The Minister of Economic Development presented a follow-up to his briefing on 23 November 2010. He said the New Growth Path Plan set out a framework in which jobs were at the absolute centre of policy and where jobs became the most important intervention in dealing with the triple crises of unemployment, poverty and inequality. The recognition of these social challenges and the single most important intervention adopted, that is, job creation, was based on the premise that jobs cannot be a residual outcome of other policies or the by-product of other processes. It had to be the purpose of what was undertaken. It differed from a conventional growth strategy that set a growth target hoping the jobs that came with it, would be sufficient.
In the New Growth Path, growth was seen as vital and many of the objectives required economic growth, but what was at the centre, were the employment outcomes. In the New Growth Path, the jobs referred to were understood to be decent work and that embraced the number of jobs, giving many more South Africans an opportunity to work and progressively improving the conditions of work. Thus the quantity and quality of work was to be addressed and the fundamental thrust would be to rebuild the foundations of the economy. While jobs were the purpose of many of the policy interventions, the means to achieve them was to have a productive effective economy, particularly in the productive centres.
The Minister emphasised that some of the old growth path was based on rising imports, particularly consumer goods and that the import of capital goods could be an indicator of economic health. However, an over reliance on importing consumer goods meant that South Africa was consuming what others were producing elsewhere in the world. The wealth creation took place elsewhere and the wealth consumption was taking place locally. It relied perhaps too strongly on the export of unprocessed goods such as raw minerals and raw agricultural products and missed an opportunity to bring more South Africans into employment.
When the New Growth Path was tabled by Cabinet it was the government's take on the challenges and the difficulties of the past and it also marked the way forward. It was the embrace of a set of measures that would change the existent reality, described thus far with all its negative elements and also the opportunities that had to be actively accessed.
The Minister addressed the key interventions that had been undertaken and indicated how they aligned with the public announcements in the State of the Nation Address and the National Budget. These covered areas such as the R 9 billion job fund, the green economy fund to finance the potential of the green economy, the merger of small business entities and the agro-processing fund put together by the IDC as well as the additional resources that the Minister of Finance had indicated in his budget speech for agro-processing and the identification of a state owned mining company that could complement the work of the private sector in the mineral sector.
Members asked if organised labour was satisfied with the New Growth Path and if not, what were their concerns. They also examined how the R9 billion would be allocated and unpacked and whether it would benefit job creation and small farmers in the rural areas. Would the funding allow the private sector and entrepreneurs to be more competitive and enable them to compete with foreign countries? Members expressed concern that there seemed to be less focus on women empowerment and questioned how 5 million new jobs could be achieved by 2020.
Address by Minister of Economic Development
Minister Ebrahim Patel said that he would be building on his statements made at the tabling of the New Growth Path on the 23 November 2010 regarding its purpose and key features and in particular on the goal of 5 million new jobs by 2020 and also on the presentation to the Portfolio Committee on the 27 January 2011 while they were on an oversight visit in Durban. He hoped to do four things in the current presentation: Firstly to recall some of the key features of the New Growth Path and its policy underpinnings; secondly, to share with the Committee some of the steps that had been undertaken since the pubic release of the document both inside and outside government; thirdly, to discuss some of the key decisions and actions that had been taken that gave an indication of the kind of way in which implementation was to take place and finally to provide some thoughts on the way forward.
Key features of the New Growth Path and its policy underpinnings
Recalling the basic structures of the New Growth Path, the Minister said it set out a framework in which jobs are at the absolute centre of policy and where jobs became the most important intervention in dealing with the triple crises of unemployment, poverty and inequality. The recognition of these social challenges and the single most important intervention adopted i.e. job creation was based on the premise that jobs cannot be a residual outcome of other policies or the by-product of other processes, it had to be the purpose of what was undertaken. It differed from a conventional growth strategy that would set a growth target hoping that the jobs that came with it, would be sufficient. In the New Growth Path, Growth was seen as vital and many of the objectives required economic growth, but what was at the centre, were the employment outcomes.
In the New Growth Path, the jobs referred to were understood to be decent work and that embraced the number of jobs, giving many more South Africans an opportunity to work and progressively improving the conditions of work. Thus the quantity and quality of work was to be addressed and the fundamental thrust would be to rebuild the foundations of the economy. While jobs were the purpose of many of the policy interventions, the means to achieve them was to have a productive effective economy particularly in the productive centres. In some ways this marked a shift away from an old growth path that was too consumption driven. Considering the last decade before the recession, the sources of growth and jobs were largely in the consumption sectors of the economy. The Minister observed that consumption was vital and successful economies were ones where the consumption was underpinned by a strong and effective productive sector. The old growth path was too strongly based on the expansion of consumer credit, so debt levels rose and the means to sustain that consumption over time was not present. Debt had to be repayed at some point and unless you had a stream of regular and consistent income to underpin borrowing, at some point people would be unable to service their debt.
The Minister emphasised that some of the old growth path was based on rising imports, particularly consumer goods and that the import of capital goods could be an indicator of economic health. However, an over reliance on importing consumer goods meant that South Africa was consuming what others were producing elsewhere in the world. The wealth creation took place elsewhere and the wealth consumption was taking place locally. It relied perhaps too strongly on the export of unprocessed goods such as raw minerals and raw agricultural products and missed an opportunity to bring more South Africans into employment. The country's economy was very energy intensive and therefore energy inefficient. For every 1000 units of energy that South Africans used to produce economic goods, other economies had a lower energy input. The economy was also characterised by monopolies and price fixing in which the competitiveness and dynamism that was vital to a strong economy was often suppressed by the actions of private players in the economy through cartels and price fixing and the abuse of market power.
When the New Growth Path was tabled by Cabinet, it was the government's take on the challenges and the difficulties of the past and it also marked the way forward. It was the embracing of a set of measures that would change the existent reality described thus far with all its negative elements and also the opportunities that had to be actively accessed. The recession in the global north had resulted in a profound change in the economic architecture of the world. While growth projections were improving, they were still relatively flat. Looking at the pattern of South Africa's external relations historically, the southern most part of the African continent was strongly welded to Europe and the USA as the key engines that drove the economy. Their economic performance created the demand for South African inputs and much of the country's prosperity rested on the economic performance of the global north. With the global economic crisis, the fragility of this model was exposed.
Elsewhere in the world, while OECD countries had major economic challenges, some Asian and Latin American countries were growing rapidly. The challenge for South Africa was that the historical markets and the ones that had always been relied on, were no longer generating the kind of fast growth that was needed. On the other hand, other parts of the world were growing fast and there was a need for South Africa to reposition itself while still maintaining and strengthening its economic relations with the global north. There was a recognition that much of the wealth and the economic energy was now in Asia and in parts of Latin America. This could not be ignored in the New Growth Path in looking at where the opportunities for growth and jobs were located. In the wake of this, there was also the new scramble for Africa's resources and that provided interesting opportunities such as in the price of commodities. Africa was still seen as a significant commodity exporter at present and in the forseeable future. There was a new leverage that came with this scramble for the resources of the continent. The old certainties were no longer there and there was a space to negotiate new relationships both with old and new trading partners.
