Department of Trade and Industry 2013 Budget & Strategic Plan: Adoption of Committee Report

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Trade, Industry and Competition

10 May 2013
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Portfolio Committee on Trade and Industry considered, and finally adopted, with amendments, the draft Committee Report on the Budget and Strategic Plan of the Department of Trade and Industry. Members discussed how issues to do with industrialisation should be presented and thought a reference should be included, historically, to the Industrial Policy Action Plans, and noted that the word “reinforce” would be used to emphasise that South Africa had not started from a zero base. One Member suggested that the issues around trade unions and labour issues should be highlighted, but others felt it was not appropriate in this Report. It was important to include mention of the global economic impact, and Members debated the issues around consumption and production, stressing that consumption of locally-produced products would have positive impact. One of the important aspects to the Committee was that the country must expand its presence in missions overseas, and that sufficient funding must be allocated for trade and export promotion.  Funding for the National Consumer Commission was also discussed but Members did not want to pre-empt decisions on yet-to-be-established agencies. The threats to the manufacturing sector sustainability were highlighted and briefly discussed, together with the impact of wildcat strikes. The Committee also noted the process if the Committee wished to make recommendations for changes to the budget, and the involvement of the Appropriations Committee.

Meeting report

Department of Trade and Industry 2013 Budget & Strategic Plan: Draft Committee Report
The Chairperson suggested that the draft Committee Report (the Report) on the 2013 Strategic Plan and Budget of the Department of Trade and Industry (dti or the Department) should be scrutinised in detail, and Members should suggest their detailed amendments as the meeting went through.

She noted that the introduction to the Report alerted the Members to, and summarised, the issue of industrialisation between 2008 till date. The 2009 and 2010 reports would be made available to Members electronically. Attention was drawn to the challenges faced and the decisions taken. She did, however, note that there was no reference to amendments to the Companies Act and Intellectual Property Act, both of which must be included.  

Mr G McIntosh (COPE) pointed out that there was no inclusion of previously-raised issues on energy and electricity. He could also not recall discussions on the issue of Zimbabwe and trade agreements. In the Introduction, in the second paragraph, “re-industrialisation” was mentioned but he felt that the risk of de-industrialisation must be pointed out because it suggests a withered economy. There seemed to be an implication that industrialisation in South Africa was starting from zero level, and he suggested that the word ”reinforce” should be used instead.

The Chairperson replied that in the first paragraph, the risk of deindustrialisation was mentioned in 2008 which was emphasised by all the parties in 2010 hence the acceleration of reindustrialisation. South Africa was industrialized 40 years ago, was later de-industrialised when the focus shifted to mining and then industrialisation became a priority again in 2009. These developments were critical, and should be indicated.

Mr B Radebe (ANC) agreed that South Africa was industrialised long ago but with the problem of imposed economic sanctions, the rate of industrialisation went down drastically. In 2009, this Committee had to ensure that the factories formerly closed down were reopened.

Mr Radebe reminded Members that bilateral investments in regard to Zimbabwe had been deliberated upon previously.

The Chairperson informed Members that the prior reports would be given to everyone. She agreed with Mr McIntosh with the need to include the impact of the energy sector in the report.

Mr X Mabasa (ANC) agreed Mr McIntosh’s suggestion on re-industrialisation. An alteration should be made to present the issue as an independent and continuing decision, and not as one suddenly made in 2009. He suggested wording such as:  ”which was further reinforced”

The Chairperson reminded the Committee that the Industrial Policy Action Plan (IPAP) was first issued in 2008, and the reason for that was the fact that at the time that South Africa was at a de-industrialised stage. It was enforced in 2009 and there was merit in mentioning that.

Mr McIntosh pointed out that the emphasis in the Introduction should be on the acceleration of the industrialisation in the economy. Some people reading the current wording still might think that industrialisation in South Africa was starting from a zero base, as in Malawi.

The Chairperson acknowledged this and agreed that ”accelerate” would be used instead.

Mr Radebe reminded the Committee that this report was on the budget vote, which had not been adopted, so that should not be pre-empted.

The Chairperson, referred to page 3, in the first paragraph, which made reference to the fact that “in its oversight, every endeavour is made to ensure that legislation is confirmational, robust, implementable and constitutionally sound”. In relation to accountability, she referred Members to page 2, at paragraph 1.1, which stated that “this overview provides the economic platform for the committee’s budget oversight to ensure the accountability of the executive and the accounting authority, within a good governance framework that serves the people”. This was the mandate for the Report.

Mr McIntosh confirmed that the word ”catalytic” was appropriate. However, at page 3, in the first paragraph, he said that the words “robust, implementable and constitutionally sound” were repetitive and should be deleted.

