Department of Trade and Industry on its Strategic Plan 2011: briefing

Meeting report

Department of Trade and Industry. Strategic Plan 2011/14 briefing
Mr Lionel October, Acting Director General, Department of Trade and Industry (the Department, the dti), said the focus of the dti would be to develop a strong, broad based industrial sector. This was the Achilles heel of the South African economy. Other areas in the dti’s strategic plan were its regulatory role and the growing of the economy whilst also transforming it. Key interventions for 2011 were:

Industrial development
The Department would seek to implement the detailed Industrial Policy Action Plan (IPAP) 2 action plan, with a greater focus here on skills development, and leveraging Government procurement. Other programmes would be the National Industrial  Participation Plan (NIPP), where new guidelines would govern offset programmes, the upgrading of skills through the Tooling and Foundry Initiative and support for ten BPS (Business Process Services) projects, which would be upgraded as approximately 100 000 jobs had been created already.

It was envisaged that the new 12i tax incentive scheme would create 2 000 jobs and agreements were in place in the Automotive Investment Scheme (AIS) which would realise R13 billion in foreign investments. Incentives would be targeted at the labour intensive side of industry. The Export Marketing and Investment Assistance (EMIA) scheme would subsidise export schemes to assist companies to promote and expand exports as there were only 2 000 exporters in South Africa

Trade, Investment and Exports
The Department would assist companies to open new markets in Africa and East Africa. It wanted to move the Southern African Development Community (SADC) from being 80% to 90% duty free. Most of South Africa’s exports to the east were raw materials and most of the value added exports were to Africa. Its biggest opportunity was Common Market for Eastern and Southern Africa (Comesa), comprising 26 countries totalling 700 million people. Here it would focus on free trade agreements for goods and the development of infrastructure which was a major impediment in Africa. It wanted to expand and extend the African Growth and Opportunity Act (AGOA) trade agreement as the automotive industry had greatly benefited from the Act. The Department wanted preferential trade agreements between the Southern African Customs Union (SACU) and India. It wanted to grow value added exports to the BRICS countries - Brazil, Russia, India, China and South Africa - and wanted investments in beneficiation not just mining from BRICS countries.

Broadening Participation
The Department would support and promote the uptake of 1 400 new enterprises. The Support Programme for Industrial Innovation (SPII) was an industrial innovation support programme for 20 new companies. The Department had issued a revised co- operatives strategy paper and intended amending the relevant Act by June this year. It wanted a new agency to oversee co-operatives. It was completing a review of small business activity and wanted to upgrade and expand the Small Enterprise Development Agency (Seda) Technology Programme (STP). It would produce a revised broad based black economic empowerment (BBBEE) programme. The focus to date had been too much on ownership. It wanted this to shift to entrepreneurship and enterprise development especially in the manufacturing sector. The Black Economic Empowerment (BEE) Advisory Council has already tabled its recommendations.

Regulations
The Department would table proposed amendments to the Estate Agency Affairs Board (EAAB) Act and the National Lotteries Act and develop regulations for the National Credit Act, the EAAB Act, the National Gambling Act and the Companies Act.

Administration and Coordination
The Department wanted to decrease its staff vacancy rate to below 10%. Interviews to fill senior management positions would be completed by June. It wanted to reduce the staff turnover rate to 9%. Female representation on the staff increased to 42 %. 92% of financial payments were made in 21 days. The larger of its agencies had been targeted for greater oversight attention.

Budget
The budget for 2011 was R6.7 billion rising to R7.5 billion by the end of the medium term in 2014.
The bulk of the budget, R4.5 billion out of a total of R7.5 billion, was incentives to private manufacturing firms. Almost half of the broadening participation budget, R400 million out of a total R900 million, would be spent on small businesses.

Risks
Identified risks were intra departmental co-ordination, insufficient human resource capacity and agency management because the agencies are major players in the economy.

Discussion
Mr A Lees (KwaZulu-Natal, DA) wanted clarification on co-operatives, whether they were for farmers or for marketing. How long did the Department take to make payments currently? What were the implications in the delay in implementing the Companies Act?