Global climate change required costs to retool an economy and this affected South Africa and many other economies that had been carbon based. It was also the beginning of a wave of green industrialisation which the New Growth Path alluded to. Finally, the New Growth Path noted the technological changes that would be providing the jobs of the future. Biotechnology and nanotechnology would change the world as Information and Communication Technology had changed the world in the last 15 years.
From this external environment, ten job drivers had been identified and six had been prioritised. Firstly, there was infrastructure. This included not only the build operations such as construction jobs but also jobs that came with the maintenance of infrastructure, the operations attached and an important element i.e. the supply of components for the build programme. The Minister commented that when South Africa had built Koeberg power station many years ago, basically all the components had been imported. Government wished to break from that pattern and ensure that there was a strong and competitive supplier industry in South Africa to provide the necessary components.
In the agriculture value chain, jobs had been identified in farming, fishing, forestry and also agro-processing and in rural development. Each of these were somewhat different and there was the recognition that agriculture had enormous potential and that it needed active policies and strong partnerships. Instead of permitting the relative general decline of agriculture that had taken place over time, there was an opportunity to turn this around.
In the resource sector there was a decision to increase the rate of extraction and also to build new industries around the processing of those minerals.
In manufacturing, the Industrial Policy Action Plan 2 (IPAP2 ) was used as the manufacturing vision of the New Growth Path and it identified what had to be done faster and smarter in implementing the plans set out in IPAP2.
In the green economy there was a move from a focus on energy generation to identifying jobs in components, services, in agriculture and in clean manufacturing.
Finally, the New Growth Path brought together initiatives in Tourism, creative industries and business services.
Four cross cutting opportunities had also been identified and they were the knowledge based sectors and the aim was to use South Africa's technological strength in certain areas to promote job creation. It was hoped to rebuild the significant strength the country had in agricultural research capacity in the past and to take inventions that were emanating from the country's universities and develop them locally.
In the Social Economy, the building of cooperatives and similar instruments designed to bring wealth to more people and to bring more people into jobs, were planned.
In the Public Sector there were opportunities to grow jobs.
There was a big opportunity for growth on the African continent. Over the last decade, in countries of more than ten million peoples, six out of the ten of the fastest growing economies of the world had been from the African continent. The Minister noted that between now and 2020 there would be an enormous increase in Africa's GDP. Towards the final phase of the job target for 2020, the additional growth of GDP due to new wealth opportunities would be in excess of R7 trillion, excluding the existing wealth on the continent. There were enormous reserves of mineral resources, fertile agricultural land, infrastructure programmes and thousands of jobs currently created in South Africa on the basis of exports to neighbouring countries.
An important role was identified in the New Growth Path for the private sector and also for the developmental state. This had led to an interesting public debate that sometimes had been trapped in the stale debate of state versus market. The world had moved on and instead of a trade off between the two there had to be an inter-connectedness and the fastest growing economies were about the best connection between state and market. The private sector currently employed the largest number of people in the economy. Even if employment in the public sector was doubled, the target of 5 million jobs would hardly be reached. Thus it was not an ideological choice but a very practical choice for the private sector to play a critical role in driving South Africa's job target. The key areas that had been prioritised: agriculture, mining, the green economy, manufacturing and tourism - were areas dominated by the private sector. The argument was compelling as the private sector had access to enormous resources and investable funds that it could bring to growth and jobs and it represented much of the entrepreneurial energy in society. If the 5milion jobs were to be achieved, the private sector had to make a major contribution.
The Minister stated that there was also a vital role for the developmental state and noted that emphasising the role of the private sector was not the same as negating the role of the state. The role of the developmental state was not seen as simply being a regulator. It had a regulatory function but it played a much bigger role which it was already doing in South Africa as it did in fast growing economies. This matter was in the public domain and the opportunity for discussion with the Committee was welcomed. The developmental state played a key role in marshalling resources or conditions for long term growth. Investment in public infrastructure and in skills was principally a role of the state, not only the South African state but states across the world. The developmental state also had to consider cost constraints in the economy, the things that increased the cost of doing business without giving society an equivalent benefit. Monopoly pricing was one example as was price fixing between two companies that drove up prices resulting in consumers bearing the cost without a benefit to society. The Minister expanded on the role for a developmental state in cutting down inefficiency in the economy. If companies had to use road transport to get their coal from a mine to a power station as there was no railway line in place, it increased the cost of the energy which was passed on to the final business users, which increased the price of goods and services across the economy.
The Minister added that the State partnered the private sector in large investments through what the development finance institutions did. Sometimes a project was so capital heavy that the private sector looked to the public sector for partnership. They did this at their own initiative as it helped to mitigate risk and to secure the capital. Smaller entrepreneurs also required state partnerships. For the capital market, the risks of backing small businesses were high, the track record was limited and the sureties were small. The state thus played the role of ensuring that there was access to capital and support services to small businesses.
The State had a role to play as an employer and it employed people in the mainstream activities of health, education and security services. It could and did play a role here and elsewhere in the world as a provider of short-term employment through public works, either because the economic cycle required the stimulation of jobs or because one needed to bring young people into an exposure with work or to bring the most marginalised and poorest sectors of the society into the economy.
The State provided a policy mix to ensure that economic growth directly and explicitly addressed poverty, joblessness and inequality. The Minister noted that not every expansion of GDP had the same effect on human welfare. Illustrating this point, he said that if as a result of massive growth in gambling in an economy, there was a rise in GDP, it did not necessarily follow from that, that there had been an equivalent rise in human development. States helped to encourage growth in activities and areas that enhanced development. It could not prescribe everything but it could support those activities. In the South African case, activities had to be more labour absorbing rather than more capital absorbing. There was a need to move beyond the old debates and what the New Growth Path sought to do, was carve out a territory of realism. The critique from one sector in society had been that there was too much state and counter voices had said there was too little state. Government perspective was that it was not a matter of either of the two but rather the recognition that each had a vital role to play. The Minister observed that the market should also not be conflated with the private sector. The private sector was the dominant player in markets but public enterprises also operated in markets.
Aside from the economic role the State played, it also supported the organisation of communities such as workers and small businesses, to ensure that when policies were formulated, the rewards of economic activity were distributed in a fair and equitable manner.
The Growth Path spoke of a strong alignment harmonising the macro and microeconomic measures to ensure that they both spoke very powerfully to the jobs target. The New Growth Path set out the vision of a competitive and stable exchange rate as the exchange rate was a critical driver of price in all external market relationships. It also put forward a microeconomic competitiveness and equity package. The Minister noted that it was not simply through the exchange rate that one could have sustainable growth and high job creation. If it required only one pool of policies, all governments would be successful but for economic growth a number of different challenges had to be dealt with. Microeconomic measures ranged from skills development to competition policies to small business promotion. Some of these addressed structural problems and the benefits would not be apparent in a six-month period and some things had to be done immediately. Skills were one of those challenges that if the investment was made in the current year, the returns would only be seen sometime in the future. However, if the investment was postponed because of short term crises, the returns would never come.
