Medium Term Budget Policy Statement: hearings

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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report


6 November 2002

Chairperson: Mr N Nene (ANC), Mr T Ralane (NCOP, ANC)

Documents handed out:
Department of Home Affairs Submission (Appendix 1)
Department of Trade and Industry Submission (Appendix 2)
Financial and Fiscal Commission Submission
Appendix to FFC Submission (excel file)
FEDUSA Submission

The Department of Home Affairs, the Financial and Fiscal Commission, the union organisation FEDUSA and the Department of Trade and Industry presented their views on the medium term budget policy statement.
Home Affairs has been affected by the fluctuating currency: the HANIS project was costed on the basis of R6 to the US dollar, but given the current exchange rate, the cost of the project has risen to R1.5 billion, which was double the initial estimate. The cost of the immigration centres has also increased because of the costs of holding someone in the detention centres.
FEDUSA agreed that trade union pension funds held enormous amounts of money but they stressed that this was money after taxation that people were investing to ensure that they had provision following their retirement. Taking the money from the funds now would simply result in the State being required to put it back into the system in the form of welfare benefits later.
FEDUSA submitted that they wanted to see an end to Government 'fiddling' with the economy to maintain the currency.
The Department of Trade and Industry discussed the success the motor industry has experienced and how daunting a task it was to achieve this kind of success in other sectors. They argued that Government and industry have to work closely, without overstepping boundaries. While Black Economic Empowerment (BEE) is a concern; they have no way of monitoring it yet. Company Registration was raised as an issue, which hampers the growth of small businesses.

Submission by Department of Home Affairs
The Department was represented by Mr Lambinon, the Director-General, Mr Krige, the Chief Financial Officer, Ms Mgxashe, the Regional Director, and Mr Macaln, the Head: Deputy Ministries. Mr Lambinon gave a brief introductory presentation (please refer to the attached document).

With regard to the Departmental allocation, Mr Lambinon indicated that they had asked for the following amounts. He also cited the expected increase which would reduce their shortfall (please see the attached document). For example, in 2002/3 they had asked for R2.1 million, had received R1.7 million and therefore needed a 25% increase in their allocation to reduce their shortfall.

Mr Nene said that while he understood Mr Lambinon's concerns and would have done the same in his position, this was not the appropriate forum to lobby for additional funding.

Dr Rabie (NNP) asked for an indication as to when the duties would be delegated to local authorities to issue ID books and register births and deaths, for example.

Mr Lambinon said this was still in the earliest stages and although the Minister had made his views and intentions known, substantive discussions would not begin until the Ministers had all agreed to go forward.

Dr Rabie asked about the funding of Immigration centres. This was especially important in light of the expected demand from refugees due to the famine in Southern Africa.

Mr Lambinon said that the cost of keeping someone in the detention centres had risen from R35 per day to R58 per day. Rail travel and not air travel further reduced the costs.

Dr Rabie asked why the decision had been made not to fill vacant posts in a bid to keep the budget down when the posts were clearly needed. What was the position within the Department regarding the employment of contractors?

Mr Lambinon said that contractors were only used on the HANIS project. They considered whether it was clearly a more cost effective option than to train and utilise Home Affairs staff, for example, when setting up and analysing IT systems. The use of outside contractors was only R17 million per year. It was very difficult for Home Affairs to provide services in rural and poor areas where they were trying to establish mobile units. Home Affairs often had to make arrangements with local authorities and traditional leaders for the use of free accommodation. They had filled as many vacant posts as they could, at the last count the Department had filled 400 of the vacant posts. In addition, in an attempt to help poor people, when there had been disasters through fire or floods, Home Affairs had secured Treasury approval to go to the areas and issue replacement documents free of charge.

Ms Taljaard (DP) asked what the situation was with the HANIS project as she believed the costing had been done on the basis of R6 to the US dollar, but the exchange rate was now R10.

Mr Lambinon confirmed that this was the case. Fortunately, the contract had not been awarded for the identity card component of the project. However, the cost to date of the project had been R1.5 billion, which was double the initial estimate.

Ms Taljaard asked what the degree of difference was between the Treasury and Home Affairs on the procurement of SENIC? Mr Lambinon said that it was an internal matter.

Ms Taljaard asked if some of the projected shortfall was due to the stringent requirements of the new Immigration Bill.

Mr Lambinon said that it had not really been budgeted for as the terms of the Bill had undergone such late amendments.

Mr Hanekom (ANC) asked why the port of entry contacts foreigners had with Home Affairs and its officials were so shabby? Mr Lambinon agreed that it was important to maintain a professional front, particularly as South Africa was attempting to attract International events. The port of entry staff were undergoing training and the service provision was to be increased. The last time the posts had been established was in 1976 when South Africa received flights from one international airline, SAA. Now it was the destination point for 100 airlines and the allocation of staff had to reflect this.

