Lotteries Amendment Bill [B21-2013]: deliberations; Department of Trade & Industry Annual Report 2012/13 & Second Quarter Performance 2013/14

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Trade, Industry and Competition

20 September 2013
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Committee continued its deliberations on the Lotteries Amendment Bill. Questions were still raised on the exemptions that would apply should the Minister appoint an organ of state to conduct the lottery, in the absence of a suitable candidate. Members agreed that there should be no chance of political interference. They discussed the provisions for the restraint of trade provisions applicable to the Commissioner, board members and employees of the lottery. There should be no perception that awarding licences or grants should be seen as a way of earning favours from beneficiaries. Members expressed their concern over the lack of detail surrounding the arrangements should an organ of state be given the operating licence, as Parliament should have oversight in this case.

The legal team of the Department of Trade and Industry was instructed to rewrite the clauses in question while the Committee continued with other business. An updated version of these clauses was presented later in the meeting. Members wanted to see clearly that no political party would benefit if the Minister had to resort to appointing a state organ to run the lottery.

The Director-General of the Department briefed the Committee on the Annual Report for 2012/13. Developing countries were leading the global economic recovery. The South African economy was recovering but at a slower pace. Government interventions in the motor and chemical industries were assisting these sectors in playing a leading role. Employment was recovering but not yet at the levels of 2008. Europe was still a major trading partner but there was a need to diversify trading interests. The trade gap was still wide and this presented an area of vulnerability.

The focus of the Department was primarily on industrial development and on broadening participation in the economy. The resurgence in the motor industry was being led by new brands from China establishing major factories. There had also been interventions to assist the recovery of the textile industries while aquaculture was growing in importance. The film industry was another growing sector.

The Department was looking to assist the development of black business. There was significant investment from China. Agreements were being developed in the region, one of these the establishment of a road and rail link between Dar es Salaam and Durban. Agreements were also being negotiated with the European Union. A number of incubators had been established, with more planned, to assist small business. Several pieces of legislation were being processed.

The vacancy rate within the Department had been reduced to 8% but was still short of the target. The targets for persons with disability and for women in senior management had been met. All suppliers had been paid within thirty days. Of the 56 targets the Department had set for itself, 36 had been fully achieved and the remainder partially. Underspending had been reduced to 0.77% of the budget. An unqualified audit report had been achieved, although there were some findings on supply chain management..

The Department faced three major challenges in the economic slowdown, the lack of partnerships between big and small business, and in encouraging more local procurement. The budget for 2014/15 was R9.9 billion although an extra R1.3 billion had been requested, mainly to support projects to broaden participation.

Highlights of the second quarter of 2013 were a move on the part of government and parastatal companies towards local procurement. The legislative programme was progressing. There were fruitful negotiations around AGOA. Measures were being strengthened to support small business. Current spending was 14% behind schedule but should improve as the year progressed.

Members from all parties praised the Department for their efforts. They had several questions and comments. The issue of intellectual property had to be addressed, as the lack of clarity was a deterrent to investment particularly in the medical research field. The trade deficit needed to be tackled. Members queried the progress of programmes to achieve beneficiaton. Members called for a united approach between government and business in promoting South African exports. Many jobs had been saved despite the economic downturn. Challenges in the European Union were affecting South Africa, and Members were told that the Rand, as one of the most traded currencies, was particularly vulnerable. Members asked what the effect of increasing electricity tariffs was on the economy. The only way to address the balance of payments was increased exports. Government should take a proactive role in procuring food from smaller farmers and co-operatives. Potential investors were often frustrated by difficulties in obtaining travel documents. Youth programmes had been delayed. Members asked what effects the strike had had on the vehicle manufacturing industry. More needed to be spent on consumer regulation. The work of Proudly South African was praised, and needed more exposure. The appointment of field workers was queried.

Meeting report

Lotteries Amendment Bill: deliberations
The Chairperson said she had been hoping to see a clean copy of the Bill, but some of the text was still coloured green.

Ms Zodwa Ntuli, dti Deputy Director General (DDG): Consumer and Corporate Regulation, said that they had thought it best to mark the text that had been changed as a consequence of the proceedings the previous evening.

