Revised Industrial Policy Action Plan: public hearings Day2

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Trade and Industry

02 March 2010
Chairperson: Ms J l Fubbs (ANC)
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Meeting Summary

Nine organisations made submissions to the Portfolio Committee on Trade and Industry, during public hearings on the revised Industrial Policy Action Plan (IPAP).

Business Unity South Africa (BUSA), mentioned that its approach to IPAP was to look beyond recession, and suggested the need to intensify and deepen coordination between public and private sector. The revised IPAP provided the promise of greater potential for achieving the goals of the industrial policy than the previous one, but intensive engagement with stakeholders was recommended to improve integration, address the cost of doing business more comprehensively, and ensure opportunities and challenges were understood by all stakeholders including government. Monitoring and evaluation, and sufficient budget to do this, were also important.

National African Federated Chamber of Commerce and Industry stated that it was supportive of IPAP in that it would unlock the potential of each of the industrial sectors to the benefit of the SMMEs and further enhance Broad Based Black Economic Empowerment, and it would increase investment in domestic economy and region and counter anti-competitive practices. A number of suggestions were made as to what Government could do to boost the region and communities.

Congress of South African Trade Unions said IPAP sought to focus on an integrated approach to deal with features such as underdevelopment in key sectors of the economy. The arrival of IPAP signaled the seriousness of the government about a comprehensive industrialisation and employment strategy. Its weakness was on its failure to highlight progress in the implementation of areas that constituted a continuation from the old IPAP. A number of proposals were put forward in respect of the review of the Preferential Procurement Policy Framework Act and the IDC Act, linking of industrial and trade policy and emphasis on green industries and agro-processing.

South African Clothing and Textile Workers’ Union highlighted that IPAP largely dealt with fleet procurement and that it should focus on procurement of other products as well including the Clothing, Textile, Footwear and Leather industry. It welcomed the IPAP programme of skills upgrading, and the measures it tabled in dealing with illegal imports.

National Union of Metalworkers South Africa spoke of socio-economic challenges that required the State to develop capacity to produce material commodities to meet the basic needs of the South African people, to reduce dependence on foreign capital. NUMSA agreed with the proposals set out in IPAP but would like to propose that government put all industrial development programmes under the Department of Trade and Industry. It proposed amendments to the IDC Act, suggested that the State take steps to reverse the liberalisation trends and noted that IPAP was unfortunately silent on the question of rural and urban development.

The Food and Allied Workers Union was of the view that development went beyond a mere industrialisation and must include other sectors, particularly those with down-stream and up-stream linkages. It felt there was a need to have a dynamic combination of both defensive and offensive trade policy stances as part of the overall strategy. This Union also commented that IPAP was poor on the issue of up-scaling agro-processing. It suggested that there was a need to develop competition policy further.

Chemical, Energy, Paper, Printing, Wood and Allied Workers Union emphasized that the aims and targets of the IPAP remained relevant. It would be looking how the IPAP2 would intervene to keep existing jobs and retain those lost during the economic meltdown. It was  of the belief that IPAP would create long term increases in employment in all sectors of the economy, and enhance skills and innovation policies that were aligned to sectoral policies. Particular comments were made upon the impact on the chemical, pharmaceutical, plastics, forestry and wood and paper and pulp sectors. The necessity for proper funding and skills development was stressed.

Agri-SA maintained that IPAP focused only on horticulture, aquaculture, organic products and niche crops. Grains and field crops were listed as low value and uncompetitive, yet this was where the greatest opportunity lay for South Africa. Industrialisation would deal with key challenges of agriculture such as market development, price stabilisation, investment attraction, and trade promotion.

South African Petroleum Industry Association set out the response to the call by IPAP for lower emission vehicles, believing that the issue could be addressed by an integrated approach in planning, introduction of new technology and revision of the current road fuel specifications for all transport applications. Consideration must be given to the required fuel, and investigation into costs and benefits of projects should be expanded to cover the possible future upgrading or expansion of the refineries in South Africa. A world class, economically viable and sustainable biofuels industry should be established in South Africa, using integrated approaches. Bio-diesel uptake would present less of a problem, but quality of bio-diesel was difficult to maintain, particularly where small producers were involved. It recommended that expert working groups be set up.

