Budget Progress Report by Department

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Trade and Industry

26 September 2000
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
27 September 2000
BUDGET PROGRESS REPORT BY DEPARTMENT
 


Documents handed out
MTEF progress report presentation [see Appendix 1]
 

Restructuring of the Department of Trade & Industry

SUMMARY
The Department reported on their budget performance over the last six months. The Department has been restructured to improve service delivery and now it is intent on establishing how to measure service delivery in terms of outputs. The new DTI is categorised into seven units and each unit will be responsible for identifying what that unit produces in terms of monthly outputs.

Changes in budget expenditure will come next year. Currently budget expenditure is divided into four programmes and there has been underspending in each of the four programmes. Expenditure will increase when more staff is appointed.

This year in order to aid rural development, the Department introduced incentives which are sector-neutral. This means that sectors which are generally not included have been included. Rural-based industries and agri-industries will now be considered for assistance.

MINUTES
The Director General of the Department, Dr Alistair Ruiters made the presentation. The focus of this presentation was on this year' Medium Term Expenditure Framework.

Introduction
The Department promised that outputs would have a more measurable impact. There are plans for a more output-oriented budget. In the past 8 months DTI has embarked upon some restructuring.

The central focus of this department is to create jobs and sustainable economic activity in South Africa. To do this they need three factors:
- higher levels of investment (all kinds of investment, from financial investment to investment in human resources)
- market access. This relates to access locally, internationally, access for small business, black business and so forth.
- a fair, efficient and competitive market place for businesses and consumers. This is accomplished through entities such as the South African Bureau of Standards which are there to protect the public.

What has DTI done to meet these objectives?
DTI's mandate is very broad (for example, they deal with issues from all business sectors to public interest issues such as the lottery). The question before them was how to capture the broad range of activities for which they are responsible. They are now changing the Department's focus to capture outputs for the each of the range of projects in which they are involved.

The new DTI has been reorganised into 7 distinct units. Each unit must now describe what is measurable in its activities and identify what the unit produces in terms of monthly outputs. This aims to answer these vital questions:
- How to measure performance?
- How does one know if one has succeeded? [Has the project had the desired effect?]

How does one translate outputs into outcomes? The stage has been set to improve service delivery in the Department. Now they have the task of measuring service delivery.

Major measurable outputs to date
Dr Ruiters went through an extensive list of what he called DTI's ''success stories''.
He listed them in the following three categories: (1) assisting industries, (2) public interest projects, and (3) developing the African region. The projects he listed included the following:

Assisting industries

- Khula - 3517 SMMEs were assisted through loan guarantees.
- EMIA (Export Marketing and Investment Assistance) - they assisted 68% of SMMEs and R36million was disbursed.
- ISA (Industrial South Africa) invested R519million in SA.
- DTI announced new incentive packages. They did this to attract investment in SA. In designing these incentives, they looked at the way they managed investment in SA and what would make people choose SA over other countries.

Public interest projects
- They were involved in consumer education projects.
- A gambling monitoring system and a problem gambling policy has been set up.
- Limited payout machines are going to be set up.

Developing the African region
- There was a SACU breakthrough on the revenue sharing formula.
- They concluded a trade agreement with Algeria.
- In terms of projects they also created jobs in the SADC region. They created small guarantees to small businesses to trade in the SADC region. These projects also creates jobs in SA.

The Budget
DTI has a budget of R2.2 billion. There is a high-powered budget committee which looks at expenditure within the Department. This committee meets with the DG once a week. Dr Ruiters noted that DTI closed off their books two months after the financial year ended. This is unheard of in the public sector.

Since February the budget has been reorganised only slightly. They have created new incentives. They did not request funds from Treasury to do this. They found the money in their budget. They increased the training of personnel because they think it is important to invest in the staff at DTI. The shifts in spending have not been significant.

Significant changes in budget expenditure will only come next year. The allocations this year have been according to the four programmes listed below. DTI makes allocations within these programmes according to government principles such as black empowerment. The programmes are:
- Trade, investment and entrepreneurial development (88%)
- Business regulation and consumer services (7%)
- Administration (4%)
- Trade policy and global positioning (1%)

To date, the budget expenditure in each of these categories is low compared to the budget estimate. Dr Ruiters advanced the following reasons for this:
Business regulation and consumer services - the Competition Commission did not need money from DTI this year. They have generated their own funds.
Administration - they held back on the appointment of certain people. The budget will take off now when people are appointed.
Trade and global positioning - they must still transfer fees to the WTO. This is a once off payment at the end of the financial year.

The new proposed DTI programme structure is as follows:
- Administration (7%)
- International Trade and Investment Policy and development (1%)
- Enterprise, Commerce and Industry policy development (26%)
- Enterprise promotion and support in SA (53%)
- Trade and investment promotion and support (13%)

Discussion
Ms Ntuli (ANC) asked what kind of businesses ISA invested in and what the provincial spread of the investments was. She also asked for a comment on DTI's working relationship with the provinces.

