Trade incentives & offerings: Department Trade & Industry, National Empowerment Fund, Industrial Development Corporation, Export Credit Insurance Corporation briefings

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Trade, Industry and Competition

23 July 2013
Chairperson: Mr N Gcwabaza (ANC)
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Meeting Summary

The Department of Trade and Industry (dti), National Empowerment Fund (NEF), Industrial Development Corporation (IDC) and Export Credit Insurance Corporation (ECIC) each described and explained the specific incentives that they offered, across multiple clusters or sectors, to individuals or entities. The objective of offering the incentives was to promote industrialisation; broadening and deepening the industrial base and broadening participation in the economy for previously disadvantaged South Africans. The dti described its clusters for investment as enhancing participation, investing in competitiveness, and services investments. To broaden participation, it had expanded its support for smaller black emerging businesses quite substantially, with particular growth in the Black Business Supplier Development Programme (BBDSP). It had improved its provincial spread and partnerships, and was concentrating on gender-sensitive and youth business.  The Co-operative Incentive Scheme (CIS) had also seen significant improvement, with focus on successful and enhanced use of technology. The Incubator Support Programme (ISP) aimed to enhance broader participation of Small Medium and Micro Enterprises (SMMEs) through public/ private sector partnerships with existing businesses, to assist with skills transfers, enterprise development, supplier development and marketing opportunities. 48 incubators were approved, and R68 million was allocated to the programme. Its Manufacturing Competitiveness Enhancement Programme (MCEP) aimed to improve enterprise competitiveness and job creation, to prevent them falling behind technologically and enhance their ability to export as well as compete in the local economy. It comprised a Production Incentive Programme (PIP), managed by dti, and an Industrial Loan Facility managed by the IDC, which would assist companies in investing in equipment, enhance their enterprises and help create a demand for their products. The Export Marketing and Investment Assistance (EMIA) scheme incentivised small exporters to explore new markets and focused on bringing black female owned businesses into the fold. Traditional incentive programmes included the automotive incentive scheme, particularly the components manufacturing sector, with a Manufacturing Investment Programme for smaller manufacturers and a “12L” tax allowance programme for larger companies. In services, there was particular support to telecommunications, increasing the film industry, and Business Process Services and Critical Infrastructure Programme, which were created to attract foreign direct investment.

The NEF aimed to provide financial and non-financial support to black entrepreneurs in Small Medium Enterprises (SMEs) in South Africa. Overall, 519 black owned businesses had benefited from this funding, and other provinces were being encouraged to enter partnerships. NEF aimed also to address market failures, which could be due to lack of finance, lack of access to markets and lack of specific industry knowledge or management experience. NEF would continue to support investees over periods of around seven years, although some loans were repayable over longer periods. It provided toolkits to the companies it supported. It did, however, face some key challenges, including fronting, the legacy of the poor design of BEE in the early years, and cautioned that it had been unable to make any further disbursements because it needed to be recapitalised.

The IDC focused on job creation, the development of female entrepreneurs, marginalised groups and people with disabilities. The Support Programme for Industrial Innovations (SPII) had been running since 1993 to promote technological innovation within South Africa. Its Risk Capital Facility was established to provide gap funding to South African black owned SMEs, using funds donated by the EU, specifically for job creation. It was now concentrating on disbursing the remaining R150 million, and was exploring the possibility of recapitalising the fund to ensure continued support of the target market. Its Clothing Textiles Competitiveness Programme aimed to grow South Africa’s ability to compete internationally. It was involved, together with IDC, in reducing costs of funding to the manufacturing industry, implementing programmes for working capital, business support, and niche funds.

ECIC combined packages as one package in conjunction with other sectors, described the four key players in the South African export credit market scheme, and noted that its schemes were intended to incentivise local manufacturing and enhance the sustainability of existing jobs as well create new jobs. It warned that it was anticipating that its surplus funds, on which it relied to smooth budget shortfalls, would expire within the next two years.