Questions and concerns from the Members were around the review of the funding model of the Industrial Development Corporation (IDC) and Land Bank, formation of cooperatives to address inequities, the role of private sector-public partnerships in speeding up development, industrialisation and technology transfer in developing rural areas, competition and trade policies, fronting in business, the issue of low productivity versus high labour costs, Agro-processing and bio-fuels, and illegal imports. Several questions remained to be answered in writing.

Meeting report

Public hearings on Revised Policy Action Plan (IPAP)

Business Unity South Africa (BUSA) submission
Dr Laurain Lotter, Executive Director, Business Unity South Africa, said the introduction of the multi-pillar approach in designing the industrial policy was a positive step. The approach of BUSA towards IPAP centred on two areas: opportunities and challenges presented by the revised IPAP, given the current macroeconomic environment, and the impact of the revised IPAP at industry level performance. The challenges and opportunities were dealt with in relation to the cross-cutting issues in the document which BUSA believed should have been raised.

BUSA felt that the funding model of the Industrial Development Corporation (IDC) needed to be reviewed because the current approach of the IDC was similar to that of private banks, and that made it difficult for emerging entrepreneurs to obtain financing from IDC. IPAP was not clear on who would be able to access the incentive schemes for sectors and investment projects not listed.

In regard to leveraging public procurement, BUSA was concerned that implementation remained a challenge because of a lack of common ground between National Treasury (NT) and Department of Trade and Industry (dti). Implementation provided a range of short and longer-term opportunities. The challenge was to balance the imperatives of transformation and promotion of local manufacturing through application of preferential procurement.

In regard to competition policy, BUSA felt that any amendment to the law should be thoroughly canvassed with stakeholders. BUSA supported the enforcement of competition law. The Corporate leniency principle continued to provide an opportunity for companies to disclose anti-competitive behaviour.

BUSA had long argued for a more strategic approach to trade policies and welcomed the detailed actions in respect of both “locking-out” unsafe and poor quality imports and “locking-in” access to increasingly demanding export markets. The challenge here was the availability of sufficient resources to ensure that the relevant agencies could respond to the demands placed on them by the action plans. BUSA was also engaged with government and labour on research into ways of combating customs fraud.

Freight logistics, BUSA submitted, continued to pose significant constraints on growth. The recently announced review of the freight logistics strategy, at the same time as the release of IPAP2, provided an opportunity to make direct links between the development of sectors in the IPAP. The decreasing utilisation of rail for movement of freight was reflected in the decline of freight transported by rail, to the extent that 80% of freight was transported by road in 2003, rising to 87% by road in 2007. In respect of the road freight strategy, the objective of government was that the optimum volumes needed to be split between road and rail. The lack of comprehensive rail strategy contributed to the current unsustainable situation.

BUSA commented on partnerships with business. It was clear from the action plans that most of the investment in productive capacity would come from the private sector. It was therefore important the plan reflected a common vision between the two parties. It was particularly important that the private sector was consulted on how to reduce the constraints to increased investment and employment. BUSA believed that successful implementation of the action plans would depend on a balance between coercion of business by conditionalities and the establishment of a relationship between business and government.

BUSA stressed that provision should be made for a comprehensive monitoring and evaluation process of the IPAP. This should include public hearings. It was also recommended that provision be made to ensure that necessary budgetary provisions for the actions were made.

National African Federated Chamber of Commerce and Industry (NAFCOC) Submission
Mr Steve Skhosana, Deputy President, National African Federated Chamber of Commerce and Industry, said that NAFCOC saw IPAP as promoting long term industrialisation and industrial diversification beyond the current traditional commodities and non-tradeable services, ensuring increased participation of historically disadvantaged people and regions in the domestic economy. It placed emphasis on labour absorbing production and services sectors, and ensured a shift from being consumption-based to being a productive country.

Three critical sectors were identified. The first included new areas of focus, being metals fabrication, capital and transport equipment, green and energy saving industries and agro-processing. The second cluster broadened on that provided by the first Industrial Policy Action Plan (IPAP1). This included plastics, pharmaceuticals and chemicals; clothing, textile, footwear and leather; forestry, paper, pulp and pulp; cultural industries, tourism, and business processes; and automotives and components. The third sector comprised sectors that had potential to grow. These were nuclear, advanced materials, and aerospace.

