Minister speaks on Economic Development Annual Performance Plan for 2013

Economic Development

15 April 2013
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Committee met to receive a briefing from the Department of Economic Development on its Annual Performance Plan and to review the work of the Department through its strategic plan for 2013/2014 within the context of the five year strategic plan. The Minister of Economic Development and the Director General of the Department of Economic Development led the delegation which briefed the Committee.

The Minister of Economic Development provided the Committee with an overview of the performance of the Department. This overview contained details on the planning framework used by the Department, the economic development policy context, progress made and the challenges facing South Africa’s economic development.

With regards to progress made, the Minister told the Committee that from October 2010 to December 2012, there had been an increase of 603 000 jobs and women’s jobs had increased by 283 400. African exports and trade with other African economies had directly generated 25 000 jobs and there was a labour intensity growth from 0.8 to 0.9. The biggest job gains were recorded in Gauteng, Limpopo and KwaZulu Natal. The ratio of unemployed dependents declined from 2.86 to 2.77. South Africa was now a member of BRICS. During the period under review, Gross Domestic Product of 3% a year had been recorded and capital stocks had increased by 6.8%. The country had registered a significant decrease in inequality. Industrial Development Corporation (IDC) funding of R30 billion had been approved and a R4 trillion infrastructure plan had been adopted. Manufacturing productivity was up and factories were using more capacity. International tourism was up two times above the global rate and new film studios and film productions had been registered. There had been new investments for the BMW 3-series, Ford Ranger, C-class Mercedes Benz and African Taxi production.
The Minister outlined the role of the Department of Economic Development in relation to the National Development Plan, the National Growth Plan, the Industrial Policy Action Plan, and the National Infrastructure Plan. The role of the Department was highlighted within the context of the complementary function of the Presidential Infrastructure Co-ordinating Commission. The Committee was presented with 38 key performance indicators against which the Department's performance was going to be structured and measured.

The Minister of Economic Development told the Committee that although much had been achieved, more still had to be done. The challenges of the economic development sector included unemployment levels that were still high and youth unemployment was a particular challenge; there was the need to improve performance of the productive sectors of the economy; and the effective implementation of decisions needed to be improved. There were new challenges from the worsening global environment, rising electricity and other user costs and workplace and community conflicts. 

In the discussions that followed the briefing, Members asked questions related to the projects envisaged by the Department for the 2013/14 financial year. The department was asked to account for the funds and appropriation of financial assistance given to companies in distress. Some members insisted that the Committee should be provided with a list of all the beneficiary companies to the funds for companies in distress. Questions were also asked about the education of small communities and small business on government initiatives and opportunities and the placement and employment of youth after training.

The Committee asked about allegations of HR problems within the Department and complaints from staff about the department’s management. It also requested the vacancy rate and turnover rate within the Department. 

Meeting report

 

Introduction by the Chairperson
The Chairperson welcomed Members of the Committee, the Minister of Economic Development, Mr Ebrahim Patel, and the delegation from the Department of Economic Development. She said that the Committee intended to review the work of the Department through its strategic plan for 2013/2014 within the context of the five-year strategic plan. The Annual Performance Plan was intended to outline the progress registered with regards to the strategic plan.

Presentation by the Economic Development Department (EDD)
Overview by Minister Ebrahim Patel
The Minister of Economic Development told the Committee that he was accompanied by the Director General of the Department of Economic Development, Ms Jenny Schreiner, and a high level delegation from the Department of Economic Development.

Background to EDD Planning Framework
Minister Patel said that the planning framework of the EDD comprised of the Strategic Plan and the Annual Performance Plan (APP). The Strategic Plan was a multi-year framework within which the Department operated. The Strategic Plan was not normally revised annually and it was expected to be tabled at the start of a new administration. The APP, on the other hand, was an annual plan that set out the performance indicators and budget that guided the work of the Department. These were broken down further into quarterly targets where appropriate. The Department reported on its performance against targets to the Minister, the National Treasury and Parliament.

Economic Development Policy Context
Minister Patel outlined the strategic goal and statement and policy mandate of the EDD. Of importance in the policy mandate of the EDD were integration, coordination and implementation. The policy mandate also comprised of the legislative framework within which the EDD operated, signed accords and institutions such as the Presidential Infrastructure Co-ordinating Commission (PICC), MinMEC and the technical MinMEC. This was all functioning within the Economic and Employment Sector cluster.

