Economic Development Department response to State of Nation Address

Economic Development

25 February 2013
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Department said the President had pointed out that the New Growth Path (NGP) was a key project of the National Development Plan (NDP) in increasing the growth trajectory with an emphasis on monitoring checklists and action steps targeting job creation and growth. The NGP’s goal was to create 5m jobs by 2020. It needed to identify the structural problems in the economy and look at job drivers. The Presidential Infrastructure Coordinating Commission (PICC) was established to maintain a centrally driven infrastructure programme and held coordination responsibilities, especially for blockages. Seven PICC projects were highlighted were State of Nation Address. The Department supported the PICC through doing its secretariat work, through significant technical assistance and through monitoring and evaluating systems and through developing key policy frameworks.

The Infrastructure Development Bill had been published for public comment and the Department would then finalise its submission to this Committee. The Bill would assist in the work of the PICC – in reducing delays and in the planning and implementation of projects. The challenge was to ensure adequate participation in the public comment phase of the Bill. The Department had drawn from the lessons learnt at the PICC and incorporated these into the legislation. The President was committed to cracking down on price fixing in infrastructure projects and the building industry had been investigated since 2011. The PICC had developed improved procurement and contract processes.

With other job drivers such as mining, it had been shown that where the state intervened, key industries could be turned round. The challenges were that joblessness was entrenched in the economy and that various sectors of the economy were not moving and falling behind, while the recession in Europe and slow growth in the USA and Japan would affect SA’s exports. Workplace conflict in mining and agriculture were new risks. The EDD had supported the establishment of Technical Implementation Forums in ministerial clusters. The lessons learnt from the Industrial Policy Action Plan (IPAP), were that job drivers needed clear action plans and monitoring on a monthly basis from the PICC and that integration across departments was needed. The President had focused on youth unemployment and had asked NEDLAC to discuss incentives. Agreement had been reached on key principles which should be signed off in the near future. The EDD was supporting the move for greater balance between the primary, secondary and tertiary sectors.

Members asked how the Solar Water Heater (SWH) project was being developed to ensure job creation for the unemployed and to create entrepreneurs. What plans did EDD have for the Small Enterprise Finance Agency (SEFA) so that it was effectively located? Members asked if there was any coordination between PICC and Transnet on the latter’s infrastructure rollout. What programme was there to solicit public comment on the Infrastructure Development Bill? It was noted that the Committee had not had the opportunity to discuss this Bill. How were manufacturing companies that had benefited from distress funding being monitored? Members asked what was being done to prevent poultry dumping. What was the frequency of the monitoring of the green economy projects? Members asked where political responsibility resided in the case of PICC. There was concern whether the infrastructure programme would create jobs and about the maintenance of the SWH. Was the special fund for youth the same as the National Youth Development Agency (NYDA) programme? Where was the Green Fund located and how much money was in the fund?

Members asked if the land required for the dig out port in Durban, was municipal or private land and what was the extent of community dissatisfaction around this plan. Could the Department clarify what was meant by “the development of electricity lines”? Whose responsibility was it to establish manufacturing in sectors designated to be targeted to increase the beneficiation of primary products? What progress had been made on the target of 100% penetration by the year 2020? Who was implementing the monitoring of the Green Fund and against what targets? The integrated youth strategy had been submitted to Cabinet by NYDA. What was the plan now that agreement had been finalised by NEDLAC and where was the coordination between the two? The Deputy Commissioner of the Competition Commission had resigned. What was the state of health of the Commission Members? 

Other questions included whether a task team was needed for the Green Fund; the estimated number of jobs created by all the planned infrastructure projects; who appointed SEFA’s board; a request for a briefing on the Umtata project; when the Committee would be briefed on amendments to the
Competition Commission Act; the situation with the Competition Commission Act was unacceptable and wanted a timeline on processes on this; which department was responsible for mining beneficiation and asked for a timeline on the dam constructions.