NAFCOC suggested that government interventions were necessary. There should be increasing awareness of IPAP to Small, Medium and Micro Enterprises (SMMEs) through seminars and information workshops. The government should identify infrastructure for SMMEs by developing business plans for township, rural industries, and former homelands. There should be capacity building of SMMEs, through designing a Manufacturing Supplier Development Programme. It was suggested that government should also be facilitating procurement and market linkages through preferential procurements. There should be emphasis on agro-processing and stable food production, and another area was the manufacturing of pharmaceuticals – both new and generic medicines.

These interventions, NAFCOC believed, would increase investment in domestic economy and the region, increase competition in the domestic economy and region, support meaningful Broad Based Black Economic Empowerment (BBBEE) in all three spheres of government and State Owned Enterprises (SOEs), and counter anti-competitive practices.

Congress of South African Trade Unions (COSATU) Submission
Ms Zingiswa Losi, Representative, Congress of South African Trade Unions, said that the release of the revised Industrial Policy Action Plan (IPAP2) was an indication that there was an acknowledgement within government that there was no country that had developed without a focused and well resourced industrial policy.  IPAP2 promised to be the engine of growth and development but it needed to be coordinated with other areas of government policy. IPAP2 had also put clear estimates of jobs to be created in most of the sectors targeted. COSATU further noted that formal employment had grown in the wholesale, retail, and business services sectors. Lastly, IPAP2 had delineated clear roles for various departments in the implementation of the key action plans. The timeframes would help in monitoring the implementation of the plans and hold those responsible to account.

COSATU commented on macro-economic policies, and agreed with the observation by IPAP that the global economic crisis had exposed the weaknesses and imbalances in the South African economy. In putting a strong case for industrial financing for productive sectors of the economy, IPAP2 contended that that such financing would have a major positive macroeconomic impact. IPAP2 was also making the critical point that macroeconomic and microeconomic policies needed to be aligned with each other. The logical extension of IPAP2 was that macroeconomic policy needed to be realigned to reflect the economic strategy. The other fundamental macroeconomic policy issue that IPAP2 identified as crucial for industrial policy was the need for a ‘competitive real interest rate regime’. High interest rates were identified as a serious barrier to productive investment.

An important element of local procurement, linked to a strategy of industrial diversification, was the use of public infrastructure programme to promote the development of the domestic capital and intermediate goods sectors. COSATU had called for the review of the Preferential Procurement Policy Framework Act and its regulations to ensure that public procurement prioritised goods manufactured locally. The current procurement and black economic empowerment policies did not have industrialisation and creation of decent work as their primary objective. State procurement had to promote collective ownership in the form of cooperatives. This was one area which was not getting much emphasis from IPAP2.

COSATU was of the view that the objectives of the industrial policy should inform trade policy, and the focus should be on promoting development and employment. The role of technical infrastructure was critical to give the country some policy space to industrialise. The use of technical infrastructure would be linked to government efforts to encourage import replacement and displacement. With regard to customs fraud and illegal imports, COSATU supported the proposal for criminal prosecutions in some cases to deal with the problem.

COSATU had called for the amendment of the IDC Act to ensure that it focused its support on labour intensive sectors, rural development, and assistance to cooperatives. Other proposals forwarded in relation to industrialise financing included imposition of tax on short-term capital flows in order to stabilise the exchange rate and to promote long-term investment, restructuring of the tax system so as to favour priority sectors in order to support SMMEs and co-operative development, and restructuring of the Retirement and Pension Fund of Workers, so that these funds could be in the hands of worker-controlled financial management institutions, and to transform the financial sector.

COSATU proposed that the Competition Act be amended, to classify import parity pricing as an excessive pricing which was detrimental to the economy, make it easier to impose divestiture orders on abuse of dominance and restrictive practices, and empower the Competition authorities to impose administrative penalties equal to the period of the anti-competitive conduct, rather than being limited to an annual turnover of companies.

COSATU submitted that research and development of Green and energy-saving industries must be given a special focus. COSATU was disappointed that IPAP2 had not put any job estimates on Green and Energy-Saving Industries.

