Department of Economic Development Department on its 2014 Strategic Plan, with Deputy Minister in attendance

NCOP Economic and Business Development

07 July 2014
Chairperson: Mr L Suka (ANC; Eastern Cape)
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Meeting Summary

The Economic Development Department (EDD) met with the Select Committee on Economic and Small Business Development to brief the Committee on its Budget Vote, Strategic Plan and Annual Performance Plan. The EDD was led by Deputy Minister Madala Masuka. The EDD reported that it had developed 18 Strategic Infrastructure Projects (SIPs) and devised a programme to implement them nationwide. These included: SIP 1 (Opening the Northern Mining Belt), SIPs 3,4,5 (Unlocking economic opportunities on South East Coast, the West Coast and North West), SIPs 8,9,10 (Energy Security), SIP 18 (Water and Sanitation) to name a few. According to the EDD, the 2014/15 APP different from that of the 2013/14 financial year was that government had taken an approach centered on “radical economic transformation”. This meant that there needed to be a radical change in the EDDs vision, objectives, outcomes and inputs in order for the EDD to appropriately achieve its set Key Performance Indicators (KPIs). 
With regard to the EDD’s legislative mandate; the department complied with the following:
•The Infrastructure Development Act (2014)
•The Industrial Development Corporation Act (1940)
•The Competition Act (1998)
•The International Trade Administration Commission Act (2002)
The mandate of the EDD was centered around job creation, inclusive growth and industrialization. The EDDs key milestones were: the establishment of a Ministry for policy integration work in 2009, coordinated response to the global economic crisis of 2009-2011, completion of the Development New Growth Path in 2010, the transfer of public entities to the EDD in 2010 and the establishment of a functioning Department by 2013, to name a few. The EDD was therefore requesting an approval of R 697 million, of which R 534 million would be allocated to agencies and R 163 million to departmental programmes.
Programme 1: Administration- R 79 million
Programme 2: Economic Policy Development- R23 million
Programme 3: Economic Planning and co-ordination – R45 million
Programme 4: Socio-economic Dev. &Dialogue -R15 million

Members however were not too pleased with the presentation from the EDD, stating that it lacked detail, there were no clear timelines, and there was no clear information around targets, specifically those at provincial level. This lack of detail was very worrisome, seeing that the Committee needed to conduct oversight work on the information presented to it by the EDD. The EDD was therefore asked to provide a detailed list of all SIPs and KPIs and the work being done by the EDD per province. Some of the questions raised by Members were:
Had the EDD successfully demarcated the work of the new Small Business Ministry?
What was the breakdown of the SIPs and KPIs per province?
What were the secondary plans for the communities around these mines when the mines closed down and how much of an oversight would the EDD plan in implementing such plans?
What was meant by “radical economic transformation”?
How did the EDD plan on achieving its 154 targets; what were the different targets for each province?
What individual projects did the EDD have in place for all nine provinces?
Would the Committee also have access to the reports from the PICC to Cabinet?
What plans did the EDD have to unblock the problems at the Medupi plant and how long would the process take?
Did the EDD have enough capacity to monitor the implementation of its plans?
What role did the EDD play in coordinating all the relevant stakeholders in the Medupi project? ie the Department of Energy and the Department of Public Enterprises
What plans did the EDD have for unblocking these bottlenecks and moving the projects forward?
 

Meeting report

Chairperson’s opening remarks
The Chairperson asked Members to introduce themselves to the Department seeing that it was the first meeting between the two entities. He said Members of the Committee were foot soldiers for the EDD because they were able to go back to their provinces and assess the work of the Department.

Briefing by Economic Development Department (EDD) on its Annual Performance Plan 2014/15
Mr Madala Masuku, Deputy Minister, EDD, thanked the Committee for the invitation and extended gratitude to the Committee for the work it did in assisting the EDD. He explained that the policy and planning legislation framework was established in the 4th Parliament and included the National Development Plan (NDP), the National Growth Path (NGP), the Industrialization Implementation Plan (IPP) and the Infrastructure Development Bill. In addition, the EDD had identified growth drivers and drew lessons from various infrastructure delivery programmes.

