Department of Economic Development Annual Report 2010/11, 1st & 2nd quarter reports 2011

Economic Development

10 October 2011
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Chairperson and Members expressed their concern that once again the Minister was not present at the meeting. The Department of Economic Development (EDD) presented its Annual Report for 2010/11, and noted that it had achieved an unqualified audit report. The financial statements were not discussed, but the Department outlined its achievements. Specific focus was placed on the drafting and now implementation of efforts on the New Growth Path (NGP), including coordination of efforts at provincial and local level. A number of other policy papers were produced. The Department’s work with other departments was outlined, which included work towards the Climate Change Conference, in view of the importance of greening issues in the economy, and work with the Department of Trade and Industry (dti) and of Mineral Resources (DMR). Other areas of focus were the attempts to save and create jobs, and work done on changes to procurements regulations, with a view to designating sectors for local procurement in December 2011. It described the work of its agencies, noted that it was assisting them to secure funding, and outlined the merger of the Industrial Development Corporation (IDC), Khula and Samaf. It had participated in public hearings on the merger of Walmart and Massmart. Research into opportunities on solar energy generation was completed and the EDD hosted green economy summits. Other conferences were held on retirement and savings funds, and the Ministerial visits were outlined.
Various sector plans had been developed and discussed. The Department achieved more than its target of R2 billion for special financing and saving of jobs. The engagements with various sectors were described, including pharmaceutical and clothing sectors. The Department had 90 staff, with a 41%: 58% male to female ratio, and 1% disabled employees, but still faced challenges in filling posts.

Members asked for more detail on the engagement with a Chinese group in relation to beneficiation in a platinum mine, and were concerned that the opportunity for beneficiation had been lost due to delays. They asked about involvement in the Green Economy, and the results of the feasibility study, and asked about the effect of the downward trend of Gross Domestic Product on the target of creating jobs. This issue was referred to several times, with Members asking if the target of creating 5 million jobs by 2020 was achievable in fact, whether it had been discussed with the political heads, and whether other alternatives should not be considered. They were interested in hearing more about the reported exodus of construction companies, the steel and electricity prices, and operation of cartels, all of which were contradictory to NGP objectives. They were particularly concerned about the vacancy rate across all of government, the objectives of creating decent employment, and, in particular, the lack of skills and staff at the EDD itself, asking if it had sought assistance from the Public Administration Leadership and Management Academy, if it had undertaken training of staff, why staff had left, and what other methods were being used to recruit, the retention strategy and the racial breakdown at top management level. They were also critical of the advertising and procedures followed for tenders, pointing out that they seemed to frustrate many small enterprises from being placed on the database, and asked for more details on the Nedlac processes, and engagement on the NGP by the trade unions.  They urged that the EDD should try to avoid any overlaps in functions of coordination, asked about the revival of industries in the Eastern Cape, asked how the merger of entities may have affected their performance and staff and the alignment of provinces and municipalities with the NGP. They were critical of the fact that the Department still did not have a website.

The Department then briefly outlined the achievements in the First and Second quarters of the 2011 financial year, describing what had been done in various fields, reporting on staffing matters, and concluded that the EDD was on track, particularly mentioning that the Industrial Development Corporation had disbursed R2.2 billion and the Distress Fund committed R3.9 billion to 98 companies and it helped save or create 35 846 jobs whilst also benefiting over 8000 employees in the layoff scheme. Members again questioned human resources matters, and also raised the issue that there needed to be better coordination with the South African Bureau of Standards, and asked questions about biofuels and better communication on the green economy.

Meeting report

Chairperson’s Opening remarks
The Chairperson welcomed Members and tendered apologies from the Department of Economic Development (EDD or the Department) for the fact that reports were made available only on this morning. However, the Committee Researcher had done an analysis of the available reports, and notes were available to Members.

She noted that the Minister had also tendered apologies, as he was accompanying the President to an International Labour Organisation (ILO) meeting.

Mr S Marais (DA) voiced unhappiness about the Minister’s absence, noting that on several previous occasions he had not availed himself for interaction with the Committee, and the Deputy Minister had only  been available twice. Whilst it was appreciated that the Ministry had a busy schedule, Members of this Committee did also.

The Chairperson said the concern was noted and would be communicated to the Minister.

Mr N Gcwabaza (ANC) made the point that Ministers may not always be available due to their workload and he would not like to create the impression that they were deliberately missing meetings with the Committee.

The Chairperson thanked the Member for this contribution.

Department of Economic Development Annual Report 2010/11
Mr Richard Levin, Director General, Department of Economic Development, highlighted the key outcomes by the Department in the previous financial year. These included formulation of the New Growth Path, dialogue with other departments, engagements with provincial and local governments, oversight exercised over various agencies, the work done on the Green Economy, the retirement conference and international work undertaken by the Ministry.