Members noted the successes, but also enquired about the failures and challenges. Drastic change and more thought had to be given to changing the current ownership of the economy. Members asked if dti had sufficient staff to check the applications and approvals, and asked for clarity on the qualitative leaps that would be needed to build cooperatives further in South Africa. They wanted more information on incentives for those with disabilities, asked to what extent the dti fostered relationships with agents to promote its products, enquired about NEF’s write off of debt and enquired about the current situation and dti’s attitude to the recapitalisation call. They felt that not enough emphasis was put on creating new jobs and ensuring that they were sustainable. The questions relating to the NEF, further information on the African Growth and Opportunity Act and challenges to the economy, which were summarised as indebtedness and continued underdeveloped areas, were outlined but the other questions would be answered in writing.
 

Meeting report

Department of Trade and Industry (dti) incentive schemes
Mr Lionel October, Director-General, Department of Trade and Industry, presented a brief overview of the rollout of incentive schemes of the Department of Trade and Industry (dti or the Department), highlighting some of the achievements and challenges in each of the programmes implemented. The dti package of incentives was divided into multiple clusters, each packaged for a specific sector or a specific area of work, with the core objectives of industrialisation; broadening and deepening the Department’s industrial base and broadening participation in the economy for previously disadvantaged South Africans.

The incentives were broadly divided as:
- Broadening Participation, which included the Department’s largest scheme, the Black Business Supplier Development Programme (BBSDP) which had expanded over the past 12 months, the Co-operative Incentive Scheme (CIS), and Incubator Support Programme (ISP)
- Competitiveness Investment, under which the Manufacturing Competitiveness Enhancement Programme (MCEP) was created, as a response to the global slow down
- Traditional Incentives under the manufacturing category included the Enterprise Investment Programme (EIP), and 12i Tax Incentive
- Services Investment, which included film, television and the phone industry

He noted that through the Department’s targeted incentives, significant and viable business processing and new sectors were being created. 

Mr Tumelo Chipfupa, Deputy Director General: Incentives, dti, said that the Department had expanded its support for smaller black emerging businesses quite substantially, although the level of support overall constituted a small portion of the total support the Department provided to industries. The Black Business Supplier Development Programme (BBDSP) had seen significant growth in the past year. There had been a four-fold increase in the number of BBDSPs assisted directly by the Department, from 306 to 1 213, and the value approved rose from R96.6 million to R451.2 million. Dti had a specific objectives to get small black businesses with potential in the mainstream, businesses would be provided with business development services and cost sharing grants for technology. Dti had also improved its provincial spread and had innovative ways of appointing partners in different provinces such as Mpumalanga, Eastern Cape and the Northern Cape. Particular effort was made to support businesses that were gender sensitive and youth owned.

The Co-operative Incentive Scheme (CIS) had seen improvement, although not as significant as the BBDSP incentive. There had been substantial improvement in the support and increase in the total number of cooperatives that had been approved, from 182 to 314, and the value of the projects rose from R48 million to R85 million. The increase in the value was due to the successful use of technology and the modernisation of business technology, which enabled small business enterprises to enjoy faster and more efficient services from the Department. This had resulted in an improvement in the provincial spread as well.

The Incubator Support Programme (ISP) was meant to enhance broader participation of Small, Medium and Micro Enterprises (SMMEs) through public/ private sector partnerships with existing businesses to assist SMMEs with skills transfers, enterprise development, supplier development and marketing opportunities. Dti had overseen the approval of fourteen incubators, with a total of R68 million allocated to the programme.

The Manufacturing Competitiveness Enhancement Programme (MCEP) had assisted manufacturers to improve enterprise competitiveness and job creation, despite the uncertainty in the business environment and uncertainty with partner economies in the European Union (EU) due to global slowdown. The incentive sought to assist manufacturers from falling behind technologically, and would sustain the capacity for the production of manufacturing goods to be exported and competitively compete in the South African economy. The two key components highlighted in the MCEP incentive were the Production Incentive Programme (PIP), managed by dti, and the Industrial Loan Facility (IFLF) managed by the Industrial Development Corporation (IDC). These programmes sought to assist companies in investing in equipment, including energy efficient equipment, which would enhance the enterprise of a particular factory, and would assist companies to establish themselves internationally in creating a demand for South African products. In the past year, 197 projects were approved. He noted that approval for this programme was dependent on a company’s ability to retain employed personnel throughout the 2 year period of the incentive.