Meeting report

Impact of State of Nation Address on Economic Development Department (EDD) and its responses
Ms Jenny Schreiner, Director General of the EDD, said the President had pointed out that the New Growth Path (NGP) was a key project of the National Development Plan (NDP) in increasing the growth trajectory with an emphasis on monitoring checklists and action steps targeting job creation and growth. The NGP’s goal was to create 5m jobs by 2020. It needed to identify the structural problems in the economy and look at job drivers. The Presidential Infrastructure Coordinating Commission (PICC) was established to maintain a centrally driven infrastructure programme and held coordination responsibilities, especially for blockages. She noted seven PICC projects highlighted by SONA (see p5 of presentation). The Department supported the PICC through doing its secretariat work, through significant technical assistance and through monitoring and evaluating systems and through developing key policy frameworks.

The Infrastructure Bill had been published for comment and the Department would then finalise its submission to the Committee. The Bill would assist in the work the PICC was doing and assist in reducing delays and assist in the planning and implementation of projects. The challenge was to ensure adequate participation in the public comment phase of the Bill. The Department had drawn from the lessons learnt at the PICC to be placed into the legislation. The President was committed to cracking down on price fixing in infrastructure projects and the building industry had been investigated since 2011. The PICC had developed improved procurement and contract processes.

With regard to other job drivers such as mining, it had been shown that where the state intervened, key industries could be turned round. The challenges were that joblessness was entrenched in the economy and that various sectors of the economy was not moving and falling behind, while the recession in Europe and slow growth in the USA and Japan would affect exports. Workplace conflict in mining and agriculture were new risks. The Department had supported the establishment of Technical Implementation Forums in ministerial clusters. The lessons learnt from the Industrial Policy Action Plan (IPAP), were that job drivers needed clear action plans and monitoring on a monthly basis from the PICC and that integration across departments was needed. The Industrial Development Corporation (IDC) had played a significant role in diversifying the economy in issuing 6.5% of total investment loans and being responsible for 10% of the jobs created and being involved in the revival of the bus and taxi industry.

Local procurement initiatives had to have maximum countercyclical effect. The Department and the dti were working on the designation of sectors, backed by the Local Procurement Accord and the PICC was setting targets for the Local Procurement Accord. The Department was working with the South African Institute of Chartered Accountants (SAICA) to support SMMEs and working with Treasury and other departments for them to implement payments to suppliers within 30 days as requested by the President in SONA.  The President had referred to the October 2012 social accord that improved conditions in the mining belt and social dialogue was becoming increasingly important for social cohesion and mobilisation. The Department was monitoring spending and progress on renewable energy projects of the green fund as well as monitoring the roll out of Solar Water Heaters (SWH) and monitoring progress on household connections to the electricity grid.

The President had focused on youth unemployment and had asked NEDLAC to discuss incentives. Agreement had been reached on key principles which should be signed off in the near future. Outcome 4 - decent jobs were being monitored via statistics and construction reports. The Department was supporting the move for greater balance between the primary, secondary and tertiary sectors. The Department was finalising its Annual Performance Plan (APP) and would present it to the Committee in mid-March.

Discussion
The Chairperson said the Department could present it together with the Strategic Plan which was due on the 12 March.

Mr X Mabasa (ANC) asked how the SWH project was being developed to ensure job creation for the unemployed and to create entrepreneurs. What plans did the Department have for the Small Enterprise Finance Agency (SEFA) so that it was effectively located?

Mr K Mubu (DA) asked whether there was any coordination between PICC and Transnet on the latter’s infrastructure rollout. What programme was there to solicit public comment on the Infrastructure Development Bill? He added that the Committee had not had the opportunity to discuss this Bill. How were manufacturing companies that had benefited from distress funding being monitored?

Ms D Tsotsetsi (ANC) asked what was being done to prevent poultry dumping. What was the frequency of the monitoring of the green economy projects?

Mr S Ngonyama (COPE) asked where political responsibility resided in the case of PICC. He was concerned whether the infrastructure programme would create jobs. He was concerned over the maintenance of the SWH. Was the special fund for youth the same as the National Youth Development Agency (NYDA) programme? Where was the Green Fund located and how much money was in the fund?