With regards to integration, the three main policies were the National Development Plan (NDP), the National Growth Path (NGP) and the Industrial Policy Action Plan (IPAP).

Within the context of the EDD, the NDP was a broad vision for overall economic and social development. It was also an integrator to connect the various elements of public policy and implementation capacity. The NGP was an economic strategy designed to shift the trajectory of economic development, including through identified drivers of job creation and achieving the NDP economic vision. The IPAP guided the re-industrialisation of the South African economy and gave effect to the NGP manufacturing job drivers. In this context, the National Infrastructure Plan gave effect to the NGP infrastructure driver.

Overview of progress made
Minister Patel provided details of progress in some areas from October 2010 to December 2012. In this regard, there had been an increase of 603 000 jobs and women’s jobs had increased by 283 400. African exports and trade with other African economies had directly generated 25 000 jobs and there was a labour intensity growth from 0.8 to 0.9. The biggest job gains were recorded in Gauteng, Limpopo and KwaZulu Natal. The ratio of unemployed dependents declined from 2.86 to 2.77. South Africa was now a member of BRICS.

During the period under review, Gross Domestic Product of 3% a year had been recorded and capital stocks had increased by 6.8%. The country had registered a significant decrease in inequality. Industrial Development Corporation (IDC) funding of R30 billion had been approved and a R4 trillion infrastructure plan had been adopted. Manufacturing productivity was up and factories were using more capacity. International tourism was up two times above the global rate and new film studios and film productions had been registered. There had been new investments for the BMW 3-series, Ford Ranger, C-class Mercedes Benz and African Taxi production.

Minister Patel further briefed the Committee on the National Infrastructure Plan and the role of the EDD. The major roles of the EDD included the convening of meetings of the PICC and the Secretariat; collecting information on 18 Strategic Integrated Projects (SIPs) every quarter for Cabinet, showing levels of implementation, spending and jobs; coordinating information to develop Skills Plans for every SIP and aggregating these into a National Skills Plan. The EDD was also charged with working with the IDC on a localisation plan for every SIP; collecting and analysing data on quarterly infrastructure spending by key public agencies, provinces, metros and national departments for Cabinet to consider. Most importantly, the EDD had to identify blockages in implementation and make recommendations to the PICC and Cabinet. EDD monitors worked to deepen the 20 year project pipeline by ensuring proposals were subjected to feasibility processes and that the necessary timelines were developed.

The Minister outlined the function of the IDC and Small Enterprise Finance Agency (SEFA). SEFA was the new agency for small business funding. It was charged with consolidating the work and operations of the three merged groupings into an effective small business funding machine. The objective was to improve the level of funding available and measure the impact on SMMEs and cooperatives.

The EDD was involved in numerous dialogue platforms and had signed several accords. It was working on implementing the Accords on National Skills, Basic Education, Local Procurement, and Green Economy. The EDD was in the process of completing the Youth Employment Accord which was going to be signed before the end of the week.

Minister Patel then went ahead to give an overview of the development of the EDD from 2009 to 2013. He summarised this in 10 phases which started from the establishment of the Ministry up to the launch and implementation of the infrastructure plan in 2013.

The EDD had received unqualified audits since its establishment and the necessary governance structures were in place. These included internal audit structures, audit committee, bid adjudication committee, supply chain management capacity and HR related committees. Staff numbers had increased by 14% over the past financial year and 146 posts were targeted to be filled in the 2013/14 financial year. The EDD was expanding its premises to new offices on the DTI campus with 2056 square meters of new space allocated during the past financial year.

Minister Patel then referred the Committee to the 38 key performance indicators (KPIs) covering the four programmes of the EDD which were contained in the Annual Performance Plan.

Challenges
Minister Patel told the Committee that although much had been achieved, more still had to be done. The economic development sector was facing the following challenges, amongst others:
- Unemployment levels were still high and youth unemployment was a particular challenge;
- There was the need to improve performance of the productive sectors of the economy. This included manufacturing, mining and beneficiation, agriculture and agro-processing.
- The effective implementation of decisions needed to be improved;

Minister Patel said that there were new challenges from the worsening global environment, rising electricity and other user costs and workplace and community conflicts. 

