Department of Trade and Industry Strategic Plan & Annual Performance Plan 2012

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Meeting Summary

The Department of Trade and Industry (dti) presented its performance summary for 2011/12, and then outlined its strategic and annual plans for 2012 to 2015. The strategic focus was informed by the Department’s five core programmes of industrial development, trade and investment and exports, broadening participation, regulation, and administration and co-ordination. In relation to the achievements in 2011/12, dti emphasised that it had reached or exceeded many of its goals, and named the number of projects and amount of investment secured in relation to rail signaling, automotive incentives, film and TV productions, and the setting up of the Manufacturing Competitiveness Enhancement Programme, whilst six projects, projected to create over 14 000 jobs, and with a net worth of R9 billion, were approved under the Critical Infrastructure Programme. Other achievements in the automotive sector, business processes, and trade, investments and exports were detailed. Emerging markets were being tapped, and revised lists on value added exports to and investment from China had been drawn. Principles on Regional Industrial Development Policy had been finalised, with regard to the Southern African Customs Union (SACU) 5-point plan. Dti also continuously aimed to broaden participation, and noted its facilitation of 180 new cooperatives, new Codes of Good Practice, support to new projects through the Enterprise Investment Programme, and black business supplier development progammes. The Cooperatives Amendment Bill was submitted to Cabinet, and the Broad-Based Black Economic Empowerment Amendment Bill and Special Economic Zones Bill were approved by Cabinet and issued for public comment. Legislation passed included the Intellectual Property (IP) Amendment Bill for Protection of Traditional Knowledge, whilst a National Lotteries Policy Framework and Bill had been drafted for approval, an the Gambling Review Process was finalised. The National Credit Act policies were finalised, and the drafting of the Businesses Act had started. Dti managed to bring its vacancy rate down to 8.45% by the end of 2011/12 and aimed to drop it to 5% in the current year. It was employing 2.34% disabled employees, and had  43.11% women in senior management positions.

The key strategic interventions for 2012/13 were outlined, in the clusters. Dti would continue to 
upscale industrial policy, and would submit designations on three sectors for local procurement to National Treasury. It would be supporting technology and human resources for industry, and 20 new industrial development projects, through a contribution both from industry of R16 million and R20 million to be raised by the  Support Programme for Industrial Innovation. Its support to enterprises in automotive, CPI, business processes and film and TV were detailed, as well as the target to launch the Manufacturing Competitiveness Enhancement Programme and the Green Enterprise Competitiveness to support 140 enterprises. In trade matters, dti was to implement an African Regional Development programme, and a report on the implementation and the projects for priority development. It was hoping to conclude  Economic Partnership Agreements with European Union (EU), the Southern African Customs Union countries, and East African Community Common Market for Eastern and Southern Africa. It hoped to increase manufactured exports to R850 million, and facilitate R45 billion investment in targeted areas. The plans for broadening participation included targets for supporting incubator and small businesses through the Small Enterprise Development Agency, Enterprise Investment Programme, Manufacturing incentive Programme and Tourism Support Programme. Provinces had been asked for proposals on two Special Economic Zones in each province. It was finalising strategies and codes for broad based black economic empowerment, women’s economic empowerment, and Isivande Women’s Fund. Dti also planned to implement an amended Cooperatives Act and to finalise the Informal Sector Strategy and the Youth Enterprise Development Strategy. The proposed legislation and regulations were detailed. Its communications strategies were to be enhanced. The budget had increased by about 30%, with an allocation of R9.09 billion for the year.  Dti listed its major challenges as the prolonged global economic recession, the high cost of capital for the productive sectors, steep rises in electricity and port and other administrative charges, continuing shortages of critical skills, and the need to diversify into other markets.

