about Kula on the 28 September. 
- The institution is not geared for the rapid work that has come through and made reference to the delay in the National Lottery. The reason for this was the lack of common management structure. He noted that there would be problems and that DTI would just have to take that chance in order to benefit from the long tern effects of it all. He didn’t expect any underspending because the budget had been redefined to cater for that. It would be monitored over a three-year cycle with the National Treasury. 
- The DTI could not deal with all SMMEs. It was the job of the DTI to provide leadership to other organizations to deal effectively with these matters. He made reference to the new procurement system and the current tender board structure.  He added that the current use of e-commerce was necessary for SMMEs.

Mr Rasmeni (ANC) welcomed the Minister’s briefing and asked for a timeframe within which the restructuring would be complete.

Mr Durr (NCOP, ACDP) congratulated the Minister on the globalization of our trade. He asked what consultations had been done in the private sector and what the input of the private sector had been.

The Minister noted that the DTI has been under extreme work pressure trying to change ships while the ships were still moving. The result was that many had to do two jobs at a time but now there was a new form in place. He believed that the process will reach a head when the DTI moved into their new building. The main operations should be in effect by the middle of next year.
- He thanked the parliamentary committees for their valuable input as far as trade was concerned.
- South Africa needed to be alert and had to improve trade relations with South America, other African states and the Gulf States.
- With regard to consultation, he stated that DTI could not consult with everyone but had rather identified key issues and had approached the relevant organizations with these concerns. He mentioned that NEDLAC was consulted in the process. He stated that DTI had good interaction with businesses and labor organizations.
- He noted that all that he said in the meeting was listed in the DTI website and urged those interested to look at it. 

Ms September (ANC) thanked the Minister for visiting her constituency (Mitchells Plain) and for making the changes. She commented that DTI did not seem “to get it together at grass roots level”. She suggested a pilot project in some areas to initiate the change at grassroots level. She referred to the Business Support Centres and stated that they were not having any effect at the implementation level.  She also noted that the committee members had not been informed about the Clothing and Textile Sector Summit and was at a loss about the decisions made at that summit.

Ms Ntuli (ANC) referred again to the SMMEs and stated that businesses in the rural areas cannot take off because banks refuse to take the risk of lending money to people in the rural area with no back-up. She asked if there was to be a body that would deal with small and medium business in the country.

The Minister introduced his colleague Mr C F Pilusa who had recently joined DTI. Mr Pilusa affirmed his commitment to the provincial sector. The Minister said that he agreed with the concept of pilot projects and the DTI wanted to offer a package to many institutions, local government, to Members of Parliament and to trade unions.  He stated that the objective was to make the service more user friendly. He apologised for the members not being invited to the Clothing and Textile Summit.  He stated that the Summit had discussed how some of the issues would be resolved. He expressed confidence in a revival of the clothing and textile industry. He stated that a new extended scheme of funding which reduced the cost of borrowing would be necessary. He made reference to the huge smelting plant opened in Maputo that week and stated that such projects would be shifted to South Africa.

The Chairperson thanked the Minister for the briefing and adjourned the meeting.

Appendix 1:
MINISTRY: TRADE AND INDUSTRY

RESTRUCTURING IN THE DEPARTMENT OF TRADE AND INDUSTRY
The Department has been involved in an intensive reorganisation exercise for the last 11 months. In essence, DTI has set itself three (3) major targets to increase access to sustainable economic growth and increase in employment. These 3 major targets are:

·          higher levels of domestic and foreign investment;
·          increasing market access for South African products; and
·          achieving a fair, efficient and competitive market place

These targets will drive the achievement of major advances in the following six (6) areas:

·          promotion of the development of small, medium and micro enterprises;
·          increasing opportunities for black economic empowerment;
·          contributing to the reduction of inequality and poverty;
·          strengthening of the international competitiveness of SA business;
·          development of the SADC region; and adding value to the economy

Substantial progress has already been made in re-organising the Department to meet these challenges. The previous ten (10) Chief Directorates with an amalgam of policy and implementation roles have been transformed into six (6) focussed units.

The Executive Management Unit (EMU), which will provide policy direction and co-ordination to Department and its associated institution.
The International Trade & Investment Development Division is responsible for policy formulation and programme management. Its work will be largely at the level of policy and strategy development, programme development, monitoring and evaluation, negotiations and relationship building in the areas of bilateral and multilateral trade relations and investment.

The Enterprise, Commerce & Industry Development Division is responsible for policy and strategy development, programme development, monitoring and evaluation, consultation and relationship building in the areas of black economic empowerment and enterprise development, SMMEs, co­operatives, business regulation, consumer protection and sector development.

Trade and lnvestment South Africa is a service delivery agency, incorporating the current functions and staff of Investment South Africa, a Section 21 company. This will be a combined trade and investment promotion agency. Its premise is the increasing interrelatedness of trade and investment. It will allow for the rationalisation of these activities, which are performed separately at present. In some instances, independent trade and investment promotion offices, outside of the ambit of embassies, are envisaged.

The Enterprise and Industry Development Agency is a service agency, which will be the key vehicle for supply-side incentive measures to business, with particular emphasis on black economic empowerment and SMMEs.

A Group Systems and Support Services Division will prove corporate services to all units in the Department and setting standards for administration and governance, which will offer a full range of corporate services, set standards for the group in the corporate governance and administration field and will monitor and evaluate the performance of the functionally independent operating units and the associated institutions.

The establishment of two regulatory and administrative institutions will take place. These institutions will administer functions currently performed by the Department.

The Commission for International Trade Administration (ClTA) will be responsible for the administration of tariffs and trade remedies, a function currently performed by the Board of Tariffs and Trade. These functions would further be linked to structures in the South African Customs Union. It would derive its legal status from a founding act, which will be the subject of a future Cabinet Memorandum.

The Companies and Intellectual Property Registration Office (CIPRO) will be responsible for the registration of companies, closed corporations, patents, designs, copyright and trademarks. This would combine the presently organisationally separate South African Companies' Registration Office and the South African Patents and Trademarks Office, two directorates within the Department, into a single client -focused service delivery unit, constituted as a trading entity.

The new structures are being populated beginning at the highest levels. Two Deputy Director General posts have been filled and it is anticipated that the DD-G Group Systems and Support Services post will be filled by end September. A new Chair for the Board on Tariffs and Trade has been appointed. The post of Chief Operating Officer, CIPRO has been advertised and should be filled by the end of September.

Several new Chief Director, CEO, COO, and Director posts have been advertised and interviews for 10 of these posts will have been completed by the middle of September. This layer of new leadership will be involved in recruiting the level of Directors. Staff migrating from current posts will fill the majority of new posts. A target of 50% women representation in all new posts from Director level upwards has been set. Filling of all new posts and migration of staff into the new structures should be completed by March 2001.



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