Economic Development Department (EDD) Annual Performance Plan 2013

NCOP Economic and Business Development

30 April 2013
Chairperson: Mr F Adams (ANC, Western Cape)
Share this page:

Meeting Summary

The Economic Development Department (EDD) briefed Members on its Annual Performance Plan 2013/14. The Economic Development Department had been established four years previously. It was now moving into a phase of implementing plans and policies. It co-ordinated with other national departments such as the Department of Trade and Industry (DTI), as well as other provincial and local government. A major focus was on the implementation of the National Infrastructure Plan and on the Industrial Development Corporation (IDC). The state of the global economy was a challenge. Social accords had been concluded in respect of education and training, skills, local procurement and the green economy. The Department had a 14% vacancy rate, particularly at senior management level.

Members asked questions around the delay in the implementation of the Economic Development Institute as well as the slow progress being made by the Department in developing Small, Medium and Micro-sized Enterprises (SMMEs). The Department was reminded of the mandate of the Members of the National Council of Provinces to represent their provinces, and Members requested more detail on where the Department had conducted its projects. More local content was needed. Members asked what contribution the Department made to job creation and the upliftment of rural areas. The Department however highlighted that its work had significantly improved over the last financial year, with jobs increasing up by 603 000, the gross domestic product (GDP) growth grew at 3% a year, inequality went down, women’s jobs went up to 283 400 and African exports grew and created about 25 000 more jobs. Added to that a R 4 trillion infrastructure plan was adopted.

 However, more work still needed to be done, especially in terms of reducing the high levels of youth unemployment. There was also a need to improve the performance of productive sectors such as agriculture, mining and beneficiation, manufacturing and agro-processing. The effective implementation of decisions also needed to be improved. Other new challenges included the worsening global environment, the rising costs of electricity and other user costs, as well as workplace and community conflicts.
 

Meeting report

Chairpersons’ opening remarks
One province was delayed and would be joining the meeting shortly. He then introduced the delegation from the Department and handed over to them to give a presentation.

Presentation by Economic Development Department
Ms Jenny Schreiner, Director-General, Economic Development Department (EDD) relayed apologies from the Minister and the Deputy Minister who were unable to attend the meeting due to various commitments. It was highlighted that the Department operated within a multi-year framework, which encompassed the Department's Strategic Plan. However the Strategic Plan was not normally revised annually and was expected to be tabled at the start of a new administration. Given the significant policy shifts, the strategic plan was tabled in March 2012. The Annual Performance Plan (APP) on the other hand set out the performance indicators and the budget which guided the work of the Department. These were broken down into quarterly targets. The Department then reported to the Minister, National Treasury and Parliament.

The Department’s strategic goal was to promote decent work through meaningful economic transformation and inclusive growth, and the goal statement was to provide participatory, coherent and coordinated economic policy, planning and dialogue for the benefit for all South Africans. One of the issues which was raised by the Committee to the Department last year was that of the policy mandate of the Department. The first leg of the policy mandate was integration, which looked at how to assist the existing functions and mandates of government departments to achieve better jobs and industrialisation goals. The second leg was coordination, which dealt with bringing development finance institutions and regulatory agencies into a common jobs-centred policy framework. The last leg of the policy mandate was that of implementation, giving effect to the EDD Annual Performance Plan and decisions of the executive structures of government.

The policy mandate was also embedded in a policy framework which was assessed annually. The frame work was made up by the State of the Nation Address (SONA) delivered annually, the National Development Plan (NDP) which was adopted in November 2012, the New Growth Path (NGP) strategy, adopted in October 2010, the National Infrastructure Plan (NIP), adopted in February 2012, and the Industrial Policy Action Plan (IPAP), adopted on the 2 April 2013. The policy framework also contained various delivery outcomes/ agreements. The legislative framework was also a part of the policy mandate, such as the Industrial Development Corporation Act 1940. The entities which reported to the Department were development finance institutions, the Industrial Development Corporation (IDC), the Small Enterprise Finance Agency (sefa), economic regulatory bodies such as the Competition Commission, the Competition Tribunal and the International Trade Administration Commission (ITAC). In addition were the MinMEC/ TechMECs which were joint initiatives between provincial Members of the Executive Councils (MECs) and the Economic Development Department. The Department of Trade and Industry (DTI) was also a partner in the initiative. Lastly, with regard to the Economic and Employment Sector Cluster, the EDD worked with other departments to drive coordination and to ensure policy integration.

