Economic Development Budget Review and Recommendations Report

Economic Development

24 October 2014
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Committee met to deliberate and adopt the Budgetary Review and Recommendations Report (the Report) for the Department of Economic Development. Members went through the Report, section by section, noting that the introduction set out the key economic achievements for 2013/14, the mandate of the Committee and key functions of the Department. Following that, there was a summary of the programmes. It was noted that the Auditor-General had reported that the overall Departmental performance was satisfactory, although certain gaps had been identified in the control environment, and it would be necessary to continuously monitor the Department of Economic Development and the entities to ensure that they were taking remedial action. The next section set out a summary of the oversight visits and findings.

Members discussed some of the issues that had been raised during deliberations with the Department or raised in previous reports. The vacancy rate had dropped, but Members suggested that a proper organogram was needed. Members agreed that punitive steps should be taken where poor performance had been identified, particularly around the financial misstatements and non-adherence to Supply Chain Management procedures, and the Department would be asked to address this and to strengthen the internal audit. The Department's efforts on the Youth Employment Accord were noted, but it was suggested that youth should be actively engaged in programmes, and the need to deal more proactively with the disabled were also identified. The Committee commended the Department in securing local procurement and content.

Members summarised the recommendations made in the previous financial year, and noted that the Department had met recommendations in relation to support to the Presidential Infrastructure Coordinating Commission, recruiting able junior staff, create more employment for the disabled, supporting small businesses and promoting the Small Enterprise Finance Agency. The gender issue was noted as needing ongoing support. Further recommendations were made in relation to strengthening the monitoring of accords, encouraging other State entities to work with SEFA and consider developing a small enterprise development institute.

The Chairperson expanded on her concept that South Africa should perhaps adopt the concept of a "National Democratic Revolution", an ongoing process connotating transformation rather than an uprising.

The majority of Members adopted the Report.

Meeting report

Budgetary Review and Recommendation Report: Deliberations and adoption

The Committee tabled the latest version of the Budgetary Review and Recommendations Report (the Report) and discussed the issues raised during the deliberations with the Department of Economic Development (EDD).

The Committee Members went through the report which was comprised of:
- Introduction: setting out the key economic achievements for 2013/2014, mandate of the Committee and key functions of the Department
- Programmes, noting the various programme titles and content
- The report of the Auditor-General (AG), which indicated that the overall Department performance was satisfactory. However, there were gaps in the internal control environment
- A summary of the Committee's oversight visits, noting the oversight visits to Gauteng, North West, KwaZulu Natal and Limpopo provinces, visit to the IDC funded projects for Nguni Cattle in Rustenburg, North West Province, visit to customs office in Durban and Durban Harbour, visit to the Norjax Tomato farm in Tzaneen, Limpopo, Visit to EDD, IDC and SEFA offices in Gauteng.

Members noted that particular attention was noted in the Report, to the following issues:
- The Committee noted with concern that the Department had revised down its vacancy target from filling 166 funded posts to 146. Although the vacancy rate against the Annual Performance Plan (APP) target was 5%, the Department filled 139 posts and therefore missed its revised target. The Committee was also worried about the high turnover rate, particularly at senior management level, and called on the Department of Economic Development (EDD) to finalise its new structure so as to address the staffing issues.

Mr S Tleane (ANC) noted that the Department was still young and yet to put up a structure and do a proper staffing. Nevertheless, he was of the view that the vacancy issue had to be dealt with as soon as possible.

The Committee noted that the Auditor-General’s (AG) findings on financial misstatement and the non adherence with Supply Chain Management on tax clearance needed to be addressed. The Committee noted the root cause was lack of monitoring and adequate internal controls to ensure compliance with relevant legislation. Furthermore, some of the audit findings pertaining to Supply Chain Management and Human Resource Management weaknesses had been raised in the previous years and no remedial action had been taken to address them. Members were of the view that there should be punitive measures for poor performance.

Mr Tleane stated that these problems should be brought to a halt and not appear in the following year.
The Chairperson asked the Committee members whether there should be punitive measures taken against the Department for poor performance.

Mr Tleane believed that the internal audit system in the Department should be strengthened to make it reliable, and thus prevent the need for external outsourcing.

The Chairperson agreed that the Internal Audit should be strengthened instead of outsourcing and that necessary policies to enable the Department to function must be put in place.

The Committee noted that the economy was facing challenges of unemployment, particularly among the youth. As such it welcomed the Department’s efforts to unlock potential through the Youth Employment Accord. This meant, however, that there was a need to monitor and evaluate progress in the implementation of the six pillars of the Youth Employment Accord, namely:  education and training, work exposure, youth brigades based on existing public employment, programmes set-asides for youth employment in growing industries, youth entrepreneurship and co-ops and private sector initiatives.

Mr Tleane noted that the signatories to the Youth Employment Accord should be active and be engaged in the programmes to ensure the objectives raised in the accords were achieved and said that the relationship between the signatories and the Department should be an ongoing partnership where the two discussed how the accord was to be implemented.

The Committee acknowledged the role played by the Department in promoting and supporting local procurement and local content by ensuring the production of goods that were 100% of South Africa origin.

Members then took note that, in the previous financial year, the Committee adopted certain recommendations and called upon the Minister to ensure that the Department acted accordingly.

The first recommendation related to the need to review the organogram to take into account the need to support the Presidential Infrastructure Coordinating Commission, and the need to recruit able junior staff. The Department had met this recommendation.

The second called upon the Minister to ensure that employment opportunities were created for people living with disabilities. The Department had met this recommendation.

The third required that the Department should continue to scale up efforts to support Small, Medium and Micro Enterprises (SMMEs) and Co-Ops, in particular through the work with Small Enterprise Finance Agency (SEFA), to establish one-stop shops in all provinces.

Mr P Atkinson (DA) noted that the performance of SEFA had increased insofar as disbursements were concerned and in fact it had doubled the amount of money it disbursed to the people.

The Chairperson noted that people had come to know about SEFA through its outreach programme though she felt it could still do much more.

Mr Tleane stated that SEFA was more involved with people who had small businesses and it was therefore crucial that it gave assistance to as many people as possible, and also educate them on the services available.

- The fourth recommendation asked that the Department should do to mainstream gender balance concerns across its programmes, building on early successes that had been achieved.

Mr Tleane noted the issue of gender was still ongoing.

Mr Atkinson agreed and added that more needed to be done to assist people with disabilities.

The Chairperson indicated that the Department could collaborate with the Department of Labour so that more people living with disabilities were encouraged to utilise the workshops.

The recommendations were summarised as follows:
- The Department should strengthen the monitoring and evaluation of Accords, and carry out an impact assessment of the records
- It should encourage state entities to work with SEFA and ensure alignment, integrated work and coordination with SEFA
- It should consider establishing a SMME development institute
- It needed to strengthen the internal risk audit unit and ensure that the Audit Committee term was renewed promptly

Other matters
The Committee asked the Committee Members to give their views on the proposal she had previously made on the concept of a "National Democratic Revolution".

Mr Atkinson explained that there was confusion as to the role of the National Development Plan and what the Chairperson had introduced as National Democratic Revolution.

Mr Tleane noted that China had the fastest growing economy and used the National Democratic Revolution concept. In relation to South Africa, which operated a free market system, he stated that the Revolution would aim to grow an economy where everyone benefitted.

The Chairperson added that the National Democratic Revolution, in the context, would be an ongoing process which connoted transformation as opposed to an uprising.

The Chairperson recommended that the Members adopt the Report.

Mr Atkinson reserved his comment.

The majority of remaining Members supported the recommendations.

The meeting was adjourned.


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