Dr Ruiters said that they try not to take responsibility in the instance where an organisation invests in SA independent of DTI's agencies. DTI tries to encourage investors to talk to black business. Sometimes there is an intimate relationship between them and sometimes there is not.

He said that they have data on provinces but not for all projects. In DTI all the provinces are represented on the board. They meet with the provinces every month. There is active engagement to sort out blockages in the provinces. They talk to MECs and to officials. DTI does not make plans and then present them to the provinces. The provinces are part of the planning process. They also work with the provinces to disburse funds.

Mr Rasmeni (ANC) asked about the provincial spread of the money given to support SMMEs. He also asked for the race and gender breakdown of the distribution of the money. Secondly he asked if DTI considered having offices in provinces.

Dr Ruiters replied that they do not have details of the provincial spread of all the programmes. However, the trend for all programmes was similar so he explained the provincial spread for one program. Three provinces get the bulk of DTI support. Gauteng gets the biggest by far. Western Cape and KwaZulu-Natal is in second place. They get two thirds of what Gauteng gets. The Eastern Cape, North West, and the Northern Province get similar amounts. It is less than two thirds of what Gauteng gets. The Northern Cape gets the least. This spread is similar for all projects. Factors that must be considered when looking at this is that many businesses are located in Gauteng. This is why there is a disparity. He said that he would bring a breakdown of projects.

In response to the second question he said that opening up provincial offices is on DTI's agenda.

Mr Rasmeni followed up his question by asking if the Department has a plan in respect of rural development.

Dr Ruiters replied that they do. Assistance incentives are now sector-neutral and thus are including sectors which are generally not included such as rural-based industries and agri-industries. The change was made this year. Dr Ruiters noted however that they must be realistic about the extent to which they can expand to the provinces.

Ms September (ANC) asked what yardstick was used to measure the restructuring of the Department. She commented that the job creation was not experienced in her constituency.

Dr Ruiters replied that an important point in respect of restructuring was that one must restructure first in order to improve performance. DTI will embark on measuring performance after their restructuring. The issue now was that they have repositioned the Department to meet the objectives of government. Ideally they want to measure performance on a monthly and half-yearly basis.

Mr Zita (ANC) asked what will inform DTI's budget? What levels of private investment does DTI want? What if the private sector does not come to invest?

Dr Ruiters replied that next year's Medium Term Expenditure Framework (MTEF) is not the focus of this presentation. He would like to come back another time to discuss this. This year they have moved money out of Administration and moved more of it to Support Services for Businesses. Where units have not spent funds, DTI takes the money away from them. He added that over the last five years the budget allocated to DTI has decreased. General objectives on spending are set by government.

On the issue of desirable private sector investment levels, he said that compared to other countries the level of the private sector generating investment in the economy in SA is low. Currently the level is at 16%. DTI is hoping for something in the region of 20 - 22%. The question was how much pressure does one put on the public sector (other government departments) to invest in SA. For example, building houses, roads and other infrastructure investment. Private sector investment must be accelerated but public sector investment also needs to be looked at.

An ANC member asked for a comment on the sustainability of projects. The member also asked if the viability of SDI projects was questioned. The member commented that DTI projects should be extended beyond the cities in provinces. It must go into the rural areas because the impact of DTI must be felt at ground level.

Dr Ruiters replied that the sustainability of a project is always considered. DTI would not put money into a project if it is not sustainable. The SDI projects have been reorganised.

Mr Lockey (ANC) said that one of DTIs projects was to assess the impact of gambling on society. In the past they said that they were going to put a hold on deploying limited payout machines. He asked why there was now a rush to deploy these machines. In addition, he asked if DTI was supporting strategic industries to give them a competitive advantage in terms of globalistion.

Dr Ruiters said that there has been no rush to set up limited payout machines. This has been on the agenda since 1996. The machines will come in the third quarter of 2001. They are still being cautious. The Minister must meet with all the MECs on this.

Dr Ruiters said that the Minister was in a better position to discuss the issue of globalisation. He noted however that SA plays a role in multilateral level negotiations. Market access is linked to globalisation. Free trade agreements have just been concluded with Brazil and India. He said that there has been a deliberate approach by the Department to look at the impact of globalisation and to engage it, not avoid it.

Professor Turok (ANC) referred to a recent article in Business Day where Standard Bank says that the availability of jobs has fallen and that unskilled job prospects are poor. He asked for a comment on what other factors contributed to the decrease in DTI's budget allocation besides the phasing out of the GEIS (General export incentive scheme). He added that this could be commented on at a later time as he did not want to ambush him.