Members asked about the possible shortcoming of
aligning the Department’s strategy to the NEPAD framework, which had been criticised on the Continent, and asked how the Department would ensure continuity in operations over the next years. The challenges of setting up Special Economic Zones was also addressed and the general progress of the South African economy was investigated. Concerns were raised over the procurement of Olympic kits from a foreign supplier. Members asked why the dti had become involved in the Walmart merger, and what this had achieved. They were interested to know the survival rate of cooperatives, what the position was if municipalities opted to create community development trusts, and whether job figures mentioned related to jobs created by government or the private sector, and what the main aims of the Industrial Policy Action Plan were. They asked if it was intended that provinces and municipalities issue licences under the Businesses Bill, in which provinces the Isivande Women’s Fund operated, what communication strategies were used, and noted lack of correlation in the past strategic plans and annual reports. Members were insistent that the dti should act stringently to persuade government departments to pay creditors within 30 days, as failure to do so impacted seriously on small businesses. The dti was asked to detail how it was dealing with the National Lotteries Board, how it would coordinate lending by agencies, what it had done to reduce the costs and difficulties in doing business in South Africa.

Meeting report

Department of Trade and Industry (dti) Strategic Plan and Annual Performance Plans 2012 briefing
Mr Lionel October, Director General, Department of Trade and Industry, outlined the strategic plan presentation for the period 2012 to 2017. He noted the vision of this Department (dti or the Department) , as being “a dynamic industrial, globally competitive South African economy, characterised by inclusive growth and development, decent employment and equity, built on the full potential of all citizens”. He then outlined the vision (see attached presentation for details).

The dti had five core programmes and clusters to carry out the objectives. Its ) Industrial Development Programme undertook development of policies and strategies that promoted sector competitiveness, growth, job creation and efficient administration of support measures. The Programme for Trade, Investment and Exports aimed to strengthen trade and investment links with key economies and foster African development, through regional and continental integration and development co-operation, in line with the New Economic Partnership for Africa’s Development (NEPAD). Another cluster focused on broadening participation and promotion of enterprise growth, empowerment and equity. The Regulatory Programme involved the development and implementation of coherent, predictable and transparent regulatory solutions, to facilitate address to redress, and efficient regulatory services for economic citizens. The Administration Programme overall saw to effective co-ordination of departmental programmes and provision of necessary support.

Mr October outlined some of the key achievements for 2011/12. In the area of industrial development, dti had registered a designation of five sectors and had promulgated amended Preferential Procurement Policy Framework Act Regulations. The dti had also achieved the Passenger Railway Agency of South Africa (PRASA) agreement on 40% local content for rail signalling in Western Cape and Durban. 91 projects were supported through the Automotive Incentive Scheme (AIS), and R4.7 million investment was leveraged. Dti had supported 72 film and TV productions, with R2 million investment leverage. The Manufacturing Competitiveness Enhancement Programme (MCEP) was being finalised with the National Treasury. Six projects, totalling R9 billion of investment, had been approved under the Critical Infrastructure Programme (CIP). They were projected to create 14 835 direct jobs.

In the automotive sector, R15 billion had been secured in investment commitments from assemblers and component suppliers. A further $100 million was committed, for a truck and car assembly plant.

In Business Process Services, R4 billion new investment had been facilitated with the potential of the creation of 2 690 jobs.

Trade, investment and exports were linked to the DTI’s strategic focus of building of mutually beneficial regional and global relations to advance South Africa’s trade, industrial policy and economic development objectives. In this sector, dti had recorded an investment pipeline of potential investment projects of R34.4 billion, including projects with Nestle and Unilever. The dti had facilitated business delegations to emerging markets such as Cameroon, Mozambique, Benin, Turkey, the United Arab Emirates and Oman. Dti had also submitted a revised list to China, on value added exports to and investment from China. A high-level paper setting out principles for Regional Industrial Development Policy had been finalised, with regard to the Southern African Customs Union (SACU) 5-point plan. 

