Minister speaks on Economic Development Annual Performance Plan for 2013; Update on Presidential Infrastructure Coordinating Commission

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. 

After the lunch break

The Director-General responded to some human resources questions that were asked in the earlier session. The Transitional Structure of the Department had been approved and had been funded across the Medium Term Expenditure Framework (MTEF) to the value of 166 posts for three years. Out of the 166 funded posts they needed to ensure they fill 146 posts in that process.

The Minister of Economic Development briefed the Committee on the work of the Presidential Infrastructure Coordination Commission (PICC), the role of the Economic Development Department (EDD), and what it was doing concerning skills development. The workshop was conducted in a Question and Answer session where Members of the Committee asked questions and the Minister responded to these.

Members asked question that related to infrastructure development, what the EDD was doing in the infrastructure development especially that it was coordinated by the Minister, clarify on the empowerment of small businesses and cooperatives, clarity was sought on the role of Financial Development Institutions (FDIs), explanation on the question of security at sea and the integration of African continent in the infrastructure built programme.

The Minister gave a brief history in terms of when the infrastructure development started back in 1652 and where it was going, which areas they were focusing in infrastructure development and job creation. He explained that Government was working on an integrated infrastructure development programme connecting different parts.  The PICC managed 18 major projects, it didn't go out and do major construction but coordinated the activities and more than 110 individual construction projects involved. They range from very large like Medupi plantwhich when completed would be something of R100bn or more to a small project which was 50 schools built in the Eastern Cape. The Kusile plant in Free State employed 11 000 workers and Medupi in Limpopo employed 16 000 workers.   

The Members of the Committee appreciated the engagement and informative workshop with the Minister.
 

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 

Discussion
Ms Jennifer Schreiner, Director-General (DG) of the Economic Development Department (EDD), said that in terms of the structure of EDD there was a transitional structure that had been approved and it had been funded across the Medium Term Expenditure Framework (MTEF) to the value of 166 posts for three years. However, the evaluation was that the EDD needed to move forward cautiously. But, because of the planning process they were involved in the last quarter, the EDD set a target of 146-155, moving to an outer year of 166.

Ms Schreiner explained that the EDD were currently in the process of finalising its operational plans. They were also looking at a spending plan, which was the costing of those operational plans and the process of identifying exactly which posts were being funded. Once they had this they would be able to move in ensuring that they have filled those posts. The EDD needed to make this clear to the Committee and they would come back at the end of May with a very clear statement of how they were moving forward on that basis.

Ms Schreiner replied that the planning process that the EDD went through in December, where they had been able to table the Annual Performance Plan (APP), had given them a clear understanding that they needed to review the capacity they needed so that they would be able to deliver. Therefore, some of the decisions the EDD had to make on which posts to fund that had resulted in the realisation that of the 166 posts, some of them would have to be refined. However, the current processes showed that the EDD was not at a point where they could say which posts would be filled or refined. The EDD’s concern was that the description of the JE process and advertising needed to be taken on board in order to be able to fill those vacancies. Of the 166 posts, it could be useful for the Committee to get a sense of how those posts were located across the budget programmes. Programme 1 was the Administration programme and of the 166 posts that had been funded, there were 77 posts for programme 1, there were 24 posts in programme 2, which was Economic Policy Development, 49 posts for Economic Planning and Coordination, and 16 funded posts for the Social Dialogue branch. Therefore, that was the way the 166 funded posts had taken place, but they were currently in a process of identifying which of these posts they needed to fill. The EDD planned to make this process visible for the Committee and National Treasury.

Ms Schreiner noted that this process also led to the question of retention strategy and how to ensure that the EDD received the necessary specialists. She indicated that they were in the process of hiring a head hunting company that would enable them to get the necessary specialist with the skills they needed in the Department.


The Chairperson thanked Ms Schreiner for the explanation. She said that the Committee had requested to see the Department's transitional structure, which tabled what the process was with regard to the 166 funded posts the DG was talking about. It was the ideal structure for the Department, hence the DG was saying they were reviewing it and would come back at the end of May.