Dr Ruiters replied that DTI looked at the breakdown of skills in SA. They responded to the challenge by introducing skills-support programmes to train new staff. They also provide for capital grants. He said that DTI would make a statement on its budget later.

In conclusion Dr Ruiters noted the upcoming World Consumer Congress. The Congress will be held in Durban between 13 - 17 November and they expect that many NGOs will attend.

The meeting was adjourned.

Appendix 1:

Department of Trade & Industry
"Building on our strengths"

MTEF Progress Report
Presentation to the Portfolio Committee of the National Assembly
27 - 09 - 2000

We have promised ... A budget


· that is focussed
· easy to understand
· outputs clearly indicated
· and a measurable impact ...

And also that we shall have ... … continuation of budget process
·
Regular interactions with relevant senior managers on specific programmes
· Actual on-site visits to the Department and its programmes by Committee
· Regular budget progress reviews

Our fundamental task and strategy is ... grow our economy through facilitating
.
·
Access to sustainable economic activity and employment
· Higher levels of investment
· Increased market access
· A fair, efficient and competitive market place for businesses and consumers

Major measurable outputs to date
Assisting our industries ...
·
New incentive packages
· MIDP mid-term review - 17-07-2000
· ISA - R519m in investment
· Export Credit Reinsurance - R2,9b in investment
· Tax Holiday Scheme - R1,2b investment
· SMMDP - R631m invested
· EMIA assisted 68% SMMEs - R36m disbursed
· Royalty agreements - R1,2b exports, R1,4b investment
· THRIP 460 applications
· Furntech training project & plant fibre projects
· Chemical test facility opened by NML
· Eurotype automotive test facility implemented
· SANAS accreditation expanded to OECD standards
· 3 MACs to be rolled-out to provinces
· Khula 3 517 SMMEs assisted through loan guarantees
· Textiles-Clothing Sector Summit held

Major measurable outputs to date
Protecting our people ...
·
Competition Appeal Court established
· Competition Amendment Acts
· Consumer education projects
· Consumer credit study and interest rate report
· Lotteries distribution fund
· Gambling - monitoring system, problem gambling policy
· FRIDGE research projects (eg tourism, cut flowers)
· Trade practices and Merchandise Marks Bill
· Counterfeit goods depot and inspectors appointed
· SACRO call centre
· 23 Usury Act prosecutions

Major measurable outputs to date
Developing the region ...
·
SADC protocol implemented
· US Africa Growth and Opportunity Act
· 2 new web-sites launched integrating 14 SADC country databases on textiles
· SACU breakthrough on revenue sharing formula
· Expanding to targeted markets in EU and in Africa
· Deputy Minister visited Uganda
· Trade agreement with Algeria

Important upcoming events
·
Exhibitions, eg Sanlam Business Week Grahamstown 26-30 Sept
· Consumer protection Expo 27-28 Sept
· SAITEX 3-7 October NASREC
· International Trade Festival Caen, France 15-27 Sept
· International Textiles Manufacturers Federation conference 23-27 Sept CT
· Global Summit of Women 2000 5-7 Oct Jhb
· World Consumer Congress 13-17 November Dbn
· World Consumer Rights Day & Award 15 March 2001

Restructuring and service improvement
·
New DTI programme structure
· Management echelon / DDG appointments
· Service delivery
· IT environment / electronic filing / new web page
· Quality of Work life introduced
· Skills and training enhancement of DTI personnel
· 54% of senior management qualifications audit completed
· Professional services shift
· Board of Tariffs and Trade appointments / CITA
· Investment SA now Trade and Investment SA
· 11 new international offices, 10 dedicated for investment resulting in cost-effectiveness
· Local presence revisited - ports / regional offices
· Companies and Patents trading account
· Policy Council of DTI Institutions

Our Budget
In total R2,2b

Budget and expenditure Aug 2000
Programme 1: Administration [not included]
Programme 2: Trade, Investment and Entrepreneurial Development [not included]
Programme 3: Trade policy and Global positioning [not included]
Programme 4: Business Regulation and Consumer services [not included]

Important budget shifts
2000/2001
· Roll-over approved R41m
· creation of new incentives
· Export Credit Agency
· Personnel cost
· Increased contributions to Khula, ISA, NAMAC & SMMDP
· Decreases in FRIDGE, SPII, PII, Spatial Development, Tax Holiday, RIDP incentives, Competition Commission

New Proposed DTI programme structure

Progr 1:

Administration

R 129m

7%

Progr 2:

International Trade and Investment policy and development

R 18m

1%
 

Progr 3:

Enterprise, Commerce and Industry policy development

R 492m

26%

Progr 4:

Enterprise Promotion and Support in South Africa

R1 013m

53%

Progr 5:

Trade and investment promotion and support

R 245m

13%

TOTAL

(excl CSIR / SABS)

R1 897m

100%


The new DTI
Our Sphere of Influence ... [not included]

 

 

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