The EDD had developed 18 Strategic Infrastructure Projects (SIPs) and devised a programme to implement them nationwide. These included: SIP 1 (Opening the Northern Mining Belt), SIPs 3,4,5 (Unlocking economic opportunities on South East Coast, the West Coast and North West), SIPs 8,9,10 (Energy Security), SIP 18 (Water and Sanitation). Some of the lessons learned from the PICC around infrastructure were around the following:

•Silos needed to be broken
•Stronger focus on outcomes
•Development of mechanisms around monitoring and evaluation
•Develop mechanisms to unblock implementation, policy, legislative and bureaucratic constraints
•Long range pipe line planning- feasibility, financing, skilling and technology
•Facilitating the vertical and horizontal coordination of government departments
•Increasing social dialogues and partnership

Deputy Minister Masuku explained that what made the 2014/15 APP different from that of the 2013/14 financial year was that government had taken an approach centered on “radical economic transformation”. This meant that there needed to be a radical change in the EDDs vision, objectives, outcomes and inputs in order for the EDD to appropriately achieve its set Key Performance Indicators (KPIs).  The EDD also had a responsibility to lift up its political and managerial oversight. According to the National Development Plan (NDP), the EDD was responsible for Outcome 4 and Outcome 6 of the Plan, which spoke to inclusive growth and infrastructure development respectively. In addition, the Medium Term Strategic Framework (MTSF) allocated tasks to the EDD which shaped the departments 2014/15 APP. There were five key targets which were outlined in the MTSF for the next five years. The APP has therefore been revised to reflect the MTSF which was approved by Cabinet.

With regard to the EDD’s legislative mandate; the Department complied with the following:
•The Infrastructure Development Act (2014)
•The Industrial Development Corporation Act (1940)
•The Competition Act (1998)
•The International Trade Administration Commission Act (2002)

There were four business organizational components of the EDD
Economic Policy Development
Economic Planning and Co-ordination
Social Dialogue
The PICC Technical Unit

Deputy Minister Masuku explained that the mandate of the EDD was centered around job creation, inclusive growth and industrialization. The EDDs key milestones were: the establishment of a Ministry for policy integration work in 2009, coordinated response to the global economic crisis of 2009-2011, completion of the Development New Growth Path in 2010, the transfer of public entities to the EDD in 2010 and the establishment of a functioning Department by 2013, to name a few.
The EDD was therefore requesting an approval of R 697 million, of which R 534 million would be allocated to agencies and R 163 million to departmental programmes.   
Programme 1: Administration- R 79 million
Programme 2: Economic Policy Development-R23 million
Programme 3: Economic Planning and co-ordination – R45 million
Programme 4: Socio-economic Dev. &Dialogue -R15 million

In conclusion, he explained that the APP covered nine months. Therefore many of the strategic objectives and KPIs were reflected in the MTSF. A new strategic plan for the EDD would be revised to reflect the MTSF obligations. The APP therefore focused on 22 KPIs, 154 targets and 5 strategic objectives.

The Chairperson thanked the Deputy Minister for the presentation.

Ms Jenny Schreiner, Director-General, EDD thanked the Committee for the invite and expressed that the EDD team was satisfied with the Deputy Minister’s presentation.

Discussion
The Chairperson thanked the EDD for the presentation. However he raised a concern that the lack of clear timelines from the EDD’s presentation was worrisome. Members needed to know the projected dates for when EDD projects would be completed in order for them to adequately assess the work of the EDD.

Mr E Makue (ANC; Gauteng) congratulated the EDD that in a short space of time the Department had managed to be as functional as it had been over the last few years. The clearly outlined KPI’s were an exciting initiative; however he wondered if the EDD had successfully demarcated the work of the new Small Business Ministry. He further asked whether the Committee would be asked to engage the EDD on the MFET 2014/15 budget. Could the EDD make available the document (s) talking to the seven critical KPI’s for projects.

Mr S Mthimunye (ANC; Mpumalanga) agreed with the Chairperson that the presentation from the EDD did not indicate clear targets and timelines for Members; which SIPs had the EDD initiated in Mpumalanga?