Discussion
Questions
In response to a request by the Minister that the Committee should allocate time for a presentation by the Director General, the Chairperson said that the Committee had allocated only one hour for the presentation and that time had been used by the Minister. She said that the overview by the Minister was very informative and formed sufficient basis for engagement and discussion with the Committee. She urged members to raise all concerns which they had notwithstanding the fact that a more technical presentation had not been given by the Director General.

The Chairperson said that the organogram of the EDD had to be improved as there was need for capacity to be improved to meet the challenges which had been identified. The alignment of the budget of the EDD also had to be presented to the committee at a later stage. She asked what the projects of the EDD were for 2013/2014.

Mr H Hoosan (ID) thanked the Minister for the informative presentation and overview. With regards to KPI 11, he said that it was time for the government and the EDD in particular to make its mark in the development of the economy. He had noticed that there was a lot of duplication on the delivery of outcomes within government. All of the KPIs were important but it was critical to ensure that the creation of jobs was of top priority. It was of critical importance to ensure that the poorer communities got the necessary education on economic assistance and opportunities. What had the EDD done in this regard? He said that money and financial assistance had been made available for companies in distress but the committee had struggled to no avail to get the list of companies being assisted and the amount of money being given to them.

Ms D Tsotetsi (ANC) said that in 2008 there was a lot of money put aside for companies in distress. It was important for the committee to get the list of beneficiaries in terms of gender and race as there were people benefiting from more than one department. What was being done by the EDD to ensure the employment and placement of youth after training? What was the EDD planning to do about staff turnover within the Department?

Mr K Mubu (DA) said that the interruptions at the Medupi power station were a critical blockage to the economic development of the nation. What was the EDD doing about this? What was the Department doing about youth unemployment? How far was the implementation of the youth employment programmes? With regards to the NDP, he asked how the NDP could be achieved if there was no complete agreement within the ANC for the entire implementation of the NDP. What is the position of the EDD on mergers such as that of Walmart and Massmart within the context of government?

Ms M Mohososi (ANC) said that the concentration of economic development was focused on the main metro areas and big provinces. What was being done about the development of rural areas and other smaller and less developed provinces?

Mr Z Ntuli (ANC) said that it was important for the EDD to give specific and measurable data on the creation of jobs and progress made with the various projects. What was the vacancy rate in the department? Could the EDD create a college to enhance the training and development of entrepreneurs?

The Chairperson asked what were the types and purposes of the agreements which the EDD had entered into. She raised concerns about the HR processes and treatment of staff within the Department. There were situations where staff were forced to leave the EDD because they were frustrated with the department. This created issues which were unnecessary and could be avoided. She requested the Minister to comment on this concern.

Responses
Minister Patel said he would respond to most of the strategic and policy matters raised by the members. KPI 11 was exactly what the EDD was planning to do. Integration was the major issue and it had to become cross cutting in the achievement of its goals. On the issue of jobs, before the end of last year, job numbers grew so there were increases especially in net new jobs. The source of his statistics was Statistics South Africa (StatsSA). On targets, the EDD was focusing on African trade within the context of the NGP and thousands of jobs were being created out of just trade within Africa. Global growth had continued to be a major driver to the economic development targets in SA. Jobs could be created in the short term by improving trade with new markets. However, long term job creation had to be done via sustainable and long term infrastructure growth. There was significant increase in the net job growth and this was not usually noticed by the public at large. The challenge was not meeting the job target but sustaining the country at that level. He said that it was important to note that there were short and long term jobs so a job for two weeks could not be considered as a job because it was very temporal. There was the need to ensure that targets and indicators were well understood and reported within the appropriate context.

On the educating of poorer communities, Minister Patel said that KPI 23 was the main instrument for this. The EDD had said that there needed to be 12 road shows to highlight the initiatives which government had for SMEs and smaller communities. An impact really had to be made in communities to assist in the education of poorer communities on opportunities. It was a new KPI.

On companies in distress, there was a KPI which set a financial target for the outflow of money from government to companies in distress, SMEs and NGP projects. This money was coming from the IDC and SEFA. Last year the IDC got a loan from the China Development Bank. Only a little portion of the money was for companies in distress. The idea of companies in distress came from a fund set up by the IDC to support companies which were affected by adverse global economic situations and not ordinary cash flow problems. It was not a grant but it was a loan. It was only given to companies whose distress was as a result of global issues and the company had a viable business plan.