The Export Marketing and Investment Assistance (EMIA) scheme created two incentives to assist small exporters to explore new markets, and forced the Department to focus on bringing black female-owned businesses into the fold. The Sector Specific Assistance Scheme (SSAS) had been issued to target very small enterprises and introduce them to the export market at a very early stage. The Capital Projects Feasibility Programme (CPFP) provided South African companies to conduct feasibility studies in Africa. Africa was the second largest growth area, and was holding up strongly in its progress, so it was imperative to emphasise feasibility studies to allow companies to improve their chances of being appointed as suppliers of capital equipment.

The traditional incentive programmes included the Automotive Incentive Scheme (AIS), which was implemented three years ago, with a focus on the growth of the component sector, where most of the jobs were created. In the past year, 25 companies were approved, compared to three years ago, when only four projects had been approved. The Manufacturing Investment Programme (MIP) was a programme appropriated for smaller manufacturers, and in the past year 539 projects were approved, with the Department committing R1.7 billion for support. The 12I Tax Allowance Programme (12I) was implemented to target larger companies, and in the past year twelve projects were approved, with a total value of R10.2 billion-worth of investments, and R3.3 billion of tax incentives were awarded to companies.

The Services Investment Cluster supported incentives in the telecommunications sector. There was increased support for the film sector in South Africa, and more films were being watched by South Africans. South African produced films had increased and this had enabled the implementation of larger productions in the country. In this cluster, the dti implemented the Business Process Services (BPS) incentive to attract investment and create employment opportunities, and in the past year dti had invested R1.2 billion and created 4 000 jobs.

The Critical Infrastructure Programme (CIF) was created to attract Foreign Direct Investment (FDI) and ensured that linkages were developed between domestic and zone based industries. In the past year six CIP projects had been approved, most of them in the mining, industrial parts, telecommunications and automotive sector.


National Empowerment Fund (NEF) briefing
Ms Philisiwe Mthethwa, Chief Executive Officer, National Empowerment Fund, stated that the National Empowerment Fund (NEF) had a two-pronged strategy to provide financial and non-financial support to black entrepreneurs in SMEs in South Africa. Up to end March 2012, it had disbursed R3.3 million, and its net value had grown to R5.5 billion, outgrowing its start-up capital. Overall, 519 black owned businesses had benefited from this funding. NEF had now opened offices in seven provinces, easing the communication process between investors and individuals located in Head Office. Through the Enterprise Development Initiative (EDI), the Department encouraged other provinces to enter into partnerships because it facilitated a comprehensive and feasible business environment. NEF focused on the empowerment of black women, where it had a target of 40%.

A key part of the support services was focusing on creating jobs in the South African economy. Its contribution to sustainable job creation had increased from 29 000 in the past year to 40 000 this year. It projected that over the next three years, its should contribute to 150 000 to 200 000 jobs. The reasons for its increased pipeline was that NEF had exceeded its intended target, and funding would be running out, so it had to stop doing investments and focus attention on getting recapitalised.

All NEF products and services were aligned to address market failures. Transactions were funded to respond directly to the needs of market failures, mostly linked to the lack of finance, lack of access to markets, and the lack of specific industry knowledge and/or management experience. Ms Mthethwa emphasised that NEF believed in “investing with conviction”, and it would not disappear once a partnership had been formed. Following market failures in the South African economy, applications were processed and had been assessed against the minimum of black ownership, level of participation of women in the transaction, black managerial and operational involvement, commercial viability and geographic spread. NEF’s investment horizon was between four and seven years and, through the provision of patient capital to its investee companies, companies could take up 10 years in paying longstanding loans.