Adv Johan Strydom, dti Legal Adviser, the dti, took Members to item 12 in the A list. The paragraph numbers were omitted and replaced by the numbers in the A list document. In clause 10, there was some consequential changes due to the deletion of paragraph (s). Paragraph (v) would be modified to make provision for the Minister to take reasonable steps to recover any grant that had been wrongly allocated. The final amendment did not need to be discussed as it was purely semantic.

The Chairperson asked what would happen to the funds generated by an organ of state.

Adv Strydom referred Members to the principal Act. Section 13 was a lengthy provision. The Minister would be exempted from sub-section (2). There might be a situation where it was not possible to appoint a licensee, and an organ of state was appointed for a certain period. The question had arisen if it would be advisable for the Minister to be exempted from these requirements. However, perhaps the only exemption should be that no political party should be involved. This was contained in (d)(iv).

The Chairperson said that the Committee would deliberate on this matter. She understood that Adv Strydom was saying that (iv) should apply.

Adv Strydom said that the current wording made provision for a blank exemption for the Minister. However, the requirements for an ordinary licensee might be applicable to an organ of state.

Mr G Hill-Lewis (DA) felt that the dti had misunderstood his question the previous day. He had asked about the case of a state organ sub-issuing a licence to a third party.

Ms Ntuli responded that this proposal was not in relation to Mr Hill-Lewis's question. The Minister would have to approve any sub-licensing arrangement.

Mr Hill-Lewis said that the process for sub-licensing to a third party had been included at the request of the dti. The board had to give permission. This did not seem to be included in the amendment of clause 13.

Ms S van der Merwe (ANC) said that if the Minister was to be exempted from applying (ii) and (iii), there would be an effect on (6) in the principal Act. This said that the political party should not be favoured if it was associated with an organ of state. It seemed that different criteria if an organ of state was appointed.

Rev W Thring (ACDP) had seen the wisdom in reducing the period in limiting the period during which an organ of state would operate. The reaction of his colleagues told him that this was not so. He agreed that sub-sections (2) and (3) should be reconsidered.

The Chairperson called a short adjournment so that Members and the dti could discuss the issue amongst themselves.

Ms Ntuli thanked the Chairperson for the opportunity to confer.

Adv Strydom referred to item 3 on page 5 of the A list. This made provision for the Minister to be exempted from section 13(2) and (3). this was only for the case where a licensee was not appointed at all. It had been made clear that this exemption should not be applied in a blanket number. He suggested that the amendment should be rephrased to exclude 13(2)(a) and (b)(iv).

Mr B Radebe (ANC) was concerned that the issue was being short-circuited. This proposal should be considered later.

The Chairperson hoped that all were clear that 13(2)(a) and (b)(iv). Something else would be crafted for an organ of state.

Adv Strydom said that the amendment could be done that same day before the Bill went to Creda Printers for printing. While the Committee proceeded with other agenda items the legal team would work on this.

Mr Hill-Lewis said that political parties would not be involved.

Adv Strydom responded to the suggestion regarding 13(4) and (6). This would be shifted as suggested by Members.

The Chairperson took Members through the A list.

Mr Radebe had raised a point on the restraint of trade on any organisation that had received a grant from the commission. No employment should be offered to a Lottery employee for two years.

The Chairperson said that the agreement had been that this would only apply to the Commissioner. If the dti did not incorporate the clause then the Committee would do this anyway.

Adv Strydom replied that this was contained in page 8 of the Bill. He submitted that there was no reason to distinguish a 'life partner' from a 'spouse'. The amendment concerning the 'life partner' should be withdrawn. The law gave equal recognition to such relationships. This related to employment but not to the receipt of grants.

The Chairperson said that there was an implication on page 6 that the Commissioner was a board member.

Mr Radebe felt that Adv Strydom was not helping. The Commissioner and his immediate family and associates should not be employed by an organisation that had received a grant. This should not be seen as a way of securing employment.

The Chairperson said that the clause quoted referred specifically to a board member.

Adv Strydom could go no further as it was now a question of policy.

Ms Ntuli felt that the proposal made sense. She asked why board members should not be treated in the same way as a member of the distributing agency. The commissioner did not really interact with the grants process.

The Chairperson did want to see board members covered by the provision, but wanted to see the same restrictions applied to the Commissioner. She was happy with the provisions on page 8. The constraints should also not apply to all employees, just the 'top dog'.

Ms Ntuli understood what was being said, but would have to applied consistently to the commissioner and members of the distributing agency.