When asked about the co-ordination between the Departments, Mr Lambinon said that this was proving very fruitful and was resulting in less fraud.

Submission by the Financial and Fiscal Commission
The submission from the Financial and Fiscal Commission (FFC) was given by Mr Josie, the Deputy Chair, Mr van Gass, the Manager: Budget Analysis, and Dr Fast, the Parliamentary Officer.

Mr van Gass pointed out the error in the presentation that on page 11 bullet 2 it should read 'declining slightly from 16% to 15%', and not 'increasing slightly from 16% to 16.5%'

Ms Taljard asked what the Commission's relationship was with the Treasury?

Mr Josie said that the relationship was not with the Treasury but with the Minister of Finance and Parliament. This was governed by the Constitution and the Intergovernmental Fiscal Act. There was a requirement that the FFC was to be passed all money bills for comment. The relationship was largely good and fairly effective.

Ms Taljaard asked if the representatives would elaborate on the statement in slide 10 that expenditure would outstrip income.

Mr van Gass said they had not carried out any studies on the reason but could speculate that it could be due to a capacity limitation. Also the area experiencing the highest growth in service delivery was welfare.

Ms Taljaard asked, with regard to the proposed levy on energy supply by the municipalities, what empirical work had been carried out to make such a proposal.

Dr Fast explained that this was not a suggestion for an additional tax, as the municipalities already increased the cost of the electricity they supplied over the cost for which they purchased it. What was being proposed was that this 'hidden' levy be made more transparent and that a suggested figure of 4% had been proffered by Price Waterhouse Coopers who had carried out research into this. The FFC's position was in line with SALGA's position on the issue.

In conclusion, Mr Josie reminded the Committee that the FFC was going through a period of restructuring with the members being reduced from 22 to nine. The current Chairperson's term was also just about to end so either a new chair or an extension of the current Chair's tenure would be decided upon soon. The changes would result in the introduction of a system of policies and practices which would allow the FFC to interact on a more rational basis with Parliament.

Submission by FEDUSA
FEDUSA were represented by Ms Humphries, the Parliamentary Officer.

Mr Zita (ANC) asked, with relation to the submission on savings and pensions, why, when pension schemes held trillions of rands in their trust funds, should the issue of taxing them not be considered.

Ms Humphries agreed that trade union pension funds held enormous amounts of money but she stressed that this was money after taxation that people were investing to ensure that they had provision following their retirement. Taking the money from the funds now would simply result in the State being required to put it back into the system in the form of welfare benefits later.

There were a series of questions from Mr Zita (ANC) and Mr Mahlangu (ANC) on the issue of the government becoming involved in job creation. Mr Zita asked why South Africa thought it would succeed in this task when governments throughout the world were failing? Mr Mahlangu pointed out the hypocrisy of some people who advocated Government involvement in job creation policies whilst also being in favour of contracting out. Contracting out was, in his opinion, a euphemism for job reduction as this was the easiest way to achieve the reduced costs. He also asked what was being done in relation to SMMEs when figures showed that their establishment rate was the same as their failure rate.

Ms Humphries disagreed that Government had no, or a limited role to play. They held regular Task Teams with the President which gave rise to many projects and programmes. The informal sector was a huge source of self-employment, as was the network of church-organisations and other groups. If these were complimented by government led capacity building programmes or assistance with training or tools and other types of equipment, people could be encouraged to achieve more.

Dr Koornhof (UDM) thanked Ms Humphries for a very thought provoking presentation, but asked for clarity on whether FEDUSA were asking for more or less Government involvement. Mrs Humphries said that they were not advocating more Government involvement, but more co-ordination between the Departments. FEDUSA were not aiming for a socialist approach favouring a mixed system.

A Member agreed that water and electricity should be zero rated for poor people, but was unclear as to why this should also be the case for people who were able to pay for these services without any level of subsidy.

Dr Rabie (NNP) said that while he agreed with FEDUSA's views on the taxation of retirement funds, he was less sure of the zero-rating of electricity. At all costs the taxation system should be made as simple and uniform as possible. Would a zero-rating system not make this too complex?

Ms Humphries said that the purpose of the proposal was to assist the poor. FEDUSA had proposed this scheme to the Treasury for its consideration and stood by its views.

Ms Hlangwana (ANC) asked what 'imaginative ways' FEDUSA would like to see the Government use to avoid large depreciation fluctuations, as mentioned in their submission. Also what was FEDUSA's policy on the issues raised by the Bureau for Economic Policy and Analysis of Pretoria University?