The New Growth Path identified partnerships as important for many reasons, chiefly as the State could not create five million jobs in a decade on its own and it needed the support of the entire society to achieve it. The big developmental goals could not be achieved if the key players in the economy were in constant conflict with each other. The Minister reiterated that partnership was not just a ‘nice to have’ but in an open and democratic society, it was a fundamental. In a closed society and a closed economy one needed fewer partnerships and the state could command an economy. In a society where popular voices were weak, large corporations could essentially drive an economy. In South Africa, where you had a particular mix of a strong and democratic state, a business sector with considerable freedoms and strong popular voices in trade unions and communities, a model had to be found where they did not compete with each other but began to co-operate.
A development pact was being proposed in the New Growth Path with organised labour, the business community and civil society, which addressed difficult issues such as inequality, remuneration policies, savings and productivity. The government had chosen to put the tough issues on the table and difficult choices had to be made. There was the recognition that it would lead to robust public engagement but if one wanted to change society and the trajectory of growth, then those issues had to be put on the table. One had to create the space for people who were going to be affected by it, to raise their voices. Many professionals had raised their concerns about remuneration policies as had organised labour and those were the issues that had to be grappled with in the New Growth Path. Institutional improvements that should be made by the state had been identified. Becoming a developmental state was a product of what one did and should be a description accorded by others, once one had succeeded.
Arriving at the New Growth Path had required great frankness in identifying the challenges but if they were not recognised then they could not be fixed. It was not only about weak performances in a department but also about greater integration across government. In terms of resources it had drawn a public envelope that was wider than the national budget. The national budget was vital but could not be relied on solely. Looking at state owned enterprises (SOEs) and using the resources they generate effectively and seeing if they could do more, was necessary. The Minister emphasised that resources could be used better and this meant fighting corruption but an enormous amount of resources were disappearing through duplication, waste and mismanagement. There was a compelling story to tell which was that waste and corruption were taking money away from jobs which meant that one could not achieve what one set out to do. Resources had also been identified in the non-state sector, private investments and social capital, the money that sat in communities, in the union movement, in institutional investment and consideration had been given to how they could contribute, within their mandates, to the New Growth Path. They would look for some return and a way had to be found to align all the differences to achieve better development outcomes.
The New Growth Path dealt with spatial dimensions, particularly the need to begin to break down the old patterns. The infrastructure programme linked up communities that had been excluded in the past. The interventions on the six priority job drivers would begin to give some provinces a more balanced economy than they had at the moment and investment flows would be strongly encouraged in areas of the economy with huge potential.
The implementation plan in the New Growth Path was not a linear, mechanical plan with exact targets for each year. Job creation that could take place immediately would be facilitated and job growth would be accelerated as the systemic interventions, such as structure and skills training which were the prerequisites for long term sustainable growth, were put in place. There were a number of phased implementations in the growth path. It was the work of a decade and it was about systematically and tenaciously pursuing the goals in the long term. It had to take place not only at national level but at provincial and local level. They had to be active partners, aligning their own vision with the broader vision.
Steps undertaken since tabling of the New Growth Path
The Minister outlined the steps undertaken since tabling the New Growth Path in Parliament. He drew attention to nine streams of engagement and sets of activities that were of a similar character.
The first was the engagement with Parliament in November 2010, the meeting with the Portfolio Committee on the 27 January 2011 and a presentation to an expanded Select Committee on the 15 February 2011. They had now begun a process of engaging other Portfolio Committees, the first of which was Water and Environmental Affairs where they had asked what the New Growth Path meant for that specific Department.
The second engagement was within government to build coherence across Departments. The economic cluster within government brought together a number of Ministers and Departments over December and January to develop a common framework of implementation for the January Cabinet Lekgotla and that in turn shaped the State of the Nation Address (SoNA) and the National Budget in February. It had been an extraordinary process in which Departments had worked together and linkages had been drawn.
The third stream of engagement was with public agencies and the first of these were the state owned enterprises (SOE). The Minister of Public Enterprises convened meetings both in December and early January and the CEOs had ensured that teams had worked during that period to plan how they would align themselves to Cabinet's decision on the New Growth Path. Those SOEs included energy, transport, forestry, aerospace and mining. They had worked closely with the Industrial Development Corporation (IDC), small business agencies such as Khula and the South African Micro-Finance Apex Fund (SAMAF) and with the Development Bank of South Africa (DBSA) to identify how their work could increasingly reflect the New Growth Path and various budget speeches would indicate the progress made.
The fourth stream of engagement was with individual constituencies and meetings, workshops and seminars had been held to familiarise groups and parties in society with the New Growth Path and to hear their concerns. These included addresses to the Leadership South Africa executive, the COSATU Central Executive Committee, NACTU delegates, FEDUSA delegates and community groupings. This was an important long-term investment as it deepened the understanding of what a constituency was prepared to do if it fully understood what was envisaged.
The fifth stream was social dialogue to develop a common commitment to the goals and framework of the New Growth Path. This process started on the 25 November 2010 and in February 2011, a fruitful and constructive meeting had been conducted with business, labour and civil society where the outline of key agreements were discussed and they had indicated that they wanted these agreements. They were to discuss these agreements with their constituencies and come back.
The sixth engagement had been with provinces and local authorities and a presentation had been made at the Presidential Co-ordinating Council with the Premiers and SALGA on the 26 November 2010. They had met with the Premiers and SALGA in January 2011 at the Lekgotla. Roadshows had been conducted in Provinces and to date Kwazulu-Natal, Eastern Cape, Gauteng, Free State, Mpumalanga and Limpopo had been covered.
The seventh engagement had been with official bodies with mandates covered by areas of the New Growth Path. These included the Human Resources Development Council where they had extensive discussions on skills development, the Competition Commission and the Reserve Bank and all the other different agencies so that they all understood and co-operated in giving effect to the growth path and the broad vision of job creation.
The eighth engagement was with the broader South African public via debates and discussions in the media, chat shows, and the New Growth Path had not been ignored in the public discourse.
The ninth engagement was with the external community including the investor community. Presentations had been made to the China Bi-national Commission, the Gulf Africa Forum that brought together investors from the Gulf Arab states and the World Economic Forum at sessions at Davos in January 2011.