COSATU said that a strengthened focus on agro-processing would yield significant prospects for the agricultural sector and a move away from the current system of exporting much agricultural produce without adding value to it. Agro-processing should be linked to a strategy of land reform and agrarian development.

South African Clothing and Textile Workers’ Union (SACTWU) submission
Mr Etienne Vlok, Research Director, South African Clothing and Textile Workers’ Union, spoke of the crisis in the clothing, textile, footwear and leather industry (CTFL), similar to that experienced in other sectors. This industry had experienced problems for some years. From 2003 onwards, the crisis was triggered by a surge of imports and tariff liberalization, which was faster and deeper than as it was required by World Trade Organisation (WTO). From the second half of 2008 to the present, the crisis was made worse by the global economic crisis. Substantial job losses had been experienced since 2003. Formal CTFL employment was down to 114 000, from 207 000 in 2002. Clothing employment figures decreased by 54%, dropping down to 55 000 from 120 000. The crisis was triggered by a sustained and steep surge from imports from China in 2003.

As a result of these crises, SACTWU developed a twin strategy; both defensive and offensive. The defensive strategy looked at trade measures, promoting local procurement, and addressing illegal imports. The offensive strategy focused on competitive programmes. Defensive measures acted as a shield to provide space for competitiveness programmes. Competition should be shifted away from price only through improving other supply strengths and re-tooling the industry, and increasing demand for local products. It was also felt a growing CTFL industry could easily create jobs, develop rural areas, and increase gender equity. The competitiveness programme contained both trade and industrial measures, and it was agreed to by business, government, and labour.

SACTWU conceded that the past six months had seen a real willingness from government to assist the CTFL industry. The implementation of IPAP programmes had started already. The Competitiveness Programme was up and running, with thirty-six companies already in the pipeline. Production Incentives would start in April 2010. Funding was announced during the budget speech. The developmental trade policy would look at strategic approach to tariffs. Clothing duties on thirty-five most important products increased to WTO-bound level. Duties on certain textile inputs not made locally would be reduced. Tariffs would not be reduced blindly. IPAP programmes would facilitate growth of the CTFL industry, and assist CTFL to move competition away from price and focus on non-cost factors including proximity, innovation and quality.

Illegal imports
SACTWU welcomed commitment from IPAP to deal with illegal imports. This was seen to be in line with the CTFL industry strategy and the National Economic Development and Labour Council (Nedlac) Customs Fraud task team recommendations. Illegal imports were a sophisticated, crude form of corruption that caused job losses and loss of industrial capacity. However, there were concerns about progress from South African Revenue Services (SARS), and the new Customs Bill was not doing enough to address illegal imports.

National Union of Metalworkers South Africa (NUMSA) Submission
Mr Tengo Tengena, Representative, National Union of Metalworkers South Africa, emphasised that South Africa’s socio-economic challenges demanded that the State developed capacity to produce material commodities to meet the basic needs of the country. Failure to realize this problem would subject the economy to persistent reliance on foreign capital. The success of IPAP would be judged on the extent to which it changed the ugly economic picture of South Africa.

NUMSA was disturbed by the fact that the macroeconomic policy continued to be an issue under debate, and had now asked the Ministry of Economic Development to give directives on government policy. This should involve a framework document that outlined the kind of macroeconomic policy that was required to realize IPAP.

NUMSA was in agreement with the IPAP document, but it was of the opinion that it fell short of taking forward alliance agreements such as the creation of the Council of Finance Development Institution, and a transitional measure towards one development finance institution, similar to that in Brazil. NUMSA had also proposed amendments to the IDC Act so that the State could inject capital directly to IDC, which was oriented towards labour-absorbing sectors. These amendments would have an impact on the Land Bank and Development Bank of Southern Africa (DBSA) for they would not be constrained by market imperatives in their pursuit of developmental objectives such as financing industries prioritised in IPAP. Another suggestion put forward was that all industrial development programmes should be under the Department of Trade and Industry.

NUMSA argued that the State should engage in active trade policy that aimed to selectively reverse the liberalisation process that posed a threat to the development of a coherent domestic productive base. This active trade policy should be coupled with the move towards a competitive exchange rate. NUMSA agreed with the clustering approach in that it gave coherence, coordination and focus on the side of the dti. NUMSA said that the success of IPAP would rely on National Treasury releasing resources for its implementation.