Ms Schreiner clarified that the EDD would come back to the Committee by the end of May with clarity on those 166 posts for the current financial year. The ideal structured process would feed into the MTEF processes because five weeks was to short to do a complete restructuring. But against the transitional structure, the identification of those 146 posts that would be filled was what they would be able to come back with.

The Chairperson asked how long would it take the EDD to finalise the fully-fledged organogram of the Department for the year.

Ms Schreiner responded that it would take them until the end of May.

The Chairperson asked whether it would be the one that had been approved by the Public Service and Administration (PSA), National Treasury and the Minister.

Ms Schreiner answered positively that it would be approved by the PSA, Treasury, and the Minister.

The Chairperson said that the ideal structure was the one that the Department would come back to the Committee to tell them when it would be finalised.

Ms Schreiner said the Chairperson was correct.

The Chairperson said she wanted that to be clear so that everybody was clear on the matter and as a Committee they were appreciative of that because the 146 and 166 posts were confusing to them. But, whilst the Department was working on a new structure they should also give the Committee figures per programme. It would also be important that out of that figure of 77 for programme 1, the Committee had to know how it was structured because there was a current plan at the moment that the Department was improving on.

Ms D Tsotetsi (ANC) asked whether the EDD was going to headhunt a specialist through consultancy companies.

The Chairperson said that the DG was trying to clarify the issue of 146 posts against the 166 funded posts. It should be remembered that there were 166 funded posts for the MTEF, but the Department was saying that for this financial year they could not afford all 166 posts. Therefore, the EDD made a target to fill 146 posts. But that did not talk to the plans the EDD currently had, which Ms Schreiner said they were reviewing. The EDD and would come back at the end of May with a fully revised plan.

Workshop on the Presidential Infrastructure Coordinating Committee
Minister of Economic Development, Mr Ebrahim Patel, thanked the Chairperson for the opportunity. He said that he appreciated that the Committee had gone into workshop mode. In that context he would be guided by the Members because the Department had a presentation that was about 50 slides that would take two hours to explain the infrastructure programme, what EDD's role was, and what they were doing for skills development. Or the Members could guide them on what they were keen to focus on. He wanted it to be an interactive question and answer session.

The Minister further explained that the presentation prepared for the Committee was an attempt at a very high level summary. He requested Members to indicate what they thought would be helpful.


Mr K Mubu (DA) said that the Committee had listened to the Minister and his team for the past few hours, which was a little daunting. He suggested that they go through a question and answer session because the Members had seen the presentation and they knew what it was. But some of them would have questions since the announcement of the Presidential Infrastructure Coordination Commission (PICC) because there was not enough information coming out to inform not only them, but the public generally as to what extent the implementation was going. In the morning session they talked about the issue of job creation and there was a reference to the fact that a certain number of jobs were lost and certain number of jobs were created. They did not know whether those jobs were lost or created as a result of that infrastructure development programme or something else. Personally, he felt they should engage in a Q & A approach so that they did not get too bored.

Mr Z Ntuli (ANC) said that maybe the Minister could explain to them what the EDD was doing for infrastructure development particularly as the Minister was coordinating.

Mr X Mabasa (ANC) said that in addition to what his two colleagues had requested, could the Minister speak on an area that empowered small businesses and cooperatives because often when huge projects were undertaken it was often assumed that this project was so huge the only people that could provide it on time, qualitatively and quantitatively, were the long established business people. This had a one disadvantage, it enriched those that had been extremely rich, which was one danger, and then small businesses were exploited.


Ms Tsotetsi asked whether there was anything that could be said regarding Financial Development Institutions (FDIs) since the constitution of the PICC.

The Minister said that the country's Infrastructure Development Programme had been running for a very long time. It started in 1652 with a small infrastructure programme of trade between Europe and Asia. They set up water refreshments for the ships and set up a military fort in Cape Town to make sure that the natives who did not accepted their rule were easily dealt with. But infrastructure was part of any country's development, they had infrastructure development before in 1652, and they had infrastructure development after.

