Department of Economic Development First Quarter 2013/14 Performance Report

Economic Development

09 September 2013
Chairperson: Mr Z Ntuli (ANC) (Acting)
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Meeting Summary

The presentation of the Economic Development Department (EDD) comprised of a performance summary with statistics, performance reports for its various programmes, and the financial report.  The Committee was told that the Department had implemented 92% of its first quarter targets and had spent 95% of its quarterly budget allocation. In relation to the 38 targets, the Department had delivered 63 outputs as opposed to the planned 48 outputs. The Department had exceeded 11 targets, had met 24 targets and had underachieved on 3 targets.

The financial statement outlined the projected budget, actual expenditure, the variance and the percentage spent.  A total of 95% had been spent and excluding transfers, this figure stood at 75%.  Of the administration budget, 110% had been spent, 55% of the economic policy development budget had been spent, 96% for economic planning and coordination, and 83% for socio-economic development and social dialogue.

During discussion, the Committee asked questions related to the progress on the filling of vacancies within the Department, compliance with human resource requirements and the relationship between the terminations and appointments.  Members expressed frustration at the slow rate at which vacancies were being filled, and were concerned about the impact of this on the performance of the Department. They were also worried about the fact that although many targets were set by the Department, many of them had not been met. The Department was asked to provide more information about its road shows and the response to this initiative by the public. Members asked what progress had been made to deal with the issues raised by the report of the Auditor General. The Acting Chairperson asked what measures and mechanisms had been put in place to monitor the success of the Department’s programmes and the accords which had been signed.

The Committee considered the minutes of the 20 August 2013, but deferred the adoption of these minutes as the number of Members present did not constitute a quorum.
 

Meeting report

Consideration of Outstanding Minutes
The Acting Chairperson informed Members that the Committee was going to start by considering the minutes dating from 20 August 2013. The Committee was only going to consider the minutes and defer the adoption, as there was no quorum.  He led the Committee through the page-by-page consideration of the minutes.  Mr M Hlengwa (IFP) suggested a minor grammatical correction.

The Acting Chairperson noted that the Committee would adopt the minutes at a later meeting.

Briefing by Department of Economic Development (EDD) on First Quarter Report
The Acting Chairperson welcomed the officials from the EDD and explained that the Chairperson of the Committee, Ms E Coleman, was absent because she had to deal with an urgent matter which had come up.   Apologies were presented by the Acting Committee Secretary, Mr Kanyiso Mkhize   After a round of introductions, the Acting Chairperson called on the Director General of the EDD to brief the Committee.

Ms Jennifer Schreiner, Director General, Department of Economic Development, told the Committee that the presentation would comprise of a performance summary with statistics, performance reports for the various programmes of the Department, and the financial report.  The Department had implemented 92% of its first quarter targets. It had spent approximately R192 million, which was 95% of its quarterly budget allocation of R201 million. In relation to the 38 targets, the EDD had delivered 63 outputs as opposed to the planned 48 outputs.

In a summary of performance for the first quarter, Ms Schreiner told the Committee that the EDD had exceeded 11 targets, had met 24 targets and had underachieved on three targets. The targets exceeded, met and underachieved for the various programmes were outlined. Some of the types of outputs included plans, meetings, implementation, reports, agreements, industrial funding, capacity building and staff and administration targets.

Performance per programme
Ms Schreiner outlined the performance of the EDD per programme. This section of the presentation comprised of information relating to strategic objectives, performance indicators, 2013/14 targets, first quarter targets and actual performance, variances and the reasons for variances.

In terms of administration, the Ministry had signed off on the service provided in the quarter, based on a report that had identified challenges to be addressed in administrative support in areas such as human resource management and supply chain management. In each quarter, standards were going to be improved progressively over the financial year. During the quarter, three EXCO meetings had been held and Internal Audit had reported on the review of the 2012/13 Annual Financial Statements. As at 30 June 2013, the staff component was 137 and in this quarter, ten appointments had been made, while 12 terminations had been effected.  The EDD was short of nine persons against the annual target.

On economic policy development, a report on employment, GDP growth and investment in relation to the jobs drives of the New Growth Path (NGP), covering the 1st quarter of 2013, had been prepared and submitted to Cabinet. A policy intervention was held on 21 June 2013 which had resulted in EDD facilitating coordinated work on pilot smallholder schemes and support for district-based planning, focusing on the former homeland areas and land redistribution. The finalisation of the construction cartel collusion investigation required engagement on the implementation of the Act. The promulgation of the section of the Competition Act relating to health market enquiries had required engagement between the EDD and the Competition Commission on the implementation of this section.