Even though IPAP showed signs of a progressive industrialising agenda, it was very silent on the distribution of economic activity between rural and urban. It had the potential to perpetuate the colonialism of a special type. NUMSA also proposed that in cases where companies had been found guilty of wrong-doing, part of the sanction should require companies to reduce prices to consumers, so that there was a direct benefit to the consumers. Lastly, NUMSA felt that Parliament had to push the Minister to account on a regular basis about progress in the implementation of the IPAP programme.

Food and Allied Workers Union (FAWU) Submission
Mr Benjamin Gafieldien, Representative, Food and Allied Workers Union, said that FAWU welcomed the IPAP programme, seeing it as an initiative that would take forward the Industrial Policy Framework in particular and the employment creation agenda in general. Development went beyond a mere industrialisation and should include other sectors, particularly those with down-stream and up-stream linkages.

There were certain basic supply side measures that were needed to ensure a successful and rapid industrialisation process and economic development. It had been proven in other parts of the world that Research and Development (R&D) was critical to raising productivity and competitive leverage by way of inventions. The lack of competition, or collusive pricing, by companies in the value-chain and input suppliers, in particular, had constraining effects on value-addition efforts and competitiveness of exporters.

Both the trade policy and trade agreements should take industrial policy imperatives into consideration. Therefore, there was a need to have a dynamic combination of both the defensive and offensive trade policy stances as part of overall trade strategy.

In respect of offensive policy stances and exports, the country would have export competitive advantage in some of the industries, and trade policy direction to this effect should take this into account. Defensive trade policy was aimed at protecting new industries, and should be harnessed with trade policy protection, including using tariffs and other trade related instruments.

In regard to competition policy, FAWU noted there was a need for the country to create national champions, especially companies that had export leverage and those that had a critical domestic role. However, this should not be the basis for uncompetitive behaviour, including a monopoly, excessive pricing, or price collusion.

IPAP was poor on the issue of up-scaling agro-processing, and significant improvements needed to be done in this area. It was also critical to move towards value-added processing to some ‘luxury’ food for export destination.

Chemical, Energy, Paper, Printing, Wood and Allied Workers Union (CEPPWAWU) submission
Mr Cedric Maluleke, Representative,CEPPWAWU, noted that CEPPWAWU welcomed the revised version of the IPAP2 because, in its view, this would go a long way in focusing and channeling resources to the key economic sectors of the South African economy, in order to create sustainable jobs.

CEPPWAWU commented on the impact that the revised IPAP would have on some of its sectors.

CEPPWAWU believed that the plastics sector had the potential to create jobs for the poor communities. The established business of plastic production in South Africa met local demand in most respects. Polystyrene was the only commodity plastic completely imported. It observed the lowest demand in the South Africa market and there was no local production infrastructure. The challenge here was to justify investment into improved technology, to ensure competitiveness and maintain production feasibility. The presence of low-cost finished product imports from the Far and Middle East had been increasing, and that has presented a challenge to local suppliers of plastic raw materials. Improving local production efficiencies would counter this competition, but this required significant capital investment. Therefore, CEPPWAWU supported commitment in IPAP2 to grow the sector by identifying key areas such automotive, packaging, medical (drips and syringes), building, and electrical. CEPPWAWU would urgently address the challenge posed by the constraints, mainly, the import parity pricing of polymers, and other key inputs such as the pricing of raw materials, lack of advanced manufacturing practices, and providing adequate support to research and development as outlined in the IPAP2. It was felt that IPAP2 should address the question of how retrenched workers would be re-skilled and re-trained, and financed to enter the manufacturing side to produce mainly for the local market.

CEPPWAWU commented also on the pharmaceutical industry, which was under mounting scrutiny because of rapidly increasing expenditures for drugs worldwide. The main challenge was to ensure that, while South Africa remained the main consumer of the global Anti Retroviral (ARV) products, which currently attracted foreign investors in the pharmaceutical industry, there was no risk of under supply. While some of the ARVs were produced locally, the main basic ingredients for these were produced outside. So, in order to be more sustainable, there should be attempts to promote local production of these important components. This should be linked with skilling of locals in drug design and pharmacology, for export markets. CEPPWAWU welcomed the commitment made by IPAP2 of promoting domestic production of active pharmaceutical ingredients.

