Economic Development Department Mar-June 2012 performance; Millennium Development Goals progress

Economic Development

18 September 2012
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Economic Development Department reported on its 1st Quarter 2012/13 performance focused on: Economic Policy Development, Economic Planning and Coordination and Economic Development and Social Dialogue; Progress against Estimates of National Expenditure targets; Human Resources; and Financial Performance.

Some highlights were
initiatives such as EDD’s Second Annual Conference held in April 2012 to engage government, business, labour, academia and communities in discussions on infrastructure and development and present the National Infrastructure Plan. EDD reported on the Outcome 4 quarterly report on Employment completed with National Treasury and the Department of Trade and Industry and submitted to Cabinet. Policy platforms included the launch of the financialisation project, support provided for engagements at NEDLAC on a multi-pronged youth employment strategy; spatial planning, which involved a holistic process with Department of Rural Development of Land Reform and CSIR to identify functional regions as a basis for improving spatial integration. EDD spoke about success in Growing the Green Economy, with 287 084 solar water heaters installed in collaboration with Department of Energy and Eskom. EDD spoke about the promotion of investment for economic development through Small Enterprise Finance Agency, special financing by the IDC, which involved R165.8 million disbursed during the quarter to eight companies, social dialogue and capacity building engagements, and interventions to create or save jobs, amongst others. EDD provided its employment statistics, stating it had 113 employees but had a budget for 142. The report also provided details on EDD’s financial performance. By the end of the 1st quarter, EDD had spent 15% of the entire budget.

Members were concerned that there were employment vacancies at the department yet there were many unemployed university graduates in related fields within the country.
Some of the many other questions asked were: The National Planning Commission Ministry had discussed challenges in spatial planning in the media recently. How was EDD and related departments to deal with these challenges?
Was the private sector was receptive to providing internships and apprenticeships.
Were there mechanisms to monitor the progress of companies which had been saved?
What was the progress in the efforts to sensitize different departments about the 30 day payment rule?
A copy of the
draft discussion paper on inequality was requested.
Were the efforts on spatial planning at a conceptual or planning stage?
Was there an impact assessment on the number of jobs saved?
Was South Africa an equal partner in the agreements with China?
What type of jobs were the 426 jobs created?

Meeting report

Economic Development Department 1st Quarter 2012/13 performance
The Economic Development Department delegation included Mr Saleem Mowzer, Acting Director General, Mr Zweli Momeka, CFO, Dr Senelisiwe Ntsele, Chief Director: Social Dialogue and Senior Economist, Ms Refiloe Ogude, Director, Mr Molefe Matsomela,
Senior Manager: Human Resource Management.

Mr Mowzer focused on three main areas in the 1st Quarter performance: Economic Policy Development, Economic Planning and Coordination, and Economic Development and Social Dialogue. EDD had held a conference on 19 April 2012 on economic policy development. The theme of infrastructure and development was an opportunity to present the National Infrastructure Plan. There was high-level participation from government, business, labour, academia and communities. The keynote speaker was Professor Joseph Stiglitz. The regulatory impact process was reviewed to align with the New Growth Path (NGP). They had developed guidelines for a socio-economic impact assessment system to help focus attention on employment creation, equity and growth. There was an effort to sensitise departments on employment and economic impacts.

The Outcome 4 (Employment) quarterly report was completed with National Treasury and
Department of Trade and Industry (DTI) and submitted to Cabinet. It showed that satisfactory progress was made on employment creation but risks arising increasingly out of global slowdown. One needed to do more to manage administered, input and food prices.

 Policy platforms included the launch of a financialisation project with UN Department of Economic and Social Affairs (UN-DESA) and the Corporate Strategy and Industrial Development (CSID) of Wits University. Support was given for the International Economics Association meeting on industrial policy in Africa, led by Prof Stiglitz and World Bank’s Justin Lin, with local and international experts.

Other outputs included support provided for engagements at NEDLAC on a multi-pronged youth employment strategy. Key initiatives proposed included public employment schemes with youth brigades; expanded apprenticeships and internships; targets for new entrants in Jobs Drivers; exploration of subsidies to employment creators and employees. A draft discussion paper on inequality had been developed – to be finalised by 30 September 2012. A submission had been made on proposed amendments to the
Broad-Based Black Economic Empowerment (BBBEE) Code to the Minister.

Economic Planning and Coordination involved spatial planning involving a holistic process with Department of Rural Development and Land Reform (DRDLR) and CSIR to identify functional regions as a basis for improving functional integration. It also involved identifying key value chains and other opportunities for linking historically marginalised regions into the core economy.

Other strategies included Growing the Green Economy: 287 084 solar water heaters were installed in collaboration with Department of Energy and Eskom. 50 000 of these were low cost heaters for low-income households. EDD also promoted investment for economic development and provided support for catalytic projects including Rise Up co-op bakeries. The
Small Enterprise Finance Agency (SEFA), which was launched in April 2012, doubled resources available for Small, Medium and Micro Enterprises (SMMEs), led to direct lending and through intermediaries and targeted support for micro and survivalist enterprises as well as small and medium enterprises.

A total of R165.8 million was disbursed to eight companies: 426 jobs were saved and/or created at a cost of R389 202 per job. IDC had a distress fund of R4, 981 billion to 128 companies. Seven
strategic infrastructure projects (SIPs) were launched at intergovernmental forums as part of the implementation of the National Infrastructure Plan. The aim of the launches was to bring together stakeholders within the state to ensure co-ordination around SIPs and to identify a lead agency that would co-ordinate SIP and drive implementation.

EDD participated in consultative forums on 15 March and 13 June 2012 as preparation for the Rio+20 Summit to get South Africa’s input to the summit. They also participated in preparation for the 5th Forum on China-Africa Cooperation (FOCAC), which clarified South Africa’s position on the matter. The
EDD collaborated with National Treasury, the dti and Department of International Relations and Cooperation (DIRCO) in compiling a BRICS country strategy for South Africa. Focused on issues that inform elements of South Africa’s economic strategy towards BRIC countries

Social dialogue and capacity building engagements included a task team meeting with social partners to update the meeting on the development of the National Skills Accord. A meeting with Proudly South Africa outlined and ratified the implementation plan of the local procurement accord as it is related to Proudly South Africa and its implementing bodies. They made a presentation to SA Council of Churches and Diakonia on the Local Procurement Accord and the churches’ role in implementing commitments.

EDD made interventions to create or save jobs included the 30 Day Payment Campaign across the country with provincial and national departments to sensitise departments to the effects of late payments on service providers and SMMEs. An agreement between shoe manufacturing co-op, Ujima Bakwena, and suppliers, Mossop Western Leathers and United Farm Suppliers would assist the co-op by supplying raw materials at discounted prices and assisting with machine parts. They also partnered with Proudly SA to present mini-exhibitions and “Buy Local” marketing events across the country.

They organized two knowledge network sessions on the role of government policy in promoting small businesses in South Africa; and
planning in South Africa as a tool for public investment decisions. Economic Development Agreements were made through a steering committee meeting with the Western Cape Furniture Initiative on 27 March to discuss development of an agreement with the furniture industry; a signed agreement with Bantex, committing the company to discount its prices of locally made folders; and the signed agreement with Proudly SA to implement the Buy Local programme in terms of the Local Procurement Accord.

Mr Zweli Momeka, CFO, EDD gave an overview of the ENE targets for 2012/13. These were the high level targets that were informed by targets in the Annual Performance Plan. Among the targets were
number of sector strategies produced, reviewed or monitored per year where the annual target of one was not accomplished. The 1st Quarter target for the number of interventions promoting economic development through leveraging of state expenditure and procurement per year was accomplished. 1st quarter targets exceeded included: number of spatial plans produced or reviewed;number of interventions to save or create new jobs per year; number of social dialogue and capacity building engagements per year; and number of economic development agreements (sectoral, workplace and national) facilitated with social partners per year.

Employment Equity Statistics showed that out of the 113 employees, 10% were white and 90% black. There were no persons with disabilities listed, but Mr Momeka clarified that this was due to a resignation. One person with a disability had already been appointed to fill the position. The target for the department was to have at least two people with disabilities. Women made up 57% of the employees but only 35% of Senior Management Service (SMS) members. He noted that the department was trying to increase the representation of women at high levels of leadership. There were 11 interns and the department would review its internship program to increase this number.

An overview of the expenditure contained information based on June 2012 reports or section 40(4) of PFMA reports. It showed expenditure per programme. By the 1st quarter, EDD had spent 15% of the entire budget. They had devised ways of spending the budget economically. Revenue collected from penalties and fines and any interest was surrendered to the National Treasury. They had estimated collecting R630 million and had collected R54 million by the end of the 1st quarter.

Mr Mowzer concluded by mentioning other projects that they had been involved in such as the
2011/12 Audit and Annual Report processes that had just been concluded and which would be reported on to the Committee shortly. There was also a focus on the implementation of the recruitment plan: he explained that the reason that the budget on employment had not been exhausted was because the department had not found people with the appropriate qualifications to fill up the vacant positions. They had also focused on policy and implementationthrough support for the National Infrastructure Plan; spatial strategy and catalytic projects; a second round of local procurement designations; policy development, that is, finalizing the inequality discussion paper, drafts completed on financialisation, gender, youth, SMMEs, and proposed amendments to the BBBEE Codes and the Competition Act.

Mr H Hoosan (ID) asked whether there had been monitoring of the signed agreements. When would a report be available to the Committee?

Ms S Van der Merwe (ANC) remarked that the National Planning Commission Ministry had discussed challenges in spatial planning in the media recently. How was EDD working together with the National Development Plan to deal with these challenges? She pointed out that interventions to create new jobs were above target. Why? She also asked how the department budgeted for penalties and forfeits.

Mr N Gcwabaza (ANC) commended the creation of 426 jobs at
a cost of R389 202 per job because it was a promising number for the recruitment and compensation of skilled workers. However, was there a budget for unskilled/semi-skilled workers? With reference to EDD’s economic development policy, he wanted to know if the private sector was receptive to providing internships and apprenticeships. On spatial planning, at what stage of implementation was the North/South infrastructure work? He commented that EDD should recruit students from high schools and universities, as well as people with disabilities and train them for positions in the department.

Mr S Ngonyama (COPE) asked what percentage of products under the green economy plan was locally manufactured. On economic planning and coordination,
EDD mentioned that they had collaborated with the DTI, DIRCO, Development Bank of Southern Africa (DBSA), and the Department of Public Enterprises (DPE) in six meetings regarding the North South Corridor infrastructure work. To what degree were these meetings translating job creation and the skills of Africa versus imported skills? Were there mechanisms to monitor the progress of companies which had been saved? He remarked that all departments needed to analyze how much they were losing by not using local materials. He also expressed great dissatisfaction with the low number of people with disabilities that EDD planned to hire.

Mr M Hlengwa (IFP) wanted clarification on what percentage of EDD’s employees were youth. Also, what was the progress in the efforts to sensitize different departments about the 30 day payment rule? What was EDD doing to curb people from breaching codes that resulted in fines and penalties? What was the nature of the intervention models used by EDD and how did they monitor their progress?

Mr S Ngonyama (COPE) requested a copy of the
draft discussion paper on inequality to be made available to the Committee. Were the efforts on spatial planning at their conceptual or planning stages? He commended EDD for the progress with the solar water heater project. Was the maintenance of the heaters also included in the project? Was there an impact assessment on the number of jobs saved? On China-Africa relations, he noted that there had been a general view that it was a one-sided relationship where China had the upper hand. Was South Africa an equal partner in the agreements with China? He asked for clarification on the department’s goal for the internship program. What happened at the end of the internship?

Chairperson, Ms E Coleman, referenced the employment statistics where 32% of employees at SMS level were females and 10% of total employees were white. She requested a breakdown of the statistics to show which positions they held. What were the reasons for the reported resignations and failure to renew contracts? EDD had stated a lack of qualified individuals as the reason for vacancies in employment positions. She expressed great displeasure at the fact that EDD claimed that they could not find qualified individuals to employ yet there were many unemployed university graduates with relevant degrees in Economics and Commerce in various parts of the country. What strategies were they putting in place to give people the experience required? Were there accruals from previous years in the budget? How much was this impacting the current budgets? What type of jobs were the 426 jobs created? On transfers, why were the transfers for SEFA made through the Industrial Development Corporation (IDC) instead of being made directly to SEFA? What informed the creation of SEFA? Why had not the SEFA strategic plan been tabled in Parliament yet as they had promised to do it a long time ago? EDD had reported attending several meetings and forums. She requested a report on each meeting to be given to the Committee. She remarked that some of the discussions that government departments were involved in, for example on spatial planning and development, had policy consequences yet the Committee was not involved in these discussions. Were the agreements mentioned made on behalf of the country? Did they adhere to the Constitution? What was the roe of the Committee in these discussions?

Mr Gcwabaza mentioned two issues that had been raised before with the EDD: employment of skilled labor from outside the country caused unemployment. Also, some industries that went down in the former homelands should be revived to create more employment opportunities because of the availability of machines in the old factories and skills among the locals.

Ms D Ntotetsi (ANC) requested a profile of the eight companies that received disbursements. How did EDD measure the impact of social development? She noted that many mainstream churches owned vast pieces of land yet the government was faced with the problem of scarcity of land. How did EDD engage the South African Council of Churches on discussions on land? What incentives would they put in place to discourage mediocrity and inefficiency given the dominance of Chinese in various sectors. The report showed an annual target of four interventions for job creation and 14 were achieved in the first quarter. Were those targets not too low? She requested more information about the schools from which interns were being recruited, and a breakdown of the grades.

The Chairperson commented that the 30-day payment rule was common knowledge to government departments. It was the responsibility of Treasury to enforce this among state departments to ensure that companies were paid on time. EDD should focus on other important projects.

Ms S Sithole (ANC) inquired about initiatives for women empowerment at EDD. They should have a specific budget for women to progress in a conscious effort to empower women.

Ms Ntesele replied that they were working on a policy to empower women and had come up with a multi-pronged paper that was still in progress.

Mowzer replied that they were working closely with stakeholders who signed the accord: organizations, businesses, labour and communities and government to monitor implementation of the accords. It was a challenge to monitor the progress of other departments but they were working with DTI and National Treasury on that. They were also working with National Treasury on whether or not to issue treasury notes to State Owned Enterprises (SOEs) and government departments, particularly on the issue of local procurement. They had held meetings with individual sectors to see how to monitor implementation of accords. They had embarked on a process at NEDLAC which involved government, organized labour, business and community representatives to develop an employment strategy for young people. The process was ongoing and had been progressing well. It would be a multi-pronged strategy. As soon as the agreements reached the NEDLAC level, EDD would report them to the Committee.

On the textile industry, Ms Refiloe Ogude replied that EDD was carrying out a product trend analysis of the textile industry in collaboration with Productivity SA and would use the outcomes of the research to develop appropriate projects.

On under expenditure of the budget, Mr Mowzer explained that the reason why it seemed like there was under expenditure in some departments was because those were figures for the 1st quarter only. The expenditure would increase as they progressed to other quarters.

On the fines and penalties, Mr Momeka answered that it was difficult to project quantities for fines and penalties, but EDD used historical figures to create the budget. On the question about accrual, he said that EDD only accounted for money that was in their account, not on an accrual basis. So far they only had accruals of R 1 million. He said that was a manageable figure. He clarified that these were not accruals due to inefficiencies.

The Chairperson remarked that they should be cautious of accruals rising to an unmanageable amount.

Ms S Sithole requested a report on the accruals at the next meeting.

Mr Matsomela answered that the goal of the internship programme was to equip interns with skills by coaching and mentoring them so that they could apply for jobs within and outside the department.

The Chairperson asked what the target number of interns was.

Mr Matsomela replied that the target was 5% of the membership.

Mr M Hlengwa asked how many of the 113 employees were under the age of 35.

The Chairperson wanted clarity on the number of employees that the EDD could employ because they had presented different figures in earlier reports.

Mr Matsomela replied that 129 was the number they had for the funding period ending March 2012. However, 142 was the figure on the ENE.

The Chair stated that the Committee would hold the accountable for the 142 they were now reporting.

Due to time constraints, the Chairperson requested the EDD to submit written responses for all unanswered questions within seven days.

Meeting adjourned.


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