Ms Humphries said FEDUSA wanted to see more co-operation between the Ministry of Finance, the Reserve Bank and the Treasury. At the moment the impression was that each was too self-absorbed in doing their 'own thing'. FEDUSA wanted to see an end to Government 'fiddling' with the economy to maintain the currency. Ms Hlangwana expressed concern that her questions had not been answered to her satisfaction, but Ms Humphries did not take the opportunity to expand further on it.

Mr Baloyi (ANC) said that the comments regarding 'savings' on page three did not, in his opinion, go far enough. What was FEDUSA's stance on whether the pension funds should be invested in South Africa? Ms Humphries said that FEDUSA's views had remained the same since 1996/97. Taxation of pensions would remove between 20-25% of the income generated by the fund which would result in this burden being borne by the state.

Mr Baloyi (ANC) also complained that if one reads the submission by FEDUSA, one could come to the conclusion that the Government had not achieved anything. Ms Humphries said that this was not the case but that the submission was aimed to highlight the problems encountered by the poor members of the society.

Mr Josie (FFC) said that he had found FEDUSA's presentation very thought-provoking and thorough. He asked, with regard to the issue of savings and investments, did FEDUSA have a stance on whether pension fund monies should be invested in low return, low risk government bonds, or to be managed in High Risk Unit Trust Portfolios?

Ms Humphries said that different Unions held different views. However, as the money belonged to the contributors, the decision on where to invest the money should lie with them.

Mr Josie asked what reasons FEDUSA could offer for the government choosing to go into deficit funding, which was very costly, when there was some slack in the system like the taxation of pension funds, for example? Ms Humphries did not respond to the question.

Members were interested in FEDUSA's alternative plans to the Basic Income Grant. What was the basis of their radical proposal?

She said that there was no certainty that the grant monies would go to needy people, it may simply go to fund 'loan shark' debts. A food distribution scheme was better as it would certainly achieve its purpose. Unlike a cash system, it was not open to abuse and fraud.

Dr Koornhof asked if FEDUSA supported the inflation target policy. Ms Humphries said FEDUSA were neither in favour of inflation targets nor fiddling with inflation figures.

Afternoon session
Submission by Department of Trade and Industry
Employment Creation Incentives
Mr Martin Nichol said that they recognised there was no magic formula for SMME's. However, they recognise the need for uniformity of action from the relevant government departments. They would like to see a partnership through the tiers of the Departments in government, ie provincial, local and the metros. The DTI's access to SMME's has been improved through the call center, which they have set up. The criticism in the past was that government failed the SMME's, but the one area of difficulty is finance. There should be better co-ordination of government's resources.

Khula and Ntsika are managed by the DTI and the idea is to improve the "one-stop-shop" approach. In this way businesses can find all that they need in one place, rather than having to go from pillar to post to gather resources. This will save time and money.

Private Sector Environment Issues
Dr Kaplan outlined the issues they faced with respect to three of their programmes.

Motor Industry Development Program (MIDP)
The MIDP is the program which was established for the motor industry. Through this program they have seen an increase in exports and considerable gains in productivity, amongst other things. This program is up for review by a DTI task team that will look at the MIDP in conjunction with having extensive discussions with the industry. A close relationship between the industry and government is the key to success. By 2012, there should be an extension of the MIDP. No major changes are expected in the program; the program will be modified while the essential architecture of the program will remain unchanged.

Strategic Investment Project (SIP)
This entails tax-based support for large investment projects. Applications to this support program were invited. The first application was received in April and the DTI have received seventeen applications. Of the seventeen applications received, three have not been approved, six are approved and the rest are under discussion. The program has proven to be very popular and the applications received have been from very big investors. The R3 billion, which has been set aside for this project, may be depleted before the end of year 2005. This is not an entirely accurate prediction. The major sectors involved in this project are the chemicals and metals sectors.

Industrial Development Zone (IDZ)
So far they have received thirteen expressions of interest of which nine have been discussed and the other four have not because they are relatively new. Four zones have been designated: Richard's Bay, East London, Coega Airport and the Johannesburg Airport. East London and the Coega airport have received their provincial operators' licenses. Dr Kaplan said that it was important for the Department to look at the program in its totality.

Integrated Manufacturing Strategy (IMS)
This is a broad framework on a direction for manufacturing. The key is to identify the priority sectors. However, the process of developing a sector strategy is complicated. The DTI has started forming sector groups. The aims are to develop capacity in these groups, setting up a process of enhancing the dialogue between the DTI and these sectors. The spirit of this strategy is not one of the government having all the answers. The intention is to encourage the sectors to come forward not only with manufacturing strategies, but also ways in which the DTI can best support them. The motor industry is a good example of where this strategy has worked and this is the kind of initiative the DTI is looking for in the various industries. The clothing and textile industries have come up with a strategy, but Dr Kaplan did not have the details of these strategies with him. These strategies are however being developed.

