Lottery Proceeds Distribution; Department Budget Report; Industrial Development & Merchandise Marks Amendment Bills

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
7 November 2001
LOTTERY PROCEEDS DISTRIBUTION; DEPARTMENT BUDGET REPORT; INDUSTRIAL DEVELOPMENT & MERCHANDISE MARKS AMENDMENT BILLS
 

Industrial Development Amendment Bill [B32C - 2001]
Merchandise Marks Amendment Bill [B33D - 2001]
Budget Presentation
Lotteries Presentation

SUMMARY
The Director General of the Department of Trade and Industry reported on the Department's budget spending for 2001. It has managed to greatly curb its past under-spending. He also briefed the Committee on how the lottery proceeds have started to be distributed. The Committee approved the technical amendments to Industrial Development Amendment Bill and the Merchandise Marks Amendment Bill as passed by the NCOP.

MINUTES
Briefing by Director General on the DTI budget
Dr A Ruiters made a presentation on the budget dealing with spending which is on track, a reflection on the improved corporate governance systems that have been put in place, and the corporate vision that the Department has established over the last two years.

He explained that the DTI budget has always hovered between R2 - 2.5 billion. The Department has about R2.2 billion for the current financial year split now amongst: DTI group, Incentives, Personnel and Operational (computer equipment etc). The Portfolio Committee had to satisfy itself that there is efficiency within the Department's budgeting and if the Department was getting value for the money it spent. The DTI group which consists of 17 agencies that report to the Department, will receive R800 million.

The Department currently spends about R259 million on Personnel. 40% of the Personnel budget is allocated to 42 people that are posted overseas. The Department spends a lot of money in keeping people in overseas posts. As a percentage of the budget, 36% is allocated to the DTI Group, 41% is allocated to Incentive Schemes, 14% is allocated to staff, 9% gets allocated to Operational.

The Department still has about R2.169 billion of the budget to spend before the end of this financial year. Dr Ruiters expressed confidence that the Department will end up with an under-spending of only between 1 and 5 per cent in this financial year.

Between 1997/1998 there was 38% under-spending in the Department. This dropped to about 34% in 1998/1999. It further came down to 24% in 1999/2000. It is now under 5%. The reason for the drop in under-expenditure has been a result of the establishment of a proper budgeting procedure.

The Department had tasked itself with evaluating the percentage of incentive schemes that made up the total of the Department's budget. This was done with an object of improving budgeting within the Department of Trade and Industry. Incentive schemes have been remarkably lower than the actual budget that had been allocated.

As part of the bid to improve its budgeting efficiency the Department has improved its corporate governance structure. The Department has been revamped to consist of different sections such as the Executive Board, the Operations Committee, Policy Committee, Offerings Committee, Audit Committee and the Internal Audit Unit. The Executive Board meets every two weeks. Each has a specific task such as Policy Committee approves policies of the Department and the Offerings Committee deals with what the Department offers to the general public. The Audit Committee is composed of external or retired auditors. An Internal Audit Unit has been specially established to deal with anything that requires attention regarding auditing matters within the Department. Financial reports are produced on a monthly basis detailing the financial performance of the Department. Furthermore, financial delegations to senior managers improve the efficiency of expenditure.

The slide on 2001/2002 budget distribution on programmes reflects the percentage of the money that has been allocated in respect of various programes within the Department.

The guiding vision within the Department is that all expenditure decisions are guided by the DTI's vision which is competitiveness and equity in a global trading system. The vision is to make the country more competitive in the global economy.

In conclusion the Director General noted that about 19 pieces of legislation had been submitted to Parliament in the past year. Twelve of these had been approved. This is evident of the improvement of efficiency within the Department.

Discussion
Dr J Benjamin (ANC) asked how important was quantity of legislation versus its quality. She asked this question because much of the legislation that has been passed had been very technical and was not really about transformation of the South African society. It was easier to come up with a large number if there was a piecemeal changes to legislation. Secondly, to what extent in the budget has the Department taken into account the issue of gender not only in terms of human resources but also in terms of the South African economy.

Dr Ruiters replying to the question on the quantity versus the quality of the legislation, replied that his mandate as the director general of this organization in the second term of government was to turn the Department around and transform it. The enactment of a host of new legislation was done in an attempt to transform the Department to what it is right now. It was necessary to stabilize this organization and the Department has succeeded in doing so. Even though the Department has not reached a stage of quality yet, it has been transformed to an extent that the general public and the personnel who work for it can understand it. The Department has increased the output of this organization in the stabilization phase. Stricter controls and monitoring have been initiated on things such as travelling allowances and it is thoroughly investigated whether a member of staff needs to travel. All this has been done to improve the efficiency and productivity of this organization.

With regard to gender equality, the Department has a certain scheme in place (EMA scheme) in terms of which the Department spends about R130 million. This supports many women to go on overseas trips. The Department has committed itself toward the improvement of gender equality and has started to reach out in supporting black firms and women-owned firms in dealing with the issues of HIV/AIDS and its effect on the economy.

Ms F Haijaij (ANC) based her question on the 42 members of staff that the DTI has deployed overseas and that a large portion of the budget has been allocated to them. She asked if the Department overlaps with the Department of Foreign Affairs which also has a programme to promote trade and investment in the missions abroad. Is the Trade and Industry Department assisting with the training of foreign affairs officials stationed abroad who are supposed to promote trade and investment? Secondly, does the Internal Audit Unit of the Department also exist in the DTI subsidiaries such as Khula Enterprises and Ntsika?

Dr Ruiters replied that the Department is currently engaged in discussions with Foreign Affairs to look at how the operations can be streamlined. Cabinet will soon be receiving a memo from Foreign Affairs with inputs from DTI about the restructuring of foreign offices. This is necessary so that there be only one foreign office manned by Foreign Affairs.