The Minister said that he was going to prepare for the Committee a breakdown of the companies and beneficiaries to the fund. Companies were worried about the publishing of the distress list as it had dire market and credibility related consequences on these companies. This was the problem with releasing the names of the companies. A balance had to be struck between the oversight of these companies and the compromising of their sustainability. The EDD was however going to do a profile of the impact of the loans with regards to race, gender and economic situation.

Mr Hoosan said that he was not satisfied with the excuse of secrecy and global conditions. There were companies which were receiving money from the IDC which we not suffering from global issues.

Ms Tsotetsi said that it was not good for beneficiaries to be anonymous as there was the need for proper monitoring. It was true that it was a loan but it was also an opportunity for these companies so there was need for the Committee to know who these beneficiaries were.

The Chairperson said that in a previous meeting, this requested list had already been given to the Committee. The list was provided by the CEO of IDC. The list has been distributed to Members. The Committee had sought legal opinion on the issues and thereafter the list was released. The only list which was not released was the one containing very confidential information.  

Mr Hoosan said that he did not receive the list.

The Chair said that the list was going to be redistributed.

Minister Patel referred to skills and placements in the EDD and said management was working on the Youth Employment Accord and it was going to give recent updates to the Committee. He agreed to the concern that the youth were having problems getting placements after training.

On the blockages of infrastructure projects, the responsibility of government was to intervene when there was any crisis. On the Medupi situation, the Minister of Public Enterprises had led government’s intervention and that had been greatly publicized and was successful. The EDD did not know the future blockages so it could not cover it in its strategic plan. However, when such a blockage happened, the Department had to move in rapidly. The APP of the EDD was more complex as it had to respond rapidly to crises and shortages. Examples of this were common in the construction sector with shortages of cement, bitumen and other building material.
Unblocking of challenges in infrastructure projects was one of the major duties of the EDD but that had to be informed by the sector or area where there was a blockage. This was a job which required serious cooperation from the other departments.

The Chairperson asked how the EDD arrived at the decision to intervene in a blockage.

Minister Patel replied that the PICC met at least once a month and there were several Ministers who sat on the Commission. The blockages were identified and prioritized and the mandate given to the EDD for implementation. There was a lot of experience to be gained during the first year of the process relating to the budget and implementation. It was going to take the EDD close to two years to develop the necessary experience in clearing blockages and monitoring the impact of the process.

On youth employment, the Minister indicated that the signing of the Youth Employment Accord was going to be signed by Thursday, 18 April 2013 and the Committee was going to be updated on implementation.

On agreement on the implementation of the NDP, Minister Patel said that South Africa was a free and democratic country where people could freely express their views. There was consensus on many issues and that was very important as the NDP and its implementation was an ongoing process where everyone in the country was entitled to their opinion yet encouraged to align to the national process. 

On mergers, Minister Patel said that there was a single message which government was sending out and that the ultimate objective was to protect South African jobs, grow the economy and improve infrastructure. When Wal-Mart applied to come to South Africa and buy Massmart, they had to do it in terms of South African law. The EDD had to ensure that it complied with the law. The process had been followed and many positive things happened. The employment standards and judicial issues were complied with. The court ruled that a particular amount of money be given by Wal-Mart for local infrastructural development. There was no change in policy and it was all about South African jobs and the development of the economy.

Minister Patel answered the question on the focus of development on bigger provinces and urban areas, saying there were other initiatives for jobs in the other provinces. An example was Limpopo where there were several projects which created many jobs. Medupi was an example where over 15 000 direct jobs were created. This did not include other indirect jobs.

On the retention of staff, the presentation made reference to net increase. This included those who were still working and those who were added over and above those who left the department. The goal of improving the quality of the staff was much better than chasing the numbers.

The Chairperson asked for specific numbers on the growing of personnel and the approval of the EDD's organogram.

Ms Jenny Schreiner, the DG of the EDD, replied that there was a process to map the staffing against budget programmes. That was reflected in the strategic plan. The EDD was currently aligning the filling of posts per budget programme. The posts were going to be filled within the context of the current APP.

The Chairperson said that the transitional structure of the EDD should be given to the Committee.

Ms Tsotetsi asked if there were other means of recruiting besides advertising.

Ms Schreiner replied that the EDD had embarked on a head hunting process.

On economic institutions and colleges, Minister Patel said that he had reviewed the IDC's work on supporting colleges. That was going to be made concrete after the signing of the Youth Employment Accord later this week.

Afternoon session 

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