Economic Development Department's Quarterly Performances for 2013/14

Economic Development

26 August 2014
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Economic Development Department (EDD) briefed the Committee on the performance and expenditure of the Department for the four quarters of the 2013/14 period.

Highlights for the first quarter included a report produced on employment, gross domestic product growth and investment in relation to the jobs drivers of the New Growth Path, which was submitted to Cabinet. A total of 18 strategic integrated projects were completed, covering spending, construction and localisation efforts.  An amount of R1 645.1 million was approved for the Industrial Development Corporation’s targeted growth sectors, which included agriculture and agro-processing.   R21.4 million was approved to assist three companies through the Industrial Development Corporation’s Distressed Fund.  An agency agreement was established with a Saudi company to market South African-manufactured medical scanners in Saudi Arabia and a Youth Employment Accord was signed at the Hector Pietersen Memorial Museum in Soweto.  The Department had spent 95% of its quarterly budget allocation of R201 799 000.

Highlights for the second quarter included the unblocking of four economic development initiatives, the review of the construction progress of 18 strategic integrated projects and the unblocking of municipal spending through the Presidential Infrastructure Coordinating Commission. The Department also engaged the South African Local Government Association, the Department of Performance Monitoring and Evaluation, the Department of Public Service and Administration and National Treasury to help overcome under-spending patterns in municipalities and to identify grants that were negatively impacting on municipal spending.  The Department spent 93% of its quarterly budget allocation of R197 058 000.

During the third quarter, highlights included a conference in conjunction with the United Nations Department of Economic and Social Affairs, as well as a workshop on the employment impact of development finance institutions. The Department also worked with the Department of Trade and Industry, the Department of International Relations and Cooperation, the National Treasury and the office of the State Law Adviser to finalise the Draft Promotion and Protection of Investment Bill.  Furthermore, a meeting was held with the mining sector, national government departments and the Global Green Growth Institute on the impact of energy price increases on the competitiveness of the mining sector and smelting value chains in South Africa.  A review of the impact of minimum wages on farm workers was conducted and the Department assisted Makana Local Municipality to provide water to Grahamstown, which had experienced water disruptions. A total of R12 420.8 million was approved by the development finance institutions, 2 924 jobs were saved or created by the Industrial Development Corporation and 624 jobs were created or saved by the Small Enterprise Finance Agency. The Department also facilitated a process by the Industrial Development Corporation to fund a youth steel manufacturing business to the tune of R5 million.  The Department spent 96% of its quarterly budget allocation of R207 700 000.

During the fourth quarter, key highlights were the completion of a report on the impact of electricity price increases on the competitiveness of the mining sector and smelting value chains and a needs analysis for co-operatives at the Makgologeng and Diyatalawa Presidential Initiatives. The spatial economic perspective was finalised, 18 strategic infrastructure projects were reviewed and finalised and a water crisis was resolved in Makana. The Department, in collaboration with the Presidency and the National Youth Development Agency, hosted the Presidential Youth Indaba.   The Department spent 118% of its quarterly budget allocation of R164 909 000.
The Department reported that difficulties had been encountered in recruiting staff with specialised and critical skills, as well as women in senior management positions. It had achieved a rate of 45% for women employed in senior management posts, and reached its national target of 2% to employ people with disabilities.  An Employee Assistance Programme had been implemented to render a 24-hour service to staff and their families, as well as a Health Promotion Programme to provide HIV/Aids counselling and testing.

Members expressed concern that a number of key performance indicators had not been met, and said the presentation lacked detail and was not dynamic enough.  Criticism was levelled at the number of inaccuracies around financial performance issues, and questions were raised about the absence in the report of any reference to the loss of thousands of jobs in the agricultural and mining sectors.
 

Meeting report

Briefing by Economic Development Department (EDD)
Ms Jenny Schreiner, Director-General,EDD, briefed the Committee on the Department’s performance and expenditure against the targets set for the 2013/14 period.

The 2013/14 financial year marked the end of the fourth administration and 20 years of democracy in South Africa. This period marked the first full term of office for the EDD, as it was established after the election in 2009. This period also provided the EDD with an opportunity to reflect on its performance and governance structures, and to take stock of its impact on the lives of ordinary citizens of the country.

EDD’s results on the Management Performance Assessment Tool (MPAT) for 2013/14 reflected an improvement from the previous year.  On the overall assessment of the process, including how well the MPAT self-assessment was done and the improvements implemented, the Department scored three out of a potential four. Comparisons with the past financial years reflected a Department that had matured in its management performance.