Ms Schreiner outlined the policy integration framework within which the Department operated. There were three key policies in this regard, the National Development Plan, the National Growth Path (NGP) and the Industrial Policy Action Plan (IPAP), and the National Infrastructure Plan (NIP). The NDP provided the broad vision for overall economic and social development, and integrator to connect the various elements of public policy and implementation capacity. The NGP provided the economic strategy designed to shift the trajectory of economic development, including through identified drivers of job creation and achieving the NDP economic vision. This was led by the DTI. The IPAP guided the re-industrialization of the South African economy and gave effect to the NGP manufacturing jobs driver. The NIP gave effect to the NGP infrastructure driver.

The NDP contained a long term national vision for 2030, while the New Growth Path was a medium term structure. The NGP had various sub sections under it. These included infrastructures for employment and development, the economic sectors such as farming and mining value chains, manufacturing, tourism and high-level services. New economies were also part of the NGP, and these included the green economy and the knowledge economy. Investing in social capital and spatial development included rural development and African regional development. Other strategies included crime prevention, health and education, etc.

The target of the NGP was to create five million jobs by 2020. Its core strategy was to achieve jobs-rich growth. The focus was on job drivers based on key sectors and markets. The means through which the targets would be achieved were to achieve more integrated actions in the state and partnerships with the private sector. Social dialogue was therefore a key aspect to building South Africa through creating partnerships and social pacts. The NGP therefore linked long-term growth to employment creation.

Ms Schreiner outlined that the Department had achieved significant growth in some areas between October 2010 and December 2012. For example, jobs went up by 603 000, the GDP growth grew at 3% a year, inequality went down, women’s jobs went up by 283 400 and African exports grew and created about 25 000 more jobs. Added to that a R4 trillion infrastructure plan was adopted. However, more work still needed to be done, especially in terms of reducing the high levels of youth unemployment. There was also a need to improve the performance of productive sectors such as agriculture, mining and beneficiation, manufacturing and agro-processing. The effective implementation of decisions also needed to be improved. Other new challenges included the worsening global environment, the rising costs of electricity and other user costs, as well as workplace and community conflicts.

Ms Schreiner then discussed the National Infrastructure Plan, which was outlined by the President in February 2012. The plan outlined 18 strategic integrated projects which would cover the whole country. About 150 000 new jobs in construction were created as a result of state-led infrastructure projects monitored by the Presidential Infrastructure Coordination Commission (PICC). An example of this was the 675kms of electricity transmission lines, which were laid in 2012. This was the largest electricity project in more than 20 years. With regard to infrastructure and the role played by the Department, meetings between the PICC, the Management Committee (MANCO) and the Secretariat were held on a quarterly basis, and blockages were identified in the implementation process, with recommendation made to Cabinet.

With regard to the Competition Commission, the aims were to reduce input costs in the economy, increase the levels of competition, ensure merger to promote public interest goals such as small business development, and to investigate price-fixing and corporate collusion and to take firm action in these regards. As for the International Trade Administration Commission (ITAC), the goals were to promote improved trade levels with a focus on developmental trade policy which promotes industrialisation, and to reduce input costs for value-added products through lower tariffs, and to provide protection for industries as part of a plan to boost competitiveness and job creation. The IDC was the country’s largest development finance institution. The aims of the Department in this regard were to increase the levels of funding, decrease the time taken for the approval of projects, reduce the costs of lending to local companies, and to improve development outcomes such as job creation and rural development. Lastly, sefa was the new agency for small business funding. The Department thus aimed to consolidate the work and operations of the three merged groupings into an effective small business machine, to improve the levels of funding available, to measure the impact on Small, Medium and Micro-sized Enterprises (SMMEs) and cooperatives, to strengthen the capacity of local businesses in rural areas and poorer provinces, and to promote training and communication projects which supported small businesses.