Chemical exports in South Africa had been growing at an annual average rate of around 19% since 1999. IPAP2 indicated that most fluorspar, of which South Africa has the second largest reserves in the world, was produced for the export market, with only 5% used locally. In this regard, the local production of fluor-chemical products would boost job creation and stimulate a local market for the products and possibly increase chances of domestic investment. The local chemical industry was biased towards an internationally competitive upstream sector, while neglecting a downstream sector that had great potential for development. Reversal of this bias would help the local industry to increase beneficiation, exports and employment.

In respect of forestry, pulp and paper, and furniture, CEPPWAWU noted that IPAP2 recognised that this sector had the potential to contribute to rural and economic development by creating jobs. The industries in the sector accounted for 170 000 jobs in 2008, while the furniture sector employed 46 000 in 2007. From 2006 there had, however, been negative growth, moving from being net exporter to a net importer. This was one of the sectors where skills shortage still remained a challenge, leaving the employees the lowest paid. Constraints outlined in IPAP put more emphasis on the skills development, and technology would be welcomed.

CEPPWAWU believed, in the wood and sawmilling sector, that South Africa’s efforts to protect the existing jobs in the sawmill sector and create more should also include it addressing the land question. This should be linked to technology transfers to communities who were in areas targeted for forestry. Small to medium scale millings should be funded by investment banks, IDC and others to stimulate broader participation. There was now a proliferation of mills but these were subsidiaries of big enterprises who were only interested in cutting costs to make more profit. These mills should be located closer to the wood processing zones. With proper funding, vast land areas could be turned into forests and that would create a lot of jobs and enhance the strategy for rural development.

Agri-SA Submission

Mr Hans van der Merwe, Executive Director, Agri-SA, said that a fine balance should be maintained between exports and imports. He stated that the Agri-sector was employing more than it was contributing to Gross Domestic Product (GDP). The employment level was sitting at 5,1% by September 2009. The number of farming units had declined by 66%. Small farmers were feeling the pinch. Macroeconomic policies should be should be aligned with BUSA. Agri-SA had asked for 14 pieces of legislation to be reviewed.

Agri-SA called for the IDC to consider providing funding to the agricultural industries. A one-stop shop for financing agricultural smallholders needed to be developed. Regarding sector specific tariff policy, Agri-SA had been talking with the government for a period of four years. Indicative reference pricing could be a basis for importing. The focus should be on agro-processing and bio-fuels.

Agri-SA was of the view that IPAP 2010 – 2013 focused only on horticulture, aquaculture, organic products and niche crops. Grains and field crops were listed as low value and uncompetitive, yet this was where the greatest opportunity sat for South Africa. It was asserted that agriculture could contribute to industrial development if good trade policies were in place. Industrialisation would deal with key challenges of agriculture in South Africa, such as market development, price stabilisation, investment attraction, and trade promotion. There were a number of crops that were seen to benefit industrialization, such as sugar cane, sugar beet, maize, sweet sorghum, cotton, canola, soya beans, and hemp. Agri-SA believed that, for IPAP to succeed, agricultural linkages were important, marginal opportunities had to be exploited, economic realities and political imperatives should be taken into consideration, and tariff policies and dedicated trade were paramount.

South African Petroleum Industry Association (SAPIA) Submission
Mr Avhapfani Tshifularo, Executive Director, South African Petroleum Industry Association, commented that the call by IPAP for lower emission vehicles could be addressed by an integrated approach in planning, introduction of new technology, and revision of the current road fuel specifications for all transport applications. This would ultimately contribute to an improvement in urban air quality. The automotive Production and Development Programme could not be completed without consideration of the required fuel to enable new vehicle technology. The integrated approach comprised new vehicle technology, fuel quality, and inspection and maintenance.

In regard to the proposal of IPAP on an investigation into costs and benefits of projects Mthombo and Mafutha, SAPIA was of the view that this investigation should be expanded to cover the possible future upgrading or expansion of the refineries in South Africa. SAPIA believed that it was in the best long-term interests of South Africa that a world class, economically viable, and environmentally sustainable bio-fuels industry should be established for South Africa. SAPIA supported the need for an integrated approach which included farm to end-user costs, renewable energy strategy, energy efficiency, and energy security. SAPIA supported the 2007 bio-fuels strategy as it set out to address job creation, cleaner fuels, rural development, the link between the first and second economy, and the need to progress towards second and third generation processes.