2013/14 Performance and Expenditure: Quarter 1
The EDD had produced a report on employment, GDP (gross domestic product) growth, and investment in relation to jobs drivers of the National Growth Path which covered the first quarter of 2013 and submitted it to Cabinet. The following investment initiatives were unblocked: Innowind Wind Energy Projects, the Chinese Mamba Cement Factory, and the Sunrise Energy LPG Importation and Storage Terminal, among others. This resulted in these businesses being able to operate and also access funding.

Progress reviews for 18 strategically integrated projects were completed for Cabinet. These reports covered spending, construction and localisation efforts.

The presentation of a draft skills plan for infrastructure projects on 14 June 2013 to the HRC Council laid the basis for the fast tracking of infrastructure projects going forward and ensured the availability of required skills at the appropriate time.

An amount of R1 645.1 million was approved for the Industrial Development Corporation’s (IDC’s) targeted growth sectors.  These included agriculture and agro-processing; forestry, wood, pulp and paper; mining; textiles and clothing; chemicals, rubber, plastics and non-metallic minerals; basic metals; fabricated metals; machinery and equipment; motor vehicles, transport equipment, parts and accessories; renewable energy, energy efficiency and components; tourism, trade and catering; transport and logistics, and other. 

An amount of R21.4 million was approved to assist three companies through the IDC’s Distressed Fund: one in clothing and textiles, one in fabricated metal and the other in vehicle component manufacturing.

An agency agreement was established with a Saudi company to market South African-manufactured LODOX medical scanners in Saudi Arabia.  Engagements were on-going between LODOX and the Saudi Ministry of Health.

Work was done by the EDD’s Presidential Infrastructure Coordinating Commission (PICC) unit with the localisation unit of the IDC, to identify opportunities for localisation at both Transnet and Eskom, which included transmission lines, cables and conductors, grinding elements, metering, pumps and valves for Eskom and locomotives.

The Youth Employment Accord was signed at the Hector Pietersen Memorial Museum in Soweto on Thursday, 18 April 2013. The Accord outlined social partners’ commitment to raise youth employment, training and skills development and to support self-employment opportunities for youth.

Discussions with Ford resulted in the temporary suspension of a decision to retrench 164 workers.

Two district capacity building workshops with social partners were held in the John Taolo Gaetsewe District Municipality on 8-9 May, 2013 and in the Dr Ruth Segomotsi Mompati District Municipality on 23-24 May 2013. The workshops enabled social partners to engage with economic development and finance agencies, to catalyse economic activities in the most under-resourced municipalities.

Quarter 1 Financial Performance
The Department spent R192 298 000, which was 95% of its quarterly budget allocation of R201 799 000 (see report for each programme’s financial performance).

Explanations for variances, by programme, were:

Administration.   There were increases in office accommodation, travel and subsistence costs, as well as improvements to conditions of employment costs effected in May 2013, and insufficient baseline allocation on the 2013/14 Estimated National Expenditure (ENE) 

Economic Policy Development.  There was slow spending on goods and services in the Broad Based Black Economic Empowerment (BBBEE) and Second Economy sub-programmes, and low spending on compensation of employees due to vacancies in the branch.

Economic Planning and Coordination. There was slow spending on goods and services in the Economic Development, Financing and Procurement, and Green Economy sub-programmes, as well as low spending on compensation of employees due to vacancies in the Branch.

Socio Economic Development and Dialogue.  The sub-programme spending pattern had improved slightly as compared to the last financial year.

2013/14 Performance and Expenditure: Quarter 2
Ms Hayley Rodkin, Chief Financial Officer at EDD, briefed the Committee on the performance and expenditure of the Department for the second quarter of the 2013/14 period (see report for the performance of KPIs).

The second quarter outcome four cycle report to Cabinet  summarised  key developments and  risks and opportunities, such as the progress on main indicators for inclusive growth, employment, GDP growth, investment and income equality.

Proposals to fast-track interventions were developed and finalised with other outcome four proposals, and were submitted to the Cabinet Lekgotla held in August, 2013. The proposals were adopted with amendments.

The policy platform on the Framework for Assessing the Impact of Broad-based Black Economic Empowerment (BBBEE) on the New Growth Path (NGP) was held on 9 July 2013. Four economic development initiatives were facilitated and unblocked during the quarter and the progress with construction of 18 strategically integrated projects was reviewed. The unblocking of municipal spending through the PICC was facilitated.