Mr A Nyambi (Mpumalanga, ANC) was concerned that there were many staff in acting positions He wanted to know what the geographical spread of the Department’s industrial development plans was. The Technology and Human Resources for Industry Programme (THRIP) showed no developments in Mpumulanga and Northern Cape and one in Limpopo. Why was this so? 92% of the Department’s payments were paid in 21 days, what about the remaining 8%? Could the Department deal with the risks?

Ms E van Lingen (Eastern Cape, DA) asked where the 30 Small Enterprise Development Agency (Seda) incubators would be located. Could the Department clarify the automated liquor registration system that it wanted to implement? What was the staff vacancy rate currently? Why was R400 million unspent?

Mr K Sinclair (Northern Cape, COPE) said there had to be serious interventions with cooperatives as they were dysfunctional with only 12% being feasible and sustainable. There was too little reference to the green economy and its possibilities. It appeared that National Metrology Institute of South Africa (NMISA) was in the wrong Department.

Ms B Abrahams (Gauteng, DA) When would the training of 150 people in technical skills start? How many jobs would the auto industry create? Could the Department give a breakdown of the number of jobs for the disabled?

Mr F Adams (Western Cape, ANC) said that economists felt that SACU was dead and that SADC was disintegrating. What was the Department’s view?

The Chairperson asked how far the economy of the country had been transformed. R9 billion had been invested in the auto industry through AIS to yield a relatively small amount of jobs compared to investing it in small businesses which would generate many more job opportunities per rand invested. How would Richards Bay Industrial Development Zone (IDZ) be advanced? How would South Africa close the trade deficit with China? What was the provincial/rural spread of the 500 export trainees? What was the rural spread of Isivande Women’s Fund? There should be uniformity in the establishment and functioning of the boards of the agencies. Did the Department have the hijacking of companies under control?

On co-operatives, Mr October replied that the Department would present proposals on a new strategy to the Committee at which time the Committee could provide input. In the past it had looked mainly at the primary level and it needed to examine the secondary level which, it was hoped, would have an impact on rural and marginal areas across the provinces.

Mr October said that June was the target for the appointment of the senior management team of the Department.

On the NIPP, Mr October said that there was no legislation enforcing offset programmes. The Department intended to convert the existing Government memorandum into legislation to leverage Government procurement.

On the budget breakdown, Mr October said the Department would provide a breakdown of the budget down to a provincial level.

On IDZs, Mr October said the IDZ programme needed to be revised. The Department would be tabling legislation on IDZs. There was a need for national legislation on a spatial development framework.

On SEDA incubators, Mr October said the Department would provide details of where the current 30 were situated and it was intended to upscale this number to 100.

On regional integration, Mr October said that SACU, which was 100 hundred years old, was going through problems. There were massive payments to the Botswana, Lesotho, Namibia and Swaziland (BLNS) countries. Some, like Swaziland, had budgets that were 50% dependent on this revenue, which was an unhealthy situation. There was big growth in trade with Angola and the Democratic Republic of the Congo (DRC) and the countries of Africa had presented a united front to the European Union in Economic Partnership Agreement (EPA) negotiations.

Ms Sarah Choane, Deputy Director-General, Group Systems and. Support Services Division, Department of Trade and Industry, said that the vacancy rate at the start of the year had been 18.2% and had decreased to 16.9% despite Departmental growth. Employment equity stood at 42.5%.

Ms Jodi Scholtz, Group Chief Operating Officer (COO), said the Minister had conducted interviews for the Director-General (DG) position and interviews for the other Deputy Director-General (DDG) positions would be completed by 20 April. To stabilise the boards of the agencies, a governance process had been developed.

Regarding risks, the Department had developed a risks register and reported quarterly to a risk management committee. 

Regarding agencies Ms Scholtz said the bulk of the agencies were at national level but the Department would provide a full list

Ms Zodwa Ntuli, Deputy Director-General: Consumer and Corporate Regulation Division (CCRD) said that the Department wanted to institute an automated liquor registration system because it was concerned by the extent of alcohol abuse as there were gaps currently in regulating liquor outlets. The register would enhance monitoring across provincial boundaries and would be available to the public who could then give feedback on illegal traders. The Department would seek to limit alcohol advertising and focus on improving monitoring. It would also be looking at “sin” industries like gambling, lotteries.

Regarding agencies, Ms Ntuli said that the governance model for agencies would cover whether the agencies were doing what they were there to do; doing what the PFMA required and did not reflect negatively on the image of the Department. The agencies had to remain credible and have the right leadership.