He stated that what was new was that Government was working on an integrated infrastructure development programme connecting different parts. The best illustration that could be given was to take the questions that Hon. Mubu asked on jobs. At the moment the PICC managed 18 major projects, it did not go out and do major construction but coordinated the activities of more than 110 individual construction projects. They ranged from very large projects like Medupi, which when completed would cost something like R100 billion or more, to a small project like 50 schools being built in the Eastern Cape. A 150 000 jobs were currently sustained in just those projects that the PICC coordinated. Of them, the single biggest one by far was the energy programmes because they were in the big built programme. The Kusile power station was the other big programme which had got about 11 000 workers. Someone said in 2010, the infrastructure programme was much bigger but he said the current infrastructure was much bigger. The difference was that in 2010 the infrastructure development was near the main airports and was visible to those who travelled a lot. Those were major projects that the PICC was involved in. Therefore, new jobs were coming through the infrastructure programme.

The Minister explained that some of the jobs were in industrial intensive areas, which were not only for building infrastructure. In the Northern Cape they were working on unlocking the manganese wealth and they were supporting the construction of infrastructure around a major manganese mine and centre plant, and construction was underway. They hoped that by June - July the construction of the centre plant would be completed. Once it is done, they would then simultaneously work on strengthening the manganese centre from the Northern Cape to the Eastern Cape exported through the port of Ngqura to ensure that the infrastructure in Ngqura was appropriate. Some of it would be processed locally, beneficiated in the Coega area which was next to the port in a manganese smelter plant. All of that would be called industrial infrastructure. So if one added all of that up, the multiplier impact of the infrastructure programme was the thing that was helping the creation of jobs in South Africa, and without that they would have been in a difficulty of weakening of the country's global markets. This was what the programme was about.


Mr Mubu said that the answer from the Minister in relation to the infrastructure and creation of jobs, was exactly what the Committee was looking at. During the World Cup in 2010, there was massive infrastructure development, like the stadium and so forth, which was visible to the public, and everybody could see what Government was doing. There were jobs that were created but were not sustainable for a longer time particularly in the construction area, and now those were gone. But, then the country was left with infrastructure, which became a bit of a white elephant and which came with a problem of maintenance and sustainability. On the other hand, there was the Gautrain project that was doing exceedingly well. The expectations were very high and exceeded performance in terms of use of it to pay back what it owes. That was a project that many people were proud of, especially those who come from that area where it was used so often. It was visible and brought pride even to the visitors who come from abroad. In the long term, the projects that the Minister was talking about would add to job creation and the value of infrastructure. But, the challenge was that not many people were aware of those projects, as they happened in the background. The only time people would hear about Medupi was when there was a strike.
 
The Minister said that it was true and if they take Kusile for example, which was in the Nkangala district of Mpumalanga and that was not a place people went to, a construction site outside the main metro area was only visible to the media. What they were going to be doing this year was to publicise all of these projects and money was set-aside in the EDD to do just that. The PICC and the Presidency would put some money into this publicising venture as well. The state infrastructure programme was about creating jobs but also about laying the foundations of long-term growth. Even though Kusile had 11 000 people, it was a massive programme, Kusile and Medupi employed close to 30 000 workers which was the size of all Sasol operations put together. Though there was not much visibility, people were employed and considered fundamental to a long-term growth potential. Security of energy supply was key and they got to put money to areas like Kusile and Medupi. EDD's role in that was to ensure that the programme working with partner departments met the targets in terms of deadlines. Many of these big projects had overshot the deadlines in the past. Since the PICC time they had to ensure they made up the time that was lost at Medupi through the industrial action and construction disputes this year. Their plan currently, was to make that time up in the next few months.