Key decisions and actions taken to date
The Minister addressed the key interventions that had been undertaken and indicated how they aligned with the public announcements in the State of the Nation Address and the National Budget. These covered areas such as the R9 billion job fund, the green economy fund to finance the potential of the green economy, the merger of small business entities and the agro-processing fund put together by the IDC as well as the additional resources that Minister Gordhan indicated in his budget speech for agro-processing and the identification of a state owned mining company that could complement the work of the private sector in the mineral sector. In addition there was the commitment to fill all funded vacancies in 2011 and Parliament would hold the executive accountable on that. The additional resources for the Competition Commission, small business and the new schemes would be elaborated on in the budget speeches of the departments and the broad consensus between business and labour on skills were also mentioned. The private sector had agreed that they would ramp up the use of private sector training facilities. They had accepted that they would train beyond the needs of individual companies in order to create more skills. There was a commitment from organised labour on the status of trainees so as to encourage companies to absorb more trainees and also a commitment from companies to improve investment in skills beyond the minimum requirements of the law which was above the 1% skills levy. Hard figures would be put on these commitments and would be announced shortly. There was a commitment on the green economy where business and labour had undertaken to go back to their constituencies with fairly concrete proposals that had been generated out of the meeting with government.
The Minister stated that he had wanted to illustrate some early actions such as the combining of the small business agencies. The single most important driver of much of the jobs would be the announcements that would come not just from economic development but from a range of different departments. Ministers of the various departments would be addressing employment in their budget speeches. In some cases it would be employment that they could create directly but it would also be in advancing policies that would unlock the potential in the economy. For example, in the Department of Communications, the Minister had finalised the technology standards for digital migration. Based on that, they had now created the platform for the manufacture of set top boxes that would be available to owners of analogue model television sets and that had important job potential.
In the social pacts, there would be the development of a series of agreements on a range of issues in the course of 2011 and they would be implemented on an ongoing basis. In the case of public agencies, they would be announcing their plans in the wake of the budget votes. In respect of small business support, it was a matter of getting the new co-ordinated architecture resolved and the new services rolled out. In the budget additional money had been allocated on direct lending to small business and initial funds would be made available in 2012.
The energy policy with IRP2 would be finalised soon together with the work on renewable energy. A new tariff framework addressed the issues of localisation and identified the legal instruments through which national departments, public agencies, local and provincial governments would make procurement decisions consistent with the New Growth Path. The Minister emphasised the importance of procurement and said that it was an existing allocation from which they were seeking to gain much more leverage.
The completion of the programme design and dialogue on youth employment was in process and the paper had been published and talks with stakeholders could take place to get good ideas and implement them.
In the steel and downstream industries, Cabinet had mandated three Ministers to conduct discussions.
A more systematic measure was being developed for keeping statistics on job creation so that Parliament would not be sceptical about the claims different departments made. There had to be a common methodology for example on the duration of job opportunities, whether for three months or more, and how to verify claims.
Dr P Rabie (DA) said that it had been an impressive submission and that he shared the Minister's view that the current unemployment rate was untenable, especially in the 18-35 year old age group. The fundamentals of the economy would have to be changed and become more labour absorbing and this was a complex process and could not be done overnight. It was affected by the global recession and more than a million jobs had been lost. He was concerned that rural areas had stagnated and by the high unemployment in those areas and the area of agro-processing had to be re-looked at. In the past, too much emphasis had been placed on market forces and the effect had been that the outputs had been increased but the number of jobs that had been shed had gone from bad to worse. He referred to the statistics and said that there had to be turnaround strategy for the agro-processing industry. He was also concerned about the long term prospects of the canning industry and noted that thousands of people in the Western Cape had been involved in this industry but it could not compete effectively with the European common market and there were also issues of food security. Dr Rabie felt strongly that something had to be done about the internal market and noted that this was not the only sector being affected and said that all stakeholders had to come together and formulate a turnaround strategy.
Mr Z Ntuli (ANC) welcomed the presentation and asked if organised labour was satisfied with the New Growth Path and, if not, what were their concerns and he had similar concerns about business. Had they not met at NEDLAC? He wondered why dissatisfactions were voiced outside the structures. He also mentioned the Women's League in this regard. He wondered what prevented these stakeholders from voicing their concerns with the Minister. With regards to the Industrial Development Corporation (IDC), he asked if they had established any industries in the rural areas as they were established to do exactly that.
Mr S Marais (DA) said that the submission had been extensive and that a lot of thinking had gone into it. He noted that not everything in the New Growth Path was new and it seemed as if things had been repackaged under a new name. There had been a lot of acronyms and he wondered if this was not another acronym that would also not work. He had looked at the National Budget to see if it supported the intentions outlined by the Minister for example in agriculture and agro-processing. He noted the allocated amount of R9 billion over three years but observed that how the funds would be allocated was not unpacked and how it would benefit job creation and small farmers in the rural areas.
Another concern in the agricultural sector was excise duties or 'sin taxes' and their effect on profitability and wine farmers. Profitability figures for the wine industry showed a decline and the prospect of job losses was increasing and the potential for job creation was being lost. He understood the social side of excise duties but it was not alcohol's problem but a conscious human behavioural problem. If substance abuse was the problem, then one had to have a more in-depth perspective and a balance had to be found that could accommodate stimulating the industry.
Mr Marais wanted more detail on the R9 billion stimulation package for the job fund and asked how that looked when it was unpacked. How much was really going to the private sector and business, especially small business? How would it help those entrepreneurs to be more competitive and enable them to compete with foreign countries. He also raised the issues of the clothing industry and procurement and mentioned clothing for sports teams such as rugby jerseys which were predominantly imported from China. He said it would be fantastic if it could be produced in South Africa but if it was going to be double the price it would not convince the interested parties to source it locally. In his opinion, assistance in this regard would not be a transgression of the World Trade Organisation (WTO) rules. It would create jobs but it had to be competitive as well, as in the global village everybody traded with each other.
On the creation of the five million new jobs by 2020, Mr Marais had serious concerns. This would require an average GDP of 7% and as there had been a projection of 4,4% by 2013. He said there would be seven years left to make up the average GDP of 7%. He acknowledged that it would increase as the years progressed but it would still come from GDP. If the economy was lagging behind now, there would have to be an increase of 8-12 % in the GDP. Taking into account the state of the global economy, he asked if this was achievable and with the GDP projections, how the country would get to the five million jobs.
A further matter that he was trying to understand was the role of National Youth Development Agency (NYDA) in job creation and stimulation, with the R1,2 billion over three years they had been allocated. How would this assist towards achieving the five million jobs. Reading the reports, he assumed that half of it would go towards salaries.
Maintaining jobs was also a concern as the New Growth Path aimed at creating new, additional jobs. If a million jobs were lost, it meant effectively that 6 million jobs would have to be created plus conserving existing jobs was also necessary.
Mr X Mabaso (ANC) compared the conditions last year with the current year in respect of the demands of the FIFA World Cup that had led to job creation. He asked what would drive the demand and stimulate job creation moving forward. He alluded to the mindset that led people to ask 'what's in it for me' as this would hamper co-operation from various sectors. He asked what was there that would inspire them to move with vigour towards the achievements of these goals. When it came to oversight, he commented that the Portfolio Committee would have to work closely with other committees and he assumed that would be the case for the Minister and Department as well. He asked what would inspire the co-operative spirit that was needed to achieve the complementarity that would defeat the silo approach.
