Minister and Deputy Minister on Department of Trade and Industry Annual Report 2009/10

Meeting report

Chairperson's Introductory Remarks
The Chairperson welcomed Dr Rob Davies, Minister of Trade and Industry, Ms Elizabeth Thabethe, Deputy Minister of Trade and Industry, Mr Tshediso Matona, Director General, Department of Trade and Industry and twelve officials of the Department. The Chairperson extended a special welcome to Ms Thabethe who had been appointed as Deputy Minister that week.

Briefing by Minister
Dr Rob Davies said the Department of Trade and Industry (DTI) was looking at making continual improvement rather than expecting the ‘big bang’. The work of DTI was beginning to improve as evidenced by the reduction in vacancies, delivery in incentives and turn around time. The Department was ranked second of all government departments in the anti corruption capacity audit. The Industrial Policy Action Plan 2 (IPAP2) had been launched and DTI had passed the first and second quarter of implementation. Employment was lagging behind in the manufacturing industry and the Department would be meeting soon with the Black Economic Empowerment Advisory Council on Black Economic Empowerment (BEE). The Companies Amendment Bill would be presented to the Committee soon and the Companies Act regulations were at an advanced stage. The Consumer Protection Act was also expected to be in effect soon. The Minister also welcomed back the Deputy Minister who had previously worked with DTI.

Department of Trade and Industry on its Annual Report 2009/10
Mr Tshediso Matona, Director General: Department of Trade and Industry presented the Annual Report 2009/10. He covered five topics: Economic context, Strategic objectives, Achievements, Financial management and Challenges.

Speaking on economic context, he noted that in the reporting period the focus and thrust of DTI’s work had been to take decisive actions to address some of the binding constraints that were impeding the economy’s growth. Economic growth, which was mainly driven by international commodity price increases and not growth of production sectors, did not significantly reduce unemployment.

DTI’s strategic objectives focused on raising the level of exports and promoting equitable global trade, promoting broader participation, equity and redress in the economy and contributing to Africa’s development and regional integration within the NEPAD framework.

Achievements against planned targets was divided into five sections: Industrial Development, Trade Investment and Exports, Broadening participation, Regulation and Administration and Co-ordination.
▪ On Industrial Development, DTI finalised IPAP 2 and it undertook work on the framework for South Africa’s response to the global economic crisis, focusing on the Industrial Development Cooperation (IDC) fund of R6.2 billion for distressed firms. Other actions included the National Industrial Participation Project which implemented 20 new projects with a $15 billion investment value where 25 000 jobs were created. Ongoing work within this sector included the Clothing and Textiles Competitiveness programmes and the Climate Change and Green Industries Projects.
▪ DTI’s efforts within the Trade Investments and Exports sector witnessed continued engagement with the People’s Republic of China on the Partnership for Growth and Development (PDG) which would be incorporated in the Comprehensive Strategic Partnership Agreement (CSPA). There was ongoing consolidation of the Southern Africa Development Community (SADC) Free Trade Agreement (FTA) involving harmonisation of policies and engagement on the proposed SADC Customs Union.
▪ On broadening participation, he said that DTI had finalised the policy proposal for preferential procurement from SMMEs which required National Treasury’s support for implementation. Other work included the realignment of the transformation objectives of the Black Business Supplier Development Program (BBSDP) which supported 4008 enterprises.
▪ On Regulation, the Department reported that the Consumer Protection Act 68 of 2008, Companies Act 71 of 2008 and Competition Amendment Act were assented to by the President. DTI had also carried out more than 50 campaigns on consumer protection, company regulation, intellectual property, liquor regulation and SMME opportunities for the World Cup 2010.
▪ On Administration and Coordination, he said that DTI had continued to produce unqualified audit reports and that payment to service providers occurred within the stipulated 30 day period. The baseline vacancy rate had reduced from 18.3% to 6.3%.

Looking at financial performance, he noted that of a budget of over R6 billion, just over R164 million had remained unspent. It had received a clean audit for the sixth consecutive year. The Director General said that although the Department had achieved against the planned targets, there were challenges such as:
▪ The reorganisation of government entailed that many departments had to review key areas of work, which delayed achievement of coherence
▪ The effects of the recession
▪ The need to enhance capacity, both financial and human resources to deliver on the outcome of decent employment through inclusive growth
▪ Managing achievement of targets against requirements for stakeholder consultation 
▪ Fragmentation of support across different spheres of government and lack of coordination across government and support agencies.

Discussion
Mr B Radebe (ANC) said that the Committee appreciated that DTI had received a clean audit for the sixth consecutive year. He asked if it was government’s position to use maize for bio-fuels. 

The Minister replied that there was a discussion taking place in Cabinet but there was no decision yet. The discussion was within the context that there was a large surplus of maize which was hard to dispose of. The priority was for food crops to be produced for food and only the surplus be used for bio-fuels.