Mr L Mokoena (EFF; Free State) referred to his own province, the Free State and asked why towns which had previously depended on mines were not being diversified in terms of economic activity. What were the secondary plans for the communities around these mines when the mines closed down? How much of an oversight would the EDD plan in implementing such plans? He referred to the President’s State of the Nation Address which made much mention to “radical economic transformation”; what exactly did this mean? What was the big national plan that government had for industrialization? Over 8 million people were still unemployed in this country, and this was a matter which needed to be addressed as a matter of urgency.

Ms E Van Lingen (DA; Eastern Cape) thanked the EDD for the presentation; however she agreed with the other Members that the presentation lacked detail. There were no clear plans outlined for the provinces. She argued that a lot of promises were made during the State of the Nation Address; however the actions towards attaining those goals were not clear from the EDD’s side. How did the EDD plan on achieving its 154 targets; what were the different targets for each province? What individual projects did the EDD have in place for all nine provinces? Those were the kind of questions the Committee needed answers for in order for Members to properly conduct their oversight work. She asked that the EDD also provide more clarity on the EDD’s 22 KPI initiatives; what was the difference between initiatives and interventions? The EDD was asked to provide specifics.


Ms Van Lingen referred to the 60 quarterly reports that would be provided to Cabinet by the Presidential Infrastructure Commision and asked if the Committee have access to these reports. The EDD’s budget for the 2014/15 financial year was R 697 million, of which R 543 million would be allocated to agencies, what plans did the EDD have for monitoring these funds, would the EDD be “headmaster” of these agencies? What specific plans did the EDD have for the new Small Business Ministry? She reminded Members that establishing the EDD as a standalone Ministry was a very lengthy one; how long would the full establishment of the Small Business Ministry take and how ready was the EDD to undertake this task? Mention was also made about the Medupi power plant, what plans did the EDD have to unblock the problems at the plant and how long would the process take?
Ms M Dikgale (ANC; Limpopo) drew the EDD’s attention to the MFET and said the numbers were not adding up. With regard to the EDD’s strategic objectives 1-3, she said they all seemed to be talking to the same thing, could they not be combined into one objective? She also made mention to Medupi and asked when the plant was envisioned to start working.

Mr B Nthebe (ANC; North West) referred to the agro logistics which was mentioned in the presentation. He asked that the EDD provide clarity on this and whether it would take the form of beneficiation and localization. An example was made about an area in Rustenburg where Anglo American was putting a lot of mines up for sale due to the strike; however the mining sector around these areas had washed away all agrarian activity. A lot of people were moved from their farms in order for mines to be established. When these mines closed down, the rehabilitation process dictated by the Mineral and Petroleum Resources Development Act (MPRDA) was not followed in most cases. As a result the communities were hugely affected economically; people could no longer farm as a means for their livelihood.

The Chairperson also asked that the EDD explain what was meant by “radical economic transformation”.

Mr L Gaehler (UDM; Eastern Cape) referred to the roll out of acidic projects which was referred to in the EDD’s presentation and argued that such projects had radically destroyed emerging sectors. What was the EDD’s role in protecting these affected communities? A lot of these projects were rolled out in the Eastern Cape and the Development Bank of Southern Africa (DBSA) was heading these projects. What role was the EDD playing in leveling the playing field for the emerging sectors, which not only had serious fines, but were also blacklisted? On agriculture, he said the EDD seemed to be very silent on the development of rural areas that depended on the sector for their livelihood.

The Chairperson thanked Members for their engagement with the EDD’s presentation. He said Members were very eager to assist the EDD, however did the EDD have enough capacity to monitor the implementation of its projects? He also agreed with Members that the EDD needed to provide the Committee with all the targets and timelines for the projects which it wanted to implement in all provinces in order to assist the Committee in its oversight work. What role did the EDD play in coordinating all the relevant stakeholders in the Medupi project? The Department of Energy, the Department of Public Enterprises and the EDD all needed to work together to move the project forward. To what extent did the EDD envision the level of job creation during the financial year? He referred to the projects which had been delayed as a result of bottlenecks, over R 20 million’s worth of projects were delayed; what plans did the EDD have for unblocking these bottlenecks and moving the projects forward?