Mr Mabaso raised the issue of disadvantaged groupings such as youth, women and the disabled and noted that not much was being done to include the disabled and he wanted the Minister's response on that. On the plans for infrastructure such as rail and roads, he asked if the Department would be able to influence the relevant departments to deliver on those products that were not necessarily under the Department's control.
The Minister responded to the observations made by Dr Rabie on the challenges of agriculture and rural development. He stated that when they had compared South Africa's performance against a basket of other developing countries, it was apparent that agriculture sustained a much larger percentage of the labour force elsewhere than it did in South Africa. Typically, as economies advanced and became more prosperous, the proportion of the population in agriculture declined. If South Africa benchmarked itself against countries with a fairly similar developmental character, then they outperformed SA in employment and per capita production. Moving forward from a recognition of the problems was the start and as had been said at the recent AGRI SA conference, government had recognised that it had not put the energy into agriculture over the past number of years that it should have.
Agriculture was a complex sector and Dr Rabie's point on the canning industry in the Western Cape had been well made. It had been a significant employer of labour and together with clothing, the critical pillars of the Western Cape's manufacturing sector and both had gone through major challenges. Turning it around required doing things in a number of areas. Meetings had been held with the canning industry and they pointed to the challenge of the exchange rate. A Rand that was overvalued made imports cheaper and exports more expensive. Some of the domestic market share was lost to cheaper imports and the volumes on exports were lost as well. Thus other countries with more competitive exchange rates were able to dominate the markets. There was a common recognition in government set out in the New Growth Path, the Statements of the Ministers of Finance, Trade and Industry and Agriculture that this was a challenge and they were working actively and patiently to try to resolve these issues given their complexity.
The Minister said that one of the areas that had been focussed on in recent years was the cost pressure on the canning industry caused by tinplate prices and the steel that went into making the actual cans. Looking at some canned food products, often the actual containers represented a big part of the total costs. If the cost of the container was brought down, the prices of the food it contained could be made more competitive. The Department had asked the Competition Commission to look at the tinplate industry to see if there was any evidence of collusion, price fixing or anti-competitive behaviour. There was also the recognition that SA's iron ore capacity was insufficiently utilised. He observed that one would expect that SA with its significant iron ore capacity would translate that into a price advantage for local manufacturers but that was not happening as in the case of steel and tinplate products. There was a big commercial dispute between an iron-ore supplier and a steel manufacturer and government has stepped in and said that their interest in the issue was the price for the downstream users and less with the commercial terms of the dispute. Years back when ISCOR had been unbundled and privatised the intention had been that a portion of the output of the mine in Sishen would benefit steelmaking and downstream industries. That had not happened and it needed to be done.
The third aspect that was important in the canning industry was constant innovation in products and the IDC had been asked to invest more money in partnership with the private sector in agro-processing. Canning was clearly an agro-processing sector and one concern was not only that there would be job losses in the canning industry but also on the farming side that supplied the canning industry. It was vital that this was turned around. The prominence given to agro-processing in the New Growth Path, SoNA and the National Budget, was a strategy that sought to invest heavily on the demand side of the supply chain. If one had a factory making fruit juice and selling it on local and global markets, it created the demand for fruit growing. There were lots of problems in growing fruit and getting it to market but, if you had a large operator, it would work together with the farmer to solve those problems. If one only had farmers selling their goods into the global market as small individual operators without the critical agro-processing support, they were likely to be unsuccessful.
The IDC's R5 billion over the next couple of years that it was making available for agro-processing was a signal of government’s confidence in that sector. The fact that in the National Budget a further quarter billion rand was made available indicated that resources ought not to be the constraint. It was expected that the price of capital would be reduced in agro-processing and that the competition probe would make sense of the price hikes in tinplate. It would also deal with the whole steel supply line, not only as it affected agro-processing but across the economy.
The Minister noted that government was mindful of the exchange rate challenge and he shared the concerns that Dr Rabie had expressed. Europe supplied significant subsidies to its agricultural industries and he welcomed the pragmatic approach Dr Rabie had put forward on agriculture. Agriculture had been liberalised in the past two decades and a lot of the supports had been removed. This had been risky in a sector that was very vulnerable to the agricultural/commodity cycle, weather, disease and matters that were outside the direct control of the farmer. Minister of Agriculture, Forestry and Fisheries, Tina Joemat-Petterson had also put a lot of thinking into what would create sustainable conditions for agriculture.
The Minister said that some of what had been put into the New Growth Path were self-evident things that successful countries did. According to the Food and Agricultural Organisation, South Africa's ratio of practice to arable land was below a significant number of developing countries. If one was not investing in the instruments of efficiency and productivity, then it would not be improved despite hard manual labour. Minister Joemat-Petterson would elaborate on how this could be done. Unless there was decisive action the opportunity would be missed to enhance employment in the agriculture supply line.
Responding to the issues raised by Mr Ntuli on whether business and organised labour was happy with the New Growth Path, the Minister said that a package had been placed on the table and the intention was not to make constituencies happy but to create the conditions for five million new jobs. There were tough things in the New Growth Path and what worked very well, was dialogue. Between the start of the process and the present stage of dialogue, there had been a positive response from both stakeholders to many of the proposals. The goal of five million new jobs by 2020 had been endorsed and they supported other elements of the growth path. They had indicated that they had issues, for instance, the labour movement might want a stronger fiscal stance and business might want a set of measures on their role different to what labour wanted. The Minister observed that this was the stuff of an open society. His assessment was that the constituents were constructively engaged with government on the details. Debate had moved away from generalisations on whether it was good or bad to concrete issues such as the green economy and how investments in it should be made. He was encouraged by this social dialogue.
In respect of the IDC, the Minister stated that one of the areas he had alluded to was the need for the expansion of their agro-processing investments. A suggestion was also made that the IDC should develop more partnerships with the Land Bank because as one created the agro-processing sector to pool agricultural production, the other problems in agriculture would have to be addressed. This included building more silos and providing funds to farmers. The Land Bank and Transnet should also work together to deal with the issue of road and rail as, unless all elements worked, they would not achieve their goal. Getting the IDC to provide more money was only one part of the solution and getting Transnet to improve the logistics of moving agricultural products from one part of the country to another was only part of the solution. The message to the IDC was a very clear message i.e. the value chain was a key creator of jobs and the key means of industrialising and leading people into the modern economy.
Looking at Brazil, the Minister stated that a much greater part of its GDP was derived from agriculture and the level of investment in Brazil in the agricultural value chain was significantly higher than South Africa even on a per capita basis and Brazil had four times as many people as SA. There was scope to do more in creating the conditions to attract private capital and in bringing the IDC in. Talks were being conducted with multinationals who were keen to invest in agro-processing and some big announcements had been made. Nestle and Pioneer were some of the companies involved. The Minister reiterated that success would be achieved by aligning all the elements and getting them working in the same direction.