Mr Radebe said that the Commissioner would still have a lot of influence over the decisions made.

The Chairperson accepted the proposal on the omission of 'life partner'.

Ms Ntuli was getting nightmares from the issue of the organ of state. The revenue generated by a state organ in this position would be addressed in the licence agreement. There was no specific amount set for channelling into the distribution fund. The current operator worked on 34%, and this should be seen as a baseline. A more significant amount would certainly be considered, amongst other issues. In terms of its operations, the operating company or organisation would be solely focused on running the lottery. This was the focus of the Act. This amendment was included in the A list. Potential bidders had asked on how their structures should appear. The dti did not want to comment on this. Requirements should dictate the structure. The dti only wanted to see an efficient operation. Some of the matters raised could not be answered simply. It could be one company under a Chief Executive Officer, or a consortium of companies. The issues of skills, financial stability and human resources should not be neglected.

Mr Hill-Lewis was uncomfortable about creating a new state entity without any guideline in legislation. Members would then have a fair idea of the structure. These were important issues for accountability and oversight. Members had no idea how this would look. He asked if such an entity would be funded by the dti or would be self-funded.

Ms Ntuli said that the purpose was not to create an organ of state, but an enabling provision for the Minister to create an organ of state. The details would not be dictated in legislation. Funding issues would be determined when such an organ was created. Private companies could raise their required funding in whatever way they saw fit. The dti just wanted to see that the company was financially sound. The organ could be created under the Department of Public Enterprises.

Mr Radebe said that regulations should come back to the Committee. Should such an entity be created, this should be reported to Parliament so that it could exercise oversight.

The Chairperson said that the further processing of the Bill would happen after the budget review process. She thanked the legal team for their efforts.

Department of Trade & Industry Annual Report 2012/13 & Second Quarter Performance 2013/14
The Chairperson said that the Committee was right at the end of the current term, but was not on track with the budget process.

Mr Lionel October, the dti Director-General (DG), said that much of the detail of the presentation would be contained in the various annexures. He started with the economic context. The dti tried to shape economic events, but was often shaped by the global economy. South Africa was very vulnerable to global developments. For the first time in almost 100 years, the recovery had been led by emerging markets. Asia was in the forefront together with Africa. Emerging economies had grown by an average of 6.3% in 2011 and 5.1% in 2012 compared to 1.6 and 1.3% in developed countries in the same years. The South African economy had grown modestly at about 2.1%. This was an improvement, but was nowhere near the 5% before the global crisis.

Mr October presented a graph depicting the decline in the gross domestic product (GDP) as a result of the financial crisis. The one positive development was an improving role of the productive sectors, especially manufacturing. This sector had grown by 12%. There had been some interventions by government with the motor and chemical industries leading the way. It was clear that the introduction of the Manufacturing Competitive Enhancement Package (MCEP) had born fruit. The designations and use of government local procurement had also assisted.

Mr October continued that there was a positive trend in the number of jobs available. There had been a recovery, but this was still nowhere near the rate of job creation experienced in the past. Investment in the economy had improved and there had been an improvement with merchandise exports. Excluding gold, merchandise exports in the fourth quarter of 2012 amounted to R170 billion. While some diversification was taking place, metal exports were dominating the market together with motor vehicles.

Mr October said that the bulk of manufactured exports went to the European Union (EU). Some diversification was needed, and there was an increasing focus on Africa, South-East Asia, South America and the Middle East. Exports were increasing but imports even more so, leading to an increasing trade gap. The country was consuming more that it was producing, and the trade gap of 5% was an area of vulnerability.

Mr October said that the core of the dti's work was industrial development. The other four clusters were trade, investment and exports; broadening participation; regulation; and administration and co-ordination. Progress was being made in creating a regulatory environment with a minimum of red tape.

Mr October listed the achievements of the dti during the 2012/13 FY. The automotive industry had traditionally relied on seven major brands, but there had been positive developments with the emergence of Chinese brands First Automobile Works (FAW) and Beijing Automotive Works (BAW). FAW's truck manufacturing plant should go into production in the new year in the Coega Industrial Development Zone (IDZ). This was happening to revitalise industrial zones. At present all minibus taxis came from Japan, but BAW was now getting involved in this sector as well. An electric vehicle roadmap had been released as these vehicles would become increasingly important in future.