Ms Schreiner thanked Members for their engagements with the presentation. She said a detailed document containing all information on targets and the various 18 SIPs would be provided to the Committee at a later stage. The detailed document would contain a breakdown on all the EDs activities provincially. In addition the document would include all the major projects which the Industrial Development Corporation (IDC) and the Small Enterprise Finance Agency (Sefa) was involved with in terms of funding and support. From the prepared document the Committee could then communicate to the EDD whether it wanted engagement with the EDD or not. It was evident that the EDD would be getting a lot of value-add from their interactions with the Committee.


With regard to the establishment of the Ministry of Small Business Development, Ms Schreiner said the process would not be as long as that of establishing the EDD in 2009 because the Department now had the experience from the last administration. It was however important for Members to understand that nowhere in the EDD was there a component or function called “Small Business”, therefore there was no part of the EDD which could be taken and handed over to the new Small Business Ministry. The function of the EDD was to coordinate and integrate the new process. The partnership between the EDD and the Ministry of Small Business Development was therefore a critical one and the EDD would work closely with the new Ministry to assist in all regards. The EDD had a responsibility to facilitate the creation of jobs and monitoring the implementation of job drivers meant that the EDD had an on-going responsibility to look at the Ministry of Small Business and to determine whether there was a move towards the right direction. However the driving of the work around the development of small business was a function of the Department of Small Business Development. One of the functions where the EDD played was around Sefa, which was a subsidiary of the IDC; the EDD was therefore providing the Small Business Ministry with the relevant support, information and strategic direction. In 2013 the EDD developed and action plan through MinMec around small business, in partnership with the Members of the Executive Council (MECs) from all nine provinces. It was therefore envisioned that the Ministry of Small Business would join the process, which was a joint process between EDD and the Department of Trade and Industry (dti).

Ms Schreiner addressed the question on the MTEF and said that the EDD was looking at the matter and all submissions were welcome in moving the process forward. Inputs from the Select Committee were welcomed. The EDD would make available information of the 7 critical KPIs available to the Committee before the end of business that day. In relation to all corridor-type projects, what was important to remember was that part of EDDs role in the SIPs was that the Department was also involved in planning. However none of the EDDs KPIs were specific to a particular province because the EDD did not have a provincial competency, the EDD was a national coordination and integrating department. The EDDs focus for the first five years were around the development of the New Growth Path and lifting up job drivers and economic development was a huge catalyst in opening up other development opportunities. The EDDs current responsibility in terms of the MFET was to re-craft KPIs to look at how far they are in implementing the National Development Plan (NDP), if not, assessing what needed to be done differently.

With regards to the EDD’s ability for monitoring, Ms Schreiner said there were 139 funded posts within the EDD and it was still a very small department. Yet the EDD was able to generate incredibly detailed reports for Cabinet in relation to the Presidential Infrastructure Coordination Commission (PICC) because it was able to utilize personnel in order departments and organizations/entities. The EDD had eight people dealing with research and monitoring, who worked with a broader range of people, the challenge however was around verifying the information generated. The EDD was also able to conduct a number of site visits; three people from the PICC technical team were responsible for these. The EDDs relationship with the Select Committee also then became very critical in this regard.

With regards to government’s plan for radical economic transformation, Ms Schreiner explained that the EDD was but only one role-player in the process; the NDP, the NGP, the National Infrastructure Plan (NIP), the Agriculture Policy Action plane etc were plans which fed into the radical economic transformation process. Therefore in a sense, it was a number of small plans which fed together and led up to government’s national plans for radical economic transformation.

Ms Schreiner maintained that there were no discrepancies with the figures. She agreed that as mines were closing down there needed to be alternative economies in those areas. Greater focus should be given to provincial planning. The EDD’s involvement in provincial planning however had not been as consistent as it would have liked, however moving forward, this would be a matter of great focus. The EDD was already interacting with provinces and municipalities around the issue of mining towns. Local and economic development could therefore not be looked at in isolation; there needed to be interaction between the Department of Rural Development and the Department of Agriculture. Each of the SIPs were administered through a public entity, however this did not remove the responsibility of the accounting officer of the line functional department. The Infrastructure Development Act was one of the tools which provided scope for the PICC to look at areas where there were economies of scale around procurement issues, such as water and sanitation which were cross-cutting and were therefore not bound to any particular province of municipality. These would therefore also provide for localization opportunities.