Responding to Mr Marais question of what was new in the New Growth Path, the Minister said that there were elements that were completely new that had not previously been in the policy framework. Some things had been in there previously but had not been implemented as the money had not been there so what was new was the money being allocated. Some things had been there but had not been connected to each other. An example was rural development and infrastructure development and seeing infrastructure as a critical means of linking rural development. Government had spoken for many years about infrastructure and rural development but the connection of achieving both simultaneously had not been made. Another example was procurement. The state had always ‘bought’ and there had always been infrastructure programmes and there had always been an industrial strategy but linking them up together had not been done. The question was whether one could create the conditions for South African manufacturing through the government’s procurement procedures.
Some of the elements of the New Growth Path had been there but not implemented. What was new was that there would be better implementation. The Minister referred to the government's establishment of small business agencies and that these agencies had been absorbing a high percentage of the public money into their own infrastructure. What was new was that that the purpose of the fiscal transfer was not principally to “pay the salaries of staff” but to have the money filter down to the small business user. The Minister suggested that what mattered most was not whether some elements were there before or were there for the first time but the combination - that was fundamentally the character of the New Growth Path.
The Minister stated that the issue of the excise duty was more complex and would be better answered by the Minister of Finance. He noted that every Minister of that portfolio always had that debate on the cigarette, wine and gambling industries.
On the R9 billion jobs package, the Minister said that it was one of a number of packages in the budget and that it was not a single sum that was directed at some of the programmes on job creation. The budget for instance had R55 million for KHULA as an additional support for small business finance. This was outside the R9 billion and that amount had been designed to support both private and public sector activities that could support jobs. The Minister noted that a very interesting and flexible mechanism had been created that was completely different. Before, the budget process entailed departments putting in bids spelling out in considerable detail how they intended to use the money. The disadvantage of the system was that it was very rigid. If you had money in your budget and there was a need in an area there was a cumbersome process to redirect that money to the need that had been identified. The new process entailed a flexible system whereby a reasonable amount of money could be accessed and if the project proved successful more money could be allocated. The bidding would open shortly and any government department could bid if for example they had a programme targeting youth unemployment. A private enterprise or an NGO could do likewise. For the green economy, additional funds were made available separate from the R9 billion.
The Minister said that Mr Marais had made a good point about procurement and clothing for sports teams. He added that local producers had to be favoured but local producers had to address the competitiveness challenge. In the procurement of pharmaceuticals particularly retrovirals, instead of a passive tender process, the government had stated that it wanted to favour local producers and they did not want to pay a higher price. Government negotiated with the producers to ensure that they got a competitive price. The pharmaceuticals were now being manufactured locally at a significant cost saving as announced by the Minister of Health in 2010. It was a considerable achievement for government in extracting value for money from the private sector as there had been too many examples of government being overcharged and being over reliant on imports.
The Minister emphasised that the localisation strategy must also be a value-for-money strategy. Working within the procurement policies government was working with now, would have a positive effect on the clothing industry. Government could support the industry by making uniforms locally. Uniform companies could also access competitiveness funds through the IDC that would assist it to bring in new technology, skill its workforce and ensure that it was as competitive as a company anywhere else. If companies only relied on a protected market i.e. that the state would buy from them, they would become inefficient and the public would ultimately pay the price. The government could attach conditions to procurement contracts such as stating that companies had to invest more in training as the lack of skills was a competitive constraint. In South Korea, the State had done precisely that and had been quite demanding in return for the support it rendered. The SA government had perhaps been too uncritical and had doled out money without conditionality around competitiveness and improving company performance. Hopefully a shift to stipulating conditions on contracts was a move that the Portfolio Committee would support.
On the question by Mr Marais on the five million jobs by 2020, the Minister responded that interesting work had been done here and it was summarised in the New Growth Path document. There were two variables that determined jobs i.e. the rate of growth and the labour intensity of that growth. It was not only the growth target that had to be increased but also if each 1% of GDP growth could create more jobs than it used to. This was not a function of will and something that could be asserted, it was a matter of which sectors were most labour absorbing. If agriculture grew faster than average, then the labour absorption in the economy would grow faster. If agriculture lagged in performance and highly capital intensive sectors grew faster than the average, then the number of jobs would be less. There would be a connection between the key sectors that had been identified in the New Growth Path. The big jobs might not necessarily be in mining but it had significant potential in the transformation of minerals to what industrialists referred to as stage four i.e. consumer goods. If it could be brought through the stages of beneficiation, the end point would be where the greatest number of jobs were. The Minister noted that this was where countries like China were particularly strong and where their industries dominated. In the new Growth Path, what was being chased was not only growth but labour intensity and the Minister expressed his conviction that the goals were achievable.
On the youth issue, the Minister said that the challenge was so enormous that reliance was not going to be made on one instrument or institution and the impact had to be measurable. There were a lot of ideas in government that were being pooled together into a more comprehensive strategy and the Minister of Finance had addressed some elements. Young people were disproportionately paying the price by being excluded from the economy and the longer they stayed out of a job after leaving school or college, the less usable their skills became as skills had to be reinforced through practice.
The Minister responded to the question of the rural budget and said that the Minister of Finance had set out different resources in the Budget such as an additional R40 million in the Medium Term Expenditure Framework (METF) for comprehensive agricultural support programmes and this included settlement support for land reform beneficiaries and other emerging farmers. Simply changing a title deed of a farm was not enough. If you left the person without the skills one could turn a productive farm into unproductive land. When dealing with land reform issues there had to be support packages in place. Thus an additional R1,1 billion was being made available under the Comprehensive Rural Development Programme, R250 million was made available for agro-processing through the IDC and R100 million for the land care programme in the form of grants and there was also the contribution of the private sector. Agro-processing would require a much bigger agricultural output and the private sector players would lubricate the supply chain.
Responding to Mr Mabaso's questions, The Minister stated that the World Cup had been an important absorber of labour in the SA economy in 2010 both in construction and in increased tourism and some of the benefits were still being felt. South Africa was now much better known globally and it had been an extraordinary marketing exercise. However, the infrastructure programme going forward was significantly bigger in size than what had been done for the World Cup. This included rebuilding road and rail infrastructure and SA was almost doubling its energy generating capacity through Khusela and Medupi Power Stations and they were massive construction sites. The Finance Minister had announced in the National Budget that there was more than a trillion rand for infrastructure over the next three years. The challenge was to translate that into local jobs. Also the more components that could be manufactured locally, the more jobs could be created locally. This would help prevent leakage of money flowing out of the economy to buy imported components for the build programme. This message had been conveyed to ESKOM and they would be held accountable.