The Chairperson also amended the phrase: “every endeavour is made to ensure that legislation is confirmational and constitutional.”

Mr McIntosh referred to the comment that due to the lack of competitiveness in declining trade, the trade industry should not be blind to the impact of trade unions. The Committee must address the issues around Congress of South African Trade Unions (COSATU). Nigerian businessman Mr Aliko Dangote had said that South Africa’s laws and policies would have to be reviewed in order to attract more investment. South Africa must recognise that one of the main challenges related to the costs associated with the labour situation.

Mr Radebe reminded the Committee that a budget was being dealt with, not a debate, and appealed to Members to refrain from making commentaries about programme issues. South Africa was still the foremost African country that attracted the most direct foreign investment. Any country where the labour was not protected would give rise to disaster, such as in Dakar. He pleaded with Members to focus on the Report.

Mr N Gcwabaza (ANC) also thought that it would be dangerous to deal with individual social partners such as COSATU in this report.

A Member made the point that South Africa’s challenges in 2009 included a decline in the textile sector which was associated with job losses, yet the only aspect identified in the Report was the lack of competitiveness. The textile industry and other sectors faced challenges due to the reintegration and globalisation, especially when South Africa was reintegrated into the global economy.  

The Chairperson replied that she agreed with making mention of the global economic impact, because South Africa had previously had an isolation economy. When the need for competition was identified, the competition laws were introduced to broaden and open up the economy so that others could enter as players into the economy and overcome some of the monopolisation that had occurred in the past. She requested input from the Committee whether ”due to lack of competitiveness” should be included or left out.

A Member suggested its inclusion.

Mr McIntosh raised concerns with the last sentence referring to “the transformation from a consumption driven to a production driven economy”. Consumption and production were not an either / or situation and he noted that consumption was not necessarily bad as it could bring very positive contributions to the economy.

The Chairperson confirmed that if the product was domestically produced, then consumption may have impact. She suggested a rephrasing, to read: “a transformation to a productive driven economy is imperative to reduce the current account deficit”. It was not desirable to have consumption based on impulse.

Mr Radebe, on the basis of previous reports, noted that South Africa’s growth between 1999 and 2000 was consumption driven, which meant that the consumers went into a lot of debt to satisfy their consumption needs, instead of securing debts for productive purposes. The phrase should therefore be left unchanged.

The Chairperson added that the Committee was not saying “no” outright to consumption but was emphasising that the economy should be productive driven.

Mr G Hill-Lewis (DA) noted that “in or of” must be inserted after the word ”decline”, in the third line of paragraph 3.

The Chairperson referred to page 10, noting that ”broad participation” included not only Broad-Based Black Economic Empowerment (BBBEE) but a broadening of participation in Africa. The Small Enterprise Development Agency (SEDA) provided support, not funding.

Mr McIntosh suggested that the word ”input” in the Introduction should be replaced with ”presentation or report”.

Mr Hills-Lewis noted that the word ”informed” should be removed from paragraph 11.5 which should then read“ RSA needs to be…”.

Mr Mabasa said the issue of recycling should be included in paragraph 11.4. He proposed that the rest of the world be named; it was not only the South that was important, in paragraph 11.6.

The Chairperson referred to Russia and India, and noted that Russia was referred to as part of the “North” and there was also reference to “South Africa will maintain its links with traditional trading partners such as EU and United States” but also pursue new markets.

The Chairperson referred to paragraph 11.7 and suggested that, in the last paragraph, the issue of the Board should be moved to the recommendations.

Mr Hill-Lewis pointed out two misplaced words; the reading should not be “promotion and trade”, but “export and trade promotions”

Mr Radebe raised a concern that he was not sure whether enough resources were being spent on the issue of trade promotion and exports.

The Chairperson said the real issue was expanding South Africa’s presence in its missions overseas. This may require a review of the programme allocation.

Mr Mabasa added that permanent presence meant the missions were already established, but there was a need to deploy presence into the missions.

Mr Radebe informed the Committee that South Africa did not have a Chamber inside China. There should be a trade attaché from South Africa in that area.

The Chairperson said that the dti was not allocating enough funds for export and trade promotion. Therefore in paragraph 11.9 she suggested that in the sentence reading ”The committee is of the view that dti needed to establish a permanent presence in foreign mission in strategic locations”, the word “pending” should be included before the reference to establishment.

Mr Radebe noted that there was an agreement that the National Consumer Commission (NCC) was under-funded but there should not be pre-emption on the yet-to-be-established agencies, because the allocations that would be given to them were unknown.

The Chairperson agreed with the remarks on BBBEE, because the BBBEE Amendment Bill had not yet been passed and would be established in the next, not the current financial year. The National Regulatory for Compulsory Specifications (NRCS) was not under-funded because it raised sufficient funds through production of licensing.