He said that the Internal Audit Unit is also responsible for clarifying issues in some of the organizations to which the Department transfers money such as Khula, Ntsika and the Competition Commission.

Ms C September (ANC) asked if the Director General could give an indication of the outputs at the end of the current budget year.

Dr Ruiters replied that he has already done a presentation to the committee reflecting the outcomes of the Departments. He did not have with him the statistics of the actual outputs that the Department will generate in each of the areas. There are seven outcomes that are expected from the Department. They reflect the values of the Department, such as growing the SADC region, reducing the inequality in South African society, developing competitiveness, black economic empowerment, generating efficiency in the DTI, small business growth and creating an efficient market.

Ms Ntuli (ANC) asked how many small and medium sized business enterprises has the Department assisted, and if the Department has been able to create employment and wealth or to promote entrepreneurs. She stressed the importance of furnishing real and practical statistics as opposed to percentages and numbers on paper as such statistics have to be accounted for to the public.

Ms Sono (DP) shared Ms Ntuli's concerns about the development of the SMMEs. She reminded the DG of his previous address to the committee where he had said that the industrial strategy was incoherent and did not address the need to develop SMMEs and black economic empowerment.

Dr Ruiters replied that their concerns were absolutely correct. The biggest responsibility that the Department faces is to increase its accessibility and outreach and to get the right products to people who require services to develop their companies and start new firms. The Department inherited old policies from the old Department and is in a process of reviewing these policies to benefit the people. The Department has, however, established many manufacturing advisory centres in the last three years and these have been productive in providing services to small businesses. The Department is not reaching enough people because it is not well targeted enough. This is the reason that has prompted this Department to increase the public outreach programme in affording services to the general public.

Lottery Proceeds Distribution
Dr Ruiters emphasised the following points in the slide presentation (see document):

Overview
The National Lotteries Board was established in terms of the Lotteries Act No. 57 of 1997. The funds in the National Lottery Distribution Trust Fund are administered and invested in terms of the Act. There are five broad categories of good causes that are identified by the Lotteries Act. A minimum of 10% must be allocated to RDP, Charities, Art and Culture and National Heritage (including Environment) and Sport and Recreation. The Lotteries Board acts as an oversight board for the National Lotteries Board Distribution Fund.

National Lotteries Distribution Trust Fund
Funds are transferred on a weekly basis by Uthingo, the lottery operator, since its first ticket sales in March 2000. The amount is calculated on a predetermined formula based on the sale of the tickets. The percentage transferred to good causes started at 10.6% and will increase to up to a high of 40.58%.

Emergency Funding
After March 2000, concerns were raised by private lottery organizations or operators that had previously received income from lotteries and scratchcards (such as Ithuba, Scratch and Win, etc). The Minister of Trade and Industry directed the National Lotteries Board to offer Emergency Funding from the Miscellaneous Purposes category to organizations that could show that the reduction of the Funding that they previously received was affecting their operations. The DTI then made a call for applications in October 2000 with the closing date of 30 November 2000. Minister Erwin appointed the National Lotteries Board as the distributing agency for the miscellaneous purposes category. 400 applications were received. A total amount of R4, 102, 000.00 was allocated to 80 organizations that met the requirements.

Applications and adjudication
The central applications office was established, with a specialized management information system. Each distributing agency identified criteria for funding and issued individual advertisements inviting potential beneficiaries to submit applications by a pre determined deadline. First adjudication meetings were held in July 2001. The overall adjudication criteria that the Department considered were, among others, general development in the Republic and the enhancement of the standard of living of the people in the Republic.

Discussion
Dr Davies asked how much money was raised by the private operators of lotteries and fundraisers that were affected by the Lotteries Act.

The Director General replied that the Department was unable to ascertain the amount of the money that was disbursed by private lotteries.

Mr Bruce (DP) asked what criteria applies in choosing one charity over another in the actual distribution process.

The Director General replied that the organization had to show that it was constituted for charitable purposes, that it was a juristic person, that it had a sound financial management. It also had to show its priority area such as providing aid to the youth, children, socially vulnerable persons such as the aged, the disabled and HIV/AIDS positive persons.

Industrial Development Amendment Bill [B32C - 2001]
Mr Johan Strydom (Dept. of Trade and Industry) made a briefing on the amendments to the Industrial Development Amendment Bill. He reminded them that the Portfolio Committee had amended Clause 11 [Section 19 (2)]: The phrase "balance sheets and accounts" was substituted with "financial statements" as this expression is more current and easier to understand.

The purely technical amendments that are contained in the B32C-2001 version are necessary consequential amendments in order to create consistency throughout the Industrial Development Act where it makes additional references to "balance sheets and accounts" or "books of account". These are in Section 17 and Section 19 (1) and not only Section 19 (2).

Discussion
Mr Rasmeni (ANC) commented that it was a bit costly for the Committee to be reconsidering amendments of such a technical nature. The state law advisors should have picked up these cosmetic amendments. Dr Davies (ANC) concurred with Mr Rasmeni.

Mr Strydom replied that it must needs be accepted that all people are fallible human beings. The State Law Advisors try to identify what needs to be rectified but there are oversights in the process.

The Chair then moved to the formal stage and adopted the Bill as amended by the Select Committee on Economic Affairs in the National Council of Provinces.

Merchandise Marks Amendment Bill [B33B - 2001]
Mr Strydom remarked that during the NCOP process, Clause 2 of Bill had been rejected on the basis that one cannot have a deeming provision in legislation as this is potentially unconstitutional and bad in law.

The Chairperson was satisfied with Mr Strydom's explanation and moved to the formal stage and reported the Bill as amended by the Select Committee on Economic Affairs in the National Council of Provinces.

The meeting was adjourned.