Mr October said that another area of intervention had been the clothing sector. This sector had been stabilised. The footwear sector was also open to imports, but new players were coming into the market. The quantity of shoes produced would increase to 100 million in the following three years. The agro-processing sector was also seeing developments. An aqua-culture programme had been introduced. Fish farming was developing rapidly. Other major products included a Small-Scale Milling plant in Durban and an Energy-Efficiency Training Centre.

Mr October said that 189 enterprises had been helped to retain industrial capacity with 12 205 jobs created under the Clothing and Textiles Competitiveness Programme. Altogether some 33500 jobs should be retained. Projects had been supported in terms of tax incentives. The list of sectors had been expanded where state owned enterprises (SOE) and local government had been directed to procure locally. Furniture was a particularly labour intensive sector. Local production was now taking over from imports. There were other programs to support students. A strong capability was being developed in the film industry. This sector was coming into its own. Another developing sector was business systems outsourcing. South Africa had been recognised by an award for the best Off-Shoring Destination of the Year for 2012 in the United Kingdom National Outsourcing Association Awards.

Mr October provided an overview of the incentives paid out over the year. Most beneficiaries were small and medium firms. The dti also sometimes assisted with infrastructure development. The other set of incentives were related to broadening participation. There was a programme for black business suppliers. New players were being encouraged into the market. Exports were being supported and 1 000 firms had benefited by attending trade fairs and exhibition. Exports had amounted to R53 billion. There was a growing role played by Asian investment, amounting to 61% of the R3.8 billion invested in the country. There was an attempt to diversify. At the South African Expos in Beijing and Shanghai in November 2012, 61 companies had participated and this had produced export orders of R35 million.

Mr October said that work was continuing with the BRICS countries (Brazil, Russia, India, China and South Africa). The trade ministers meeting had been hosted in March. There were currently negotiations on the removal of toxic provisions by the EU. South Africa would make some compromises in exchange for export concessions. The other major work was moving on free trade areas. A common mandate had been created in the Southern African region to develop a common approach. There was active engagement on the North-South corridor. A road and rail network between Dar es Salaam and Durban. A treaty was being created by the ten countries involved.

The Chairperson asked what the Memorandum of Understanding involved.

Mr October replied that under the free trade agreement there were three legs. One of the greatest impediments to trade was the absence of road and rail links. Agreements were needed between the different countries to co-operate on the different legs. A draft treaty was before Cabinet and had been distributed to the other partner countries. This would help to start the construction phase.

Mr October said that there had been many business initiatives, especially through technical missions. Indonesia was a fast-growing Asian market.

Mr October said that a big programme was broadening participation. The Seda Technology Programme managed a number of incubators for small, medium and micro-enterprises (SMME) . New incubators were being created. There were currently 42, and eight more had been approved. Work was being done on gender empowerment. Youth enterprise was another focus area. The work place challenge programme was being expanded to co-operatives.

Mr October said that the other major area was legislation. Work was being done on various policy frame works. The Committee was familiar with the various pieces of legislation. The Licensing of Business Bill, Lotteries Amendment Bill, Business Reform Registration and National Credit Amendment Bill had been developed for approval by Cabinet. The Special Economic Zones and Co-operatives Amendment Bills had been introduced in Parliament. The Broad-Based Black Economic Empowerment (B-BBEE) Amendment Bill had been approved by Cabinet and the Legal Metrology Bill had also been approved for public consultations.

Mr October turned to administration. The vacancy target of 5% had not been met but the situation had improved to 8%. The target of 2.4% on disability had been achieved with a current rate of 2.8%. Regarding women in senior management the figure was 43%, and the dti was one of the leading Departments in this regard. The dti had paid all suppliers within 30 days. A clear policy had been developed for the entities under the dti.

Mr October referred Members to a full annexure on performance information. The dti had achieved 36 out of 56 targets fully, and the balance partially. Most of the underachievement was in terms of the automotive incentive schemes. Companies had not taken up the new models as quickly as expected.

Mr October presented information on financial management. The level of underspending was improving steadily. In 2010/11 it was 6%, and in 2012/13 it had been reduced to 0.77%. He presented a breakdown of the variances. Of R64 million in under spending, most of this was in the automotive scheme to the tune of R36 million.