Mr Levin said the drafting of the New Growth Path (NGP) was a seminal achievement, which had been approved by Cabinet in October 2010. Dialogue about key measures of the NGP was continuing, with various departments, entities and provincial governments. The EDD had begun a process with the Department of Performance, Monitoring and Evaluation (DPME) to develop a new system to measure the employment impact of government programmes and policies. It was important that departments raised awareness on interventions made on job creation, which was a key priority of government.

The EDD had created dialogues to save and create jobs at sector and workplace levels. Three meetings of the Economic Advisory Panel were held, as well as capacity building workshops. The Department undertook work with national departments and finalised delivery agreement on decent employment through inclusive growth. He said there was an outcomes-based monitoring and evaluation system that was coordinated by DPME. This contained twelve outcomes, and included employment creation through inclusive growth. Another leading department was the Department of Trade and Industry (dti). He said various outputs and actions contained in Outcome 4 (decent employment creation), covered a broad range of departments.

Mr Levin said the EDD had undertaken work with dti and National Treasury in proposing changes to procurement regulations. This raised the profile of local content and procurement within government, and would provide the basis on which the Minister of Trade and Industry could designate particular sectors for local procurement, which would become effective on 7 December 2011. The Department would also work with the Department of Mineral Resources on the development of the beneficiation strategy, saying that it was of vital importance to add value to minerals extracted underground, so that they were beneficiated locally rather than being exported in raw form.

The EDD had also worked with the Departments of International Relations and Environmental Affairs in preparation for the December Climate Change Conference in Durban (COP17). This work would culminate at the end of December with the actual conference. He said the EDD was also involved with the Department of Health on the National Health Insurance. The EDD also undertook initial work on the youth employment strategy, economic inclusion and the social economy.

He then outlined the ways in which there had been engagement with provincial and local governments, including participation in the anti-poverty visits by the Deputy President, the most recent being in Limpopo last weekend. It was attempting to align provincial growth strategies and integrated development plans to the NGP. This area of work was of huge importance and he would elaborate upon it later.

Mr Levin said the Department convened meetings with the Ministers and MECs (MinMEC) to discuss the NGP, the Revised Industrial Policy Action Plan (IPAP2) and the Green Economy. Initial work was undertaken on the economic spatial perspectives as part of the envisaged regional planning economic framework. The Department addressed blockages that hindered progress of provincial-led projects.

Mr Levin also noted that the oversight of agencies that had been transferred to the Department was an important part of its work. It was assisting these agencies to secure funding from the fiscus, and to re-align with the employment focus of government. The Department was involved in the merging of the Industrial Development Corporation (IDC), Khula and Samaf. EDD participated in the public hearings of the merger of Walmart/Massmart, and also supported conditions for the Kansaai/Freeworld merger.

The EDD was involved in areas of the Green Economy including COP17 and the Upington Solar Park Initiative. Research on opportunities presented by solar energy generation technologies had been completed. The Department had also collaborated with the IDC on a business plan for a green fund and concessionary financing. The Department co-hosted green economy summits and was also looking at resolving challenges faced by the renewable energy and waste management investors.

A conference was held in February to look at mobilising savings and retirement funds for development. A viable platform was created for industry stakeholders to engage with the establishment of a financial instrument that could include a development bond. Engagements were also held with key stakeholders including the Government Employees Pension Fund and Association for Savings and Investment, as well as with the International Finance Corporation, in relation to green economy investment opportunities.

Mr Levin outlined the international work of the Ministry, which had visited countries both in conjunction with the President or Deputy President, or on their own, including visits to Belgium, China, the USA, Tanzania, Oman and the United Arab Emirates.

A number of policy papers were produced when the NGP was drafted. These papers included documents on social economy, knowledge economy, mining and beneficiation, manufacturing, public sector, agriculture and rural development, Integrated Resource Planning, the fabric rebate and Broad Based Black Economic Empowerment (BBBEE). A number of policy platforms on the economy, national dialogue, lessons from the World Cup, a joint workshop on the green economy between EDD an the International Labour Organisation (ILO), and a policy platform on food security were held in the previous financial year. He said there were several intergovernmental engagements with a view to re-aligning local developmental strategies with the NGP.

Mr Levin said engagements that focussed on strategic plans were also undertaken with Development Financial Institutions (DFIs) and regulatory bodies. The Minister held several engagements with the IDC to ensure that the strategies took into consideration the imperative of job creation. There were also engagements with the Competition Commission and Pioneer Foods. In conjunction with the Minister of Public Enterprises, engagements were undertaken with several State Owned Entities (SOEs). There had been meetings with the agencies, both in terms of re-aligning and budgetary matters, and reporting was now being done by agencies on a quarterly basis.

Various sector plans had been developed and discussed, and the reports on a range of matters were outlined (see attached presentation for full details). There were engagements with other critical departments on economic planning, some resulting from the anti-poverty visits undertaken with the Deputy President.

The Department had achieved in excess than the target of R2-billion set for special financing, through the IDC distress funding. This intervention had led to 12 182 jobs and 43 companies being saved, whilst the UIF Fund had managed to save over 11 847 jobs in 48 companies.

