Committee Report on Department of Economic Development and its entities Strategic Plan 2013; Committee Oversight Reports

Economic Development

13 August 2013
Chairperson: Mr Z Ntuli (ANC) (Acting)
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Meeting Summary

The Committee met for the consideration and adoption of three reports. These included the Oversight Report of 19-22 June 2012; the Oversight Report of November - December 2012; and the Report of the Strategic Plans and Annual Performance Plans of Entities of the Department of Economic Development.

During consideration of the Oversight Report of the 19-22 June 2012, Members agreed that they should not focus on the language and grammar in the reports but rather at whether the content was correct. They also agreed that the Content Adviser and the Committee Researcher should restructure the recommendations section of the oversight report. The same was observed for the Oversight Report of the 27 November – 7 December 2012.

With the Report of the Annual Performance Plans of Entities of the Department of Economic Development (EDD), Members made observations that were directed at the Department and entities such as the International Trade Administration Commission of South Africa (ITAC), the Small Enterprise Finance Agency (SEFA), the Industrial Development Corporation (IDC), the Competition Tribunal and the Competition Commission.

Whilst discussing ITAC, the Committee noted that the entity reported to the Department of Trade and Industry as well as the EDD. They recommended that ITAC share information that it had given to the DTI with the EDD. With SEFA, Members noted that the issue was the turnaround time or the time it took for the submission of applications for financial assistance to be approved. The other issue was the unnecessary requirements people were subjected to before an application could be considered. The Committee recommended that these matters be reviewed. They also recommended that SEFA should focus on its relationship with the Small Enterprise Development Agency in all provinces, not just KwaZulu-Natal.

The Committee requested that the EDD monitor the commitment by SEFA and the IDC to have a one-stop shop office per district in each and every municipality. Members agreed that these entities should be visible in rural areas as well because even though their services were directed towards the poor, the entities were primarily located in cities and towns.

In terms of the Competition Tribunal, the Committee noted that it was time to make recommendation on how the poor were affected by collusion. However, they debated whether this was an issue for the Tribunal or the Competition Commission. Members recommended that the EDD monitor the Competition Tribunal’s mandate. The Committee also suggested that the Competition Commission should consider public interests when it looked at competition.

The Committee considered and adopted all three reports with amendments.

 

Meeting report

Opening Statement
The Chairperson welcomed Members of the Committee. He explained that the purpose of that meeting was for the consideration and adoption of Committee reports. Apologies were received from the Honorable Chairperson, Ms E Coleman, Honorable N Gcwabaza (ANC), Honorable S Ngonyama (COPE) and Honorable M Hlengwa (IFP).

Oversight Report of 19 – 22 June 2012: Northern Cape, KwaZulu-Natal, Gauteng and Mpumalanga
The Chairperson said that the Committee should go through the report page by page focusing on its content rather than looking at language and grammar, which would take up a lot of time.

Mr K Mubu (DA) said that in terms of observations when it did oversight the Committee should focus more on going to the affected small business owners so as to get first hand information about their challenges rather than wasting time sitting in meetings with officials.

Ms D Tsotetsi (ANC) stated that it was also important to find out how many jobs were created in the provinces. They should also make an unannounced visit to those provinces that they already visited.

Ms M Mpane-Mohorosi (ANC) noted that the attitude of government officials contributed toward the failure of Government in bringing services to the people.

Ms Mubu said that there was very little visibility of Black Economic Empowerment (BEE) in Government projects and recommended that the projects should have broader BEE participation so as to include small business owners.

The Chairperson said that in terms of his observation, the Committee when doing oversight at Medupi Power Plant tended to look at the machinery rather the infrastructure that was there.

Ms Tsotetsi said that at Medupi the issue of infrastructure, which they came for, was addressed at the end and therefore they needed to make a follow-up on that issue.

The Chairperson said that the Content Advisor and the Committee Researcher should restructure the recommendations of the report and put them in a correct way.