The Management Committee of 1 July 2013 recommended engaging the South African Local Government Association (SALGA), the Department of Performance Monitoring and Evaluation (DPME), the Department of Public Service and Administration (DPSA), as well as National Treasury on funding flows to overcome under-spending patterns, and to identify conditional links to special grants that were negatively impacting on municipal spending.

The Small Enterprise Finance Agency (SEFA) conducted seven road shows to market its products and services.

The Barnes Group was assisted with applications to purchase steel pipe manufacturer, Hall Longmore, which belonged to Murray and Roberts.

The South African/United Kingdom social dialogue was hosted in support of the Youth Employment Accord on 10 September, 2013 in Cape Town.

The EDD participated in the Local Procurement Conference hosted by COSATU in Cape Town on 9 September, 2013 (COSATU is a key social partner of the Local Procurement Accord).

The Department hosted a Spatial Development Knowledge Network on secondary cities on 17 September, 2013.  An EDD Knowledge Network Session was hosted on 25 September, 2013 on "Aquaculture Farming: Key Policy and Market Lessons."

Quarter 2 Financial Performance
Mr Steven Hlahane, Director: Financial Management, EDD, briefed the Committee on the Department’s financial performance for the second quarter of 2013/14.  During this period, the Department spent R184 113 000, which was 93% of its quarterly budget allocation of R197 058 000 (see report for each programme’s financial performance).

Explanations for variances, by programme, were:

- Administration.  Insufficient baseline allocation on the 2013/14 ENE for compensation of employees and office accommodation. The budget would be realigned during the adjusted estimate.

- Economic Policy Development.  Slow spending on goods and services in the BBBEE and second economy sub-programmes, and low spending on the compensation of employment due to vacancies in the branch.

- Economic Planning and Coordination.  Slow spending on goods and services in the Economic Development, Financing and Procurement, and Green Economy sub-programmes, and low spending on compensation of employment due to vacancies in the branch.

- Socio Economic Development and Dialogue.   The sub-programme spending pattern had improved slightly, compared to the last financial year.

2013/14 Performance and Expenditure: Quarter 3

Ms Rodkin briefed the Committee on the performance and expenditure of the Department during the third quarter of the 2013/14 period (see report for the performance of KPIs).

The financialisation conference was held in October 2013 with the United Nations Department of Economic and Social Affairs.

A workshop on the employment impact of development finance institutions (DFIs) was held with SEFA and senior officials of the National Youth Development Agency on 23 October, 2013.

The EDD worked with the Department of Trade and Industry, the Department of International Relations and Cooperation and the National Treasury, as well as the office of the State Law Adviser to finalise the Draft Promotion and Protection of Investment Bill. A briefing document was prepared for the economic sectors and employment cluster meeting on the Bill.

A meeting was held with the mining sector, national government departments and the Global Green Growth Institute among others, on the impact of energy price increases on the competitiveness of the mining sector and smelting value chains in South Africa.

A review of the impact of minimum wages on farm workers was conducted as part of a 20-year review of the labour market.

A total of 17 Strategic Infrastructure Projects (SIPs) for the quarter to June 2013 were reviewed by November 2013.   The EDD assisted Makana Local Municipality to provide water to Grahamstown, which had previously been experiencing water disruptions.

A total of R12 420.8 million was approved by the DFIs, 2 924 jobs were saved or created by the IDC, and 624 jobs were created or saved by SEFA.

The Mediterranean Clothing company went insolvent. The EDD approached the IDC for the restructuring of the clothing manufacturing section of the business, which resulted in the IDC’s approval of a partial restructuring loan. A total of 130 jobs were saved as a result.

Two interventions were implemented to grow the green economy - the finalisation of blending and pricing regulations in respect of bio ethanol, and the rollout of phase one of the Solar Water Heater Programme.

The EDD held a public service internship programme workshop with national and provincial government departments on 17 October, 2013.  The purpose of the workshop was to determine options to scale up the number of public service interns to 60 000 in 2014/15. 

The EDD held a competition knowledge session on 29 October, 2013. The theme of the session was “The development of competition policy in South Africa: Policy Development and Implementation Challenges”.

A small business knowledge network session was also held on 3 December, 2013 in Durban. The title of the event was ‘’Unlocking the Economic Potential of Townships: Perspectives in KZN”.

A district capacity building workshop was conducted in the West Rand District Municipality on 3 and 4 October, 2013 for social partners - local government officials, entrepreneurs, youth, cooperatives, labour and the women’s sectors - on the NGP.