Mr October gave a breakdown of expenditure. R8 286 million had been spent of a final appropriation of R8 351 million.

Mr October revealed the findings of the Auditor-General (AG). There had been an unqualified audit opinion but the AG had made some findings. Compared to 2010/11, where there had been 5 or 6 blocks of findings, this had been reduced to two areas. The injunction of the Minister to improve continuously was being heeded. Most of the findings were regarding contracts of below the figure of R500 000. The entire programme of training and instruction notes was improving the administration of spending and supply chain management. On the whole there was progress.

Mr October summarised the challenges for 2012/13. The biggest impact was caused by the decline in exports to the traditional markets, and diversification was needed. The second was on the broadening participation leg. There was a real gap between formal and informal business. There were incentives for black business and co-operatives. In the agricultural sector commercial farmers had to become integrated with their smaller counterparts. There had been progress on designation, but there was still not a culture in all levels of government and SOE of local procurement.

Estimates for 2013/14
Mr October said that the dti was looking to reprioritise from the automotive support scheme to small business support. Treasury approval would be needed for that. There was a full breakdown in the annexures.

Mr October said that the medium term expenditure framework (MTEF) for 2014/15 allocation was a baseline of R9.9 billion. A further R1.3 billion had been requested. Of this, R1.1 billion was requested to broaden participation under the Co-operative Development Act. Office renovations would be needed for the dti. He presented a table of the current allocation. The revised baseline would increase to R11 billion, but he understood that revenue would be tight. He hoped that the baseline would be expanded slightly.

Second Quarter 2013/14 highlights
Mr October said that there was an important intervention to support the localisation programme. A local content verification office had been established by the South African Bureau of Standards (SABS). 65% of renewable energy equipment had to be locally procured. This drive was moving into locomotives and other areas. This would also apply to the manufacture of buses. Rapid transport systems were now relying on locally purchased buses. The bulk of tuberculosis medicine was now locally procured. The dti was working with Treasury on procurement notes. These had been completed on several commodities. A solar photo-voltaic localisation roadmap had been completed. The last interesting innovation was working with clothing retailers such as Mr Price on local procurement, and this was now resulting in an upturn for the local industry. A pan-African quality structure had been established. He listed some 87 projects that were ongoing.

Mr October said that the important point to emphasise in terms of investment was the AGOA initiative. The Minister was currently in the United States of America (USA) to work on an extension and things looked promising. The codes of good practice had been completed and he hoped to issue these at the conference in October. There was an honours programme at the University of the Witwatersrand and a Bachelor of Economic Development Degree was now being offered at the University of the Western Cape. Approval had been given for another 30 small business incubators.

Mr October said that the Co-operatives Amendment Act had been assented to by the President in August. The B-BBEE Amendment Bill was now with the provinces and should be finalised in the National Council of Provinces (NCOP) in the next two weeks. He mentioned some of the other legislation being processed.

Mr October presented a layout of expenditure for the financial year (FY) to date. The current variance was 14%,. but he predicted that the position would improve in the remainder of the year.

The Chairperson welcomed the comprehensive report.

Dr W James (DA) thanked the DG for his comprehensive review. He felt that the one area of weakness was intellectual property (IP). His first concern was that indigenous knowledge was not being protected. The second issue was the Cabinet-approved IP document. This was a good initiative in the face of competing interests. In the health area he welcomed the move towards generic drugs. The problem was the there was a burden of infectious diseases for humans, animals and plants. Vaccines were needed but could not be generic. Developments of these products were expensive and could only be done by the biggest companies. No big company would invest if it could not protect its IP rights. The animal health side was also important. The culling of ostriches had ruined the sector. There were bugs that attacked grapes and a vaccine was needed for this as well. It was of the greatest importance to look after IP rights and he saw a weakness in that department within the dti.

Mr October took the point that IP policy was critical. There were emerging market challenges. Parts of the economy were well developed. South Africa's involvement in generic medicine had led to a breakthrough at the World Trade Organisation. South Africa should strive to remain being a world leader in this regard. A policy frame work had been released and the dti was negotiating with other departments. The IP Bill had been discussed at the NCOP. The debate was ongoing. The loss of indigenous knowledge had to be addressed and a short term intervention had been needed.