Dti aimed to broaden participation. It had facilitated the establishment of 180 new small scale co-operatives. It had drawn, and was awaiting the Presidential Council endorsement of the Codes of Good Practice. The feasibility study for the proposed Saldanha Industrial Development Zone had been completed, and was out for public comment. 806 projects had been supported through the
Enterprise Investment Programme (EIP), with the value of investment leveraged being R12,3 billion, whilst 17 330 jobs could be created. The dti had supported 183 cooperatives through the Cooperative Incentives Scheme. 548 enterprises had been supported through the Black Business Supplier Development Programme (BBSDP).

The legislative amendments included the submission of the
Co-operatives Amendment Bill to Cabinet and the business case to National Treasury (NT). The Broad-Based Black Economic Empowerment Amendment Bill had been approved by Cabinet and issued for public comment. The Special Economic Zones (SEZ) Bill and policy were approved by Cabinet, and were issued for public comment.

The National Assembly had adopted the Intellectual Property (IP) Amendment Bill for Protection of Traditional Knowledge. The National Lotteries Policy Framework and Bill had been drafted for approval. The Gambling Review Process was finalised, together with the review of the Gambling Act. Dti had reviewed and developed the policy on the National Credit Act (NCA), had developed a policy, and commenced the drafting of the Businesses Act.

In respect of administrative issues, Mr October noted that dti had reduced its vacancy rate from the 16.9% of 31 March 2011, down to 8.45% at 1 March 2012. The dti had achieved targets of having 43.11% of women in senior management positions, and was employing 2.34% persons with disabilities. 92% of all creditor payments had been made within 10 days, and 8% of all creditors payments were made within 14 days.

Mr October then outlined the key
strategic interventions for 2012/2013, under the core programmes or clusters. In the area of industrial development, dti intended to further upscale industrial policy by tabling the Annual Rolling Industrial Policy Action Plan to Cabinet. It planned to complete and submit designations templates to the National Treasury for three sectors, for local procurement. Another major intervention was, via the Technology and Human Resources for Industry Programme (THRIP), to support 2 200 students and 850 researchers in chemical, information and communication technology, metal and minerals, agriculture and biotech and energy. It would be supporting 20 new projects in industrial development, to the total value of R36 million. This amount was to be raised by the Support Programme for Industrial Innovation (SPII) contribution of R20 million, and a R16 million contribution from industry.

Dti further planned to support enterprises through the Automotive Incentive Scheme (AIS) and the 121-tax allowance. It was to support 12 enterprises, worth R6 billion, through CPI, Business Process Service would support 15 projects, whilst  Film and TV Production would support 63 film productions worth R400 million and R1.8 billion respectively. BPS activities would support the generation of 6 000 jobs. The Export Market and Investment Assistance (EMIA) aimed to support 860 enterprises to participate in the EMIA scheme. The dti also planned to launch the Manufacturing Competitiveness Enhancement Programme (MCEP) and the Green Enterprise Competitiveness (GEC), to support 140 enterprises.

In the areas of trade, investment and export, Mr October noted dti’s implementation of an Africa Regional Development programme, and said dti had a report on the implementation and the projects for priority development in SACU, the Southern African Development Community (SADC) and Service Delivery Infrastructure projects. It aimed to conclude Economic Partnership Agreements (EPA) with European Union (EU), the SACU countries, and East African Community
Common Market for Eastern and Southern Africa (ECOSAS). The dti planned to increase manufactured exports under the Export Market and Investment Assistance (EMIA) scheme, to R850 million. It also planned to facilitate investment in targeted sectors, to the value of R45 billion.

Dti then outlined the plans for broadening participation. The Small Enterprise Development Agency (SEDA) Technology Support Programme aimed to establish 44 incubators, approve 40 technology transfer interventions, and support 268 small and medium sized enterprises (SMMEs). The Enterprise Investment Programme (EIP) would approve 450 SMMEs for the Manufacturing Incentive Programme (MIP), to the value or R6.3 billion, and create 9 240 jobs. It would also approve 300 SMMEs for the Tourism Support Programme (TSP), to the value of R4.2 billion, creating 6 160 jobs. Dti also planned to  implement the approved action plan emanating from the SMME Review Report and an agreement with the National Treasury on the Ten Set Aside products. It also aimed to support 30 new contracts with companies to participate in the Workplace Challenge Programme.

