Committee Report on Department of Trade & Industry Budget 2009/10

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Trade and Industry

22 June 2009
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Members of this Portfolio Committee had in previous meetings, received inputs and presentations from the Department of Trade and Industry (dti) and its entities. The Committee Secretariat and Researchers had drawn up a draft Report, tabled at the meeting for consideration by Members. In going through that document, Members highlighted a number of issues. They requested that the Report should include the National Lotteries Board Trust Fund division and its distribution of the funding, and an explanation of the crossover functions of the Department of Trade and Industry and other departments, in particular the Department of Agriculture. References to agro processing would need further expansion. The dti and the new Department of Economic Development would be asked to coordinate their efforts, provide their Strategic Plans to this Committee and establish de facto links.  Members discussed the need to strengthen and consolidate all trade agreements for the maximum benefit of South Africa, and it was suggested that the Committee should insist that negotiators take a strong stance, and that the Committee could also review the outcomes of their negotiations. The final Report should include a recommendation that this Committee should adopt a more proactive role, and engage with other parliaments on parallel oversight roles. Members felt that the policy of Broad Based Black Economic Empowerment required a review, greater clarity and more effective application. Development of a human action plan was also required, and the private sector must be brought on board to apply the policies consistently. The Committee felt further discussion was needed on redefinition of trade policies and amendment and better application of the applicable regulations, including competition aspects. The subject of cooperatives also needed further attention. The question of incentives was identified as another multi-faceted issue. The Industrial Development Corporation’s role and difficulties must be addressed, and it must be asked for a growth plan as it was presently acting akin to a bank. Attention must also be given to the role of Khula and whether the use of intermediaries was effective. The Committee would also need to follow up on other entities that still had not submitted reports.

Meeting report

 

Budget Vote: First draft of report for deliberations by Members
The Chairperson apologised for any “teething troubles” with documentation not having been received by all Members. She noted that the Department of Trade and Industry (dti) was to be advised by the Committee Secretary that it should submit documentation only to this Committee. The report tabled was only a first draft. It embraced most of what had emerged from the first briefing by the dti regarding the Department, Khula, the Industrial Development Corporation (IDC), and the views of the Minister of Trade and Industry. It excluded the Research Report.

She then asked Mr Msimanga, Parliamentary Researcher, when other documentation would be made available.

She suggested that the Committee should, in this meeting, study the draft and make comments, although not change the political substance unless this was incorrect.

Mr S Marais (DA) pointed out that he had received the document the previous afternoon and wondered why other Members had not.

The Chairperson pointed out that she and other Members were still not electronically connected – and some did not even have a fax connection - so had not had the opportunity to familiarise themselves with the document.

Mr Marais then pointed out that page 2, first paragraph, only mentioned two entities and he suggested that the National Lotteries Board Trust Fund division also should be added. The DA believed this Fund was not distributing a large sum of money to the intended beneficiaries, and he would like an explanation.

The Chairperson answered that she felt a number of similar issues would raise themselves. Cooperatives were another issue. They could be grouped together in one paragraph in the report.

Mr Z Mabaso (ANC) asked if this was already covered, and where cooperatives should fall in the report. The Parliamentary Researcher had written a better analysis on page 4 of the Report, yet did not seem to cover cooperatives.

Mr Mabaso added that another bullet point was needed under bullet point 1 on page 2, to provide a broader presentation, and emphasise the need to narrow the gaps between different economic classes of people.

Mr Ntuli drew attention to what he felt was misuse of the word “Industrial” on page 1, paragraph 2.

The Chairperson concurred that this seemed to be an error of substance.

Mr Mabaso asked whether the subject matter of the report was unique to the dti or whether it extended to other departments. In regard to agricultural products, there was a crossover between dti and the Department of Agriculture.

The Chairperson said that this was termed agro processing.

Mr S Njikelana (ANC) agreed but added that it was confined to the IDC, and not referred to by the dti. In general, he felt that the references to agro processing were rather thin.

The Chairperson said that she recalled that this had been referred to under the category of Export Foodstuffs and that accordingly it fell under the World Trade Organization (WTO).

Mr Lwasi Msimanga, Parliamentary Researcher, pointed out that agro processing was associated with Genetically Modified Foods (GM) and had received a lot of attention under such heading.

Mr Njikelana pointed out that the penultimate paragraph on page 3 contained an incomplete sentence.

Mr Marais said that he thought this was left blank so that the Committee could insert its opinions.

The Chairperson replied that she considered this very important and that the Members may wish to comment now or later on this..

Mr A van der Westhuisen (DA) pointed out that perhaps it would be prudent for Members only to comment after the re alignments were known and completed.

The Chairperson said that she felt that this was a useful approach to adopt so that the Committee  could strategise and plan.