NEF conceptualised and provided a business toolkit to its investee companies. The toolkit would be a step by step business planning process for applicants and would available in five other South African languages such Zulu, Xhosa and Sesotho. The toolkit would provide businesses with the skills to improve and refine their business plans, without any additional cost.

The key challenge faced by the NEF was fronting through contract management agencies. Black Economic Empowerment (BEE) was designed poorly in the 1990s, and companies had taken a small interest in different types of sectors without direct operational interest. NEF therefore insisted now that its investee companies had to be operationally involved in the businesses they ran, and not superficially investing.

Ms Hlengiwe Makhathini, Divisional Executive, NEF, described the NEF funds across the economic Spectrum. The iMbewu Fund was an SME fund providing entrepreneurship procurement and franchise finance. Approvals had increased trend, and compounded annual growth rates were showing around 40% increases in volumes approved. The Rural Community and Development Fund supported rural economic development through new ventures, acquisition, project finance, expansion and Greenfields finance. uMnotho Fund funded new ventures, acquisition, project finance, expansion, capital markets, liquidity and warehousing. The Strategic Projects Fund aimed to increase the participation of black people in early stage investment in industrial and manufacturing transactions.

Industrial Development Corporation (IDC) briefing
Ms Meryl Mamathuba, Head: Development Funds, Industrial Development Corporation, said that the Corporation (IDC) had built capacity over a number of years, which enabled it to manage its funds effectively. This capacity was used to manage both special purpose funds that the IDC set aside, as well as being used for government departments such as the dti and the Department of Economic Development (EDD). Its incentives were focused on job creation, the development of female entrepreneurs, marginalised groups and people with disabilities. It ensured that qualifying clients had seamless access to its incentives.

The first incentive the IDC managed for the government was the Support Programme for Industrial Innovations (SPII). This had been running since 1993, and was established to promote technological innovation within South Africa. The SPII schemes included the Product Process Development (PPD), which was targeted at small and micro enterprises, enabling them a maximum grant of R2 million on a matching basis. The Maximum Scheme was targeted to medium to large enterprises, enabling a maximum grant of R5 million. The Partnership Scheme, was targeted to large projects and was available to all companies, with a minimum grant of R10 million on a 50% matching basis, with a levy repayment calculated on a defined Internal Rate of Return (IRR) over a fixed period. Since its inception, over R1 billion worth of transactions had been approved, a total of 1 315 projects, R826 million was anticipated to go towards SME enterprises, R204 million was anticipated to go to women who had shareholding rights and R366 million was anticipated to reach black owned businesses. Overall, the SPII incentive was projected to create a total of 3 017 jobs.

The Risk Capital Facility (RCF) incentive was established in 2002, with a fund size of R850 million. It was established to provide gap funding to South African black owned SMEs. It consisted of monies from the European Union (EU) donated to the South African government. Since 2002, this incentive had approved R692 million in value towards 145 transactions, of which R576 million went towards SME supported transactions. The incentive was intended to create 11 800 jobs and 1 197 of those businesses would be by women. It was also anticipated to create 984 Historically Disadvantaged People (HDP) managers and 96 women managers. Its focus in moving forward was the allocation of the remaining R150 million, and exploring the possibility of recapitalising the fund to ensure continued support of the target market.

The Clothing Textiles Competitiveness Programme (CTCP) was established to grow South African based clothing, textiles, leather and footwear manufacturers to be globally competitive. It consisted of four schemes, but only two were managed by IDC: the CIP and PIP.

The Competitiveness Improvement Programme (CIP) used a cluster level approach at the regional and national level, where a number of companies with common goals came together and identified their shortcomings. The project was projected to cost up to a maximum of R25 million over the five-year period of the programme’s implementation.

The Production Incentive Programme (PIP) supported the acquisition of capital equipment, where old machines were no longer optimal. It supported process improvement and development interventions targeted at clothing manufacturers, textile manufacturers and Cut, Make and Trim (CMT) operators.