The EDD facilitated a process to fund a Youth Steel Manufacturing Business initiative- Umzungulu Steel in Pietermaritzburg -- by the IDC to the tune of R5 million.

Quarter 3 Financial Performance
Mr Hlahane briefed the Committee on the Department’s financial performance for the third quarter of 2013/14, during which the Department spent R200 306 000, representing 96% of its quarterly budget allocation of R207 700 000 (see report for each programme’s financial performance).

Explanations for variances, by programme, were:

- Administration. There had been an improvement in spending due to the adjustments effected during the Adjusted Estimates of National Expenditure (AENE) budget process. 

- Economic Policy Development.   Spending had improved due to the realignment of the budget during the AENE budget process.

- Economic Planning and Coordination.   Spending occurred according to the revised cash flow projections.

Socio Economic Development and Dialogue.   The programme’s spending pattern had improved due to a budget alignment during the adjusted estimate.

2013/14 Performance and Expenditure: Quarter 4
Ms Rodkin briefed the Committee on the performance and expenditure of the Department during the fourth quarter of the 2013/14 period (see report for the performance of KPIs).

The Makhathini Agribusiness Development Conference took place on 17 and 18 February, 2014. The purpose of the conference was to bring together farmers, as well as key officials from the Great North (uMkhanyakude, uThungulu and Zululand).

A final report was completed on the impact of electricity price increases on the competitiveness of selected mining sector and smelting value chains. The AFGRI agreement was signed and sent to the Tribunal.

The Department conducted a research paper on the impact of the BBBEE policy on the New Growth Path, with a specific focus on the agricultural sector (smallholder farmers).

Through the EDD’s intervention, the Mamba Cement Company was granted a water-use licence to use water from the Crocodile River for industrial use in its cement-production facility situated in the Thabazimbi Local Municipality.

A draft intervention framework in collaboration with the IDC and the Greater Alexandra Chamber of Commerce was developed. On 5 February 2014, EDD participated in a discussion around the initiatives concerning the Alexandra Township.

A draft action plan was developed for the Vhembe District Municipality’s skills development initiative.

The EDD continued its participation towards the revitalisation of distressed mining communities. 

A needs analysis for co-operatives at the Makgolokoeng and Diyatalawa Presidential initiatives was completed.

The spatial economic perspective was finalised in March 2014.

A total of 18 SIPs for the quarter to September 2013 were reviewed and finalised by February 2014.

A water crisis was resolved in Makana, after which the focus shifted to general systems problems as part of a greater focus on service delivery systems in municipalities.

The IDC approved a total of R5 534.1 million to save or create jobs.  About 20 000 jobs were saved or created by the IDC. Through the distressed fund, 2 574 jobs were created or saved. SEFA created or saved 1 794 jobs.

The Grand Inga Hydroelectricity Project has been earmarked to bring to South Africa 4 800 MW from the Democratic Republic of Congo.

In collaboration with the Presidency and the National Youth Development Agency, the Department hosted the Presidential Youth Indaba on 28 February to 2 March, 2014 at the Birchwood Conference Centre.

A quarterly report on the implementation of the youth accord was submitted to highlight implementation across the state, business, labour and youth.

Quarter 4 Financial Performance
Mr Hlahane briefed the Committee on the Department’s financial performance for the fourth quarter of 2013/14, during which the Department spent R194 796 000, or 118% of its quarterly budget allocation of R164 909 000.  Slow spending in personnel and generated savings in goods and services were utilised to augment the deficit (see report for each programme’s financial performance).

Explanations for variances, by programme, were:

- Administration.   Spending increased in this quarter, mainly due to the marketing and communication strategy payments.

- Economic Policy Development.  100% of the budget was spent during this quarter due to the shifting of funds from generated savings to augment the reduced SEFA economic competitiveness and support package allocation by R50 million.

- Economic Planning and Coordination.  100% of the budget was spent during this quarter due to legal costs and the shifting of funds from generated savings.

- Socio Economic Development and Dialogue.  100% of the budget was spent during this quarter due to the shifting of funds from generated savings.

Human Resource Strategy and action plan for 2013/14
At the inception of the EDD in 2009, 265 posts were approved.  Human Resource’s planning strategy, to fill 166 funded posts over the Medium Term Strategic Framework (MTSF) period, was developed.  The annual target for funded posts in 2011/12 was 129, and 142 in 2012/13.  By 31 March 2013, 139 funded posts had been filled.  Funded posts for the remaining Medium Term Expenditure Framework (MTEF) period was expanded to 166 posts.  The EDD’s recruitment strategy was prioritised to enable the delivery of targets forecast in the strategic plan and annual performance plan.