The Chairperson noted the second paragraph of page 3. Although there was currently a concentration on South to South exports, the exports South to North should not fall away, but the draft Report was worded that only South-to-South exports should be strengthened. She felt that South Africa should consolidate trade agreements for the maximum benefit of South Africa. The document as presently worded was ambiguous in its use of “pursue”, which could imply making only some trade agreements, but breaking others. The recently-signed Economic Partnership Agreements (EPA were questionable, in regard to South Africa’s interests. She added that this was a subject she was going to mull over, and she would raise it later. She added that despite Ministerial accord on Trade Agreements, Parliaments over the world were playing a bigger role in such Agreements. This Committee should guide the Minister and ensure that the oversight role of Parliaments was carried out, to the maximum benefit of South Africans

Mr B Turok (ANC) explained that the Minister had tried to convey exactly what the Chairperson had said. He added that the US Congress took a strong line over US Trade negotiators, and, if Congress felt they were giving too much away, would instruct the negotiators to take a stronger stance in negotiations. He felt the Committee should go further than it had in the past. It should not only insist that South African trade negotiators should take a strong line in favour of South Africa, but the Committee should also review the efforts of the negotiators.

Mr Njikelana added that previously the Committee had requested the dti to abide by its views. He urged that the Committee should assign guidelines and provisions to trade negotiators, and review their efforts on conclusion of the agreements, and that trade negotiators should be aware that their efforts could be reviewed both the dti and Parliament.

Mr Marais asked that such an approach should stress South Africa’s interests, especially the poorest of the poor. He felt that it was difficult to be prescriptive but that core principles should be identified and all negotiators must apply them.

Mr N Gcwabaza (ANC) agreed with Mr Njikelana. During WTO negotiations, especially those to do with agricultural products and interests, the European Union (EU) and USA were protecting their interests to the detriment of South Africa.

Mr Mabaso said that the Committee should impress upon the Minister and Department that South Africa should not be over ambitious initially, but steadily work to gaining a better deal.

The Chairperson added that this Committee should become pro active and think ahead rather then be passive or reactive.

Mr Turok said that he felt the word “maximise” was not the most apt, but that “improve” should be used instead, to emphasise the changed approach.

Mr Njikelana added that this should not apply to agricultural interests or products, but extend to pharmaceuticals and medicines.

Mr Njikelana said that this Parliament should protect its oversight role and engage with other Parliaments about their similar roles, which might lead to visible progress.

The Chairperson said that this should be stated as one of the Committee’s recommendations.

The Chairperson asked for an explanation of the acronym NAMA in paragraph 4 on page 3.

The Researcher responded that it referred to Non Agricultural Market Access.

The Chairperson pointed out that three countries had not signed the Southern African Customs Union (SACU) agreement, and asked if there was an acronym for this grouping.

Members noted that the acronym ANSA could apply to the three, being Angola Namibia and South Africa.

The Chairperson said that Parliament needed to be given the full information, not in a fragmented form, and the reason why South Africa had not signed this treaty.

Mr Turok noted that the dti had produced two good documents, especially the Action Policy document. The Minister was happy with the Action Policy, but not with the Action Plan, containing the methods of implementation, and this was being revised and might be amended a few times.  Strategic  Plan would be developed, and this must be read in conjunction with the budget.

Mr Mabaso referred to page 4 and the intensification of the Industrial Plan, especially as pertaining to Broad Based Black Economic Empowerment (BBBEE).

The Chairperson explained that she saw BBBEE as a presently somewhat mixed policy, which required review, so it could move on to be a more efficacious policy that was also understandable to everybody.

Mr Marais asked that there be clarity so that people could align themselves with the policy and know where they stood in relation to it.

Mr Turok suggested BBBEE should be reviewed, not just subject to comment, as it required both more talk and more action.

The Chairperson agreed it should be discussed more fully.

Mr van der Westhuizen felt that preparation for BBBEE was lacking, and that its objectives were often being overlooked.

The Chairperson said that it seemed that there was not effective implementation of the policy as currently submitted; the paragraph merely referring to it should be rejected.

Mr Njikelana found these assertions most encouraging. BBEEE, especially as it related to procurement by the provincial and local tiers of government, must be properly implemented.

Mr Turok suggested that the word “intensified” be replaced by “adjusted” in this paragraph of the report.

The Chairperson noted that development of a human action plan was also required.

Ms M Kotsi (COPE) said that it was important to get the private sector on board, as BBEEE could not be left to the Government.

The Chairperson said she felt that all tiers of Government were doing as much as they could with the Preferential Procurement Plans, so that BBBEEs received Government tenders, but she agreed that the Minister did need to refer to the private sector.

Mr Turok said the point had been well made and felt that the provinces should be more active

Mr Marais asked that the private sector be asked to follow suit.

The Chairperson said that a report should be submitted back to the Committee within a set time frame.

The Chairperson then referred to page 5, and thought trade policies should be redefined.