The CIP and PIP programmes had funded 360 projects valued at R2.2 billion, had supported 240 SMEs valued at R1.27 billion, had created 7 890 jobs, and had saved 62 085 jobs. In the future, it was expected to further enhance job sustainability and creation in the sector, technological improvements and global competitiveness. 

It was noted that dti had provided a capital value of R1 billion to the Manufacturing Competitiveness Enhancement Programme (MCEP), which was being used, together with IDC input, to effectively co-finance to reduce the overall cost of funding to the manufacturing industry. The three sub-programmes implemented had been the Working Capital Facility (with a value of R750 million), the Niche Fund Programme (R265 million) and the Business Support Programme (R35 million). There were 27 approved programmes funded within the IDC’s budgetary frame, with a value of R405 million, 18 SMEs were supported, valued at R99 million, there were 8 women owned projects, valued at R65 million, and 11 BEE owned projects valued at R216 million, and it was expected to create 3 618 jobs. Its focus in the future was improving resourcing of the fund, including the under-resourced Niche Fund, to ensure continued support of the target market and accelerate the implementation of the Niche Fund portion of the fund, in order to stimulate new and emerging sectors.

Export Credit Insurance Corporation of South Africa Society Limited (ECIC)
Mr Mandisi Nkuhlu, Acting Chief Executive Officer, Export Credit Insurance Corporation, stated that the Interest Make-Up (IMU) scheme of the Corporation (ECIC) had evolved after 1994. However, since most export transactions were priced and funded in US dollars, it became necessary, in 2003, to redesign the IMU scheme into a US-dollar based scheme. The rationale for the IMU scheme was based on three key elements related to the nature of international competition in global trade:
- Competition on the quality and price of goods offered by its exporters
- Ability of its exporters to offer a technical solution and funding solution as one package. The funding solution spoke to the availability of long term finance for the foreign buyers to buy South African goods at competitive interest rates
- Availability of the political and commercial risk insurance capacity for the different host countries, to unlock the provision of long-term finance.

The IMU and ECIC insurance package were combined as one package to work in conjunction with other sectors. The four key players in the South African export credit market scheme were:
- exporters or contractors who could produce quality goods or services that could compete internationally. - financial institutions who had access to US dollar liquidity, and the risk appetite to provide long term finance into cross-border markets
- ECIC political and commercial risk insurance to crowd in the financiers to go to markets and countries which ordinarily they would avoid
- Government funded IMU support (managed by ECIC), to ensure that the export credit loans were priced competitively.

Projects needed to meet the eligibility criteria in achieving at least 50% of South African content under the export contract. The scheme was intended to incentivise local manufacturing and enhance the sustainability of existing jobs, as well as the creation of new jobs.

Most of the IMU funding was sourced by the dti. Over the years interest had been earned on the surplus funds sitting in the IMU bank account, and these had been utilised to cover spikes in disbursements that exceeded the annual budget allocation or transfers from the dti. In the past, ECIC had relied on surplus funds in smoothing budgetary shortfalls. However, it was expected that these would come under increasing pressure and the surplus was likely to run out by 2016.

Since its inception 64 export credit polices had been issued by ECIC. Out of these, 41 exporters were employed on projects that were supported and benefited from the IMU scheme. Its cumulative GDP impact since 2008 amounted to the creation of over 55 000 jobs, addition of an estimated R1.5 billion to the South African GDP and overall support to projects worth R13.9 billion. In line with the Industrial Policy Action Plan (IPAP) objectives, R6.9 billion of value added exports were facilitated and approximately R4 billion were added to the national fiscus, compared with R631 million paid out under the IMU scheme and net claims of R133 million that were paid by the ECIC.

The features of the new IMU scheme were remodelled to create loans with shorter repayment periods. Smaller contracts, which generally had shorter repayments, would benefit from the cheaper interest rates under the new scheme. Fixed term interest rates would also be available for large infrastructure projects that required long-term fixed funding.

The outlook, in the near term, for the ECIC would lead to the increased utilisation of price competitiveness. The projected increase in the pipeline of projects and new commitments would stretch and exceed the current budget allocations made in the Medium Term Expenditure Framework (MTEF). However, given the anticipated two-year lead time before the surplus funds in the IMU bank account ran out, there would be time and space to revisit the budget assumptions and future budget allocations.