In 2012/13, the recruitment of appropriate staff decreased the vacancy rate to 2.1% by year end.  Difficulties were encountered in the recruitment of staff with specialised and critical skills, as well as women in senior management positions.  The EDD achieved a rate of 45% for women employed in senior management posts, and achieved the national employment target of 2% for people with disabilities.

An Employee Assistance Programme was implemented to render a 24-hour service to staff and their families, as well as a Health Promotion Programme to provide HIV/Aids counselling and testing, in partnership with the Government Employees Medical Scheme.

A performance management and development system was implemented in 2012/13.
In 2012/13, 14 governance policies were developed internally and approved.
                       
Discussion
Mr S Marais (DA wanted to know why some of the Key Performance Indicators (KPIs) had not been met.

Ms Rodkin replied that the reason was that some of the KPIs, such as the green economy accord and the youth accord, were still work in progress.

Mr S Tleane (ANC) lamented the fact that the Department’s presentation was not dynamic enough.

The Chairperson said it seemed the Department’s report was only written for compliance purposes. She said the Department should pay more attention to the compilation of its reports. The report should help the Committee to understand what the Department had been doing. If the report failed to do that (provide detailed information) then it became a challenge for the Committee.

Mr Madala Masuku, Deputy Minister of Economic Development, said the Department was still finding its feet. That was why the report was so erratic.

Mr M Lekota (COPE) questioned why the variables assessed in the report were not the same in all the quarters. He suggested that the Department should go back and look at this area again.

The Chairperson said there were too many inaccuracies around the financial performance issues of the report. She ruled that the Department should go back and correct this.

Ms D Rantho (ANC) referred to the Department’s assistance to the Makana Local Municipality to provide water to Grahamstown. She wanted to know if the Department had followed up on its interventions, as someone from that municipality had complained that they had no water.

Ms Schreiner replied that the EDD’s Presidential Infrastructure Coordinating Commission task team had been tasked to track the implementation of projects.

Ms Rantho referred to the Department’s intervention which saved the Mediterranean Clothing company from insolvency through an IDC restructuring loan. She asked if setting a target for the Mediterranean Clothing company to increase its staff to 250 would not lead to the company becoming insolvent again.

Mr Mahomed Vawda, Chief Financial Officer at the EDD, said the Department had brokered a solution between the various parties to save jobs. The clothing part of Mediterranean Clothing had been sold and the textile business had been bought. This solution had saved half of the jobs.

Mr P Atkinson (DA) asked why the Department was involved in providing water to Grahamstown.   Was that not the duty of the Department of Water Affairs?

Ms Schreiner replied that the Department had become involved in the water issue because it had been brought to the attention of the EDD’s Presidential Infrastructure Coordinating Commission, which had been tasked with the responsibility of tracking implementation and assisting the municipality. The EDD had also sourced the necessary expertise needed to solve the water disruption crisis.

Mr Marais asked why the Department was involved in a review on the impact of the minimum wage on farm workers. Was this not the domain of the Department of Labour?

Ms Schreiner replied that the EDD’s role was to provide integration to farm workers. The EDD worked in partnership with the Department of Labour.

Mr Marais asked why the Department did not report on the thousands of jobs that had been lost in the agricultural and mining sectors. Why was the Department not involved with this?

Ms Schreiner replied that the monitoring of job figures was an important part of the EDD’s work. She said mining and agricultural issues were covered in the Department’s quarterly reports.

The Chairperson noted that there was an improvement in the Department’s reporting on the fourth quarter’s performance. She advised the Department to make sure it kept its current workforce, as this would lead to stability and progress in its performance.

Ms Schreiner replied that the reason for the Department’s confident reporting on the fourth quarter was because the information was still recent and fresh. The Department was also still maturing, as there were quite a number of new employees that had joined them during the fourth quarter. The Department would use the comments from the Committee to improve their reporting performance.

Mr Masuku assured the Committee that the Department would be more accurate with its information the next time they appeared before them.

Chairperson’s closing remarks
The Chairperson highlighted areas for the Department to work on.  She said the Department should ensure that it provided the Committee with accurate financial input that would tally with its non-financial information. The Chairperson also felt that a system for tracking the Department’s interventions should be put in place. The Department also needed to establish a more stable staff force and update its website more regularly.

The meeting was adjourned.
 

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