On the EDDs silence on agriculture, she said agriculture was one of the job drivers that was actively being monitored by the EDD, with a strong emphasis on small development in order to ensure market access and beneficiation. Each of the 18 SIPs were coordinated through various agencies appointed to do the coordination work. A full list of the SIP coordination entities would be provided to the Committee.

Deputy Minister Masuku responded that the EDD had a responsibility to create jobs and facilitate inclusive economic growth. The EDD therefore had a responsibility to unblock economic opportunity and develop policy which would move economic development forward. The EDD was therefore set on interaction with provinces and using their core infrastructure projects forward, the Medupi project for example a number of gaps had been identified; beneficiation and localization would also play a significant role in the facilitation of jobs in the area. Black industrialists need to be promoted and strengthened. A special working committee has been established to deal with the issue of dying mining towns, the EDD would report back to the Committee on progress made.

Mr Mahomed Vawda, Senior Official, EDD, responded to the question on agro-processing and beneficiation and said one project which the EDD had was the Noble Resources Project which had invested over R 600 million in infrastructure for municipalities in terms of water and electricity. This investment brought in the single largest investment which in turn created over 5000 jobs in the soya farming industry. Barriers to entry were also very low. The plant produced soya oil and soya cake, which was then used in chicken feed production. What was important to note was that the soya cake was being imported throughout the chicken farming industry and Noble Resource Project catered for 50% of South Africa’s domestic supply. Another example of beneficiation was the Agro Competitive Fund.

Ms Semphete Oosterwyk, Chief Financial Officer, EDD and said the figures were correct.

Ms Dikgale agreed and said she had mis-read the figures.

Deputy Minister Masuku explained that “radical economic transformation” was about accelerating the work of the EDD an involving other role-players in moving the work of the department forward. 

The Chairperson said the economic development agenda was an on-going debate. He thanked everyone for their inputs.

Mr Mokoena said it was a concern that the EDD was engaged in programmes which created jobs however existing jobs were not being protected. South Africa should therefore seek to move towards protecting existing industries in order to promote more exportation of goods and fewer imports, as a result, more sustainable opportunities for employment would be created. Radical industrialization needs to be promoted.

Mr Nthebe said there should be an explicit and deliberate intent to bring about land and agrarian reform as part of the move towards economic transformation. Agriculture should be identified as one of the key job drivers.

Dr Y Vawda (EFF; Mpumalanga) raised a concern that future economic growth seemed to be centered around Gauteng almost entirely. Countries such as Germany had embraced the concept of decentralizing economic growth and South Africa also needed to look towards that direction. The country’s transport system also needed to be further improved. He suggested that the EDD also look towards making it a priority to monitor the two new universities.

Mr J Londt (DA; Western Cape) said there were over 200 positions on the EDDs organogram; however there was provision for only 139 filled. The vacancy rate within the EDD seemed alarmingly high.

Ms Schreiner responded that the vacancy rate was a matter that the Department was paying very close attention to. However there were three dimensions to it; firstly the EDD was still a new department and because it was still growing it took a conscious decision not to fill all the available funded posts. A model for staffing had been developed, and this enabled the EDD to first fill the crucial posts permanently, however some people would be employed permanently and some on a contract basis depending on the EDDs needs at that particular time. The EDD would therefore be an unusual Department with a slightly higher turnover than most departments; not because there was a problem within the EDD but because it was a deliberate move by the so that it could source whatever skills are needed at that particular time. She relayed however that the EDD was finding it difficult to draw in the right skills set, however a retention strategy has been developed and the EDD was looking into going into a head-hunting process, in parallel with advertising. Also as the EDDs functions became clearer; the department’s organizational structure would also change. The 2009 organizational structure was not ideal and therefore needed to be reviewed against the EDDs five strategic objectives. However none of the EDDs strategic objectives was delivered on by a specific branch within the Department; therefore silos across departments needed to be broken. The EDD was therefore working very hard to source the right skills set at the right time.

Deputy Minister said the EDD was busy consolidating all the department’s plans.

The Chairperson thanked the delegate from the EDD for the presentation and all Members for the interactions.

The meeting was adjourned.
 

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