Discussion
Ms S van der Merwe (ANC) raised general questions, relating particularly to the first two presentations. She wanted to know what was missing. Although there was much talk of success, the NEF had spoken of drastic measures for it to massify, and the need for change in ownership of the economy. In order to achieve that, more people would have to be incentivised. She said there seemed to be a good basis, but that more needed to happen to change the face of the South African economy. She also noted that it would be useful to hear about failures, what was being done right and what was done wrong, and what was missing from the programmes.

Ms van der Merwe asked how target groups were able to access these funds and incentives, and how applications were being processed, whether online or in person.

Ms van der Merwe asked NEF about freezing of the new loans, noting that NEF’s website stated that loans to BEE companies had been suspended due to lack of funds. She felt there needed to be more information on that particular issue.

Mr G McIntosh (COPE) said he was encouraged by all the presentations, but asked dti how or what staff were available to monitor and check out all the approvals it managed.

Mr McIntosh said NEF gave an interesting presentation and asked it for more detail on the franchises which it had funded, including McDonalds, querying whether it had funded individual franchises or the entirety of the McDonalds franchise in South Africa.

Mr McIntosh asked the IDC to what extent it worked with universities like Stellenbosch, Cape Town, Pretoria and Kwazulu-Natal on the innovation side. He had noticed that innovation efforts in Kwazulu-Natal were low, and wondered whether that was because of the function of the university, since activity was low in that area.

Mr McIntosh congratulated the ECIC on its work on risk analysis, saying that he would not give any export credit guarantees to the Central African Republic.

Mr Z Wayile (ANC), highlighted that certain social ills related to the social economic profiles of South Africa were related to its historical background. He noted that historically, BEE had focused on individuals and there had been a move by the government encouraging BEE initiatives to be more biased to women, youth and cooperative developments. He wanted more clarity on what qualitative leaps had been made to build co-operatives in South Africa. Similarly, he noted that although there was a strategic bias towards rural areas, to try to address poverty, people in those areas were still complaining of the lack of information, and lack of general, financial and non-financial support. He felt the presentations lacked sufficient emphasis on how incentives would be accessible to people with disabilities, who continued to be marginalized. He further expressed the continued bias to Gauteng, which had a historical economic significance during the apartheid years and had benefited from it. He wanted to know how the dti and entities would redress the imbalances. Transformation of companies from production to automation had to be critically examined because a number of jobs had been lost, and any jobs now created must be sustainable.

Mr G Hill-Lewis (DA), asked the dti what its interactions were with the National Treasury on the various other incentives it offered, how it would link them, and the status of the new incentive extensions that were announced by the Minister in this year’s budget. He asked to what extent the dti fostered relationships with agents to get its products into the market. He asked NEF how much it had been forced to write off.

The Acting Chairperson said that there was a problem penetrating the Northern Cape, the least accessible of the provinces, and wanted to know exactly what the challenges were. 

The Acting Chairperson noted that dti had placed much emphasis on sustaining jobs, but it did not seem that enough focus had been put into creating new jobs. He would be interested to see how the dti maintained its expansion and managed to create new jobs as well as retaining existing jobs.

The Acting Chairperson asked NEF about its recapitalisation and at what stage the engagement was between dti and the National Treasury.

The Acting Chairperson asked the ECIC what stage its engagements were before its funds dried up. He commented that there was a need to broaden the engagement of people in mainstream economic activity. Issues of inequality, and geographic spread, were also important, and if economic activity remained continuously concentrated in urban areas, the challenges around economic migration would not be met.

He asked that the questions on strategy be answered during the meeting, but the rest of the answers to be provided in writing.