Mr N Gcwabaza (ANC) asked if the DTI program for distressed companies was successful.
 
Mr Nimrod Zalk, Deputy Director General: Industrial Development Division, DTI replied that the IDC fund was part of what was formulated by a joint government task team in response to the recession. Subsequently the IDC fund had moved to the Economic Development Department which would be able to give an up-to-date account on the fund.  

Ms C September (ANC) asked if DTI was making any inroads with beneficiation to help improve the current account deficit.

The Minister replied that growth in the value added sector needed to be encouraged and consumption need not outstrip production to avoid a current account deficit. The New Growth Path and IPAP 2 were meant to address these issues.

Ms September asked what the Department would want to do about the strong Rand.

The Minister replied that the DTI was not directly responsible for macro economic management but it was the job of the department to highlight the impact of the over valued currency. The issue was not that the Rand was strong but that the Rand was over valued. 

Mr T Harris (DA) asked which incentives among those provided, were not taken up within the manufacturing sector.

The Minister replied that there was a role for on-budget incentives in financing industrial development but as seen from IPAP 2 the main source of industrial development should not come from budget incentives. This should come from a radical restructuring of development finance institutions that provide finance.

Mr Harris asked how much the Department had spent on World Cup tickets.

The Minister replied that the World Cup only closed in July and the annual report presented covered the previous year’s activities. DTI brought tickets as part of the World Cup for leveraging up trade and investment promotion. The information would be communicated to the Committee.  

Mr Harris asked how IPAP 2 would fit in with the New Growth Path.

The Minister replied that IPAP 2 did not cover everything that the New Growth Path covered. The New Growth Path covered issues more substantially as it dealt with issues more broadly. It covered more sectors beyond the Industrial Policy Plan.

Mr Harris asked if the investment targets were adjusted for inflation. If this was the case would the Department then say that they had achieved their targets?

Mr Sipo Zikode, Acting Deputy Director General: Empowerment and Enterprise Development Division (EEDD), replied that the Dollar denomination was used to measure the performance of projects so that the exchange rate did not affect the offset.

Mr Harris asked if the regulations for the Consumer Protection Act had been published.

Mr Ebrahim Mohamed Acting Deputy Director General; Consumer And Corporate Regulation Division, replied that the regulations would be published later during the week or early next week.

Mr Harris asked if the newly established Economic Development Department (EDD) had improved coordination within the economic sector or had worsened the situation. Was it a replication?

Mr Njekelana asked the extent to which DTI helped in coordinating the government’s economic cluster.

The Minister replied that DTI worked very closely with EDD through various forums such as MINMEC.
Genreally within government, there was need for greater coordination and this would be achieved through the outcomes-based budget approach. In this new approach, departments would constantly be engaging through the implementation forums. DTI did not coordinate the economic cluster but this was done by the Department of Rural Development. 
 
Mr J Smalle (DA) asked if technical capacity assistance of Small Medium Enterprises (SMEs) was being done at local community level.

The Minister replied that it was critical to have resilience of what was done at national level with what was done at provincial and local level. There was a disjuncture with provincial growth development strategies and national strategies. There was a need to look at industrial development decentralisation.

Mr S Njekelana (ANC) asked if DTI had a trade interest in the West African region in countries such as Nigeria. Most of DTI’s work was focusing on SADC and the Common Market for East and Southern Africa (COMESA).

The Minister replied that real trade was happening more regionally and bilaterally. The world economy was changing as there was this different form of dialogue. There was a limit to export led development. Hence there was a need to develop the local market.  

Mr Njekelana asked what DTI’s vacancy levels were.

Ms Sarah Choane; Deputy Director General, Group Systems and Support Services, replied that DTI had had a baseline vacancy rate of 18.3% which had been reduced to 6.3%.

Mr Gcwabaza asked if the companies that were helped through the distressed companies program kept their end of the bargain with regards to avoiding retrenchments and re-skilling workers.

The Minister replied that the training layoffs for instance in BMW were successful as they were preparing for a new investment. The program worked in some cases but it did not work on a large enough scale to prevent job losses. There was an impact here and there.

Mr Gcwabaza asked how many SMEs had emerged out of the FIFA World Cup and what their level of sustainability was.

The Director General replied that the report by the Local Organising Committee had not yet been published but would soon be ready. DTI had been part of this process.  

The Chairperson thanked the Minister, Deputy Minister, Director General and DTI officials. The Committee had intended to engage with the Annual Reports of entities such as National Lottery Fund and CIPRO among others but due to time would do so next financial year.

The DTI delegation also included: Mr Xavier Carim, DDG; Mikateko Mubva, Deputy Director; Mpho Ramatla, Acting CEO; Jodi Scholtz, Group Chief Operations Officer; Marks Thibela, Chief Director: Strategy; Riaan Le Roux, Acting DDG: TISA; Thomo Skhumbuzo, System Director: International Trade and Economic Development;

The meeting was adjourned.