The Chairperson said that the Department acted as the secretariat and the Department of Rural Development headed the ministerial cluster.

Mr N Gcwabaza (ANC) asked with regard to land required for the dig out port in Durban, whether the Department was referring to land between the airport and the sea and was this municipal or private land. Could the Department clarify what was meant by “the development of electricity lines”? Whose responsibility was it to establish manufacturing in sectors designated to be targeted to increase the beneficiation of primary products. He said it appeared the development finance institutions were not aggressive enough in their efforts to support the establishment of SMMEs.

Mr M Hlengwa (IFP) wanted the Department to respond on the extent of community dissatisfaction around the dig out port in Durban. What progress had been made on the target of 100% penetration by the year 2020? Who was implementing the monitoring of the green fund and against what targets? The integrated youth strategy had been submitted to Cabinet by NYDA. What was the plan now that agreement had been finalised by NEDLAC and where was the coordination between the two? The Deputy Commissioner of the Competition Commission had resigned. What was the state of health of the Commission?

Mr Z Ntuli (ANC) asked whether a task team was not needed for the green fund.

The Chairperson asked what the estimated number of jobs of all the planned infrastructure projects was. Who appointed SEFA’s board? She wanted a briefing on the Umtata project.

Ms Schreiner said she would go back and prepare a detailed report regarding the job creation numbers. The process of job creation measurement was a new process and was part of the monitoring mechanism which monitored not just investment and the end product but also job creation. The Infrastructure Development Bill was not yet before Parliament and a presentation would be done when it was. The details on the PICC would be given with the Strategic Integrated Project (SIP)’s presentation. The details on the dig out port would be checked and reported back to the Committee. The Department acted as a secretariat of the PICC and did not build the electricity lines itself. The Minister was applying his mind on the matter of the Competition Commission and it would be inappropriate for her to comment at present. He was looking at both the institutional capacity of the Commission as well as new legislation for the Competition Commission Act. The Department needed to prepare proper engagements with the Committee on the SWH and SEFA as it appeared there was an information gap.

The Chairperson wanted to know when the Committee would be briefed on developments around the amendments to the Act.

Mr Ngonyama said the situation surrounding the
Competition Commission Act was unacceptable and wanted a timeline on processes around that issue.

Ms Schreiner said information on the regulatory bodies would be provided in writing.

Ms Neva Makgetla, Deputy Director General for Policy, said distressed companies had benefited and some had created hundreds of jobs. The poultry dumping issue was more about what kind of tariff increase to impose, a dumping or general tariff increase. The Department, with the IDC, would give support to promote local capacity for local procurement to the industry.

Mr Gcwabaza asked which department was responsible for mining beneficiation.

Ms Makgetla, said it was not about pushing mining companies to beneficiate but rather about whether government had eliminated the obstacles to the beneficiation of mining products and at the same time to improve conditions for SMMEs to manufacture products.

Ms Schreiner said that SEFA would be doing a presentation the following week.

The Chairperson asked that the Director General be present.

Ms Thato Minyuko, Acting Deputy Director for Social Dialogue, said the PICC secretariat monitored implementation and whether the intergovernmental focus was aligned and sequenced. The PICC was the implementing and coordination agency and monitored its developmental impact on the economy. MOUs had been signed with private sector partnerships in four Strategic Integrated Projects (SIPs). A key challenge was changing and shifting the behaviour of departments to act as a quality control mechanism on the work being done. The Department was taking information and consolidating it into a dashboard. The Department could make available which Minister was responsible for which project. The Department was in the process of preparing a report on the Green Fund. The Department had learnt that government coordination had to be structured better. There was active and on-going coordination of the companies benefiting from the distressed funds through quarterly reporting on the impact of the intervention. The Department had set up working groups to develop a comprehensive strategy on anti-dumping and looking beyond that to support for the local industry. The broadband issue would be part of the SIP’s presentation. 

Mr Ngonyama asked for a timeline on the dam constructions.

Ms Schreiner said it would be part of the SIP’s presentation. She added that the youth employment initiatives were expected to be completed by the end of February.

The meeting was adjourned.


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