Department of Trade and Industry Strategic Plan 2010 – 2013 and Budget 2010/2011

Meeting report

Department of Trade and Industry (dti) Strategic Plans 2010 – 2013 and Budget 2010/11
Mr Tshediso Matona, Director General, Department of Trade and Industry, presented the Medium Term Expenditure Framework for 2010 – 2013, of the Department of Trade and Industry (dti), to the Committee. 

Mr Matona summarised the dti’s vision and mission to the Committee. Strategic objectives were named as including raising the level of exports and promoting equitable global trade, promoting broader participation, equity and redress in the economy, promoting direct investment and growth in the industrial and services economy, with a specific focus on the creation of employment, promoting the coordinated implementation of the government’s economic vision and principles and contributing to Africa’s development and regional integration within the New Partnership for Africa’s Development (NEPAD).

With regard to an overview of the economy, it was noted that the economic outlook had improved in comparison to 2008 when the credit crunch had become an economic crisis. Mr Matona said that the domestic economy had begun to show some signs of recovery during the last two quarters of 2009 but that there were still some significant risks. The recovery, however, was only a start, and required support through sustained government interventions in partnership with social partners.

Critical interventions were needed to support sectors in distress. The interventions included improving small business support, as well as the Capital Expenditure programme of R846 billion, which was making an allowance for the recovery and support of industrial strategies.

The work of the dti was divided into the themes of industrial development, broadening participation, trade, investment and exports, administration and co-ordination and regulation.

Industrial development pertained to the development of polices that promoted sector competitiveness, growth, job creation, and efficient administration and support measures.

Trade, investments and exports pertained to strengthening the trade and investment links with key economies and fostering African development in line with NEPAD.

Broadening participation pertained to the development of strategies that promoted enterprise growth, equity and empowerment.

Regulation pertained to the implementation and development of coherent and transparent regulatory solutions that facilitated easy access for the redress of economic difficulties for citizens.

Administration and coordination pertained to the effective coordination of departmental programmes as well as the provision of support for effective implementation.

Mr Matona gave a breakdown of the Medium Term Expenditure Budget (MTEF) for 2010-2013. He confirmed that on average, the allocation of the budget over the MTEF period was as follows: 8.8% went to compensation, 8.8% went to goods and services, 13.5% went to agencies, 67.8% went to incentive payments and 0.2% was allocated to capital payments.

A five year comparison of the budget, and figures for expenditure, were tabled to the Committee (see attached presentation for details).

Mr Matona summarised the main challenges. Many were due to the impact of the global recession. Other challenges the dti was facing were linked to the empowerment of women and people with disabilities. Information Communication Technology (ICT) services were deemed as a challenge, because of antiquated infrastructure and inadequate governance and skills. The other challenges arose from capacity constraints regarding functional skills, experience and the skills pool.

Discussion
Mr B Mnguni (ANC, Free State) displayed concern about job creation. He said that after looking at the strategic plan he had noticed that research and development had been decreasing. With regard to broad based economic empowerment, he wanted to know how many jobs were being referred to, and what percentage of the Gross Domestic Profit (GDP) the dti envisioned for that.

Mr Mnguni noted that no effort had been made to address the high cost of labour. The dti had made reference to decent jobs, and he sought clarity on what ‘decent jobs’ were.

Mr K Sinclair (COPE, Northern Cape) said that there were policy issues that needed answers and that it was a pity the Minister and Deputy Minister were not present to address those issues. He added that he was aware that the officials from the dti might not necessarily have all the answers with regards to policy issues.

Mr Sinclair made reference to the 2010 FIFA Soccer World Cup euphoria and added that given the enormous capital that had been spent on the FIFA event, it was incorrect to say that all South Africans would reap the rewards. It added that it would only be selectively beneficial and that people in the rural areas would not benefit.

Mr Sinclair was critical about the Industrial Policy Action Plan (IPAP) flagship initiative. He displayed concern as to how the revised Policy Action Plan (IPAP 2) could be presented if the document has not been presented to Cabinet yet.

Mr Sinclair said that, in regard to development patterns in South Africa, something was wrong. He emphasised that investment could not continue for the Eastern side of the country only but that it should be spread evenly.

Mr Sinclair noted that 70% of the Budget in the MTEF had been for incentives. He asked for a more detailed breakdown of that 70%.

A dti spokesperson said that, in regard to these incentives, and the impact on jobs and Gross Domestic Profit (GDP), half of the funding went towards Small and Medium Enterprises (SMEs), especially in the manufacturing sector. The presentation had made reference to various SME manufacturing sectors as well as the larger production companies. In regard to the enterprise investment programme, there was an indication that, for the MTEF period of three years, dti was hoping to create 66 000 jobs.

Dti confirmed that a quarter of the incentive budget would go to the automotive development scheme that comprised assembly and component manufacturing. The other quarter of the budget would go to the Industrial Development Zones (IDZ). The dti had been liaising with National Treasury on making proper allocations for IDZ. IDZ was a programmed issue and that collaboration between national and provincial government was imperative for this. He added that it was an area that needed further evolvement. In regard to the IDZ, the National Treasury had been pressurising the dti to see at what stage of development it would be necessary to bring in funding from the private sector. He added that with new developments like the IDZ, it often took a while before they became commercially viable.

Mr Sinclair was concerned that the Department of Economic Development did not have its own budget yet.

Mr Sinclair was concerned that it was difficult for ordinary entrepreneurs to do business in South Africa.

Ms E Van Lingen (DA, Eastern Cape) said that more information on procurement was necessary. Dti had said that it had a good model. She was concerned about how transparency was built into that model.

Ms van Lingen asked how far the dti had progressed on the issue of solar geysers, and its programme.

The dti spokesperson said that dti would be providing incentives for solar heaters from its manufacturing investment incentive.

Ms Van Lingen echoed Mr Sinclair’s stance on how difficult it was for Small and Medium Enterprises to operate, due to regulations. She said that this led to dishonesty, since many businesses just set themselves up for business without complying with regulations.

Ms Zodwa Ntuli, Deputy Director General, dti, said that dti was guided by the Constitution in regard to its mandate, and stressed that the dti could not make regulations but only implement and help review them. It was noted that a system had been put into place to allow for the very easy registration of businesses. The dti had assisted with the reduction of costs for smaller companies, since it was no longer necessary for smaller companies to have an auditor, although it was still necessary for them to maintain sets of accounts, to comply with other statutory requirements, and in the event that someone wanted to see it. She added that in addition, the process of name reservations had been scrapped and that it was no longer necessary for companies to reserve names before registration. It would therefore be possible, under the new systems, to register a Close Corporation within one day, and a company within two or three days. She admitted that the problem arose when this was not consistent, but said that the dti system was indeed capable of doing this.

Ms Ntuli said that it was possible for a person to have an informal business and comply with regulations as there were other forms of business, like sole proprietorships, that people could also register under the Business Act. She emphasised the importance of listing companies on the dti database.

Ms Van Lingen said that she was on an oversight visit to Richards Bay and was willing to fight for the Industrial Development Zone (IDZ) there. She was alarmed that there was no money for it and added that it played a huge role in the export market of South Africa.

Ms Van Lingen said that this was the year for action against corruption and that it was not enough for those who were dismissed simply to move to another government department and be re-hired. This would lead to the perpetuation of corruption. She said that those who were fired as a result of corrupt activities should be prosecuted, and their criminal actions dealt with.

Mr Matona confirmed that dti had provided funding for this year for the IDZ and that Richards Bay was also receiving funding from the province. The Department would be liaising later in the year with National Treasury with regards to the funding for the Richards Bay IDZ.

The meeting was adjourned.