The Mandate and work focus of EDD continued to evolve as government implemented larger parts of its electoral mandate and in the light of the roll-out of New Growth Path programmes. The Department had in place an internal audit and an audit committee. On a positive note, staff numbers increased by 14% over the past financial year, with 131 appointments by 31 March 2013. 146 posts were targeted to be filled by the end of the 2013/14 financial year. The Department had expanded its office space on the DTI campus.

Annual Performance Plan 2013/14
Ms Schreiner outlined that there was a shift in the Department from a focus on policy development to a greater emphasis on implementation. This provided for the reviews of progress on all Strategic Integrated Projects (SIPs) of the National Infrastructure Plan. Therefore entities that reported through the Department would be held accountable for their direct impact on jobs and development. The new indicator on jobs was the introduction of review on a quarterly basis. Development assessments would also be done for the agencies’ impact on jobs, women, youth and the rural population. Additional funding of R30 million was allocated in the 2012 budget to build capacity across economic sectors over the next few years. R5 billion was also made available to target financial commitment for targeted NGP sectors, small businesses and companies in distress. Small business entities would also have targeted road shows and stakeholder sessions to communicate facilities in government.

The Department's Annual Performance Plan (APP) set out the key products/ outcomes that it would deliver during the 2013/14 financial year. The APP had four programmes; Programme 1, Administration had five indicators with 21 outcomes. Programme 2, Economic Development and Budget had nine indicators with 28 outcomes. Programme 3, Economic Planning and Coordination had 14 indicators with 137 outcomes, while Programme 4, Economic Development and Dialogue had ten indicators and 42 outcomes. The Department's outputs increased from 148 to 228 outputs from the previous financial year. This reflected the growing capacity within the EDD.

The budget expenditure for Programme 1 was estimated to be at R 64 million for the 2013/14 financial year. The spending trend reflected that the spending focus over the medium term will be on expanding and building capacity in support functions, such as information technology (IT), finance and human resources. The bulk of expenditure in this programme over the medium term went towards spending on compensation of employees, machinery and equipment, and the related goods and services, such as operating leases and travel and subsistence. The budget estimate for Programme 2 was at R 26 million. The bulk of spending would be in the Growth Path and Creation of Decent Work and the Economic Policy sub-programmes, and would go mostly towards compensation of employees. Over the medium term significant increases in expenditure were expected in the Second Economy sub-programme to allow the Department to promote strategies and policies that grow an inclusive economy, and advance economic activities to address youth unemployment. This included developing the economic developmental index and holding consultations on the national infrastructure plan with key stakeholders.

Expenditure estimates for Programme 3 were at R 664 million. The spending focus over the medium term period would be on strengthening the institutional capacity of the competition bodies, development finance institutions and trade administration for which the department had an oversight function. Between 2009/10 and 2012/13, the transfers to the regulatory bodies increased significantly as a result of transfers to the Competition Commission for the establishment of the cartels division and associated staffing costs. Spending on goods and services was expected to decline significantly due to the reprioritisation of spending on consultants and professional services, while spending on compensation of employees was expected to increase due to improved conditions of service.  The spending focus in Programme 4 (see tables, slides 35-36) would be on increasing the co-ordination of policies on economic development through the activities of the National Social Dialogue and Strategic Frameworks and Capacity Building for Economic Development sub-programmes.