Mr Levin then outlined engagements with various sectors. In the pharmaceutical sector there was work around the new procurement regulations. The Department was looking to escalate procurement of stationery from local producers. It had also engaged with the SA Bureau of Standards (SABS) on the implications of the NGP on inter-government fiscal relations. Discussions on capacity building were held with the clothing sector, and the leadership Task Team overseeing the implementation of the Framework Agreement for South Africa’s response to the international financial crisis. There were further engagements with the suppliers of solar water heaters on solar heater rollout to meet the target of 1 million by 2014. Other engagements were held with National Economic Development and Labour Forum (Nedlac) and the electricity sector, the Human Sciences Research Council, and the engineering agency.

In the clothing sector, the EDD was able to facilitate economic development agreements around procurement. EDD was also involved in the training layoff procedures agreement, where there had been some difficulties during the transition of the Sector Education Training Authorities from the Department of Labour to Department of Higher Education and Training, but where the EDD was able to assist, and to simplify the guidelines to enhance effectiveness of the programme. That had led to consensus on the training layoff scheme and the pilot project to build decent work in the construction industry.

The EDD had achieved an unqualified audit in the 2010/11 financial year. Both the internal audit function and audit committee were fully functional. Various committees had been established, and 90 staff members had been appointed. The gender split was 41% males and 58% females, but the Department still faced some challenges in finding the necessary skills, which resulted in under expenditure due to the fact that posts wee not filled. The EDD had requested rollovers amounting to R35.1 million, but only R3.3 million rollovers were approved. The Department generated its revenue mainly from fines imposed by the Competition Commission.

Mr Levin said there were some weaknesses, but overall the EDD had met its plans as set out in the Annual Performance Plan. It had shown itself able to coordinate the work at other national departments and at provincial level. Important policy work had been completed. The Department had succeeded in ensuring that most of the entities re-aligned their strategies with the key priority of job creation, and reiterated that it had managed to save jobs.

Mr Marais congratulated the Department on achieving a clean audit. He asked about its working relations with other national departments.

Mr Marais asked how the functioning of the EDD would be affected by a claim by a Chinese group that it would stop local beneficiation at a mine where it had 45% ownership, wanting to know if that had been discussed, and what could be done to ensure that there would be no job losses.

Mr Levin responded that the case by the Chinese group was something the Department would look into but the Minister of Trade and Industry had been engaging on this matter. He promised to bring the Committee the latest available information on the debacle.

Mr Marais enquired how the EDD had overcome the challenge of spatial planning, as often there was conflict with environmental conservation groups and the Department of Environmental Affairs, but obviously the EDD needed to look at conservation and the green economy.

Mr Z Ntuli (ANC) also wanted to know about the results of the feasibility study by the IDC on the Green Economy.

Mr Levin said that the trade-offs between green issues and economic development lay at the heart of what would unfold in Durban. Challenges for developing countries were to meet the targets for mitigation. There needed to be a balance with a particular focus on renewables. EDD played a role, at Ministerial and Departmental level, in promoting renewable initiatives such as solar water heaters, and also was coordinating work with key role players in the sector. The IDC supported the green economy through research and was involved in the Solar Water Heating project. These would be showcased in Durban. He said that although it was difficult to strike a balance, greening the economy was essential to the NGP. The country was faced with particular challenges, where there were carbon emissions and jobs were involved. He said there were no clear-cut answers on this issue, but it was an area that could be championed. However, as with any other development issue, the country needed to balance the green economy with protecting existing jobs. He said there were important regulatory issues around water licensing and environmental impact assessments.

Mr Marais enquired how the downward adjustment of the Gross Domestic Product (GDP) would affect the NGP objectives of creating five million jobs by 2020, especially given the impact of the global economic crisis.

Mr Gcwabaza said the kind of engagements entered into indicated that the Department saw the broader picture on matters relating to economic development.

Mr Gcwabaza enquired into whether there had been discussion on the reported exodus of construction companies, who were leaving the country to do business elsewhere, and whether they were likely to be brought back in. He also asked that the answers be tied into the envisaged infrastructure spending of over R800 billion, and the question of steel prices and the electricity price hikes, which hampered industries. These latter problems seemed to oppose the objectives of the NGP and had a negative contribution on the domestic usage of electricity, whilst price hikes would in general defeat the purpose of economic development and better lives for individual families.

Mr Levin said the Competition Commission was already looking at operation of cartels in the construction industry. He said national government was concerned by the pace of infrastructural development. The Department had become aware that the pace of infrastructure development was slowed by weak implementation capacity and poor planning by the State. Infrastructure projects were not well conceived and aligned with national priorities, although there should be strategic links when selecting projects. The Cabinet had established the Presidential Infrastructure Coordinating Committee to focus on the systematic selection, planning and monitoring of large projects. He said the scope of work for this committee would include prioritisation of projects, building a project pipeline, ensuring skills development and local procurement, community empowerment and research. In respect of steel prices, he confirmed that there were ongoing discussions, coordinated by dti and Department of Mineral Resources, and National Treasury was now also involved in the debate, which should be finalised soon.

