Department of Trade and Industry Budgetary Review and Recommendations Report: discussion

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Trade, Industry and Competition

16 October 2013
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Committee considered the draft Budget Review and Recommendations Report.  Members felt that issues such as youth unemployment and continued inequity in South Africa should be addressed. Opposition Members objected to the implication in the report that the resilience of the South African economy to the global recession had been solely due to government policy, and requested that other factors such as the contribution of the private sector should also be highlighted.

Members felt that more information was needed on beneficiation, especially in terms of scrap metal.  The need for local procurement should be stressed.  The Department of Trade and Industry was requesting additional funding to open more foreign trade missions.  The low nominal increase granted to the National Credit Regulator meant that the body faced a real decrease in funding.  The amount being budgeted for the Regulator was queried.  It was explained that they were being forced to vacate their current leased premises.

There was some discussion on the practice of adjusting targets during the financial year.  The report needed to explain the high vacancy rate at the National Consumer Commission and the high resignation rate from the South African Bureau of Standards.

After reviewing the report, Members were urged to study the changes as they would consider the draft report again the following day.

Meeting report

Opening Remarks
The Chairperson welcomed Members and complimented them on their wide range of dress styles.  The agenda was adopted and apologies were tabled.

Department of Trade and Industry Budgetary Review and Recommendations Report (BRRR)
Introduction
The Chairperson said that the BRRR was about more than money. It was about the resources allocated to a Department. The dates of the financial year (FY) under consideration should be included for clarity, as there was public ignorance of what the government FY cycle was.  Some other changes were made for clarity and grammatical correctness. She had drafted the introduction herself, but invited comments from Members.

Mr X Mabasa (ANC) thought that there should be a reference to the inequity still experienced in the country. This would explain some of the actions taken by the Department of Trade and Industry (dti).

Dr W James (DA) questioned the statement that the resilience of the economy was ascribed to the New Growth Path (NGP). He felt that this was misleading.

Mr Z Wayile (ANC) reflected that whilst the global situation was being contemplated, the position of the African continent should also be considered. Some of the highlights of the SA government, such as the Brics (Brazil, Russia, India, China and South Africa) conference, should be highlighted. Youth unemployment was a time bomb. This was a nerve centre for Cabinet. The heritage of apartheid could still be seen in the nodal approach to development. Money was still being put into the cities at the expense of rural areas. By 2030 two thirds of the population would be urban based.

The Chairperson replied that the speech was a reflection of the views of the Committee not just her own. She had forgotten to note a reflection on the rural areas.  Regional integration had to be addressed as well. Brics had not happened during the FY and should not form part of this report.  This was a rare opportunity for parliamentarians to influence the budget. Departments and programmes that were doing badly improved their efforts at the end of the FY. Some of the targets had not been met, and needed to be taken into account.  This might be mentioned later in the report. The whole world faced economic challenges. The issue of inequity would have to be addressed.

The Chairperson felt that opinions were divided over the National Development Plan (NDP).  Unions might dismiss it while the DA felt that it was the answer to all the country's problems, according to media reports.  She had tried to bear the varied viewpoints in mind.

Dr James said that the Chairperson was making an empirical claim that the resilience of the South African economy was due to government policy. This was not a credible proposition, and the resilience could be present despite government policy. It might just be due to the productivity of the workers.

The Chairperson had tried to indicate that government policy had been a significant factor. Many persons from all political perspectives would agree on that. The World Bank talked about the resilience of the economy which could be traced to the NGP. The Minister of Finance, Pravin Gordhan, had also made this point in his budget speech of 2012, and had been supported by the DA at the time. The NDP had not been mentioned.  She had said that the participation of the private sector was crucial to assist government in overcoming economic challenges. One sector alone could not solve all the challenges. All stakeholders needed to work to overcoming the challenges.  She appealed to Dr James to read the final paragraph, which was her opinion.

Mr G McIntosh (COPE) understood Dr James's position. There were ‘nice turn of phrases’ in the introduction, but sometimes the English language was funny and made a negative from what sounded like a strong positive phrase. He felt that the same sentiments could have been expressed differently to stress that there were various factors that had fuelled the resilience of the economy. 

Mr N Gcwabaza (ANC) said that there was no dispute over the resilience of the South African economy. Government policies had enabled this resilience. Labour and the private sector behaved within government policy. Perhaps the manner in which the sentence was phrased had created the problem. There were many factors involved, as echoed by the International Monetary Fund (IMF). There should still be a concern over the trade deficit and this should be addressed in the introduction.

Dr James said that it was clear that the economy was resilient due to a stable macro-economic framework. He proposed this should be mentioned in the introduction.

The Chairperson said that the points made by Members had been captured and would be considered.

Mr Wayile said that this process was being embarked upon on the eve of the twentieth anniversary of democracy.

The Chairperson said that this was an important point.

Mandate of the Committee
The Chairperson said that some entities had been included in this section at the request of Members. On page 4 there was a blank area. A contents page would be included. 