The strategy had been updated, but SAPIA believed it had failed to address the practical and economic issues of integrating bio-fuels into the fuel supply chain.

SAPIA saw fewer problems with the up-take of bio-diesel because bio-diesel could be blended up to 5% into road diesel and industrial fuel without any significant issues, and there was going to be no need of any process changes at the refineries. The quality of bio-diesel was inherently difficult to maintain and was aggravated where many small producers were involved.

Lastly, SAPIA recommended that expert working groups, involving all relevant stakeholders, be set up to identify ways of addressing each of these complex issues to ensure successful implementation.

Discussion
Discussion with BUSA
Mr X Mabaso (ANC) commended BUSA for putting more emphasis on the integrated approach of government spheres, and said that its strategies seemed to address inequities around SMMEs issues.

Mr S Marais (DA) asked BUSA if it had looked at the options of developmental finance because IPAP was not direct about the role of small businesses. He also wanted to know views of BUSA on the issue of public – private sector partnerships.

Ms Lotter explained that BUSA had created a small business desk in order to assist small businesses because it believed in enterprise development. Further, the robust debate about Eskom proved there was a healthy relationship between the government and private sector. Boundaries were debated and the private sector understood it had a role to play if the country was to move forward.

Ms C Kotsi (COPE) enquired which areas BUSA would look at in regard to the review of the IDC funding model, and what role the private sector planned to play on the provision of infrastructure regarding freight logistics. She noted that the State was spending much on road maintenance.

Ms Lotter replied that it had to be recognized that the IDC was acting like the other banks, because it was not receiving money from government. Small businesses could not give their homes as collateral security. She further said there were not sufficient funds to move from road to rail at present as more investment was needed in rail. Debate with the private sector was continuing on how this could be done.

Due to time constraints the Chairperson asked BUSA to reply in writing to questions that could not be answered.

Discussion with NAFCOC
Mr L Mphahlele (PAC) commented that technology transfer to rural areas was worth supporting. He wanted to know if this transfer was going to be in technology only, because industrialisation was another thing that needed to be addressed.

Mr J Skosana (ANC) replied that rural industrialisation was possible. However, NAFCOC said that transport costs were too high. Sometimes these costs were caused by unnecessary traveling because some produce was not processed where it was grown. NAFCOC was trying to have the produce grown and processed in one place, and that would create more jobs.

Mr S Njikelana (ANC) asked NAFCOC what plans it had in place to use government to break entry barriers to the pharmaceutical industry.

Mr Skosana explained that what was needed from the government was monitoring and regulation. NAFCOC, when visiting the Arab Emirates, saw that easy technology was available, so that the country could produce its own drugs at low cost.

Mr B Radebe (ANC) wanted to know if the current financial model was helpful to NAFCOC, and what its views were on fronting.

Mr Skosana said finance was not reaching members. Fronting was problematic for them. Mostly business politicians, not full-time business people, practiced it. In most cases it happened when people did not belong to the industry with whom they were doing business, because they knew nothing about it.

The Chairperson requested NAFCOC to reply in writing to questions on procurement.

Discussion with COSATU
Mr Mabaso asked what COSATU was doing to ensure cooperatives were established on a bigger scale.

Ms Losi explained that COSATU needed strong support from the government. The government has ring-fenced ten products, and it needed to procure from SMMEs and cooperatives.

Mr Radebe wanted to know how COSATU planned to balance the issue of low productivity versus high labour costs.

Ms Losi elaborated that costs of production in other countries were very low. That was why COSATU was calling for BBBEE and the up-skilling of the workforce. The private sector was not doing enough to up-skill its workforce, and there was a lack of oversight from government in this regard. Hence COSATU should be the “eyes and ears of the government”.

The Chairperson asked COSATU to forward, in writing,  its ideas on improving procurement processes in relation to implementation, and how it planned to link industrial finance to rural development and land reform.

Discussion with SACTWU
Mr Marais asked what the view of SACTWU was on import and export tariffs, and what proposals it had in place to curb illegal imports.