Mr Gcwabaza asked if there had been discussion, in particular, on electricity price hikes.

The Chairperson noted that contradictory statements were made by municipalities around electricity, and asked for comment on what was actually happening.

Mr Levin said the issue of electricity price hikes gave the department sleepless nights, but the EDD was awaiting the outcomes on the Independent Power Producers (IPP) and coal generation, to see if that would have any impact on the pricing structure.

Mr Z Ntuli (ANC) sought clarity on decent employment as it related to the vacancy rate at government departments. Much State money was unspent because vacancies were not filled. The President’s State of the Nation Address had called for posts in the public service to be filled.

The Chairperson asked about the effectiveness of the workshops with provinces on re-aligning strategies in the area of job creation, and asked if the Department was satisfied with this

Mr Levin said there were challenges of trying to build capacity at the EDD. There were distortions in the numbers of vacancies that were available in the public service, although there were challenges in building the necessary capacity. In many instances his own Department had struggled to find the requisite skills, because applicants, although there were few available, tended to prefer to be employed in the private sector.

Mr Molefe Matsomela, Chief Director: Human Resources, EDD, added that finding the necessary work experience was another issue, and often the Department ended up having no suitable candidates. EDD would head-hunt those with the requisite skills. The Department was looking at re-aligning its strategies, and had liaised with the Department of Public Service and Administration (DPSA), particularly with t a view to opening up lower positions, since the current structure was too top-heavy.

Mr Levin added that South Africa was concerned with the growth trajectory of the economy. He said the crisis in the Euro Zone was a major problem, given that Europe was South Africa’s largest trading partner. This forced the country to look at emerging economies like China, and this was pointed to in the NGP. There needed to be a rebalancing of that trading arrangement, and a focus on regional opportunities and opening up of new markets, especially in view of the fact that seven of the ten emerging economies were African countries. He said that whilst growth was important, the composition of that growth was even more important. It was important for the Department to find the sectors that were labour-absorptive. He said the department was concerned by employment trends. There was a flattening out on employment growth in the fourth quarter survey by Stats SA.

Mr Ntuli asked what was suggested in relation to procurement and cooperatives.

The Chairperson asked when progress would be noted on the integration of programmes, especially the NGP and the IPAP2.

The Chairperson sought further clarity on the mandate in regard to Nedlac, and the relationship with other departments.

Mr Levin said engagements with different spheres of government were critical. He said the Department was working with provinces in identifying key priority projects where there had been blockages. The Department facilitated engagements between provincial Heads of Departments and the regulatory departments at national level. He said the meetings were looking at how national departments could help in unblocking projects. Another technical meeting between ministers and MECs to look at some of these blockages was scheduled for next week.

Mr Levin added that Nedlac fell under the Department of Labour. There was a NGP dialogue process that focussed on the drafting of accords. The EDD was in the process of finalising the Green Economy and Local Procurement accord, and the latter would include opportunities cooperatives.

The Chairperson asked if Mr Levin was involved in any international forums, as this would help to empower him in gaining a broader perspective of issues.

Mr Levin said that in the last financial year he had been concentrating on the process of setting up the new Department, and did not have time to participate on international trips. Instead, there was a focus on ensuring that the Department met its obligations to the Executive, Parliament and the people.

The Chairperson said it was important that the Director General should attend study tours to understand how other countries did in the area of economic development. She added that international learning visits would help in accelerating the work of the Department.

Mr Levin said that he would look into getting international experience. There were good examples around the globe of other planning departments. Departmental staff could get an understanding on how other countries in East Asia and Latin America had achieved their aim. However, the current environment was not entirely conducive to staff attending international visits, which was always a challenge when starting a new department, but this would be done.

Mr X Mabasa (ANC) asked how companies and small, medium and micro enterprises (SMMEs) were entered into the Department’s database. He said that during oversight visits, many emerging companies expressed their frustration on this area.

Mr Zwelinjani Momeka, Chief Financial Officer, EDD, said the supply chain management in the Department provided for the database of SMMEs. The Department would for advertise participation on the database on platforms as the State tender bulletin. Recently the Department had also used the Sowetan, Star, City Press and Sunday Times newspapers. The applicants on the supply database must be pre-qualified and were expected to provide the required documentation including a tax clearance certificate. This was a comprehensive process, and applicants were familiarised with the standard contract terms and procedures.

Mr Momeka said this system helped the department in having the suppliers and SMMEs classified accordingly in empowerment stakes. The Director General would ensure that procurement was driven to these people. Every two years the Department would advertise, but it also conducted quarterly updates of the database as there were new entrants into the market. The Department also ensured that suppliers on the database were not blacklisted by the National Treasury. The Department promoted competition among suppliers. However, they would also be removed from the database if they became bankrupt. Those who had a record of not delivering and those involved in acts of corruption were also taken off the list, and the information was relayed to National Treasury.