Ms Schreiner concluded that in less than four years the EDD had established itself and built its initial capacity. In the past year it leveraged off this capacity to strengthen its work and impact. The Department played a key role in the development of strategic frameworks, the NGP, Outcome 4, the development of the National Infrastructure Plan and alignment between the NDP and existing frameworks. It also coordinated social dialogue which resulted in five key social accords. The level of infrastructure funding increased significantly over the past year, and one of the Department’s key focus was the implementation of previously developed policies and plans including the Industrial Policy Action Plan (IPAP).

Discussion
Ms B Abrahams (DA, Gauteng) asked about the R 4 trillion infrastructure plan and wondered whether the R1 trillion nuclear plant was part of that. How many sustainable jobs would be created in the factory in Cape Town? What was the Department doing to develop SMMEs in the provinces? Where there any mentorship programmes in place?

Mr D Gamede (ANC, KwaZulu-Natal) requested that the Department supply all accords for the Committee to distribute them throughout their constituencies. What role did the Department play in strengthening foreign missions? What progress had been made in the establishment of an economic development institute? Were there any tariffs being implemented for the imports of poultry? He also asked the Department to indicate how many vacancies had not been filled at senior management level.

The Chairperson asked the Department to elaborate on its work with companies in distress. A concern was raised about the lack of engagements with the NDP committee. The confusion between the NDP and the NGP were also a concern. What mechanisms were in place to improve the effectiveness of sefa? How did the NDP impact budget requirements of the Department? He argued that sefa and CIDA did not ‘talk’ to each other, especially at provincial levels. This had a negative impact on the growth of SMMEs.

Mr B Mnguni (ANC, Free State) argued that the NDP was being criticised by the COSATU, and asked how the Department drove its policies towards the implementation of the NDP.

Ms Schreiner responded that SMMEs was an area on which the Department had a strong focus. The Government took on board the importance of sefa and its marketing plan. As a result, as part of its corporate strategy, sefa aimed to go on various road shows to the provinces to make sure that the work of sefa reached local levels. Currently, a promotions package around sefa and government support was also in the pipeline. Other government initiatives included support for small businesses and corporations; an example was the annual heads of missions’ conference, driven by the DTI. She added that staffing questions would be responded to in writing. However the Department was facing a challenge in terms finding the perfect blend of skills. Regardless of this, the Department had plan in place to improve its staffing capacities. What happened to the companies in distress fund? A business hub would also be established in an attempt to mentor and support upcoming small business entrepreneurs, so that could contribute positively towards growing their sectors.

Accords would be provided. The Committee Secretary needed to provide the Department with an indication of the numbers. With regard to the 'economic development institute', the Department was looking at establishing a virtual institute rather than a physical one. The vacancy levels at senior management levels would be provided to the Committee in writing. Various posts have been advertised. With regard to NDP and NGP, it was important to recognise that policy development had taken place at varying different times, however the long term visions of both policies was in place and integrated planning was something the Department was committed to.

Dr Neva Makgetla, Deputy Director-General: Policy, EDD responded that in terms of sustainable jobs, the bulk of the jobs were in the construction industry, therefore should construction grow, jobs were sustainable. Increase in agriculture also added to increased job creation. With regard to the economic development institute, the Department was busy with the finalisation of two projects; the United Nations (UN) Department on Social Affairs provided support for corporate strategy and finalisation, also the Department was looking at developing long term strategies which would develop internationally competitive industries. In terms of job, in Limpopo the build programme increased medium household income and this was something that would be implemented to all provinces. She added that the NDP and the NGP were very much aligned; the main differences were that the NGP had a stronger focus on trade and exports, while the NDP had a longer-term vision. In terms of ITAC and poultry, the IDC was engaged to find out how the tariff could be increased. However, the free trading agreement signed with the European Union provided a challenge for the implementation of the fixed tariff.

Dr Senelisiwe Ntsele, Acting Deputy Director-General, EDD, and Senior Economist, EDD added that three task teams had been established to deal with the issue of imports, trade and transformation of the poultry industry. The intention was to formulate a sector strategy by the end of May 2013.