On the ‘what's in it for me’ stance that some would adopt to the New Growth Path, the Minister stated that this attitude was not one that could lift a society to achieve its growth potential. The New Growth Path called for a new sense of solidarity across society and everyone had to put something on the table in order to build something bigger. Those with more resources could put more on the table and every South African had to make a contribution to rebuilding the economy. The President had made the call and within government there were the tools to get better outcomes. Conditions could be placed on public grants and the Minister of Trade and Industry had indicated that there were enormous tax breaks for companies. In some countries the tax breaks and subsidies were tied to very clear public interest goals such as job creation, the development of local technology and the development of the local economy. It was not only a call to patriotism but a commitment to use every instrument at one’s disposal to begin to achieve the goal.
On the question of inter-departmental cooperation, the Minister stated that the New Growth Path was not something that would guide the Economic Development Department only and it was not a departmental strategic plan but a vision of government adopted by Cabinet and endorsed in the SoNA. As the driving force of government policies, different Ministers were talking about the New Growth Path and all departments had an important role to play.
In respect of disadvantaged and excluded sectors of the society that Mr Mabaso had spoken to, the Minister said that it was an important public objective of government to bring more young people, women and the disabled into the economy and the question was how. It required specific programme funds and incentives and in some cases it meant growing those sectors of the economy more actively that absorbed women and young people. In the green economy, for example, the opportunities for women and young people were significant. Looking at the gender profile from elsewhere in the world, it was clear that the green economy had the ability not only to create jobs but to ensure that a significant slice of those jobs went to women and young people.
With respect to people with disabilities, government was re-looking at sheltered employment factories and in some cases at creating and maintaining specialised production facilities that are targeted at providing job experience for people with disabilities. In the employment equity policies, government was also encouraging the private sector and public sector to draw people with disabilities into the economy. As the different jobs drivers of the growth path are rolled out, more opportunities for excluded South Africans would be identified.
Mr Marais thanked the Minister for his comprehensive response but raised the issue of the NYDA once more and noted the amount they had been allocated for job creation and asked how much would be used for salaries of the NYDA. The Minister had addressed issues around youth employment but he specifically wanted to know how the NYDA as an agency would help to create jobs. There was no indication of their commitment in this regard and eventually there should be an investment value per job. Would this be value for money or not and this was the huge challenge.
On the topic of competitiveness raised by the Minister, Mr Marais said economists spoke about productivity and that if productivity was low then one could have the best plan in the world, yet one would never be able to compete. This was where one needed partnerships with labour and business and everyone should share the same vision and objective of increasing productivity. In a country like China, productivity was prioritised and workers had to perform. Investor confidence was also important and so was certainty and they went hand in hand. If there were concerns about nationalisation and other concerns affecting certainty, then investors would be reluctant to make long term investments which was what was needed. Portfolio investment was needed but they were just funding the deficit and the balance of payments. Mr Marais referred to the example of the steel industry mentioned by the Minister. It had been confirmed that they were importing sheet metal for motor manufacturing. He had found it strange that South Africa was exporting all this iron ore and importing sheet metal and there was an automotive development programme for which there were huge incentives. This did not make sense and was one of the challenges that had to be addressed in order to achieve local beneficiation.
Dr Rabie said that many manufacturers in SA got away with the excuse that the scale was too small and that was why the iron and steel industries were not being developed. It was a handy excuse to say that the economy was too small. It was also said that the country was off the beaten track and therefore it was not viable to produce goods here. He asked the Minister to investigate this as employment could be created for South Africans. Why should sheet metal be imported from other countries?
The Chairperson noted that it would be fair to the Minister to wait till the NDYA outlined their plans to create jobs and then one could see if the money would be absorbed by salaries. It would be unfair to expect the Minister to answer that question at present. She also informed the Minister that the Committee was happy with the New Growth Path and they were looking forward to what was promised for the country. What they needed was more detail on the role of the Department in the whole scenario and what they would be doing to see that the New Growth Path was implemented and how it related to the mandate of the Department. She said that the New Growth Path would require a lot of integration, harmonisation, organisation, co-operation and co-ordination of effort for it to succeed. Added to that would be hands-on supervision from whoever was responsible, including politicians. Who was going to ensure that this happens? Some of the things could be quick wins and she wished to know if that kind of effort would be co-ordinated from somewhere else and who would be ensuring from time to time that that happened. Furthermore, would the cluster be able to monitor this and give feedback on a quarterly basis on how far the implementation was. She added that this was important in order to gauge the success or failure of the implementation.
The Chairperson asked where the R9 billion would be housed and who would really be administering it. As she understood it, everybody who wanted a share would have to motivate for it. This was for the purpose of following up and to check up with the relevant persons. A tool could be created for whoever made a bid and received funds and this could be used to monitor and evaluate if projects were implemented. It would be easier for the country to know that in a particular period, this was what had been requested and this was what had been achieved. It would also be important for procurement tracking purposes and to check progress especially in small business development. It was important to get an audit on who the government was doing business with and who the private sector was doing business with so that collectively as partners they could arrive at the correct way of doing business. She referred to the rule of paying for procurement in 30 days and she said that one should ensure that payment was justified.
The Chairperson said she was concerned as there seemed to be less focus on women empowerment by government. She wondered if it was because of the 50/50 clause or that it was thought that women were equally empowered and that it was no longer a focus. She reminded the meeting of President Mandela's statement that anything that did not empower women was doomed for failure. Women made up the greater majority in the country and the empowerment of that greater majority was critical.
Finally, the Chairperson asked how the ideals of the New Growth Path were to be integrated with the Framework Agreement. She stated that if one looked at the Framework Agreement on the response to the economic crisis, some of those issues came up with quick solutions and quick wins in a medium term basis.
The Minister responded to Mr Marais by saying that the Chairperson had ruled on the NYDA. He added that the issues that had come out in discussion with the NYDA in 2010 was that there were key programmes that would have to be expanded and strengthened. There were youth employment programmes around co-ops, youth entrepreneurship and instances where programmes around internships had been weakly implemented. Every public institution had to be harnessed to bring more young people into employment.
The Minister said he agreed with the first point Mr Marais had made about productivity which was that the fundamental driver of the competitiveness of producing a product was not absolute labour costs but unit labour costs. The question though was what determined the productivity of labour and experts agreed that a very big component lay in managerial systems. Skills played a critical role and the Minister cited Germany as a country with a highly trained workforce who were constantly exposed to the best training environment and skills opportunities. Skills were a big driver of productivity. Some countries relied on crude methods to address productivity challenges but as economies became more complex, more sophisticated means such as training and work organisation became more important. If there were many layers of management between the decision maker and the producer of the goods or services, it was very costly and decision making was probably inefficient. So de-layering management was an important contribution to labour productivity and this had happened in Japan after the Second World War where life long employment contracts were offered to workers in exchange for their active participation and commitment to improving the success of the enterprise.