Mr Lionel October said that on the area of recapitalisation, the NEF board made the right decision, since it had massively expanded its programme, top around R3 to 4 billion rand, over the past 4 to 5 years. It had not received the budget allocations from dti or National Treasury to enable it to continue approving and disbursing, and so NEF had approached government for a clear directive on its future. The dti fully supported the proposals from NEF and would like to see National Treasury and government regularly injecting funding to NEF, through annual budget allocations. Dti was also supportive of NEF getting borrowing rights, as currently its classification did not give it the ability to borrow money as the IDC could.

NEF had made a presentation to the National Treasury on its new business model, and the issues related to next year’s budget, but due to the current fiscal climate there would be a minimal increase in budget, although there had been agreement, in principle, that the government budget needed to shift from consumption to investment. He stated that dti had managed to extend support to the established businesses in the economy, especially in the automotive industry and small medium enterprises. Its remaining areas of challenge were the undeveloped areas of the country, and he agreed that there should not be part of the South African economy that remained undeveloped. The two sets of incentives that he saw as most important were the Special Economic Zones (SEZ) programme, where special economic zones would be created and extended to new provinces, and a greater push into agriculture and the agro-processing sector which had to date lacked the necessary support. Township businesses, SMEs and cooperatives known as the informal sector were still disengaged from the economy and so dedicated incentives were in place directly targeting such areas. The institutional and methodological capacities were in place, but there was still a problem in implementing them.

He added that it was important to note that the economy was heavily dependent not only on manufacturing products but also raw materials, and any slowdown had a huge impact. The domestic economy had continued to create jobs in the first quarter of 2013, although unemployment rose due to new job seekers entering the market. The South African manufacturing sector was well positioned to benefit from Africa’s strong growth outlook over the medium term. All of dti’s programmes were aligned with its three main goals of industrialisation, board based employment and creating a fair and regulated environment for businesses. The IPAP was launched in the beginning of the year and implementation reports noted that investments were taking place. The South African Business Process Services (BPS) sector was, in April, voted as the best off shoring destination by the European Outsourcing Association.

He added that dti had launched its National Exporter Development Programme (NEDP) to assist non-traditional and new exporters, whilst also continuing to assist its traditional exporters. The strong focus being placed on the Continent’s economic development had facilitated the collaboration between the South African and Nigerian auto industry.

The African Growth and Opportunity Act (AGOA), which allowed South African exports to enter the US economy free of duty, was due to expire in 2015, and lobbying was being done with a view to extend this agreement.

Mr October made the point that the main issue that was challenging the South African economy was indebtedness. Due to unsecured lending, many people had become over-indebted. Global uncertainty was also making the rand volatile. 

Discussion
Mr McIntosh congratulated the Department on the Africa Business Forum in Cape Town which was very useful, and emphasised that the rest of Africa was a free market, with Nigeria bringing money in with no strings attached. FDI in Nigeria had exceeded that of South Africa, where the only deciding factor was whether there was money to be taken.

Mr McIntosh said that in relation to AGOA, the American government would easily sense that the South African government did not like the American free market system, as demonstrated by the lack of support given to Walmart, by both the Ministers of Trade and Industry and Economic Development, to enter the South African economy. He wished the Department luck on its lobbying and said that government had to send the right type of message to other economies.

Ms van der Merwe commended the good basis of giving, receiving and the positive benefits obtained from incentives to the economy. She said the Department needed to understand how it was going to increase these incentives, since it was in the position to think more broadly about the future outlook, and a discussion was needed about re-capitalising the NEF.

Mr October responded, to McIntosh, that the Nigerian economy was four times the size of South Africa’s, and dti needed to ensure that the growth of Nigerian and South African economies became complementary, since South Africa was the largest investor and exporter in Nigeria. As Nigeria grew, so would South Africa. He repeated that all efforts were being made to secure the future of AGOA.

The Acting Chairperson s said it was imperative for a country to protect its own local businesses and local suppliers. Government had been correct and within its rights to request accountability from Walmart if it wanted to invest in South Africa. Walmart had a history of importing cheaply, of poor labour relations and discriminating against women. Although he welcomed direct investment, South Africa was a country that needed to protect its own laws, government and its own businesses, and to further its own public and private interests.

The meeting was adjourned.
 

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