SEZs would be used to facilitate regional economic activity. Dti had requested all provinces to submit two proposals for SEZs.

Dti planned to release the amended Codes of Good Practice for Broad Based Black Economic Empowerment (BBBEE). It would finalise the National Strategic Framework on Gender and Women Economic Empowerment, and support 60 new projects through the Isivande Women’s Fund. The Cooperative Incentive Scheme (CIS) and the Black Business Supplier Development Programme (BBSDP) were to support 490 and 700 enterprises respectively. The dti planned to implement an amended Cooperatives Act and to finalise the Informal Sector Strategy and the Youth Enterprise Development Strategy.

On the regulatory side, dti was preparing for submission a Regulatory Impact Assessment (RIA), dealing with regulation of business and economic citizens, and the National Credit Act policy. It was also developing regulations on the protection of Indigenous Knowledge and for the National Lotteries Board. It planned to process the Special Economic Zones Bill, the Legal Metrology Bill and the Businesses Amendment Bill. Finally, the amended BBBEE Act would be implemented.

On the administrative side, dti planned to reduce its vacancy rate to 5% and reduce the staff turnover rate to 9%. It aimed to make all eligible creditors’ payments within 30 days. The Service Delivery Improvement Plan (SDIP) for 2012–2015 was to be approved and implemented. Dti planned to take a more pro-active approach to public awareness platforms and events, and had a strategy to prepare 12 programme-focused publications, to increase public awareness, whilst it would also
carry out six multimedia awareness campaigns, and conduct 80 outreach initiatives.

Mr October then moved on to present the allocated resources and budget. Dti’s budget increased, for 2012/13, by about 30%, and had received a total allocation of R9.09 billion, with the total from 2012 to 2015 being R30.5 billion.
The specific line item allocations were indicated (see attached presentation for full details).

Mr October listed five major challenges that dti faced. Firstly, he noted the prolonged global economic recession, especially in relation to South Africa’s traditional trading partners, which had a negative impact on the domestic economy. Secondly, the cost of capital remained high for the productive sectors. There was a steep rise in administration charges, particularly for electricity and port charges. There remained skills shortages in critical areas. Europe still remained South Africa’s biggest market, and there was a need to diversify and intensify relations with the BRICS (Brazil, Russia, India, China) economies.

Discussion
Mr B Mnguni (ANC, Free State) asked why the dti had established some of its strategic objectives around the NEPAD structure, noting that it had been challenged on the continent.

Mr October conceded that there were challenges with the recognition of NEPAD by other countries on the continent. This was because other countries or regions had competitive packages and did not see the need for NEPAD. However, there had been agreement now on that, and NEPAD had been wholly incorporated as an African Union structure and programme. An enhanced African strategy was still needed, as the growth rates were increasing in many African countries. The dti held an Africa Dialogue Conference, where Ministers from around the Continent had discussed putting together a solid African strategy.

Mr Mnguni asked what the survival rate of co-operatives was.

Mr October replied that the dti had completed the National Economic, Development and Labour Council (NEDLAC) and the Cabinet process for regulation of cooperatives, and the State Law Advisers were now dealing with the legislation. The highest failure rate in the private sector was found in SMMEs and cooperatives, because they lacked the necessary support. In addition to legislative amendments, dti was putting in place a cooperative incentive scheme, and would expand the range of support, funding and technical assistance. 

Mr Sipho Zikode, Deputy Director General, Enterprise Development, dti added that the survival rate of the cooperatives was very low, presently at 12%.

Mr Mnguni commented on job creation, asking if the jobs mentioned were to be created by government or the private sector. He noted that government was also supposed to facilitate an environment for the creation of jobs.

Mr Nimrod Zalk, Deputy Director General: Industrial Development Division, dti, responded that it was mostly the private sector that was generating the jobs and investments.