Ms Nwabisa Mbelekane, Committee Researcher, said that from what she understood about the challenges written in the report, they were based on a slide that had been presented and the Committee had agreed that they should be used as recommendations. This was not necessarily what the Committee observed; it was what had been taken from the slides and they were using it as recommendations in the report. They were going to use the challenges as recommendations and when the recommendations were put together, they would come back to the Committee for verification if they were good.

The Chairperson said that that was not his understanding but they should rather adopt the report so that the Researcher and Content Adviser could put it into perspective and restructure the recommendations properly.

Ms Brenda Baso, Committee Content Adviser, said that if Members agreed with that it meant the content of the report was ok. Then their assignment would be to formulate the recommendations in terms of summarising the challenges in a language that was clear.

Ms Mpane-Mohorosi asked whether that meant that the recommendations would be crafted and the report would go straight to be tabled in the House.

The Chairperson said they were going to adopt the recommendations but they were saying the support staff should go and put them in a correct way, as the content adviser would be there she would be able to see how the recommendations should be put. Those recommendations would go to the department and should not be crafted in a general sense but rather be specific in terms of what the Committee recommended.

Mr Mubu moved for the adoption of the report.

Ms Tsotetsi seconded the move.

The Committee adopted the report with amendments.

Oversight Report of 27 November 2012 – 7 December 2012: KwaZulu-Natal, Gauteng, Limpopo and North West
The Committee agreed that the report should be treated the same as the first report. The Content Adviser and the Committee Researcher should restructure the recommendations.

Mr X Mabasa (ANC) moved for the adoption of the report.

Ms Mpane-Mohorosi seconded the move.

The Committee adopted the report with amendments.

Committee Report of the Annual Performance Plans of Entities of the Departments of Economic Development
The Chairperson said he was not sure whether the Committee should follow the same route as it did with the Oversight Reports because there were so many entities.

Mr S Mohai (ANC) proposed that Members should feel free to make comments if they felt they needed to say anything about certain entities. If there were no comments, the Committee should proceed to the next entity.

The Chairperson agreed with Mr Mohai’s proposal. He asked whether there were any recommendations to be made for the International Trade Administration Commission of South Africa (ITAC) regarding the tariff investigation and instruments of investigation on page 2 of the report. He also asked about the implementation of the new broadcast and regional integration, human relations and staff. If there were no questions, the Committee should move on to the Small Enterprise Finance Agency.

Ms Baso said that the Committee should look at some of the issues that Members reported that day and they should formulate recommendations around them. For instance, with ITAC the issue that was raised by the Chairperson and Honourable Ngonyama related to the fact that ITAC was also reporting to the Department of Trade and Industry (DTI). It would be helpful if ITAC also gave an indication to that Committee on cross cutting issues so that the Committee would be aware of the issues reported to the DTI. For instance, when they were talking about the challenges South African farmers were experiencing with regard to the European Union (EU) duties, ITAC said the DTI was handling that in terms of ensuring that the policy also supported local businesses. She was not sure whether Members would want them to formulate a recommendation around that issue.

The Chairperson asked whom they were recommending to - to the Department of Economic Development (EDD) or DTI.

Mr Mohai said he agreed with what was contained in the report - that because ITAC was reporting to two departments, EDD and DTI, it should share issues that related to DTI to avoid duplication or for them to be left behind on issues of development. Even on the issue of agro-processing, recently in Limpopo someone raised the issue of poultry, looking at trade issue with Brazil, and so forth. The report looked like it was the report of the recent meeting because the Chairperson of the Committee said that it was not simplified for people who were doing trade, and was surprised by the level of understanding by the people themselves because the farmer who raised the issue of poultry understood the level of trade relations. So, when they consider the last report of the entities that they monitored, it appeared that the situation at times was so fluid or they needed to keep up with the fluidity of the economic conditions in the country such that on quarterly basis they were able to get data details, which related to the issues that they were raising.

The Chairperson said that what he was asking was whom they should recommend to between the EDD and DTI.

Mr Mohai said ITAC should give the Committee the reports that it shared with the DTI.