The Minister noted that as infrastructure was being built, the country had to avoid having “white elephants”. But the stadiums were not all white elephants because the country wanted to position itself to be a major venue for sport tourism. Therefore South Africa needed infrastructure like that. It should be remembered that the government invested a lot in the 2010 World Cup to visibly bring South Africa as a name into everybody’s mindset across the world. If one travelled across the world many people who never heard of South Africa who were soccer lovers had heard the country as of 2010. Two years after 2010, the country's tourism number shot through the roof. The country's tourism growth last year doubled the international average, doubled what was the global growth in tourism. Part of that reason was the exposure the country received in the 2010 World Cup, and you did not get that exposure unless you have a stadium. So, it was easy to get such exposure if you had sports infrastructure in place and made their Therefore, infrastructure should have a broader vision than just a return on sports facilities that were built.
 

The second part was that the infrastructure should connect the rural poor to the urban areas. A lot of the past infrastructure entrenched the old patterns of apartheid. The new infrastructure should connect roads to the rural areas and there were currently road works in the Eastern Cape linking metros and huge amounts of road works linking the N2, and that was the part of the Sihamba Sonke infrastructure project.

The Minister acknowledged that Gautrain was very successful but had cost the state a lot of money. The government’s focus now was not so much on building more Gautrains. There was an emphasis on the less glamorous, even more integrated public transport systems. So Joburg getting the Reya Vaya rights or MyCiti in Cape Town was very important. There were six major areas where the PICC looked at Reya Vaya every quarter, and the information was directly tabled to Cabinet. But within that, the PICC monitored currently Riya Vaya and MyCiti to see how much growth had been. In Nelson Mandela Bay they've got 15 kilometres of bus lanes. In eThekwini, they've got two phases they were working on that would be completed by 2018. In Rustenburg they've got the Rustenburg Transport Rapid System that they were supporting. And finally, in Tshwane they've got a R2 bn programme that was being rolled out. So they've shifted from big high speed trains to integrated inner-city transport connecting taxis, buses and trains much more seamlessly. The plans were coming together and parliamentarians who were using the transport system here in Cape Town could attest to that. Joburg was the most advance. When they've completed with this project it would be 12 cities that would be involved but they were starting with the 6 that had been mentioned above. The infrastructure programme therefore was shifting from large projects- like Gautrain- which was necessary and important in linking Joburg and Pretoria. In the new phase, the focus would be on inner-city transport.

The Minister said the role of EDD in this regard was that basically every week each of their members were in touch with a metro so as to get a report of what happened in the last three months within their integrated public transport system. If the metro was going on a bus tender process they had to sit with the Department to go through the tender conditions which specified local buses. If they had an under-spending the Department called the mayor and the Chief Financial Officer of the city to a meeting of the PICC where they would be given an analysis of spending that had been compiled and would be asked whether that was accurate, and what was the turnaround plan. They would then be invited three months later to at look whether the turnaround plan had been implemented.

The Minister addressed the question on the use of small businesses and cooperatives and highlighted that some of the programmes were focused on the groups. In the Eastern Cape they were busy with the completion of 49 schools and about half those contracts went to small companies where these were primarily contractors.  Medupi was a multi-billion rand project which involved complex technology. It was massive requiring 16 000 people. It was something that large companies tendered for and in return those large companies assembled sub-contractors which were small companies. So, for certain projects they were not capable to be designed and run by small businesses and for other projects they could be run by small businesses.

The Minister said that the school built programme consisted of 49 schools in the Eastern Cape. Every two weeks the Department received an update report on how the project was progressing. And in a month or so they receive photograph of the school showing the additional amount that had been built in that month. When there were problems, as sometimes they were, they stepped in and tried to solve the problem. In one case the contractor was not delivering and what they did was to help the project manager to put pressure on the contractor to withdraw so that a new contractor could be procured that would ensure that the schools were actually built. The most important step in unlocking the problem was information and it was not easy to collect information as it was from the outside. So they've build a lot of systems to get information and they got about 5 people who only collected information. They made phone calls around the clock and logged in thousands of calls per month just collecting information on the systems and the progress in the different parts of the infrastructure programme.

The Minister said that they promoted small businesses. They did that by ensuring that the large companies sub-contract but they could not run those contracts and they could not select the small businesses, they had to leave that to the contractor to do because somebody should take a responsibility for delivering the programme on time. For example, if they were to choose which companies Eskom should use for the power station and those companies let Eskom down then Eskom would not be able to deliver on public mandate it had been given. So they were very sensitive to small business and even wanted to change the tender conditions to require the big contractors to support the small businesses more actively, but the selection of small businesses was left to the main contractor.