Mr Mabasa wanted to know how the gap was bridged between entities owned by historically disadvantaged individuals (HDIs) and established companies. He said the emerging entities were not technically empowered, and needed a simpler way to get into the database, otherwise they would remain outside the fold.

Mr Marais was not satisfied with the reply given to an earlier question on the Chinese group, saying that the question was raised in prior engagements, and the Department had then said that it would look into the matter, and engage with dti and the Department of Mineral Resources (DMR). During the delay in this process, there had been loss of beneficiation.

Mr Levin said that the EDD took note on the point of the platinum mine ownership by Chinese Group and would engage diligently with it. He said the department had engaged national regulatory departments on this, to mainly look at blockages, which included issues such as water licences.

Mr Marais sought clarity on the working relationships across departments in relation to the Green Economy.

Mr Marais asked if the Department agreed with him that the five million jobs proposed in the NGP was not an achievable target, and whether it was not time to consider other alternatives to grow the economy and get more people involved at the lowest possible levels. He stressed that the Department needed to focus less on investigations and more on producing workable options.

Mr Levin said it was still early to concede defeat on the employment creation target of five million by 2020. There was a lot that government could do in infrastructural projects, and these would unblock a number of investments that in turn would create job opportunities. He said there were direct and indirect interventions to ease the regulatory burdens, especially with provinces, to get job creation on track.

Ms D Tsotetsi (ANC, Gauteng) said that advertising for database participation in newspapers was not useful, pointing out that there was still a high level of illiteracy, and suggested that radio and use of public liaison officers would be preferable. Suppliers found that the forms were “a nightmare” to fill out, and the information on them had to be simplified.

Mr Levin said the volatile global economic situation had necessitated that things be done differently. He said the dialogue process was important and that local procurement was an important lever, although it required a lot of applications. The local procurement accord that the department was finalising was important in terms of the commitment that some companies were making in the private sector. He said if there was a concerted effort, the Department could overcome its challenges.

Mr Momeka said points raised by Members would be included in procurement debate. He confirmed that the Department would explore the use of radio stations and place more emphasis on community radios when it invited suppliers to tender. However, he pointed out that National Treasury had a requirement to use newspaper advertisements. The EDD could, in future, be more sensitive to the needs of suppliers and would use Liaison Officers to relate information. The use of forms was also regulated by Treasury, but the department could help individuals with them by hosting workshops.

Ms Tsotetsi asked why the vacancy rate and skills shortage were still an issue, despite the existence of organisations as the Association for Unemployed Graduates.

Mr Ntuli agreed the vacancy rate was worrisome at the department. When the President announced a turn-around time of three months in filling vacancies in the public service, he must surely have been aware of the challenges, for he wondered why commitments should be made if there were no mechanisms to deal with them. He also asked why people could not be trained internally, even if they did not have the requisite skills. He also asked why the EDD staff were concentrated in Pretoria, despite lack of space there, and the greater needs elsewhere in the country.

Mr Gcwabaza suggested the department look into what the Public Administration Leadership and Management Academy could offer by way of skills training.

The Chairperson added that it was also of concern that some executive managers were leaving the Department before they even had been employed for six months, and wondered whether they were being sufficiently exposed to training that could assist them in doing their jobs better.

Mr Levin assured the Committee that the EDD was not sitting still in relation to recruitment, and was working consistently on the issue. The EDD was already looking into grooming people at the lower levels. He said the concerns raised about the area of recruitment and the vacancy rate would be conveyed to the Minister, since the executive was also responsible for human resource management.

Mr Levin said office space was being attended to and dti had procured a building in Hatfield (Pretoria). Entities under the umbrella of the Department, like the National Consumer Commission, were being appropriately housed.

There would be a follow-up with Palama with a view to develop training programmes for staff so as to strengthen the capacity of the present staff.

Mr Matsomela added that internship programmes would be introduced in 2012 in order to deal with unemployed graduates. He confirmed that office space was a challenge, but was being attended to. The Department was also finalising its engagements with DPSA to ensure that a pool of lower level employees entered the department.

The Chairperson said the Department needed to resolve the office space issue urgently. She said there needed to be a special meeting on the skills issue. She said she did not get a sense of the tangible steps that the Department was undertaking to address the issue of the vacancy rate. She asked about the actual role that the Department played in coordination, stressing that there should not be duplication in the public service, and that EDD had to ensure synergy to avoid such overlaps.

Mr Gcwabaza wanted to know if the clothing and textile initiative in the Eastern Cape was part of the call to revive the sector in the former homelands. He said revival of the clothing and textile industry needed to be aligned with the revival of cotton farming. This would allow for collaboration with the Department of Agriculture. The farming of cotton had a potential of creating one million jobs.

Mr Levin said the intervention in the Eastern Cape clothing and textile industry was focussed on a single company and was not a comprehensive approach that covered the province. The Department was able to rescue over 200 jobs out of a possible 700 that were shed. He said there were engagements with the MEC for Economic Development in that province to look at the automotive sector. He agreed that the farming of cotton needed to be looked at, as it was conducive to the local environment. There needed to be a consideration of the outcome on selective agreement on the clothing sector. He said there was an agreement on new entrants to the labour market, although it was controversial and was the subject of debate in the industry, as it was proposed that the new entrants would come in at wages below the minimum, provided targets were met around job creation.

Mr Gcwabaza was happy to see that there was a call upon the private sector as well, as government could not create jobs alone, but asked if the private sector was also creating jobs through investments.

Mr Levin said government interventions alone would not meet the five million jobs target. There were other interventions that could be made, especially from the perspective of the dti and other line function departments. These departments could help create conducive conditions for the private sector. The EDD was emphasising the dialogue aspect. He said there were direct interventions the Department could make around job targets and that companies were willing to make commitments. Business had made commitments through skills development, training artisans and agreeing to train people beyond company needs.
Mr Ntuli asked if the merger of entities like Khula, Samaf and the IDC had impacted on their performance. He wanted to know about the progress of the merger.

Mr Levin responded that the merger of Khula and Samaf would not result in job losses. The Department, in conjunction with DPSA, would ensure those affected by the merger were absorbed in the public service. He said that there was an element of uncertainty amongst staff during all organisational changes.

Mr Ntuli asked if provinces and municipalities were aligned with the objectives of the NGP. He also asked if Khula had problems with loan allocations, especially the capping.

Mr Levin responded that the alignment process with provinces and municipalities involved making presentations on NGP. Once provinces got a better understanding of the sectors identified as job drivers and the proposed micro economic interventions, it became easier for them to align with the objectives of the NGP.

The Chairperson interjected and sought clarity on the confusion caused by overlapping roles between municipalities and provinces on integrated projects. She cited the case of Ngqurha, in Eastern Cape, where the provincial government did not want to be part of the project, whilst the municipality responsible for the project struggled financially. This was an area where government should be collaborating more effectively.

Mr Levin said there were engagements with MEC in the Eastern Cape, as well as with management of Ngqurha and dti. An intergovernmental coordinated approach was needed when dealing with these projects. The EDD had been successful in the implementation of Outcome 4. Legal frameworks were important in defining roles and getting results. He said these were governance issues that needed to be continually addressed.

The Chairperson enquired about the departmental website. The Committee had been requesting that this website be set-up, yet it had not been done, and she asked when it would be created.

Mr Levin said that a website had been developed and the Department was looking at its hosting. In the next four weeks this should be finalised and by the end of the year the Department would have the website fully operational.

The Chairperson said that economic development had to take a lead role and suggested that the Department should be thinking about re-zoning the country.

Mr Levin confirmed that there was activity in the area of improved logistics. Rail and freight was high on the Presidential Infrastructural Coordinating Committee agenda. The absence of rail infrastructure added to the cost of moving goods from the ports, and weighed heavily against the Department in terms of the overall economic development strategy. He said investment in this sector as well as commuter rail service would be prioritised. Mr Levin said there had been problems identified in the past twenty years where banks were uncomfortable giving loans for development in areas closer to the townships. He said this also applied to inner cities, as they were deemed unfit for bonded houses by the banks. There was a high level of frustration around that of which the EDD was aware, but it still needed to impact on that. In relation to concerns as to whether the legislation governing the Competition Commission was hindering progress, Mr Levin said it was about the interpretation of legislation..

The Chairperson asked about the  Comprehensive Strategic Agreement that South Africa had with the Chinese government, and asked how this would benefit South Africa, since the Minister had participated in the crafting of that agreement.

Mr Levin said that the focus on this agreement with China was on concessionary financing. The Development Bank of Southern Africa (DBSA) and the IDC had concluded agreements that also focussed on beneficiation of source. Most of South African exports were unbeneficiated raw materials and it imported value-added goods. There was also a focus on the composition of bilateral trade relations with China. He said there was focus also on partnership around the green economy.

Mr Marais asked if the Department had a plan to employ people who lived with disabilities.

Mr Ntuli wanted to know more about the claims that the Competition Commission could not employ more staff as a result of being denied funds by the Department.

Mr Mabasa asked for the racial breakdown of the top management posts at the Department.

The Chairperson asked if the Department had a retention strategy and how it was implemented. She also wanted to know why people had exited the employ of the Department, especially at executive management level.

Mr Levin said the Department had developed an HR plan that was submitted to the Minister. He said most senior personnel left EDD to join other departments. He said again that there were challenges around establishing the new department.

Mr Matsomela said the department had 1% employment of people with disability and had a 58%: 41% female to male gender split. The Department was liaising with organisations to boost the number of disabled employees. He said the Department was in the process of developing an HR strategy that included a retention strategy, which would be a better indicator of the main reasons for resignations, as opposed to receiving letters from employees that did not specify much. Some of these issues were covered in the HR plan and, once it was rolled out, it would assist the Department.

Ms Tsotetsi asked if people left the employ of the department voluntarily or were asked to leave because of inefficiency.
Mr Matsomela said the bulk of the staff that left had followed the former Deputy Minister Ms Gwen Mahlangu Nkabinde to the Department of Public Works. There were no cases of inefficiencies that were being investigated. Ministerial staff employment was tied to the contract and term of office. There were no performance bonuses in the previous financial year as it was the first full year of operation.

Dr P Rabie (DA) wanted to know if there were plans to recruit young graduates into the department as the 20.7% vacancy rate was still far too high.

Mr Levin said the suggestion was very good and the Department was in fact bringing young people at assistant director and managerial levels. During the previous financial year the Department started very low on staff, but had built the base of employees and was implementing some of the suggestions. He said that, although this was not in the report, the EDD had managed to permanently a number of people who were formerly on contract.

The Chairperson said that the Minister and Director General would be called to another meeting, after the Committee had met with the Auditor-General. She hoped that all issues raised by the Committee would be taken seriously.

Department of Economic Development First and Second Quarter 2011 Performance Reports
Mr Levin said a guide on employment reporting had been created for provinces on economic policy development. A report looking at employment trends, progress in employment drivers, reports on employment creation and progress in implementing Outcome 4, was submitted to the July 2011 Cabinet Lekgotla. The Department developed a reporting template for other State departments and agencies. It held the Economic Development Conference in Johannesburg in July 2011, where there were panel discussions on the aspects of the NGP. He said the conference was attended by among others, Cabinet Ministers, Members of Parliament, academics, and civil society. The conference was able to develop a platform for vigorous engagements by policy makers and stakeholders.

Mr Levin said a draft discussion document on the alignment of BBBEE with the NGP was prepared. In the area of economic planning and coordination there were engagements with provinces and metros including Ekurhuleni and Ethekwini.

The EDD had done an assessment of infrastructure sector plans, in preparation for the Lekgotla report. In terms of the participation in the Deputy President programme, the Department reviewed the Northern Cape provincial growth and development strategy. Various engagements were undertaken with most municipalities in the NC, to monitor ongoing and planned projects.

Mr Levin said the Minister held meetings with the Independent Electoral Commission to review their financial results and performance. The Department hosted an all day workshop to examine the merger of the IDC, Samaf and Khula. Quarterly meetings with all the DFIs and regulatory bodies proceeded as planned. The Department produced an overview document on the small business merger during the first quarter. The IDC had disbursed R148.7 million in distress funding and had created or saved 4 087 jobs.

The EDD had also attended the Southern African Development Community, East African Regional Community and Comesa summit that initiated discussion on the tripartite free trade agreement in June. The signature of this would benefit 600 million African people.

EDD had engaged with the Home Affairs Forum on Foreign Skills, as well as various stakeholders on the training on layoff scheme. He said an important intervention was done on the layoff scheme, developing new arrangements to make the scheme user-friendly and more accessible. Work was done with a view to implementing a technical assistance programme with organised labour.

Mr Levin reiterated that the EDD was head-hunting to put in place capacity for more work by January 2012. Further work had been commissioned on the alignment of the BBBEEE and the NGP. A business plan had been drawn for the implementation of the Economic Development Institute. He said the Department was consulting on a new document on Youth employment, and had developed an approach to gender. The Department was looking at the implications of such a policy. Initial work had also been done on income inequality. There was engagement with the Academy on Social Economy (University of Johannesburg) to explore ways in which the Department could help the project.

Mr Levin said engagements with provinces continued on the aspect of blocked projects. He said the DG held a number of meetings with the staff of Khula and Samaf to allay concerns and allow the staff an opportunity to speak on the merger of the two institutions. The Minister had also had engagements with the chairmen of the IDC and Khula. A consultative workshop with the clients of these institutions was held, on the impact the merger would have in the area of small business and micro finance.

IDC had already disbursed R2.2 billion. The Distress Fund committed R3.9 billion to 98 companies and it helped save or create 35 846 jobs whilst also benefiting over 8000 employees in the layoff scheme.

The department participated in the Medium Term Expenditure Committee process and had made recommendations on the budget. A task team to implement government’s commitment to install solar water heaters had been established. The department had also made contributions to the work undertaken by government on bio-fuels, and had been participating on preparations for COP17. Mr Levin said in most of the areas the department was on track in terms of the targets it set itself. He said 95 posts had been filled out of 129, but EDD still needed to strengthen the policy and social dialogue units.

Mr Marais said the collaboration with the South African Bureau of Standards (SABS) was most needed as there were too many products that claimed to be local, whilst there was nothing local about them.

Mr Levin said there was coordination with SABS was around setting the technical standards for local content. Specifications differed from sector to sector. This was linked to the contracts awarded as they required bidders to ramp up local content in the product. He promised to do more work on the roles and functions of SABS for future briefings as requested by the Committee.