In terms of economic planning and coordination, and with particular regard to the unblocking concerning Innowind Wind Energy Projects, the Committee was told that the EDD had facilitated the receipt of an amended approval from the Department of Agriculture, Forestry and Fisheries (DAFF) for Innowind’s sub-division of Agricultural Land Act.   The Chinese Mamba Cement Factory had experienced problems with work permits for key personnel. This had been resolved by the EDD jointly with the Department of Trade and Industry, the Department of Labour and the Department of Home Affairs. The investment could now commence in the Limpopo province. The EDD had also facilitated the signing of the lease agreement between the IDC and Transnet in the Sunrise Energy liquid petroleum gas (LPG) Importation and Storage Terminal in Saldanha Bay. During the first quarter, progress reviews on 18 strategic integrated projects had been completed for Cabinet. These reports covered spending, construction and localisation efforts. The Committee was also briefed on the Solar Water Heater program, the Accelerated Schools Infrastructure Development Initiative (ASIDI) programme, the Presidential Infrastructure Coordinating Commission (PICC) skills plan, and other strategic engagements.

On economic development and dialogue, the Youth Employment Accord had been signed at the Hector Petersen Memorial Museum in Soweto on 18 April 2013. The EDD had also held a youth workshop on 7 May 2013 with the National Youth development Agency, the Industrial Development Corporation (IDC), the Small Enterprise Finance Agency (SEFA) and the South African Youth Council, during which agencies presented packages offered to the youth, and assessed how these structures could be aligned to assist youth to access funding.

Financial Performance   
Ms Semphete Thobejane, Chief Financial Officer, Department of Economic Development, presented the financial performance of the EDD in terms of the various programmes, outlining the projected budget, actual expenditure, the variance and the percentage spent. A total of 95% had been spent and excluding transfers, this figure stood at 75%.  Of the administration budget, 110% had been spent, 55% of the economic policy development budget had been spent, 96% for economic planning and coordination, and 83% for socio-economic development and social dialogue.  

Discussion
Mr S Ngonyama (COPE) remarked that the figures for appointments and terminations were almost static, as the number of appointments was almost equal to the number of terminations. He questioned the reason for such figures. What was the response of the EDD to situations where targets were not met due to the non-availability of stakeholders?   There were many targets which had been set, but not achieved. He requested that more explanations should be given by the EDD in this regard.

Mr Hlengwa asked what the selection criteria were for the rolling out of the road shows. On the youth accord which had been signed in April 2013, he asked if the EDD was satisfied that the desired impact was being achieved. This was a broad question, but he wanted the EDD to briefly provide its opinion, which could be valuable to the Committee.   He asked what was meant by “the ageing assets of the Department”, as the EDD was just over five years old. 

Ms M Mpane-Mohorosi (ANC) expressed her concern about the road show targets of the EDD not being met.   Only three provinces had been referred to. What were the plans for other provinces? She noted that the EDD had spent much on administration, but there was still very slow progress in terms of appointments. This had to be changed, as the human resources plan required the filling of the currently vacant positions. When was the EDD planning to fill these vacancies?

Mr X Mabasa (ANC) said that he assumed that the report of the EDD was also informed by the comments and reports of the Auditor General (AG). What had been done in response to the comments of the AG? What was the relationship between the targets, outputs and products? There was a high turnover of staff, and many were hired on contract. What was the reason for the terminations of the various contracts? He asked if the EDD could provide the Committee with information related to the targets for the other quarters. This was going to help the Members understand the trends in expenditure and performance. In terms of job creation, how well was the EDD doing in promoting small, medium and micro enterprises (SMMEs) and the focus on the broadness of Broad-Based Black Economic Empowerment (BBBEE)? It was important to empower a pool of ordinary people and not just to facilitate the creation of a few millionaires. How was the EDD utilizing cooperative societies, taking into account the need to enhance economic development in rural areas and the gender issues?

Ms D Tsotetsi (ANC) remarked that it had been very difficult to follow the presentation. She was very concerned about the Human Resource (HR) and personnel situation at the EDD. The precarious situation in the Department had been going on for a very long time. The situation was unacceptable and had to be dealt with urgently. How could the EDD deliver on its mandate if there we no personnel? She asked why there were many key performance indicators (KPIs) which did not have targets. The overspending on accommodation was not acceptable -- what plan had the EDD put in place to curb the over expenditure on accommodation? This problem had been around for a very long time and there had to be a clear plan to handle it.

The Acting Chairperson asked what method had been used to extend invitations to the EDD’s road shows.  It was disappointing to learn of the very low turn out levels at these road shows. What was the exact problem with the Chinese Mamba Cement factory, and why could local manufacturers not be used? How was the monitoring of the implementation of the various accords done, and what mechanisms were in place to ensure that the implementation of these accords was monitored?  He noted that the over-expenditure was concerning, and asked how did the EDD planned to correct it.