Mr Vlok replied that proximity was crucial when it came to imports and exports. It was possible to supply retailers much quicker because shipment from overseas took six weeks. In regard to legal imports, he said containers needed to be checked thoroughly, and that prosecution should take place, but arrests were not made. SARS was issuing fines instead of imprisonment.

Mr Radebe wanted to know if it was the duty of government to put in money for up-skilling or if it was the responsibility of the industry, with the Sector Education and Training Authorities (SETAs).

Mr Vlok said it was the responsibility of all parties involved. However, the industry had a successful SETA. The problem was that it did not have enough money for apprenticeship.

Ms Kotsi commented that South Africa could not compete with the Asian countries when it came to clothing. The country was in dire need of quality material. The government and trade unions needed to intervene.

Mr Vlok responded that SACTWU saw cooperatives as an alternative. However, there were some problems that it was trying to solve, such as how to get the retrenched workers to form cooperatives and secure funding.

Discussion with NUMSA
The Chairperson asked NUMSA to respond in writing on issues of energy supply.

Discussion with FAWU
Mr Mabaso enquired how FAWU was going to ensure that the measures it was putting in place were not going to be countered in other Southern African regions.

Mr Gafieldien replied that through affiliation with COSATU, FAWU would be able to influence the government through agitation and participation. FAWU had already started securing funds for cooperatives.

Dr M Oriani-Ambrosini (IFP) wanted to know what could be done to transform food production.

Mr Gafieldien said what was needed was skills development and capacity building, and that there should be a balance.

Mr Radebe said the South Africa community was reluctant to use sources of food as a bio-fuel. He asked what the attitude of FAWU was towards using staple foods such as maize to inform bio-fuels.

Mr Gafieldien responded there was no excuse not to use those products for bio-fuels if there was a surplus.

Discussion with CEPPWAWU
Mr Njikelana wanted to know the views of CEPPWAWU on skills development.

Mr Maluleke replied that it had to do with commitment from the sector involved. It remained a challenge to up-skill retrenched workers so that they could be again players in the mainstream economy.

Mr Mabaso asked about the plans of CEPPWAWU regarding cooperatives.

Mr Maluleke explained that did remain a challenge to the Union. It was something that unions needed to debate thoroughly and prioritise.

Discussion with Agri-SA
Ms F Khumalo (ANC) wanted to know statistics regarding women participation in stock farming and farming in general.

Mr van der Merwe answered he did not have statistics with him, but women participation was still a serious issue, and Agri-SA was trying hard to engage with women organisations.

Mr Marais asked if Agri-SA looked at the exchange rate, because agriculture was capital-intensive. He asked if Agri-SA had information on the impact bio-fuel had on our fuel needs.

Mr van der Merwe replied that the issue of the exchange rate required proper analysis and management.

Mr N Gcwabaza (ANC) wanted to know the views of Agri-SA on opportunities opened up by IPAP in growing the large unused tracks of arable land, and asked if Agri-SA would facilitate participation in the issue of willing buyer and willing seller.

Mr van der Merwe said the issue of willing buyer and willing seller was a thorny one and it would take some time to be resolved.

Mr Mabaso enquired to what degree Agri-SA was using technikons, universities and agricultural colleges, what was being done to include blacks who were previously excluded, and what  lessons should be taken from white producers who used cooperatives before.

Mr Radebe asked if it was necessary to review the Land Bank funding model so that it was farmer-friendly.

Mr van der Merwe explained to the Committee that, fundamentally, agriculture was a result of macroeconomic realities. Agri-SA was trying to recruit as many people as possible, but the trend was that they had to remain competitive. Economic realities were not harmonious with political needs. Agriculture always had to adjust to economic realities. At present, it could accommodate only a few. Emerging farmers were brought into the fold, and they were talking with the Minister on strategies that needed reviewing.

The Chairperson requested Agri-SA to answer in writing to all questions it could not answer.

Discussion with SAPIA
Mr Marais asked if the various available grades of diesel were not going to affect the production of diesel from bio-fuel production.

Mr Mabaso wanted to know what could be the role of this industry in addressing the issue of inequities and assisting in the establishment of cooperatives.

The Chairperson asked SAPIA to reply in writing to the questions.

The meeting was adjourned.


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