Overview of the key relevant policy focus areas
The Chairperson noted that the issue of industrial development had been advanced in the section. A paragraph had been added on mineral beneficiation. The issue of scrap metal should be factored into the report. Mineral beneficiation should be expanded on. Various issues had been raised on this matter. She asked if Members understood minerals beneficiation as mainly scrap metal. With the permission of Members she instructed the staff to attend to this.

The Chairperson asked if the relevant paragraph should address local procurement specifically or just procurement generally. The issue was about procurement but with an emphasis on local procurement. The emphasis of the section was on 'key policy issues'.

Dr James disagreed. The heading 'Local procurement' should be retained.

Mr Wayile said that some of the debate was that there was no local content in certain solar heater programmes.

The Chairperson noted the satisfaction of Members. She asked if youth unemployment should be addressed in the paragraph on economic transformation, as this target had been missed. She asked the content advisers to consider this.

Ms Zokwanda Madalane, Committee Content Advisor, said that the reference to youth unemployment would best be addressed elsewhere in the document where it could be addressed specifically rather than in a general section.

The Chairperson asked if there were signed bilateral agreements with the Brics countries.

Ms Margot Herling, Content Advisor, said that this was more about trade relations than agreements.

The Chairperson felt that some poetic licence was being taken. This might lead to complications when the report was tabled in the House.

Dr James was satisfied to continue with the current wording on this issue. He remembered some discussion on agricultural processing under the sub-paragraph on measured objectives.

Ms Herling said that the issues such as agri-processing would be addressed later. She had understood that Members had agreed to move the reference to later.

The Chairperson said that the programmes of the dti had been reorganised. Some more attention was needed to the sections on the objectives of the Department.

Summary of recommendations
The Chairperson asked how many of the 60 new products targeted had been hit.

Ms Madalane said that this section outlined the aims. What had been done would be addressed later in the report.

The Chairperson felt that simply saying that there was an aim was insufficient unless it was specifically stated that the results would be included later.

Ms Herling said that there would be an explanation of how the different sections of the document fitted with each other. The intention had been to insert this once the discussion on the content of the document was completed.

The Chairperson had made a note about R75 million in section 7.

Ms Herling said that this was for additional funding requested for the 2014/15 FY. It related to section 4.4. This would facilitate the establishment of more foreign offices.

The Chairperson said that this recommendation had been under section 3.2 originally. The concern was about the source of funding. A relationship was needed.

Industrial development
The Chairperson asked all Members if they understood what was meant by the percentages quoted under the bullet point 'Industrial development' on page 11. On the top of page 12, second paragraph, a grammatical error had been corrected. Under incentives, no one had been able to tell her what incentives were available.  She found those on page 13 of the document.  She noted that examples would be added on page 13.

Mr G Hill-Lewis (DA) said that under Consumer and Corporate Regulation, a figure of a 2.8% increase for the National Credit Regulator (NCR) was mentioned. Across the programme, the increase was actually 2.5%. He felt that the Committee should recommend a greater increase as this was below the inflation rate. The NCR and related bodies played a crucial role, and it was unfortunate that they should face a reduced allocation in real terms. Such a low increase actually amounted to a decrease in real terms.

The Chairperson said that the figures in the table referred to nominal and not real figures. The drafters of the report should look carefully at which figures were used. Nominal figures were normally lower than real increases. This was a budget and such errors could not be tolerated.  The NCR should not be short-changed.

Mr McIntosh had made some suggestions. At the time, he had put them under service delivery.  His suggestions on investment could perhaps rather go under industrial development.

The Chairperson said that three additions were still needed from the staff. Mr McIntosh's inputs had been received. There would be more discussion on this point the following day. The substance of the report was not the current issue. Communications and media had been collapsed into the administration programme by dti. She asked if this funding would be used for the foreign missions. She asked if some of the figures quoted on page 16 were not referring to this.

The Chairperson's next point fell under the heading of 'Service delivery performance'. Members had wanted to delete the word 'legacy' from paragraph 5.1 on page 21. This needed to be changed to 'impact' in the reference to the global economic crisis. 

Mr Hill-Lewis referred to the second bullet point on page 21 regarding the NCR. He objected that R90.4 million would be spent on a new building while there was a desperate need for more inspectors, better integrated technology (IT) and more capacity in the legal department to pursue offenders.

The Chairperson said that the NCR was operating with a skeleton staff.  She thought that what had happened was that the new building was needed for the extra staff needed.  She asked the Committee staff to check on the NCR staff complement.

Mr Gcwabaza said that all entities needed to have space to work. Government must however guard against each entity having its own building.  There should be some sharing.

Mr Mabasa said that the broad principle cited was correct. It should be balanced against proper, conducive working conditions. It was correct that more information should be obtained so that Members could make an informed decision.

The Chairperson agreed. The campus used by the dti was huge and should be able to accommodate all entities. People should not be forced to work in a ‘nook and cranny’.

Mr McIntosh said that the Companies and Intellectual Property Commission (CIPC) was also looking for a new building. He had seen that some money had been set aside for this.

The Chairperson said that the same principle should apply.