Ms Ntuli said that in terms of the draft IP policy a lot of contributions would be invited. A number of consultations had been scheduled. There were many issues regarding the co-ordination of IP as there were several departments involved. A common approach was needed on IP. On the protection of traditional knowledge, the dti was unapologetic about pushing through the legislation. Any other kind of protection was not being precluded. Gaps would be closed in other areas.

Rev Thring thanked the dti for a well-presented contribution. His party had lamented the balance of payments position for some time. For three years the deficit had continued to widen, especially since the global recession. Interventions had been put into place and diversification was an option. However, the process had been quite slow. He asked when there would be a visible improvement. There was also a national deficit, and these deficits did not bode well for the economy. Beneficiaton was a government policy and this should be implemented aggressively. There was still a trend of exporting raw materials and importing the finished product. He cited the jewellery sector as an example. He asked if any students were being trained. He was pleased to see that there were incubator projects. He wanted to know if this was being transferred to a local government level. He had experience from the eThekwini municipality. He asked how broadly this programme was being taken up at a local government level.

Mr October replied that the pace of beneficiaton. was the slowest of all the programmes. A lot of electricity was needed to drive the projects, as the electricity crisis had forced many projects to shut down. The dti appreciated the important role played by municipalities. The bus purchases in three metros had energised the market.

Mr Garth Strachan, Acting DDG: Industrial Development, the dti, said that there were more stages to beneficiation. Higher levels of production should be targeted. A top-level team had been put together to investigate opportunities in beneficiation in five critical value chains. There would be significant progress.

Mr October added that the focus areas of beneficiation had been addressed at the previous Cabinet lekgotla. Focus areas would be platinum, titanium, iron and steel, and gold and diamonds.

Ms van der Merwe said that there was a lot of progress being made and it was an encouraging report. One of the areas where there was a problem was that there was not a 'Team South Africa' approach. There were 45 overseas missions. A lot of people trying to do business abroad were experiencing different approaches from businesses, embassies and trade missions. Business never approached foreign affairs except when they were in trouble. She noted eighteen vacancies in the trade missions. An initiative was needed to bring all South Africans aboard on the National Development Plan (NDP).

Mr October responded that there was a bad disjuncture. China and the USA presented a united approach. The export strategy was being beefed up, revitalising the export councils. There were councils in the different sectors, but these had been neglected for a while. Government could only open doors and facilitate. The smallest enterprises might have received some funding.

Ms Jodi Scholtz, Group Chief Operations Officer (COO), the dti, said that there had been a programme to train individuals for deployment to the overseas missions.

Mr Shabeer Khan, Chief Financial Officer (CFO), the dti, referred Members to the Cuba initiative. Some of the dti budget had been diverted to the Department of International Relations and Co-operation (DIRCO) to facilitate this.

Mr Z Wayile (ANC) applauded the presentation. It gave a sense of where the country was and the international context. There were a few areas which he wished to highlight. South Africa had not been immune from the global crisis. A stimulus fund had been set aside to assist distressed industries. Some of the jobs lost had been saved. He asked what the successes and shortcomings had been in that programme, and how many jobs had been saved. The second area was the strength of the EU market. There were a number of challenges in the EU affecting other member states. He asked how these affected South Africa. He asked if there were any alternative measures to ensure that any economic shocks could be responded to. His third question was on the electricity supply. There were a number of industries labelled as heavy users. Some of these were multi-national and were threatened with closure due to rising electricity costs. A number of jobs in the value chains had been lost. A multi-front approach was needed. When the FAW deal was negotiated with the Coega IDZ a number of municipalities had been involved. A number of investors had been promised free land. He asked how consistent signals could be given to foreign investors.

Mr October replied that it was a healthy development that different provinces and municipalities were looking for investment. A joint package should be provided. Ten packages had been presented.

Mr Stephen Hanival, dti Chief Economist, said that about 40 000 jobs had been secured. There had been a focus on capital investment, but this was now moving towards local procurement and energy efficiency. This would boost the demand for energy efficient technology and capital goods. BEE and job creations were being supported. The budget over three years was R6.2 billion of which R2 billion had already been committed.

Mr Strachan said that one of the major issues was the differentiated electricity tariffs both between and within municipalities. This was a threat to the manufacturing sector. A team met weekly with Eskom and Treasury to understand the demand and supply measures. There were arrangements with the Energy Intensive User Group (EIUG). There were weekly interventions with municipalities . The underlying problem was that electricity revenue was central to all municipalities.