The Chairperson said, therefore, that the Committee was recommending to ITAC to share information that it had given to DTI.

The Chairperson said that in terms of the Small Enterprise Finance Agency (SEFA), he remembered the intermediaries where Members felt very strongly, saying that intermediaries were supposed to be controlled and managed by the EDD. Seemingly they were charging their own interest and doing whatever they wanted and the EDD was happy with that situation. Now it seemed that intermediaries were like loan sharks, and that was not acceptable to Members.

Mr Mubu said that their issue was the turnaround time or the time it took for the submission of applications for approval, in that it took so long. The other issue was the unnecessary requirements people were subjected to before an application could be considered. For example, there was the issue of the security collateral. Some people were asked to give a leg and arm just to get a very small amount from SEFA. The other issue was that of business plans. It was said that many people had no knowledge of preparing a business plan, but SEFA insisted that it be a major requirement for anyone to be considered for a business loan or financial assistance.

The Chairperson said that Members should remember that SEFA said it was working hand in hand with the Small Enterprise Development Agency (SEDA).

Mr Mubu responded that this was only in KwaZulu-Natal.

Mr Mabasa said that the relationship between SEFA and SEDA was national but the fact that it was happening in KZN indicated a weakness with regard to other provinces, but in terms of strategy it was national.

The Chairperson said that SEDA was supposed to have prepared those plans for customers of SEFA. This bordered on mentoring and coaching, which was lacking. But SEFA would continue to say SEDA was always called to assist, but one would find that it suggested to shortening the requirements instead of having too many requirements.

The Chairperson said that in that issue the recommendation could be a review of the requirements for a person that was applying for financial assistance for his/her business.

Ms Mpane-Mahorosi said that another recommendation that should go to the EDD was that they should see to it that they monitored the relationship between SEFA and SEDA, not only in KZN, but also in all the provinces. Also, with the issue of people with disabilities, the EDD should ensure SEFA and SEDA adhered to that 1% which had been allocated to the disabled nationally.

The Chairperson asked from where the 1% allocation was coming from.

Mr Mabasa said that it was stated as a requirement.

The Chairperson said he thought it was 1% of the loan from SEFA given to the disabled but it was said that 2% of employment applied to people with disabilities. But, with the money, they had not agreed how much they should get - there was no quota as yet agreed to.

Ms Mpane-Mohorosi said the Committee had to rephrase the recommendation and state that the EDD should see to it that disabled people were also catered for.

The Chairperson said that the recommendation should be restructured properly by the support staff in a way that would cater for the disabled so that they had a share of resources provided by SEFA in their Small Medium and Micro Enterprises (SMMEs) and corporations.

Ms Tsotetsi said that on several occasions, the issue on whether the approval of applications for funding involved mentoring had been raised, but for her it should be an interview because the business plan could have been developed by a consultant or someone who had a skill to do that. But, the person who was going to run the business had no idea of that particular business. That person had to be interviewed with a view to assist, so as to get the sense if the person knew how to run the business.

The Chairperson said that what Ms Tsotetsi was raising would be covered by the recommendation that stated that the application requirements should be reviewed by SEFA.

The Chairperson said that in terms of Industrial Development Corporation (IDC), he was not sure if the Committee should put it as a recommendation to IDC but they could put a recommendation to the Minister and the EDD to monitor closely the one-stop shop of IDC and SEFA that if a person was going to seek financial assistance, they should not be driven from pillar to post in terms of loans belonging to IDC and another belonging to SEFA. They should have a way of putting it as a recommendation. For example, the Committee could request that the EDD monitor the commitment by SEFA and IDC to have a one-stop shop office per district in each and every municipality.

Ms Tsotetsi said that one of the presentations made the recommendation that this be done, but the Committee should rather follow up to see if that recommendation had been implemented in terms of the timeframes.

The Chairperson said that issue of timeframes was important because the entities had already committed themselves. And, the Committee requested that the EDD monitor and give timeframes to each and every district.