Regarding the EAAB legislation Ms Ntuli said the ground work had been done and a draft policy and draft bill had been produced. She said blacks only comprised 4% of estate agents and the legislative framework had to be transformed.

Regarding the transformation of the economy, Ms Ntuli said the regulatory framework was dated and needed overhaul for sustainable transformation of the economy to occur.

Regarding the Companies Act, Ms Ntuli said the Department was ready to implement the Act but that in terms of the legislative process it was at the President. The Act would be implemented once he signed it.

The Acting Chief Financial Officer said that the under spending occurred because of money not spent on the AIS. The Department also saved money as it implemented policy that all flights of less than five hours were booked as economy class tickets.

On the payments within 21 days, she said 92% of claims were paid within 21 days; the 8% balance was paid within 30 days.

On the issue that certain provinces had not got projects, Mr Sipho Zikode, Acting Deputy Director-General: Empowerment and Enterprise Development Division (EEDD) said the three projects were university based and done in provinces that had universities.

On the SPII programmes, Mr Zikode said that these programmes were done by the Industrial Development Corporation (IDC) on the Department’s behalf.

On Isivande, Mr Zikode said that it was designed for small business and for rural areas

Mr Nimrod Zalk, Deputy Director-General: Industrial Development Division, said that NMISA was important from a safety and export perspective and ensured precise measurement. IPAP2 had identified the green economy as being significant. The Department was working with the Department of Energy (DOE) on the renewable energy feed-in tariff (REFIT) to ensure that there were minimum levels of localisation in these projects.

In the South African Renewables Initiative (SARi) the Department was focussing on solar energy. Bio fuels provided a job creation opportunity.

He said AIS was very capital intensive, but the Department had secured R14.7 billion in investments with the largest proportion at the component level.

On trade discussions, Mr October said the Department would do a full presentation when the DDG returned from China. On the transformation of the South Afrlcan economy, he said that the growth and transformation of the economy could not be separated; as the economy grew so transformation had to take place.

Mr M Maine (North West, ANC) asked if the restructured programs of the Department would produce results. 85% of transfers were to agencies which were underperforming; would this money be properly spent? Did the boards of the agencies share the same vision that the dti had? Why did we not adopt the strategy of Mr Yunus Mohamed (of Grameen Bank)?

Mr Sinclair asked if the two Deputy Ministers had specific areas of work allocated. REFIT was becoming problematic because Government was not taking strong action and investors were becoming cold to South Africa. Could the dti assist Government so that REFIT could be approved and be viable for foreign investors? He agreed with the Department on the liquor regulations as it had an obligation to act and act decisively. The Department should come with proposals so that it could have a stronger hand in the three spheres of governance.

Mr October said the programme restructuring was not major restructuring, but more a case of aligning work. On the issue of whether the dti was too big to manage lots of agencies and legislation, he said that the Group COO had the task to review agencies and align them.

On Grameen, Mr October said the Department had introduced the South African Micro-Finance Apex Fund (SAMAF) but that it was now in the EEDD

On the Deputy Ministers, Mr October said that Deputy Minister Elizabeth Thabethe covered the transformation, enterprise development and women’s empowerment portfolio and that Deputy Minister Thandi Tobias-Pokolo covered regulations, the CCRD, Trade and Investment South Africa (TISA) and export promotion.

On the REFIT tariff, Mr October said the Department was planning talks with the DOE

The NEF (National Empowerment Fund) would be relaunched, it was not as big as the IDC, which got cheap loans, so its role was more that of facilitator and catalyst.

The Acting CFO said that the NEF had been given R2.4 billion in recent years and 1.2 billion still remained to be given to it.

Ms Scholtz said that the Minister had met with the boards regarding the management of the agencies and that the Department would implement the new model of working with the agencies

Ms Ntuli said that the Department wanted to align the agencies’ mandate with the political mandate.

The Department would share with the Committee the regulations regarding liquor control.

The Chairperson asked if the Department had achieved what it wanted with regards to the AIS.

Mr Zalk said the AIS was not a bail-out, which was a media perspective, as globally the auto industry had fallen into a slump. At that time the industry had been negotiating a new agreement. The agreement had in fact given renewed confidence in South Africa as an investment destination.

The meeting was adjourned.