Reponses
Ms Schreiner replied that she was going to group some of the questions, such as those relating to the targets and others related to HR issues.

On the targets, the total of 38 referred to the KPIs, and it was important to remember that when the EDD presented its Annual Performance Plan (APP), it gave a breakdown of the types of products delivered. The current style of reporting was linked to the products, as outlined in the APP. The products and KPIs were not supposed to be mechanically divided by the four quarters in a year, as this would mean that there was going to be different delivery in the different quarters. This was also linked to the idea that the spending plan for the entire year did not necessarily have to be split into four to be allocated to the four quarters. There were often major expenses in certain quarters, and planning had to be done accordingly.

On the achievement of the desired impact of the youth accord, the EDD was currently involved in a process of monitoring the first quarter. She proposed that the Committee should allow the Department to respond to that question after the information in that regard had been aggregated.  The EDD was refining the way in which it was monitoring the implementation of the various accords, but the report had been tabled in May 2013 and distributed to Parliament. The EDD had also established a Committee of Principles which was committed to becoming a monitoring mechanism for the accords. The EDD hoped that this committee would provide added value.

Ms Schreiner asked to be allowed to reply to all the HR questions in one joint response. She told the Committee that she could not immediately give the details as to the reasons why each and every contract which had expired was not renewed. It was also not appropriate for this to be discussed in terms of individuals, as there were a number of categories of people employed in the Department. Owing to the fact that it was a new Department, there was an agreement that people should be employed on a contract basis. There was a category of people who were employed on contract basis, but in permanent positions. The EDD had since December 2012 advertised the permanent positions. There had been progress, although not as much as was desired. In the first quarter, there were 11 posts advertised and 13 interviews had taken place during that process. The Committee would be updated on the progress made during the second quarter. The EDD was also involved in head-hunting, to ensure that the right skills set were attracted to the Department. There were people whose contracts had ended because the permanent positions they were holding had been advertised, and two people could not be employed to fill one position. In other situations, people were employed to do a particular piece of work and after the job was done, the EDD did not find it necessary to keep them on. The filling of the vacancies of Deputy Director Generals was in the head-hunting process, and was receiving priority attention.

The EDD needed to do some stock taking in terms of the HR environment in order to determine where it was and to move forward. The stock taking had been done with the support of the Department of Public Service and Administration (DPSA), and this had assisted the EDD to know which posts were funded.  The Department could now re-prioritise funding, depending on the strategic plan of the Department. The EDD shared the anxiety of the Committee that the process was not moving fast enough and the Department was committed to do its best to move the process forward. Significant progress had been made in the second quarter and the Committee was going to be updated in this regard.

On the issue of targets not being set for a particular quarter, these were targets for other quarters and because the report was being done only for the first quarter, the Department felt it would be better to leave the details of those targets out of the presentation. The targets for each quarter had been set out in the APP.
 
The Acting Deputy Director General: Economic Planning and Coordination, Mr Mahomed Vawda told the Committee that the road shows were advertised on community radio stations, in newspapers and through SEFA’s contacts in the provinces. The audiences had included individuals, members of the SMME community, professionals and business agencies. Presentations were often made by SEFA, the IDC, the NYDA, the DTI and the EDD. The road shows were planned to happen in all the provinces, and the Committee would be updated on progress in this regard.

In terms of funding challenges, SEFA did not have a presence in all the towns but there was a new exciting project which was going on where SEFA and the Small Enterprise Development Agency (SEDA) were going to be able to market each other. This was going to mean a bigger reach in terms of the audience.  

The Acting Chairperson reminded the officials from the EDD of the need to invite the Portfolio Committee to these road shows so that there could be more interaction and support from Parliament.

Mr Vawda replied that the EDD would provide a programme of the road shows to the Committee.

In terms of cooperatives, the EDD had a project which it planned to roll out during the second quarter. This project was being financed by the Employment Creation Fund and was going to be rolled out in coordination with SEFA. The EDD committed itself to update the Committee on the progress of this project.

Regarding the IDC list of companies in distress, the EDD was willing to make the list available to the Committee but wanted it to be noted that the information had to remain confidential and only accessible to the Members of the Committee. If this information were released to the public, it would negatively affect these companies, as they would come under pressure from their clients and suppliers. It was sensitive information.

Mr Damon Mathfield, Acting DDG: Socio-Economic Development and Social Dialogue, explained that the EDD was developing a one-stop-shop portal for SMMEs which was going to align all programmes across government so that businesses could access these opportunities and have the necessary knowledge in one portal. The EDD had also been engaging with the National Treasury to review the venture capital funding incentive scheme.  