Ms Tsotetsi said another issue was the proximity of the offices and there were all those target groups, but they could not access services of these entities because they were located in the cities and towns.

The Chairperson said that they should be visible in rural areas as well because they always say it was for the poor but were located in cities and towns.

Mr Mohai said that the overriding point that the Committee had to make when they spoke about entities was that they should distinguish themselves from normal financial institutions like commercial banks because their creation was primarily to be responsive to the needs of poor people since they had a developmental role to play. Commercial institutions had no obligation, it was either one complied or did not with its requirements irrespective of whether there was a potential that existed. The developmental state concept that they were advocating for was for the technical ability to enhance potential that existed in communities for people to access the resources that the state had put at their disposal.

The Chairperson said that issue was very important so that the entities should not lose the concept of a developmental state.

Mr Mohai said the point was that there should be a distinction between the entities and the normal commercial institutions and that effort should be demonstrable in their work in terms of how they conduct their business. At the heart of what they were proposing was coordination and integration to say they knew that the state didn’t have maximum resources but it should utilise what it has in a meaningful way.

The Chairperson said that IDC and SEFA should not be obsessed with the issue of risk when granting loans because their role was developmental to enhance the business potential in communities as already correctly pointed out by Honorable Mohai.

The Chairperson said in terms of the Competition Tribunal they had to formulate a recommendation.

Mr W Thring (ACDP) asked who benefited in the Competition Tribunal. For example, if there were big multi-national companies who had been found guilty of colluding and fixing prices, they could be penalised for a sum of around R190m, but those who suffered from collusion was the poor man on the street. If these big companies were penalised a few hundred million, did the poor on the street get restorative justice? And if they were talking about a developmental state, how then could they ensure that very poor people in that sector were assisted?

The Chairperson said that they had been grappling with that issue for a long time and it was time to make recommendations on the matter. The fact of the matter was that the money was taken back to the National Treasury and the Treasury decided whether it should be allocated for social grants or building of schools. There was a difference between the Competition Tribunal and Competition Commission, although they dealt with same things but at a different level. The question from Mr Thring was directed to the Competition Commission.

Ms Mpane-Mohorosi said that the last paragraph on page 18 of the report stated that there had been no changes to the mandate of the Tribunal and therefore no changes made to the strategic plan and annual performance plan. She requested that they should recommend that the EDD should ensure that the mandate was carried forward and changes were implemented.

Mr Mabasa said that the starting point would be to improve the strategy and then recommend changes. But, because they were not doing that it would not be timely and appropriate to change the mandate.

The Chairperson said that they Committee never tried to change anything or agreed for a change in the mandate but had accepted what they said in the report. The Committee had never questioned whether their strategy was wrong.

Ms Tsotetsi said that before the Committee concluded that the strategy was wrong or right, they had to access it first against performance and identify whether there was a hindrance in the basis of the change. If it did not hinder progress or performance, it was still okay and they could make a follow up to that effect.

The Chairperson noted that the Committee agreed that there was not anything wrong with the Tribunal’s strategy and that was why he was asking what they should recommend that the Tribunal change because the Committee had never said what the Tribunal was doing was wrong.

Ms Tsotetsi emphasised that if the strategy did not hinder performance, there was nothing wrong and the Committee could only comment on it after an assessment.

Mr Mohai noted that the Committee already adopted the strategic plan and the Annual Performance Plan when they passed the budget. Members accepted that the mandate did not change, agreed with the areas of focus and should continue with the areas of focus. The only thing was to keep abreast of what issues the Tribunal raised in its strategic plan, which should hold it accountable.

The Chairperson asked whether there was anything to recommend regarding the Competition Commission. There was an issue of public interest which the Committee requested the Commission to look at which they said they were doing. The Committee had to make a recommendation in that regard. The recommendation should encourage the Commission to consider public interests when it looked at competition.

Ms Mpane-Mohorosi moved for the adoption of the report.

Mr Mubu seconded the move.

The Committee adopted the report with amendments.

The meeting was adjourned.
 

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