Mr Mnguni asked what percentage of the entire dti strategy was covered by the rolling out of IPAP and what the “golden thread” of IPAP was.

Mr Zalk replied that the IPAP was basically about raising investment, adding value and enhancing employment in the manufacturing sector, based on the fact that it was manufacturing that had the highest multiplier in the economy and was the greatest source of growth and employment. IPAP sought to engage in a collective problem-solving process with manufacturers and potential investors, to understand the main constraints and challenges faced. The dti, through the IPAP, was now setting up a strategy to address the challenges. On the financial side, the Industrial Development Corporation (IDC) had realigned its focus on IPAP and more funding was secured for the Manufacturing Competitiveness Enhancing Programme. The Preferential Procurement Policy Framework Act was used by dti and IPAP to enhance and promote local companies.

Mr Mnguni asked about the viability and feasibility of establishing two SEZs in each province.

Mr October replied that the dti was simultaneously handling the legislative and practical implications of the SEZs. It had written to all the provinces, asking that each provisionally identify two SEZs, although this was intended to be neither a minimum nor maximum, but merely an impetus to the process. All provinces except KwaZulu Natal ha responded, and dti would now do feasibility studies on their establishment and operation. SEZs would have to be viable, and multi-sectoral; one example was Rustenburg in the North West.

Mr Mnguni asked if dti was intending that local governments and municipalities should issue licences to companies, under the Businesses Amendment Bill.

Mr October replied that dti had engaged with the various government departments to start drafting the Bill, and the main reason was to have provinces and municipalities playing a more active role in and oversight over businesses, to address the high numbers of illegal operators. The consultation was ongoing.

Ms B Abrahams (ANC, Gauteng) asked in which provinces the Isivande Women’s Fund operated, and what kind of projects it funded.

Mr Zikode replied that the Isivande Women’s Fund was established for women in the rural areas to assist them in empowerment initiatives. Four provinces, Free State, Gauteng, North West and Mpumalanga, had so far benefitted from this fund.

Ms Abrahams asked how the dti intended to manage the awareness platforms and events, and what strategy was used to ensure success.

Mr Clement Manoko, Chief Director, dti, replied that dti was now taking a proactive approach to its awareness programmes and had visited almost all the provinces. It had intensified the awareness programmes where needed, and was also exploring possible cooperation with municipalities and provinces to improve the awareness programmes. 

Mr A Nyambi (ANC, Mpumalanga) asked why previous strategic plans of the dti were not always linked closely with results shown in the Annual Reports; this was particularly true of employment and vacancies.

Mr October replied that the dti’s vacancy rate in 2010/11 was 16.9%, but this was reduced to 8.45% in the following year, and the new target of 5% reflected the need to continuously improve. Dti had now changed its performance indicators, as they had not been very clear in previous years.

Mr Nyambi asked for clarity on the link between the performance targets and performance agreements, and shortage of skills in critical areas, asking how dti could achieve its targets if it had skills shortages. He also asked if dti had plans to ensure the continuity of its performance targets from one year to the next. Finally, he asked if the dti was sure that its programmes were sufficient to achieve its goals and strategic objectives, and whether new porogrammes were needed.

Ms Jodi Scholtz, Group Chief Operations Officer, dti, replied that there was an embedded system within the dti to deal with the strategic plan. There were also quarterly review sessions, convened by the Director General, to examine progress against performance targets, and the internal auditors of the dti were asked to examine how the progress was cascaded into individual performance agreements, so that progress was monitored. Each of the units within the dti had divisional plans, cascaded down to the Chief Directorate level. A strategic team had the duty to ensure continuity of plans and processes.

Ms E Van Lingen (DA, Eastern Cape) asked about the dti’s position on energy and nuclear technology, and whether it conducted research in these areas.

Ms van Lingen asked if  bulk infrastructure for municipalities and water schemes were included in the CIP.

Ms Noncebe Mashaba, Chief Director, dti, noted that under the CIP, a particular investment project or programme had to be identified, and then CIP would assist with the infrastructure that was critical to the investment. In most cases, the municipality worked with the investors to identify the projects.