Mr G McIntosh (COPE) had one comment and two questions. He was conscious of the fact that the Minister was in America. What one must remember that while emerging economies were making an impact, South Africa was the 'gorilla in the garden' of the African economy while the USA played that role in the global economy. He asked where the BAW factory was to be located. He queried government expenses on items such as cellphones.

Mr October agreed that this was the country's largest vulnerability. The Rand was one of the most traded currencies and was vulnerable. The trade deficit fluctuated with commodity prices. This was an added vulnerability. Even in the boom period, increased earnings in the early 2000s had been due to increased prices rather than production. While the exchange rate had been strong there had been increased imports while exports had suffered. The only long-term solution was to reduce the proportion of export earnings based on commodities. There should be more reliance on manufactured goods. Intermediate goods were not such a problem, but 25% of the import basked consisted of oil and petroleum products. A large component was also in the form of luxury goods and pharmaceuticals.

Mr Radebe noted that the Department of Performance Monitoring had rated the dti as one of the best in government. On industrialisation, it was good to see the number of projects. There was no way that the widening current account deficit could be addressed without increasing exports. Even Europe had realised that industrialisation was at the core of economic development. The South African government had already taken this to heart. As new industries produced more their wealth must be shared. The NDP was clear that co-operatives should already be supplying 50% of food. Government was procuring 40% of all food, amounting to R7 billion. He asked how many co-operatives were in this supply chain. Small-scale farmers also had to be accommodated. One common issue in discussions with foreign ambassadors was the difficulty in investors procuring the necessary permits to visit South Africa.

Mr October thought that Parliament could champion the role of set-asides. Some purchasing power could be set aside for smaller business. Food and furniture could easily be targeted.

Mr Hanival confirmed that this was a focus area.

Mr October agreed with the problems in investors obtaining visas. This process should be improved.

The Chairperson welcomed the Naturina Primary School from Johannesburg. The children were fortunate to see democracy in action.

The Chairperson noted that the target of projects for women had been exceeded. This was commendable, but there was a delay with programmes for the youth. There were still financial areas which needed some focus. There was still some room for tighter compliance. The CFO had worked in the AG's office formerly and should be able to guide the process.

Mr Hill-Lewis also congratulated the dti on the audit report. The issues of concern raised by the AG were no fault of the dti. The payment of debts was an example to other Departments. The global vehicle manufacturing industry was very competitive. He asked what the initial effect of the strike had been, and if the dti had been active in this area. He was still of the view that the dti did not spend enough on consumer regulation and enforcement. There was a request for an additional R110 million in this regard. There had been a decline in spending in other areas. Forty field workers had been appointed across the country at significant expense. He wanted to hear more about this. He agreed on the need for local procurement. There were bodies like Proudly South African (PSA), but they were not nearly as vocal as he would like to see in driving local procurement. He had bought a Toyota recently, but the salesperson had been unable to say which models had been locally manufactured. The PSA logo was seen far too seldom and he was pleased to see it on the presentation.

Mr Strachan replied that the PSA was very much on the dti radar. It was a National Economic Development and Labour Council (Nedlac) institution and the institutional architecture was being considered. There should be a greater focus on programmes rather than events. There was an increase in the budget for PSA.

Ms Ntuli said that Parliament had asked the dti about rural initiatives. Field workers had been seen as one way of increasing the uptake on dti projects without the need to establish permanent offices in outlying areas. These field workers would travel through the provinces.

Mr October acknowledged that the Minister had engaged in the first bargaining sessions and had stressed the need for stability in the labour relations environment. At the same time, one of the vice-presidents of BMW had been visiting the country. There was a good collective bargaining system in operation as opposed to other sectors. These industries were global exporters and could not afford disruptions.

The Chairperson asked what the dti's view was on recapitalisation.

Ms Scholtz said that there had been engagement on recapitalisation.