Mr Mabasa wanted to know where the net gain was made between saving and creating jobs. He also asked if the whole country was considered when looking at economic development and distributing job opportunities.

Dr Rabie asked if it would be advantageous to have the green economy spread and explained to everybody in the country. He said factual evidence was needed in explaining the ways in which this concept would benefit the economy.

Mr Levin responded that there were many new jobs in the areas of business and financial service. There was an area of improvement in manufacturing in the first quarter of 2010, but that had since slowed. Dti was looking at measures and interventions that could be undertaken to support the sector. There was pick-up in mining and agriculture as well, but that also was flattening out in the second quarter. Agriculture was a burning issue as there had been a long-term decline in that area. He said uneven development and distributing jobs to the former Bantustans was a problem, as 17 million people still lived in those regions. Employment levels were lower, dependency ratios were still higher, and one employed person in those areas tended to support seven other people, as opposed to other parts of the country, where one employed person supported two others. The proportion of working woman was much higher, and the levels of education were still much lower.

Mr Levin said the Department had tried to unblock the regulatory processes especially as they impacted on agricultural projects. The Department was involved with projects in the area of renewable energy and waste management and recycling. He said the focus on the green economy projects was the successful roll-out of the solar water heater. This intervention was of a national scale but had been unevenly distributed up to now. If funding was approved by National Treasury, the Department would be able to ensure even distribution among provinces, especially in relation to new housing developments where there was no electricity. He said this was an imperfect technology but warm water was better than ice cold water. Through this contract system the Department would be able to influence the local content side, youth employment, cooperatives’ involvement,  and achieve a number of its objectives.

Mr Ntuli asked for more detail on the contributions of the Congress of South African Trade Unions (Cosatu) and the ANC Women’s League on the NGP.

Mr Levin said Cosatu had participated constructively in the NGP, but there was an argument that it was silent on women. There was space in the NGP to recognise and strengthen the gender roles.

Mr Ntuli asked for more information on the bio-fuels and food shortages.

The Chairperson asked if there were other ways to produce bio-fuels, rather than using crops.

Mr Levin said that the bio-fuels technology was more about the kind of feed stock used. He said SA was looking at the use of beach sugar and sorghum as they were less water intensive. He said there was commitment and consideration at the cabinet level to get bio-fuels project going but all that was dependent on the question of water availability.

Mr Mabasa wanted to know if the Department outsourced any of its functions with regards to recruitment and employment.

The Chairperson asked if the time period for job evaluation had been reduced. She asked if the department would be able to recruit for the available posts before the end of the year. She asked what qualities the department was seeking in the personnel that it hoped to employ in policy development, and how it would ensure that the same challenges were not faced in future.

Mr Levin confirmed that the EDD would attempt to hire more disabled people, especially once it had more information. He said that the EDD managed recruitment internally, but there were areas that were out-sourced. He said the Department was looking at specialised and skilled personnel with Master and Doctoral qualifications. Although the Department sometimes found enthusiastic people, it would take a lot of skill to draft an implementable policy on socio-economic challenges that would achieve Departmental objectives required skill. The experience required did not necessarily mean that a person had to be older, but should have a demonstrable knowledge and involvement in policy development.

Ms Tsotetsi asked if it was possible for the department to identify people who could be trained in this area of specialisation.

Mr Matsomela said the Department was re-aligning its strategies to bring people in at lower levels and train them to occupy the strategic executive positions. He said the main challenge was that candidates applying for posts, without having the necessary grasp of the basic concepts of policy development. He reiterated that “experience” related to depth of knowledge in a particular field.

The Chairperson again wanted to know if it was possible to identify candidates with potential at the interviews. The Department could send such a person for training. Policy formulation was not much of a challenge, but required innovative thought.

Mr Mabasa thought it contradictory that the Department wanted highly trained people, and yet it had failed to send people on training. The Committee’s criticisms were directed to trying to achieve improvements, and he said that if EDD could not help the country, other departments would struggle even more.

Mr Ntuli asked if there were difficulties in forming the legal frameworks.

Ms Tsotetsi suggested that the Committee Chairperson should perhaps sit-in on interviews where the Department sought to hire specialised personnel.

Mr Levin said the Department had no problem with the questions and criticism. When he referred to legal challenges around coordination, he said that this did not necessarily imply that there must a law that said EDD should lead on matters of economic development. He said the real problems lay with regulatory authorities. These could unblock the processes on projects.

The Chairperson concluded that the Members were particularly concerned about the high number of vacancies and inability of the Department to fill them. She suggested that the Director-General, when engaging with the political principals, should ask if there was still confidence about being able to achieve the target of five million jobs over the period of ten years, and asked if South Africa was focussing on the right things that would enable it to reach this target, and possibly reviewing the target, given what was happening in the global economy, and particularly in light of the problems in Greece.

The meeting was  adjourned.

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