The Minister said in terms of the question of DFIs, the Industrial Development Corporation (IDC) was currently supporting the infrastructure programme in a number of different ways. In the Kusile power station Eskom was the implementation agency. Eskom puts out a tender and that tender included all the equipment that had to be bought. In the past they've imported lot of the components, but now the IDC had partnered with a local company to produce the Air-cooled Condenser System and the IDC was providing co-finance to that South African company to be able to pick up that contract and provide the Air-cooled Condenser System. It was a massive contract which was probably about R2.5bn and would use an enormous amount of local steel that was produced in South Africa using South African iron ore. It was part of their beneficiation programme which would be using local iron and steel and would produce a finished product that goes into the Kusile power station. The IDC played an absolutely key role.

The Minister said that the other place the IDC played a key role was to ensure that there was enough investment in building materials. So the IDC had a partnership with the Public Investment Corporation (PIC) where they both had shareholding in 2 cement companies. The IDC had a joint venture with the one and the PIC had a shareholding in it and they were the 2 FDIs that helped to ensure that there were investments in the materials that were coming into the built programme. Therefore, if you look at IDC's work was very actively involved in the infrastructure programme.

The Minister said that the Development Bank of South Africa (DBSA) was another DFI that also played a role in the infrastructure. The DBSA's did so as project managers and were project managers at the moment for the school built programme for the Department of Basic Education in the Eastern Cape. The DBSA also project managed a number of projects at municipal level.

The Chairperson said that she was concerned with the issue of security in the maritime sector. She asked whether in dealing with the issues of intra or inter Africa development was the PICC looking to issues of security and making sure that when projects were implemented they did not put South Africans at risk when venturing out in the sea and be victims of pirates.

The Minister said that as government they've been concerned with the kind of piracy activities that were happening on the east coast which should not begin to manifest itself to the west coast, and they've seen some newspaper reports indicating challenges there. The South African Navy should play a role in keeping the sea lanes open. If Africa was cut off from trade from the rest of the world because of piracy, and problems like that the continent would face enormous problems. Because the population was growing, people's expectations were rising and they've got to create growth and jobs for a growing number of urban Africans, not just in South Africa but all over the continent. Therefore, their efforts were intended to help to create conditions for the country to benefit and since it was the largest economy in the continent it had a responsibility to safeguard its interests. 25 000 new jobs were created just in the last 2 years from things South Africa sold to the rest of Africa. Burundi would not be able to finance the kind of programmes that would keep South African sea lanes open. They could not keep on relying on the United State, France, China to keep Africa sea lanes and trade roots open. And ultimately Africans should be responsible for their own future and with it came risks which was a legitimate public debate of whether they've got to do it one or the other, in one area or the other, but in the end there had to be closing of ranks to the fact that they've got a responsibility to ensure that Africa remains part of the economic main stream.

The Minister concluded that if there was a big appetite by the Committee for a more detailed presentation on the African engagements he could be willing to talk to the Minister of International Relations and Cooperation because she coordinated most of their work and their thinking on specifics. It would also be very useful to give the overall presentation of the PICC to a number of different portfolio committees. But there were some areas of the infrastructure work of the Department that were vital to the Economic Development Portfolio Committee for its own focus like the area of small business and cooperatives as asked by Hon. Mabasa. Infrastructure and skills was also another area which the Committee could play a key role.

The Chairperson thanked the Minister, the DG and the delegation from the Department. She said the President did not made a mistake by appointed the Minister and Minister Nkwinti from Rural Development to head the PICC work. It was an ambitious programme especially with the responsibilities it had given over the Continent integration. It would also be important to have quarterly briefings possibly with other Portfolio Committees because it was quite informative and many questions would still need answers as the programme move forward like skills transfer, and how many African companies would benefit from this huge infrastructure built programmes.

The meeting was adjourned.
 

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