The Chairperson thanked the dti for several of the improvements and innovations noted in the presentation. This was a massive portfolio and she appreciated the way in which all the critical issues had been addressed. The textile industry had gone through a real crisis, and the turnaround had been tremendous. The measures taken were working. The next step was in ensuring that the retailers supported the local industry. Stakeholders had been brought together to find a positive solution on electricity costs. Issues about external trade offices had been raised for some time. There were many incentives to be looked at, and these had been improved and tightened. It was hard to quantify the number of jobs created. There was a solid relationship with the Department of Agriculture, Forestry and Fisheries regarding ship-building for the fishing industry. However, many challenges remained. Beneficiaton was still a matter of concern, but it was a good sign that the process had started. She urged Members to read the report of the dti as well as the briefing prepared by the Committee researcher.

Lotteries Amendment Bill's revised set of proposed amendments: deliberations
The Chairperson noted the return of the legal team with a revised set of proposed amendments.

Adv Strydom presented the updated document to Members. The first change was to page 6 of the Bill. The clause relating to the restraint on trade of the commissioner was reworded to read 'at the end his employment'. There was an extra clause to cater for a commissioner not taking employment with any beneficiary of a grant. The clause dealt with the case of an organ of state being appointed to manage the lottery.

Mr Hill-Lewis asked how a political party could have a financial interest in the operation of the lottery.

Adv Strydom said that if there was no possibility of such a circumstance arising the provision could be deleted.

Ms van der Merwe said that no party should have an interest in a company running the lottery.

Rev Thring said that if the commissioner were to appoint an organ of state there should be some conditions. The conditions listed should be excluded so that the commissioner would not be perceived as being biased in favour of any political party.

Adv Strydom said that reading section 13(2)(a), the Minister, before granting authority to an organ of state, had to ensure that no political party would be involved.

The Chairperson said that Members wanted to see the Minister abide by 13(2)(d)(iv).

Mr Radebe proposed a simpler wording to the clause.

The Chairperson referred to the principal Act. She concluded that when the Minister was appointing the organ of state, he or she must be bound by the prohibition on political parties having an interest.

Ms van der Merwe proposed that the amendment as presented on page 5 of the new A list, item 5, be rejected. Instead, the requirements contemplated in section 13(2)(a) would not apply.

Ms Ntuli was happy with this proposal.

Mr Hill-Lewis was happy with this proposal. He was not, however, sure why the Minister would be exempted from all the procedure. The Minister would still have to follow the advertising procedures, and only if no suitable candidate came forward would an organ of state be appointed. A call would be made for applications, of which none was found to be acceptable. A state organ would then be appointed without another notice being placed in the Gazette.

Ms Ntuli said that this explanation was correct. There had to be specific grounds for the Minister to appoint a state organ. The Minister could also assess the quality of previous licence holders and then decide to appoint a state organ. A state organ was not prevented from bidding but would not get preferential treatment.

Adv Strydom moved to item 4 on page 5 of the A list. This was for a new section 13B, dealing with a temporary licence. If (iv) was retained on the political interest, there should also be a consequential amendment in this case.

Mr Theo Hercules, State Law Adviser, gave the consequential amendment to section 13B.

Mr McIntosh said that this 'organ of state' was developing a life of its own. There were often bright ideas, but when the T's were crossed and the i's dotted, the picture became a lot more complicated.

Adv Strydom said that clause 24 would now provide that no member of the board or a distribution agency would be entitled to take up employment with any beneficiary of a lottery grant for a period of 24 months after leaving the employ of the lottery.

The Chairperson wanted the revised Bill to go to the printers before the end of the day. She thanked the DDG and her team. The process was not yet complete. She reminded Members of the meetings scheduled for 2 and 3 October to further deliberate on the Bill. The Bill should be placed on the ATC.

Mr McIntosh was not sure if there was provision for the Committees to meet on those dates.

Mr Hill-Lewis had a busy programme for the afternoon of 2 October and asked if the meeting could be for the morning only.

The Chairperson said that dates and times could be reviewed. She reminded Members that there would still be an opportunity to introduce amendments. It would allow for quicker processing if these were submitted in writing, and this should be done by 1 October. Verbal proposals would still be accepted at the meeting. The date for the debate had still to be set and would depend on the schedule of Parliament.

Mr Radebe said that the availability of the Minister would determine the most appropriate date.

The Chairperson said that other plenary sessions might be added to the programme. There was a view that there could be a plenary session on 8 October, but it would be irresponsible to make plans based on this. Members would be informed.

Consideration of minutes of meeting
The Committee consider and adopted the minutes of the meetings of 1, 13, 14, 16, 21 and 23 August 2013.

The meeting was adjourned.


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