Mr October added that the dti was looking at increasing its share in the allocations so as to properly support the investment projects.

Ms Van Lingen asked about the dti’s position when municipalities created community development trusts rather than co-operatives.

Mr Zikode replied that the formation of solidarity funds by communities was an international best practice and if the community development trusts were to operate like solidarity funds, then this was supported, as it could complement the external support to the community. However, these funds or trust must be regulated by legislation and well supervised.

Ms van Lingen asked if dti did not include water, fuel and airport charges as challenges to business operations.

Ms Van Lingen remarked that the dti should enhance the campaign to ensure that government departments respected the requirement to pay creditors within 30 days. Their failure to do so impacted negatively on local businesses.

Mr Zikode agreed that the deadline of thirty days was not respected by many government departments. Dti would write out to these departments requesting them to respect the deadline, and he commented that even this period was long, and ideally should be 10 or 15 days.

Ms M Dikgale (ANC, Limpopo) asked what measures were taken by the dti to handle the challenge of skills shortages in critical areas.

Mr K Sinclair (COPE, Northern Cape) asked what the dti was doing to regulate the crisis of uncensored loans. He encouraged the dti to take the debate to a higher level and to encourage a culture of saving amongst South Africans.

Mr Sinclair asked why the dti engaged in the Walmart issues.

Mr October replied that it actually was an expensive exercise, but dti’s main concern related to whether Walmart would buy from local suppliers, or whether it would displace them and merely import, as it did elsewhere.  Dti had to protect the interest of local producers and companies against Walmart, which was one of the biggest companies in the world. The dti was successful in securing the interests of local companies, as Walmart was compelled to create a R100 million supplier fund, to bring in local suppliers, both nationally and internationally.

Mr Sinclair asked what the dti was doing about the current turmoil in the National Lotteries Board.

Mr October replied that the dti was considering amendments to the legislation, and was undergoing an assessment and consultation process to try to reinstate order in the National Lotteries Board (NLB). The work of the Board had been upscaled, although the turnaround times were still too long. The Minister had met with the Chairman and the Executive Management of the NLB, was aware of the challenges, and dti was working to address them. Mr October reminded Members that gambling was a joint national and provincial competence, so dti was also engaging with the provinces.

Mr Sinclair asked about the role of the SEZs in the resolution of the disjuncture between the national and provincial government departments.

Mr Sinclair asked what measures were put in place by the dti to facilitate, coordinate and regulate the procedures for granting project funding by agencies such as the Development Bank of Southern Africa (DBSA) and Khula.

The Chairperson asked how many senior managerial posts in the dti were vacant.

Ms Annelize Jooste, Chief Director, dti, noted that as at 31 March 2012, there were 19 senior management positions and 35 middle management positions vacant at the dti.

The Chairperson asked what role dti played in making it easier to do business in South Africa.

Mr Zikode replied that the dti had initiated the “red tape reduction” programme in a bid to ease the costs and difficulty doing of business in South Africa. This programme had already been initiated at provincial levels, with a pilot project in four provinces, and this had registered success. Funds had been requested from the National Treasury to further this programme and it would be rolled out nationally in 2012/2013, with municipalities becoming involved.

The Chairperson asked whether dti’s satisfaction with the budgetary allocation implied that it would achieve all that it had planned.

The Chairperson asked what percentage of trade was conducted with Eastern and Asian countries, and asked how well South Africa was performing in  international trade.

The Chairperson asked what the dti was doing about the recent issue of the South African Sports Confederation and Olympic Committee (SASCOC) procuring Olympic kits from China, and the impact of this on the local economy.

Mr Zalk replied that the dti had issued a statement registering its concerns. The dti was still obtaining details on the exact nature of the procurement, but there were significant concerns about undermining of the capability of local textile and clothing manufacturers. Dti would be writing formally, to the Minister of Sports and Recreation to register its concern and request him to look into the matter. 

The meeting was adjourned.

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