Mr Mnguni said that Europe was one of the main trading partners with South Africa. However, trading had declined as a result of the European financial crisis. Regardless of this, South Africa had a projected growth of 3.7%. How did the Department synchronise with other department such as DTI, to reach an attainable growth plan and strategy? 

Dr Makgetla responded that there was a problem with the increased deficit in 2008. Therefore the infrastructure plan was being amended.  In the long term, the Department was concerned with regional development work to insulate the region from international impacts.

Ms Schreiner informed the Committee that the Department set up specific productive sectors which pulled together various players in the economic cluster to look specifically at interventions from the productive sectors. Interventions were therefore put in place to address challenges in the productive sectors of the economy.

The Chairperson referred to the recent Brazil, Russia, India, China, and South Africa (BRICS) group of countries summit and said that 92% of India’s budget came from SMMEs and the informal sector. He asked how South Africa’s informal sector was being supported and developed in terms of policies. Concern was also raised about the high vacancy rates in the Department. What were the reasons of staff leaving the Department? What progress had the Department made in the establishment of the virtual economic development institute? He argued that the bulk of the Departments’ budget was spent on various oversight missions. What oversight mechanisms were in place to make sure that the budget was being distributed fairly to all the relevant sectors?

Ms Schreiner responded that the Department was committed to meeting its 146 cap with regard to staff capacity. However, the Department did not want to fill posts for the sake of filing posts. Therefore the Department had a deliberate recruitment strategy aimed at getting high quality staff. As for the reasons why staff was leaving the Department, there were various reasons for this. Some staff members were employed on contracts; others were transferred to other departments etc. As for the economic development institute, the Department was looking at establishing a virtual institute. She agreed that the bulk of the Department's budget was spent on entities; however a mechanism was in place to monitor the use of funds. For example, the allocations were done at various stages, where any major governance and/or policy challenges could be determined and assessed. The Department held quarterly meetings with all its five entities. The entities were assessed according to whether they met their predetermined objectives and how they were aligned with the Department's key deliverables. The work of the entities also had to be aligned with the priorities of the Department. Entities therefore had to report back to the Department on a quarterly basis. With regard to oversight, there were various mechanisms in place, such as interactions with the Minister. However there were still various areas where the Department still had to improve, such as improving processes and enhancing the capacity of entities.

Dr Makgetla responded to the question on SMMEs and said that most SMMEs failed within five years of being implemented, therefore setting up a sustainable market with functioning credit institutions was increasingly difficult. Added to that, most of South Africa’s informal sector was classified by street vendors. Such a sector could therefore not be charged tax; as such it did not contribute to national economic development. The Department was, however, in partnerships with other sectors and institutions to develop strategies to develop SMMEs. Work with the DTI was of high importance in this regard. The Black Economic Empowerment (BEE) Code amendments also had to be assessed.

The Chairperson referred to India as an example and said that 95% of India’s informal sector was tax based, and this was a great success.

Dr Makgetla responded that, in South Africa, there was a challenge with defining ‘informal sector’. In the case of South Africa, informal sectors did not pay tax, and it was therefore easier to support SMMEs which were usually registered institutions.

Ms Schreiner added that the Department appreciated the interaction with the Committee, and that the questions raised helped the Department to effectively implement its priority projects. Human Resources (HR) issues were, however, being taken into consideration and would be dealt with. As for the budget, the Department did not foresee any significant changes seeing that the nature of the Department had not changed.

The Chairperson said that the Committee appreciated all the amount of work and efforts made by the Department.  He added that in terms of coordination and giving policy direction, the Department was a key player. Economic development spiralled down to the provinces, and so the Department was doing a great job in this regard.

Committee minutes: adoption
The Committee adopted, without any changes, its minutes for 04 December 2012, 26 February 2013, and 19 March 2013.

The Chairperson added that the Independent System and Market Operator Bill was being retagged and would be referred back to the Committee. Members needed to go back to their provinces to present the Bill. However, Members would be informed accordingly.

The meeting was adjourned.
 

Present

  • We don't have attendance info for this committee meeting

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: