Economic Development Department performance 2011/12: briefing

Economic Development

09 October 2012
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Economic Development Department (EDD) briefed the Committee on its financial and non-financial performance. The Department said the main success indicators of its performance were the 300 000 jobs that had been created, but the Department was concerned that the jobs were disproportionately generated from within the public sector and that workplace inequalities had not decreased. The Department was moving from policy development towards policy implementation. In this regard it was refocusing the Industrial Development Corporation (IDC), developing social accords, supporting the development and implementation of the National Infrastructure Plan and reforming its small business entities.

The challenge was the slow economy and the economic downturn in Europe and potentially the United States of America and China, which put pressure via exports and financing on the infrastructure plan. Other challenges were the persistent inequalities experienced in the workplace and the shortage of skilled high level staff. The Department had mitigation strategies for these challenges and was establishing its own new systems internally.

The Department had provided detailed assessments on the progress of the New Growth Path (NGP) which had led to the establishment of the Presidential Infrastructure Coordinating Commission (PICC), The Department supported the secretariat of the PICC in the development, coordination and implementation of the National Infrastructure Plan. The IDC’s activities had been aligned with the NGP to fund this development. The South African Micro finance Apex Fund and Khula had been consolidated into the Small Enterprise Finance Agency (SEFA) which had been launched in April 2012. Four social accords had been convened : the National Skills Accord, the Basic Education Accord, the Local Procurement Accord and the Green Economy Accord. The Department had worked with the Department of Rural Development and Land Reform to develop a coherent, integrated, spatial approach to development.

Two surveys had been conducted on the impact on employment by all national and provincial departments. In addition, a research paper on the role of the state in employment creation had been commissioned. The Department had also commissioned research on the impact of the Black Economic Empowerment (BEE) codes on listed companies. 

The Department had provided support for the Tripartite Summit to establish a Tripartite Free Trade Agreement amongst the regional economies of  the Southern African Development Community (SADC), the East African Community (EAC),  and the Common Market for Eastern and Southern Africa (COMESA) . The Department had participated in the development of infrastructure within the North - South Corridor and it had made presentations at the International Labour Organisation (ILO) jobs pact workshop in December 2011. All corporate governance requirements were met. The overall vacancy rate was 13.2%.

The Department concluded the presentation by saying that while employment creation was on track, new risks had emerged locally and internationally. The Department would be accelerating its responses to the global crises and to inequalities in the workplace. The Department would continue its shift from policy development to policy implementation.
 
Members said that the Department’s impact on reducing inequality was the real indicator of its success. What were the findings of research on the impact of BEE codes on listed companies? Could the Department comment further on the youth development strategies the Department was involved in? What were the Department’s mitigation strategies for the persistent inequalities which led to workplace conflict? Was the Department making interventions in the mining industry to save jobs as it had done in forestry?
Was the Department’s work on policy alignment and co-ordination complete now that it was starting to focus on implementation? It had made little reference to the state of the global economy and how that would impact on the growth outlook and how the recent Moody’s downgrade would also have an effect. Members said the Department’s role was to get the private sector involved in the creation of jobs. Members wanted more detail on what had been implemented regarding the National Infrastructure Plan (NIP) and also more information on the North - South corridor initiative. Had the Department approached universities regarding the shortage of skills? Was the IDC just funding projects or was it funding projects to revitalise or develop new industries? How far has the issue of internal parity pricing for iron and steel been resolved? Members said it appeared people with disabilities were not taken seriously if one looked at the recruitment figures. Had the term ‘decent work’ been quantified? What were the Department’s plans to close the inequality gap? Could the Department expand on the comment on the role of the Portfolio Committee? Was the doubling of the resources provided to SEFA an actual doubling of resources?  To what degree was the local content in the Solar Water Heater program improving? Members asked if the 300,000 jobs had created temporary jobs or decent jobs. Members wanted to know more about the results of the skills audit done by the Department, asked if the Department had any policy for foreign investments, and if the Department oversaw the PICC. Was the Department happy with the 13.2% vacancy rate? Why was the Director-General still employed in an acting capacity? Members noted  that the Department’s planning cycle was not in congruence with that of Government. Members wanted more information on the PICC and more analytical data on the real economy. How much had been disbursed on the training lay-off schemes and to distressed companies? Were these funds exhausted and what impact had it had on the companies? Members were  concerned that while the Minister was travelling regionally on development issues, there had been no information or discussion on its outcomes from him and the Committee was getting no information from the Department either.