The Minister noted that in SA the reality was that there was a strong labour movement and workers with constitutionally protected rights. Unless one built partnerships, there would be endless conflict as the rights of people could not be removed. Energy should go towards improving outputs and dealing with the many issues of skills development. Technology was also a driver of labour productivity as it increased the rate of production and people should be given the tools, the skills and the environment to improve their output. If workers wanted higher wages on a sustainable basis, then the productivity challenge had to be addressed. If management wanted to have productive workers they had to recognise that it went hand in hand with a decent working environment and decent wages. This was the high road of development that was being chosen and it was not easy and required effort to get the parties to work together but there was a determination to succeed.
The Minister stated that investor confidence was an important issue. At a recent meeting convened by the President at Davos with investors and CEOs of large multinational corporations, there had been an overwhelmingly positive attitude towards South Africa. They stated that they had business propositions and saw opportunities for investment in SA and these were being followed up.
The Minister responded to the observations on the car manufacturing sector and he noted that this sector was attracting greater investment and investors were confident that the environment was conducive to doing business. The issue of the sheet metal was one that had been raised by the Department and it was on the agenda. However, the approach being taken was that instead of prescribing to car makers to use South African produced sheet metal, they were seeking to increase the localisation of targets that were set for them. Which targets they chose would be their decision as long as there was an increase in the localisation levels. Government had to be careful not to prescribe in too much detail in areas where they did not have the expertise as they could get it hopelessly wrong. They could also create conditions that would be conducive for them to use local goods. To do that required creating the incentive structure to start up an operation. It was a problem when you needed an incentive permanently but when a company needed to start an operation, the level of support at that point could make the difference in whether they would establish an operation in Thailand, South Africa, Morocco or Russia. Incentives were being structured and a big car maker would potentially be participating in a major localisation project once negotiations were finalised. The Department would continue to investigate how to improve localisation levels.
The Minister acknowledged that the argument for economies of scale was accurate but also that it could be over argued. A decision had been taken shortly after the transition to democracy on car manufacturing whereby the companies would produce fewer models but more vehicles to get to the economies of scale. It was rationalised further, that those models should be sold abroad and they earned an incentive credit through their exports to bring other models in. This was the case for Mercedes Benz and BMW. Thus the motor industry had economies of scale and they had the global market they could aim at. Government did not want to fight with the principles of economies of scale as it made sense that when one was producing in huge quantities, costs could be brought down. However, one did not have to be a prisoner and one could shape it as human beings by the structure of incentives and this had driven a lot of investment in the auto industry.
On the questions raised by the Chairperson, the Minister said that the Department's role with respect to the New Growth Path, would embrace a number of different elements. One role was to do work on how one measures a job and there should be some rigour when it came to the definition and this would require the application of a standardised methodology. The knowledge base of the Department and other experts would come in. Secondly there would be the role of co-ordination and this was precisely the recognition that the mandates of different departments are best achieved when they combined their efforts. For example the Department of Mineral Resources had a strong mandate on minerals and the Department of Trade and Industry had a mandate around industrialisation. The EDD could facilitate a strong partnership between the two on iron ore to ensure that one could get more of South Africa's iron ore processed locally. The co-ordinating role would be about drawing the connections, facilitating and strengthening the opportunities that existed between the different functions. In some cases it would be the alignment of mandates, going to the IDC and saying that it could not continue as if there was no growth path and that it should align its work so that there would be a greater employment outcome. In some cased EDD's role would be in social dialogue.
The role of co-ordination would be too big for one department and the presidency would have to assist as it does in other aspects of government. Ministers could also play a vital role in co-ordinating as they already did this with their MinMec's, provinces and local authorities. It was not an exclusive role but one that was meant to strengthen the culture of co-operation across government where EDD could promote the idea and get many people to run with co-ordinating.
The Minister agreed with the Chairperson on the easy wins and the Portfolio Committee could contribute their suggestions.
On where the R 9 billion was located, the Minister responded that it was on the National Treasury vote. From there, through the bidding process; it would be transferred either to a private sector entity or to a public sector entity. The decision-making process around the bids would have an interdepartmental character and there were a number of strengths and insights needed to evaluate the bids.
On the procurement tracking, the Minister said this was an important area and he underlined his earlier ideas and emphasised that they working very hard to concretize these ideas.
The Minister clarified that the ‘30 days’ payment of suppliers’ rule applied to valid claims and there had to be a forum to resolve disputes. Often through tardiness, government departments did not pay on time and this tardiness and negligence had to be eliminated. Naming and shaming and peer pressure had been contemplated and it was suggested that a portion of the bonuses of Directors General and CEOs of public entities should be subject to compliance with a directive to pay within 30 days.
On women empowerment, the Minister said that at the World Economic Forum there had been a session that dealt with Nordic competitiveness i.e. the Swedes, Danes, Norwegians and Finnish economies. They had highly competitive economies and were fairly egalitarian societies. Many factors were identified but delegates emphasised that they had succeeded in bringing a high percentage of women into the economy and into senior positions. The Minister commented that if one left large numbers of women out of the economy and decision making, one was reducing the pool of talent that the economy relied on. By reducing the pool of talent, the foundations of long term growth and dynamism in the economy were undermined. Some of the things Nordic countries had done was investing in childcare so that women were able to work and children were properly looked after. The Minister noted that the empowerment of women was not only a social objective but that there were also enormous economic benefits and more should be done to achieve it.
On the New Growth Path and the response to the global economic crisis, the Minister stated that the DNA of the Framework Agreement had been incorporated into the New Growth Path. The concepts had been separated, such as short term interventions, and basic principles had been incorporated into the New Growth Path. In respect of counter cyclical fiscal policies, in the Framework, the point was made that strong counter cyclical policies were needed. In a recession one had to use fiscal and monetary measures to smooth out and get the economy to recover. In the macroeconomic framework in the New Growth Path, the counter cyclical concept was mainstreamed. In the framework a fund had been created for distressed companies which provided access to lending at a time when private credit markets were fairly tight. In the New Growth Path, the same concept was being taken aboard in some areas where dedicated funds were allocated to incentivise economic activity. An example would be the green economy fund. Not only was the short term challenges being addressed but also the long term prospects of the economy.
The Chairperson thanked the Minister and said that it had been more of a workshop as they were able to understand clearly what the New Growth Path was all about, and the participation of members had also assisted in clarifying the issues. She thanked the Director General and his team for their presence. She also acknowledged the presence of the media. She agreed with the Minister that implementation would require partnerships and she was interested in seeing a mind change in government and especially by officials. This was necessary if the New Growth Path was to be implemented successfully as well as IPAP 2. She hoped that the same pattern of commitment would be seen throughout the three tiers of government and intra-departmentally, not only on paper, but in deed and in their actions. The Committee was entrusted with the responsibility of making it a success not only as Members of Parliament but as partners who had an interest in seeing growth and development in the country. The Chairperson thanked the Minister once more and assured him of the Committee's commitment to partnering with him to achieve the objectives of the New Growth Path.
The meeting was adjourned.
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