Mr Radebe, on the issue of co-option, said a huge amount of money could not be allocated.

Mr Hill-Lewis proposed an amendment to paragraph 11.9, reading: “ the allocation to the Consumer & Corporate Regulation Division Programme should be reconsidered, given the possibility of new agencies being created in the near future”.

The Chairperson added that a similar phrase should be removed from the conclusion and included in the recommendations.

Mr McIntosh said his concern was that South Africa faced high threats to the sustainability of the manufacturing sector, particularly from rising energy costs and constraints.  Another cause was high labour costs but there was no reference to this.

The Chairperson replied that there were two factors involved in labour costs. One was the internationally-acknowledged and unacceptable gap in the country. However, there was also the point that wildcat strikes could not be accepted, as this disrupted the economy. 

Mr Mabasa also pointed out that there were different interpretations to this issue. South Africa was rated second, if not first, in the world with regard to labour inequalities. This was because labour was not adequately paid.

Mr Radebe confirmed that there was a distortion of how much was being paid. The Minister from Germany had made the point that during the industrialisation of Germany, the unions demanded high wages which were complied with because the people were very poor. However, as they advanced, and when Germany received compensation from the rest of the world, labour had to step down and cuts were made. South Africa had not yet reached that stage of making settlements with labour and business. The issue of high labour costs must therefore be removed. The wildcat strikes must also be abolished because they had a high impact on the economy. Secondly, there was no ”slow-down” in infrastructure. There has never been so much spending on infrastructure, reaching the trillion rand mark.

Mr Hill-Lewis said it would be wonderful to spend R1 trillion on infrastructure. However, the first tender was only issued in September 2012. Whether the words “slow down” or “slow progress” were used, there were real challenges to the manufacturing industry. The phrase ”programme could potentially cause a threat” should be changed to ”pose a threat”.

The Chairperson added that there were other ways of interpreting ”slow down”, it may mean an interruption, but there certainly must be an agreement on what it means.

Mr Gcwabaza cautioned that the word ”slow-down” must be used with caution.

Mr Radebe suggested that the lead downtime of projects must be shortened.

The Chairperson said there was a need to expedite the development expected, and this would cut the lead time down which was currently perhaps three years in some cases, also extended by the wildcat strikes. The word “interruption” should be used, instead of  ”slow-down”. Some of the presenters appearing before this Committee, from United States and German companies, had agreed that the labour conditions in those countries where there were low prices were not comparative to South Africa’s legislative conditions and Constitution. This country would certainly not be aiming to have another revolution. There was a need for good and cordial relations between employees and employers.

The Chairperson adjourned the meeting for few minutes, so that few amended sections could be printed for the Members. She noted that the full document would be forwarded electronically.

The Chairperson pointed out that the budget was set out on page 3. The budget of the dti was R9.6 billion. This was broadly allocated, as follows: Industrial Development - 75%, Trade Investment and Export Promotion - 5.3%, Participation - 5.3%, Regulation - 2.7% and Administration - 7.2%. 

Mr Radebe suggested that the whole sentence about dti in paragraph 11.8 should be removed.

Mr Hill-Lewis reiterated that dti needed to spend more on Export Trade Promotion, but that the way the sentence was framed did not effectively set out the expected meaning.

The Chairperson said that the phrase ”to establish and fund a presence in Strategic Foreign Mission” should be included in paragraph 13.1.

Mr Mabasa proposed that the budget should reflect the importance of the developments. He asked whether this was covered somewhere.

Mr Radebe added that the Committee’s Researcher had been requested to get a speaker for the establishment of the Corporate Development Agency. The Department was still in the process of this development, and it should not be pre-empted.

Mr Hill-Lewis referred to paragraph 1.1, which set out the constitutional mandate of the Committee, and specifically asked whether the phrase “the Portfolio Committees are also advised ........for possible amendments within the budget vote for its consideration” meant that this Committee’s recommendations were automatically forwarded to the Appropriations Committee for its consideration.

The Chairperson noted that the recommendations had actually commenced with the Budgetary Review and Recommendation Report process. The Minister would review the recommendations and this would be reflected into the first quarterly report.

Mr Hill-Lewis noted that the Committee had the right not only to recommend to the Minister a re-allocation, but also to change the allocation, via the Appropriations Committee. He asked whether the committee recommendations would be considered by the Appropriations Committee at the appropriate time, or whether there was a need to insert this as a special recommendation that the matters must be referred to the Appropriations Committee.

The Chairperson replied that it they would reach the Appropriations Committee, but only after the full process.

Mr Radebe proposed that the Report be adopted, and Members did so.

The meeting was adjourned.


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