Meeting report

Economic Development Department (EDD) performance 2011/12 briefing
Mr Saleem Mowzer, EDD Acting Director-General, said the main success indicators of the Department's performance were the 300 000 jobs that had been created, but it was concerned that the jobs were disproportionately generated from within the public sector and that workplace inequalities had not decreased. The Department was three years old and was moving from policy development towards implementation. In this regard it was refocusing the Industrial Development Corporation (IDC), developing social accords, supporting the development and implementation of the National Infrastructure Plan (NIP) and reforming its small business entities.

The challenge it faced was the slow economy and the economic downturn in Europe and potentially the United States of America and China, which put pressure via exports and financing on the infrastructure plan. Other challenges were the persistent inequalities experienced in the workplace and the shortage of skilled high level staff. The Department had mitigation strategies for these challenges and was establishing its own new systems internally.

The Department supported the secretariat of the Presidential Infrastructure Coordinating Commission (PICC)
 in the development, coordination and implementation of the National Infrastructure Plan. The IDC’s activities had been aligned with the New Growth Path (NGP) to fund this development. The South African Micro finance Apex Fund (SAMAF) and Khula had been consolidated into the Small Enterprise Finance Agency (SEFA) which had been launched in April 2012. The Department had been engaged in the takeover process of Massmart by Wal-Mart and was pleased with the recent court judgement on the matter.  Four social accords had been convened - the National Skills Accord, the Basic Education Accord, the Local Procurement Accord and the Green Economy Accord. It had worked with the Department of Rural Development and Land Reform (DRDLR) to develop a coherent, integrated, spatial approach to development. 262 000 solar water heaters had been installed and the IDC had created 45 900 jobs through its investments.

The main challenges in implementing the annual performance plan were that the targets did not adequately reflect the new tasks that arose in the course of the year, in particular the work of the Department on the PICC. 17 Strategic Infrastructure Projects (SIPs) had been identified and a monitoring and evaluation framework had been developed to track the SIPs progress.

The Department had provided detailed assessments on the progress of the NGP which had led to the establishment of the PICC. Two surveys had been conducted on the impact on employment by all national and provincial departments, in addition, a research paper on the role of the state in employment creation had been commissioned. It had also commissioned research on the impact of the Black Economic Empowerment (BEE) codes on listed companies. 

The Department had established a business hub at the South African Institute for Chartered Accountants (SAICA) for Small Medium and Micro Enterprises (SMME). IDC’s disbursements had increased by R2 billion to R8.5 billion,  transfers to SAMAF and Khula totalled R225 million, and it had raised a jobs bond of R2 billion. The Department had provided support for the Tripartite Summit to establish a Tripartite Free Trade Agreement amongst the regional economies of  the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). The Department had participated in the development of infrastructure within the North - South Corridor and it had made presentations at the International Labour Organisation (ILO) jobs pact workshop in December 2011. The Department had held workshops in seven provinces on the NGP, on the social accords and on capacity building workshops for labour. All corporate governance requirements were met. The overall vacancy rate was 13.2%.

He concluded the presentation by saying that while employment creation was on track, new risks had emerged locally and internationally. The Department would be accelerating its responses to the global crises and to inequalities in the workplace. The Department would continue its shift from policy development to policy implementation.
 
Discussion
Mr H Hoosen (ID) said the Department’s impact on reducing inequality was the real indicator of its success. What were the findings of research on the impact of BEE codes on listed companies? Could the Department comment further on the youth development strategies the Department was involved in. What were the Department’s mitigation strategies for the persistent inequalities which led to workplace conflict? Was the Department making interventions in the mining industry to save jobs as they had done in forestry?

Ms S van Der Merwe (ANC) wanted to know whether the Department’s work on policy alignment and co-ordination had been completed now that it was starting to focus on implementation. She said there was little reference to the state of the global economy and how that would impact on the growth outlook and that the recent Moody’s downgrade would also have an effect.

Mr N Gcwabaza (ANC) said the Department’s role was to get the private sector involved in the creation of jobs as there was R520 billion of 'uninvested' funds in the private sector. He wanted more detail on what had been implemented regarding the National Infrastructure Plan and also more information on the North - South corridor initiative. Had the Department approached universities regarding the shortage of skills? Was the IDC just funding projects or was it funding projects to revitalise or develop new industries? How far had the issue of internal parity pricing for iron and steel been resolved?

Mr X Mabasa (ANC) said it appeared that people with disabilities were not taken seriously if one looked at the recruitment figures. Had the term ‘decent work’ been quantified? What were the Department’s plans to close the inequality gap? Could the Department expand on the comment on the role of the Portfolio Committee as mentioned on page seven of the presentation? Was the doubling of the resources provided to SEFA an actual doubling of resources?  To what degree was the local content in the Solar Water Heater programme improving?

Ms D Tsotetsi (ANC) asked for how long the disabled person mentioned was employed at the Department?

Ms M Mpane-Mohososi (ANC) asked if the 300 000 jobs had created temporary jobs or decent jobs. She wanted to know more about the results of the skills audit done by the Department.

Mr Z Ntuli (ANC) asked if the Department had any policy regarding foreign investments like the Wal-Mart case. Did the Department oversee the PICC? Was the Department happy with the 13.2% vacancy rate? Why was the Director-General still employed in an acting capacity?

The Chairperson asked what the Department’s investment amount in RiseUp Bakeries was. Could the Department rate the work under review that it did? Could the Department give a progress report on SEFA? How far was the Department in the piloting of Khula Direct? As the strategic plan had not been reviewed and revised, she was afraid the Department would be faced with the same challenges going forward. She noted  that the Department’s planning cycle was not in congruence with that of Government. She wanted more information on the PICC and more analytical data on the real economy. How much had been disbursed on the training lay-off schemes and to distressed companies? Were these funds exhausted and what impact had it had on the companies? She was concerned that while the Minister was travelling regionally on development issues, there had been no information or discussion on its outcomes from him and the Committee was getting no information from the Department either.

Mr Mowser replied that it was clear from the questions raised that the Department needed to have more regular and more detailed interactions with the Committee on policy dialogue and planning. The issues raised had been grouped into 12 categories.

Dr Neva Makgetla, EDD Deputy Director-General: Economic Policy Development, responded to questions on the economy, equality and job creation. Following the global economic crises, the country had experienced an economic down turn which had manifest itself first in the formal sector where one million jobs had been lost, mainly in the commodities sector. The official figures after 2010 showed that there was rapid employment growth in four successive quarters which had recovered 300 000 jobs but that it had to be remembered that one million jobs had been lost.

On the question of why the unemployment figures were so high, she said that the norm for adults employed in income earning activities was 60% while in South Africa it stood at only 40%. There had been a steady decline between 1970, when it was close to the norm, and 2000. In addition, youth unemployment was generally double adult unemployment rates. These were structural economic problems and not of a fiscal nature. People had no jobs and no education. The mining industry which 'absorbed' a lot of jobs was not a creator of jobs and there had been a history of under investment in manufacturing. Foreigners were coming to South Africa for jobs because South Africa’s economy was stronger than its neighbours.

Mr M Hlengwa  (IFP) said South Africa needed to develop its own people to get the skills. The Department should say what skills the education authorities needed to develop.

Dr Makgetla said the data on inequalities was bad, but while she could say that the country had not become more unequal, it had also not become more equal. South Africa was one of the most unequal countries in the world, with a GINI co-efficient (a measurement of wealth inequality within a country) of 0.7. The commodity boom between the year 2000 and 2009 was coupled to a decrease in remuneration for workers and therefore sustained the high inequality, notwithstanding the increase in jobs. The richest deciles were located in the urban areas and the homelands were the worst off. There was a need to address this as it was a legacy of apartheid and colonialism. It would be difficult and would not come overnight.

The Congress of South African Trade Unions (COSATU) had embarked on a worker survey on workplace inequalities in 2012. The findings were that 75% of workers felt that they were systematically being racially abused, therefore unrest in the workplace would occur. To address this needed a long term development plan for work organisations at supervisory and middle management levels.

When there was a financial crash, recovery normally took several years. The United States and European government spending had not been strong and there had been  a greater response from the private sector in the United States. South Africa had experienced a 15% decrease in exports to Europe. The Department was engaging with its social partners and the provisioning of infrastructure would decrease inequalities and support investment and job creation. Africa and the east had become important alternative markets but the country could not totally insulate itself from outside effects on the economy.

The meeting adjourned.
The remainder of the meeting will follow

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