Budget Vote 31: briefing by Ntsika, Khula, IDC and CSIR

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE

CSIR Presentation
Ntsika Budget 2002/3 Presentation
IDC Budget Report Back

SUMMARY
The IDC, Ntsika, Khula and the CSIR presented their budget reports to the Committee. Key issues addressed included activities of the various agencies and their progress.

A common theme underlying the discussion with all agencies was the need to promote Black Economic Empowerment through these agencies and to promote and develop the rural areas.

Minutes
See Power Point Presentations

Discussion
The Chair reminded the presenters that in future their presentations should be more concentrated on outputs and targets, instead of visions and missions, as these were budget hearings.

Industrial Development Corporation
The Chair asked Mr Gouws to comment on the impact of the incorporation of Saldanha Steel into Iskor. He also asked what the impact of this would be to the steel industry in South Africa as a whole.

Mr Gouws said that R 4 billion had been necessary to save Saldanha Steel and the IDC had injected R5, 5 billion. The incorporation of Saldanha Steel into Iskor had allowed it to start selling into the domestic market This will have the effect of increasing efficiency and cutting costs with the added benefit that Iskor's monopoly has been broken.

Ms F Hjaij (ANC) asked how American President George W Bush's recent announcement that preferential treatment will be given to the South African steel industry in trading with the USA will affect the steel industry.

Mr Gouws said that the IDC was very happy about this as it means that Iskor will be able to sell to the US without being constrained by quotas and tariffs. He added a word of caution and warned that flooding of the market could be detrimental to the industry.

The Chair pointed out that preferential treatment was not being given to the South African steel industry. Rather, South Africa was not being subject to tariffs and protectionist policies being imposed on others.

Mr L Zita (ANC) asked Mr Gouws, CFO of IDC, for the racial breakdown of the recipients of IDC loans. Mr D Lockey (ANC) said that the figure in the presentation stated that 33 percent of approvals went to black companies, which was rather low. Being eight years into democracy, he would have expected the figure to be in excess of 50 percent.

Mr Gouws said that in rand value, black companies actually receive lass than 33%, it is closer to 15%. This sounds low because IDC is not in the micro market. The typical target market for the IDC is in the region of R1-5 million. They do manage to reach some small businesses through intermediaries, but are cautious against duplicating the functions of Ntsika and Khula. There are programmes run by the IDC's Development Funding Department that aim to beef up the equity structure of Black Empowerment companies.

Ntsika
Mr Zita asked Mr Lefa Mallane for a register of enterprises that deal with Ntsika.

Ms Ntuli asked if Ntsika capacitated Small, Medium and Micro Enterprises (SMMEs) or intermediaries.

Ms Hajaij asked what criteria Ntsika uses to select intermediaries.

Mr Mallane said that Ntsika is mandated to work with intermediaries. He pointed out that a lengthy selection process and stringent accreditation measures were in place to select intermediaries. He said that Ntsika does have a list of intermediaries and that all are subject to a performance audit.

Mr S Rasmeni (ANC) said that Ntsika had supported 349 service providers in 2001. How did Ntsika identify which service providers to support? Could the Committee be furnished with a list of Ntsika's service providers?

Prof S Ripinga (ANC) asked Mr Mallane where the strategy goals of Ntsika derive from. He felt that it was important to have a holistic small business development strategy including other agencies such as Khula. He also noted that the economy does not seem to be creating jobs with over 35% unemployment.

Mr Mallane said that the DTI handle the small business development strategy and that Ntsika make recommendations.

Ms Hajaij asked Ntsika and CSIR jointly what is being done about cocooning and incubators. She has been asking about this for the last three years but had not yet received an answer.

Mr Mallane said that he would make reports of what is being done regarding cocooning available to Members of the Committee.

The Chair asked for clarification on the output tables 5.1 and 5.2 contained in the presentation. He pointed out that there was an expected reduction in performance outputs for 2003 and was interested to know the reason for this.

The Chair also asked why Ntsika will be getting R10 million less from the Department of Trade and Industry (DTI)

Mr Mallane said that the DTI determine the allocation and that Ntsika can only work with what is allocated.

The Chair said that Mr Mallane did not seem too perturbed by the loss of R10 million from the DTI. He asked if it was because an increase was expected from donors.

Mr Godfrey Kruger from Ntsika said that the R10 million lost from the DTI had been replaced by monies donated by the European Union.

Mr Rasmeni referred to a television documentary aired recently where laid-off workers in the Eastern Cape were mobilised for training and entrepreneurship under the auspices of the Department of Labour. Was Ntsika working with the Department of Labour in this area?

Mr Lockey asked Mr Mallane to demonstrate how the figure of 100 000 jobs created in 2001 was arrived at. He also asked Mr Mallane to clear up a discrepancy in the report with regard to efficiency indicator costs stated at 10 percent, but in the budget stated at 30%

Mr Godfrey Kruger from Ntsika explained that there is a 30-70 relationship between support costs and programmes. He said that a percentage of 10 percent is achieved by reducing costs.

Mr Lockey said that he is even more confused about the discrepancy. He asked if overhead costs stood at ten percent or thirty percent.

Mr Kruger replied that an intricate calculation is used to reach the figure of ten percent. The thirty-seventy split was just a way of looking at overhead costs in relation to other costs.

The Chair asked how Ntsika is able to measure that their service has created 100 000 jobs. Ms Ntuli asked if there is a method of finding out if the entrepreneurs supported by the intermediaries are surviving.

Mr Mallane replied that Ntsika gets information from its intermediaries as to how many jobs are being created with Ntsika's programmes. He said that they even receive the names of new employees. He added that if the Auditor General had found a problem with their methods, they would have found a different way of calculating the figure.

Khula
Ms Ntuli asked to what extent Khula Start made an impact on people's lives.

Mr Tati said that it had made a demonstrable difference. Page 4 of the slides showed sectoral distribution of programmes benefiting mainly women in the rural sector. Page 6 showed that the total employment created stood at 22 000. The average employment per company from Khula Start was 1.92 and the spatial composition of Khula Start showed that it was concentrated in the rural areas.

Ms Hajaij expressed her concern that for every R1 000 given to rural people, only R270 per month is received in salaries. This is way below the social grant. This did not make sense.

The Chair said that about 788 000 jobs had reportedly been created by Khula. Have these jobs been sustained or created once-off and then lost? There is a possibility of double counting here as jobs created may have been lost and then created again.

Mr Tati agreed that there was some double counting contained in the figures. However, companies no longer funded were not included in these figures. Mr Tati said that the bulk of jobs created were sustainable jobs.

The Chair said that Khula could therefore not claim that on 31 March 2001 788 000 people were sitting in jobs created by Khula's programmes.

Mr Tati said that this was correct. He said that the figure was cumulative and that the figure at that given time was around 100 000.

The Chair said that sources in the banking industry had said that in the aftermath of the Saambou incident that banks were unwilling to work with agencies such as Khula.

Mr Tati said that Saambou was not geared towards enterprise lending but consumer lending. He agreed that it is a challenge to find banks that want to lend to enterprises. The point of Khula was to give a guarantee in order to link disadvantaged communities to finance.

The Chair asked what recapitalisation was received by Khula from DTI and what figure was thought to be sufficient.

Mr Rasmeni asked if Khula had the breakdown of the loans provided to small businesses according to the principles of Black Economic Empowerment.

Mr Tati said that the fact that 70% of loans went to survivalists and bias of Khula Start towards women showed that there is a general bias in favour of historically disadvantaged people. He said that approximately 65% of the people benefiting from the programme were black.

Ms Ntuli asked if Mr Tati could categorically state that Khula had made a difference.

Mr Tati said that Khula definitely did made a difference as before there was no organisation playing the role of Khula. A good way to look at it was that Khula was a drop in the desert rather than a drop in the ocean. He added that he impact has been small, but it is incremental.

CSIR
Dr Sibisi said that he agreed with the Chair's views focusing on outputs and that he would make the budget and business plan of the Council for Scientific and Industrial Research (CSIR) available to the Committee.

Mr Zita asked how the CSIR was responding to calls by the State President in his address to review the science and technology in South Africa.

Dr Sibisi said that the CSIR is keenly aware of the President's remarks. He said that the Department of Arts, Science, Technology and Culture are driving an initiative and that the CSIR would play a key role in this.

Ms. B Ntuli asked what the CSIR was doing to empower historically disadvantaged communities in the real rural areas such as the Northern Province.

Dr Sibisi said that he would send a detailed report. He cited two examples of rural development through the CSIR. Firstly, he said that agreement had been reached with a scientist who implants vitamin A into grains to use his patent free of charge providing that no profiteering takes place. Secondly, a rural telephone lines project as well as road development project in Transkei whereby communities build roads in order to encourage maintenance is being set up in the former Transkei in which the CSIR provides technical support.

Prof Ripinga asked what kind of technology was being developed to combat malnutrition, sanitation and water problems in the rural areas. He also asked what type of programmes the CSIR had set up in the rest of Africa.

Dr Sibisi said that sixty projects had been implemented country wide in the poverty nodes identified by the Cabinet.

Ms Hajaij asked what is being done regarding indigenous knowledge systems.

The Chair said that last year at this briefing, the CSIR had painted a picture of declining research and development by private individuals. He asked how this picture has evolved over the last year.

Dr Sibisi agreed that this was a grave problem. He said that only 0.7% of the GDP was devoted to investment in research and development. He said that a dramatic upswing would be required to provide the private sector incentives to carry out their own research.

Mr Rasmeni asked what is being done to improve the condition of the roads as well as housing. He also asked if the CSIR is involved in developing solutions to water, sanitation and electricity problems.

Mr Lockey asked if scientists were taking up the President's call to develop the area of biodiversity research.

Dr Sibisi pointed out that the CSIR had a Biotech division called Biochemtech, which works closely with the research and development division of AECI, which had been taken over by CSIR. He emphasized that biodiversity research is long term and would take a while to reap tangible benefits.

In response to the question posed earlier regarding incubators by Ms Hajiaj, Dr Sibisi said that he would get back to the Committee with statistics.

Mr Zita said that the relationship of people to science needs a re-think. He asked if the CSIR is ensuring that science is relevant to the people.

Dr Sibisi agreed that there is a need to promote scientific research that is relevant to the people and acknowledged that there was room for improvement in this regard.

Ms Ntuli asked how focused the CSIR is on indigenous technology.

Dr Sibisi said that it is important that technologies are developed that makes a difference. He said that these do not necessarily need to be indigenous to be effective.

The Chair commented that the amount of people who stayed until the end was a testimony to the importance of the issues discussed.

The meeting was adjourned.