Follow-up Questions
Mr Ngonyama said his observation was that there had been underperformance in terms of the road shows. The effort was unfortunately very selective and on the other hand there had been great expectations from the public. In addition, the rural areas were always left out, yet that was where there was the greatest need. It was important for the Committee to have an idea or a synopsis of the report on employment, GDP growth and investment in relation to the jobs drives of the NGP, covering the first quarter of 2013, which had been provided to the Cabinet.

Mr Mabasa said that any economy which did not recognize the critical role played by SMMEs was not going to do well. This was even more critical in a country with historical disparities like South Africa. The response of the EDD was that there was a plan to involve cooperatives, and that it was going to be rolled out in the whole country. This was a future plan, and he hoped that the inadequacy of the answer did not reflect inadequacy in the implementation of the plan. A clear plan on SMMEs and cooperatives had to be made. Did the EDD have a plan of identifying the very impoverished areas in the country, to give them top priority? There were certain areas in the country which were extremely impoverished, and he wanted to know what the EDD was doing to assist such communities.

Ms Tsotetsi said that on the HR issues, it would be good for the Committee to know why there was such a high turnover in the EDD. She expressed concern about that fact that the EDD was using taxpayers’ money to fund companies in distress, yet a list of the names of these companies had not been made available to the Committee. Access to such a list would greatly assist the Committee with its oversight work. No matter how sensitive the information was, there was the need to get the list, as these companies were benefiting from state funds. She commented that with all the good plans, it was important for the HR mess to be sorted out so that the objectives of the EDD could be achieved.

Rev W Thring (ACDP) apologised for coming late, and noted that he may be asking questions which had already been answered. He asked what instruments were being used by the EDD to monitor the success of its initiatives and programmes. He asked what the synergies with other government departments were, as there had been reports in the media that there could be instances of unhealthy competition. He queried why Ms Schreiner had indicated that the Committee could not get a report which was meant for Cabinet, and asked if there were any rules preventing the Committee from gaining access to such a report.  

Ms Mpane-Mohorosi asked what the current number of contract personnel in the EDD was. What was the EDD doing to improve its programmes in relation to the access of information by the public?

The Acting Chairperson said that the EDD had only five minutes to respond to the follow-up questions, and the rest could be provided to the Committee in writing.

Responses
Ms Schreiner replied that the concern about the inadequacy of efforts put into the road shows was a genuine one, but some of the road shows had been extensively conducted. It was important to note that these road shows had been driven by the top level of SEFA officials and they were not taking the place of other on-going communication strategies. The Minister had set targets for SEFA, and had encouraged them to step up their efforts to even exceed the targets. The EDD agreed that there was a need for more communication and more activity and publicity for the road shows.

The Department was taking seriously all the comments and concerns raised about small businesses and cooperatives and the importance of building in support for cooperatives in the SMME process. The action plan of the Department was going to be reviewed to ensure that the issues were adequately addressed. The action plan was being finalised and the comments of the Committee would be incorporated.

Ms Schreiner insisted that Cabinet memos were addressed to, and meant for, Cabinet and nobody other than Cabinet could distribute them to anyone else. However, the content of the document could be made available to the Committee. The EDD would ensure that it sent a quarterly update to the Committee. It was important to be sensitive to the different mechanisms of government in this regard.

On having a mechanism to evaluate the EDD in relation to the New Growth Path, there was not a direct correlation, so it was difficult to state and outline the particular interventions, policies and programmes which had had a direct impact on the NGP. There was, however, a need to refine the ability to measure the impact of the EDD’s programmes and initiatives.

Ms Schreiner added that the Department was going to compile a document containing well organised responses to all the questions, and this would be submitted to the Committee.   

Mr Mabasa remarked that the only thing which was being done by the DTI on cooperatives was the setting of policy. The rest of the work was supposed to be done by other departments. He suggested that the EDD should submit in writing a report on the work it was doing on cooperatives and SMMEs.

The Acting Chairperson noted that in the interests of time, the meeting had to be adjourned, but he invited the Chairperson of the Committee, Ms E Coleman, who had now joined the meeting, to make the closing remarks.

The Chairperson said that she had not been part of the meeting and was not quite sure what had been discussed. However, she was concerned about the style of reporting. In future, the EDD should attach its submissions to the National Treasury. In terms of the KPIs, the impact of the work done by the EDD was not being felt.  The programmes and initiatives had to be more vigorous, and accompanied by more accurate reporting. The Committee appreciated the presentation, but was very worried about the number of people in the EDD who were only in acting positions and not permanent employees. Every year there were new personnel, and that was unacceptable.  The Committee was willing to support the EDD in resolving the challenges facing the Department.

The meeting was adjourned.

 

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