Ms Saroj Naidoo, Parliamentary Liaison Officer, the dti, said that the staff complement at the NCR was 139 with 14 vacancies. The entity was located in Midrand.  he current landlord did not want to renew the contract. It was an industrial area and not well located.

The Chairperson said that this information put the emphasis back on the Committee.  She had had the wrong impression on their current office space. She asked for this to be confirmed in writing. She asked how the amount of R90.4 million was in addition to the current rental. If the dti could not accommodate the NCR on its campus then the issue should be looked into.

Mr Hill-Lewis asked if 'acquisition' meant that they would buy new premises or would again be renting.

Key interventions
The Chairperson said that a title had been added on page 22. Under the heading 'Support programme for industrial intervention' there was a reference to twenty new projects with support of R36 million which would be approved. These projects had not been approved by the end of the 2012/13 FY.

Ms Madalane said that the Annual Performance Plan (APP) and Strategic Plan (SP) had to be analysed as well. The value of the projects had been increased to R41 million. The last sentence of this paragraph explained what the dti had achieved, which amounted to three projects to the value of R12 million. It had exceeded its targets.

The Chairperson said that under the heading 'Support for small business', the target had been ten incubators. The Annual Report (AR) had indicated four, but the dti had achieved eight.  Measuring achievement of targets was a means of assessing performance. She understood that the circumstances might have changed.

Ms Madalane said that the purpose was to compare the SP and the AR.  The changes would have to be explained.

The Chairperson instructed Ms Naidoo to solicit an explanation from the dti.

Mr Hill-Lewis found the reflection of the old and new targets useful so that missed targets could not be hidden away. Departments were entitled to change their targets, but Parliament wanted to know why targets were missed.

Mr Mabasa noted that it was a challenge of procedure.

The Chairperson said that under the heading 'Youth development strategy' she half understood what was being said, but on the other hand it was ‘gibberish’. An internal decision had been taken to change the policy. This paragraph should be corrected as the point was clear but the language was not.

The Chairperson said that the sections on issues raised during deliberations were largely the same. Under the heading of governance and beneficiation, the Committee had asked for more on ports. She noticed that a lot had been added to the original document regarding ports. Transnet had made a proposal on labour intensive programmes which the Committee welcomed. The Committee needed to be seen to grant praise where it was due. The Committee had raised some concerns, but there were areas where positive comments should be included. It was good to see how the positive comments blended into the concerns.

The Chairperson said that there had been huge concerns over the “Team South Africa” approach.  A united approach was needed in dealing with international business. This sentence now read a lot better.

The Chairperson asked where the new organisational structure of the dti was captured.  She was informed that this was found on page 31.

Section 6
The Chairperson said that the word 'published' in the paragraph on the CIPC should be deleted.  This might give the impression that there were separate published and unpublished targets.  Members had agreed that the funding issue should be highlighted. 

Mr Wayile felt that the development of the co-operative call centre should be expedited to have greater availability to the rural co-operatives. Many co-operatives were in rural areas and might not be able to access the call centre.

The Chairperson directed that the Committee's unanimous support for recapitalisation of the Export Credit Insurance Corporation (ECIC) should be stressed. The Committee supported extra funding for the National Consumer Commission (NCC). New issues had been raised regarding the NCC report, and she urged Members to study the new text before the meeting the following day. However, the recommendations regarding the high vacancy rate should not come out of thin air. Some facts about the vacancy rate of 77% should be included as the figure was concerning..

The Chairperson said that the recapitalisation of the National Empowerment Fund (NEF) was addressed under paragraph 6.4. The Chief Executive Officer had expressed a need for this to the Committee despite the fund still showing a balance of R4.4 billion.

Mr Phahla Mahlaka, the dti, said the correct term was balance and not account. He could not confirm if the figure quoted was correct but would verify the figure.

Mr Wayile said that the figure must be reflected.  The NEF said that there was a process of sourcing funding from the ITC.

The Chairperson agreed.  There was a report of 91 resignations from the South African Bureau of Standards (SABS). This amounted to 8% of the staff complement. A lot of serious statements were being made in this paragraph. While these might be true, a sober approach should be followed. It would be pertinent to spell out some background. In 2012 certain functions of SABS had shifted to the National Regulator for Compulsory Specifications (NRCS). Funds should shift with function in terms of the Public Finances Management Act (PFMA), together with other resources. This had led to several challenges, including human resources (HR) related challenges. Employees transferred to the NRCS were given better service conditions. As a result, much dissatisfaction had arisen. This had not been effectively resolved, prompting a number of employees to leave. She noted the agreement of Members.

The Chairperson said that she would give Members a chance to study the changes made.  Copies of the management performance assessment tool should be made available to Members.    This covered strategic management and governance. The Department needed to pay attention to a number of management factors. Despite the performance mentioned, the dti was described as having a good performance. It had outperformed other departments in the cluster. She felt that it would be worthwhile to include these comments in the conclusion.

Mr Hill-Lewis raised a programme issue relating to a trade policy conference being held later in the month. It would be beneficial for himself and other Members to attend this.

The Chairperson agreed, and would deal with the invitation later. There was also an invitation from an event planned in the Makhado municipality.

The meeting was adjourned.
 

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