Mr Turok thought that in fact amended and effectively-applied regulations were needed. There was a view that the current financial crisis arose because the regulations had not been properly and timeously applied. Part of that related to lack of enforcement of unfair competition laws. He suggested that enhanced competition and regulatory processes were both required, but conceded that more thought was needed on implementation.

The Chairperson explained that the dti had placed competition almost as a division of regulation, but felt that there was no harm in spelling it out more clearly to stress the point. It was a valid point that both a suitable policy and strong implementation were necessary, especially because of the actions of business leaders.

Mr van der Westhuizen suggested a renaming as Competition and Compliance regulations.

Mr Njikelana disagreed, saying he did not feel that this was an appropriate combination. The dti had put this aspect under Regulation, presumably with good reason, and it should remain there.

The Chairperson said that it was not necessary to refine this in the document; the Committee was flagging it for further attention and consideration.

The Chairperson said that with regard to co-operatives, once again the Committee’s comments served as a reminder to itself.

Mr Ntuli said he wanted some indication of the Strategic Plan from the Department of Economic Development.

Mr Turok said he felt that Parliament, the Director General and the dti should co-ordinate their efforts and that the two departments should establish a de facto situation.

The Chairperson said that the relevant departments should note the concerns of the Committee that there was no joint mandate and no clarity on their future cooperation.

Mr Njikelana said there was a need for clarification on the role of the Department of Economic Affairs, and what competencies were to be taken away from the dti.

The Chairperson said the ambit of those changes would become increasingly clear after the Budget debates.

The Chairperson noted that the question of incentives was a large issue with many facets.

Mr Turok said he was sceptical about incentives for the Small, Medium and Micro Enterprises (SMMEs) and he would like this spelt out, and the progress with SMMEs determined.

Mr Marais asked for clarity whether this meant actual payments or incentive schemes, and whether it related to exports only.

The Chairperson then asked for comment on the IDC Strategic Plan report on page 6.

Mr Turok explained that in the past the IDC had contributed enormously to industrial development of South Africa, but now that it was to be administered on a costs recovery principle, its role was less effective. It had become similar to a financial institution, like the Development Bank of South Africa (DBSA) The IDC had not been re-capitalised for some time, and so it was now concentrating on companies which showed profits and paid dividends. This meant that there was little capacity for small enterprises.

The Chairperson said she would welcome any suggestions or proposals in writing.

Ms Kotsi suggested that as the IDC was referred to in various places, the Researchers should consolidate all references to it in one place in the report.

The Chairperson agreed with this suggestion.

Mr Njikelana noted the ongoing difficulties with the IDC and said they should be dealt specifically. It required recapitalising and a firmer base.

Mr Marais agreed with Mr Turok’s analysis of the IDC. He questioned what its role should be, saying that the current situation did not benefit either the country or the economy. IDC required a vision and a growth plan. Despite the abundance of available manpower in the country, no good plans to use it were advanced. The IDC had an undisclosed role and plan. He suggested that ten and twenty year strategies and business plans should be made.

The Chairperson summarised that IDC was not a bank, that there were many competing financial institutions, but that because of its cautious policies it was acting only like a bank.

Mr Mabaso noted that co-operatives sometimes fell under SMMEs, sometimes under BBBEEs, as there did not seem to be a firm and fixed plan for them. Although they could create and sustain jobs and business activities, they were not presently reaching the intended targets.

The Chairperson asked that Mr Msimanga give further attention to this point.

Mr Njikelana supported the idea that cooperatives were essential in creating businesses, and thereby jobs, but was unhappy about the present funding mechanisms. R200 million –described as a donation from an EU donor - was insufficient and he hoped that the dti would set aside sufficient funds and state how it would give support.

The Chairperson said she felt that there was an overlap with the South African Micro Finance Apex Fund (Samaf))

Mr Marais asked what the distinction was between Khula and Khula Direct, and the role of intermediary agencies between Khula and the ultimate beneficiaries. He requested clarity on its core function and whether the middleman should be cut out. He also asked for details of its geographical spread of Khula and why it was now spreading to 6 other provinces.

The Chairperson noted that the numerous questions that Mr Turok and Mabaso could not be answered at this point.

The Chairperson said that Members should read the documents on Community and Individual Development Association (CIDA), as they would be dealt with in a later report. She also suggested that the National Lottery Board, as suggested by Mr Marais and other items should be grouped together properly in a final report.

Mr Ntuli asked whether all the questions and queries were to be flagged for response by the dti.

Mr Mabaso noted that more explanations were needed, particularly on Khula and cooperatives, and if necessary a workshop should be held.

Mr Njikelana said he also wanted more updates on entities that had not given them for some time.

The Chairperson noted that the entities must account to Parliament.

She noted that there would be a follow up meeting the following day.

Mr Mabaso raised the issue of financing of Parliamentary Committees. He wondered if Members could, for instance, attend an upcoming function in KwaZulu Natal.

The Chairperson said that the imminent meeting of Committee Chairpersons would deal with this issue.

The meeting was adjourned.


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