The final issue related to the Department of Science and Technology (DST). The national research and development strategy has a number of components. The fiscus has set aside more funds for it. Because the DTI is a principal supporter of technology development, especially in the business sector, they are in discussions with the DST on what the DST has developed. The institutional issues need further discussions, but in broad terms the DTI have worked closely with the DST on this national strategy.

This concluded Dr Kaplan's presentation. The chair asked that the DTI submit a written form of their presentation.

Ms Mahlangu asked three questions on the medium term incentive, outlined in their submission. What kind of jobs was created under this project? How many permanent jobs were created and has black economic empowerment resulted in benefits?

Dr Rabie (NNP) said that he realised that there was no magic formula for the small to medium enterprises, but he wanted to know how SA compares to other countries in our development of the small to medium business sector. From his discussions with an academic with knowledge of labour, it appeared that SA's laws are rigid and therefore inhibit the growth from small to medium businesses. He was also interested to know how long the DTI thought that SA would keep the marketing edge in the motor industry.

Ms Taljaard said that with regard to items in program 5, in her opinion some of the expenditure items could be seen as consumption items. Her concern was that they were "viaring" out of these projects. She also wanted to know whether this was the result of the DTI not spending fast enough in these projects.

Mr Nichol addressed Dr Rabie's question first. Over 50% of the SA labour force worked in SMME's and that compares well with developed countries. Our informal sector is quite small in comparison to that of other countries. Regarding the labour dispensation and the effect on SMME's: these are debates that are continually reviewed by the DTI. The DTI needs more time to evaluate whether the changes in law are good for the industry.

Dr Kaplan, in answer to Ms Mahlangu, said that he had no data at hand. He did not know what kind of jobs would be created, but he would obtain this information for the committee, although job creation is likely to occur in the chemical and metal sectors and most jobs would be of the semi-skilled variety.

To answer Ms Taljaard, Dr Kaplan said that the expenditure she referred to was not always easily distinguishable as, either, consumption or investment expenditure and that even if some of the expenditure was consumption expenditure, it still had a positive impact on investment.

To answer Dr Rabie, he said that the motor industry had seen success and they foresaw more, but there is excess capacity in the auto market. SA would have to work hard to keep it's success in the motor industry. The Committee should also never think that the success would be maintained for all time. The DTI is cognisant of the need for more hard work and they are not resting on their laurels.

Ms Taljaard said that she accepted the distinction between the MIDP and the SIP, but wanted to know whether any studies were being done to identify other sectors of excellence other than the MIDP.

Dr Kaplan said they would love to replicate the success they have achieved in the motor industry, but that her question was not that straightforward. The requirements for a successful industry are daunting. The international experience has shown that it is not up to government to choose which business sectors would do well or to estimate how well they would do. Government should not be in the business of picking the winners. The DTI does not envisage supporting businesses in this way. What the DTI will look at is the dynamic potential of an industry. The reality is that there are declining sectors. In other words, it would be cheaper to import a product than to make it in SA. An example being the clothing industry and the DTI are very concerned because this industry has dynamic potential and so the DTI are currently engaged in a study to see how dynamic that potential is. The other concern the DTI has is identifying the areas where there is a lack of dynamic potential. It is a lengthy and difficult process and once an industry is identified it is more than likely going to affect another. For example, if the clothing industry has a low dynamic potential, then there will be a detrimental effect on the textiles industry and so forth.

Mr Mohlala (ANC) asked why it was so difficult to register a closed corporation. The problem being that this type of registration has to be done in Pretoria and does not help the businessman who is trying to get started in a distant, rural area.

Mr Schneeman (ANC) asked whether there were many interactions between the DTI and the Department of Social Development on the projects Social Development gets involved in. The projects started by Social Development seem to flounder because of a lack of expertise; does the DTI share its expertise?

The Chair asked whether the DTI could quantify BEE and whether compliance could be monitored and what was being done where companies do not comply.

Mr Nichol said that he was not sure whether any relationship existed with Social Development. He would get back to the Committee on that. The DTI do recognise the need for "on the ground care" so that small businesses have access to finance and know how to use their funds. This is why they have mentorship programs, which have proved successful.

To answer Mr Mohlala: the company registration process is being decentralised. Dr Kaplan said that developments are being made in this regard. However, the registration office operates on its own mandate and is independent of the DTI. He admitted that this was not a confirmed answer and said that he would try to have a better answer for the Committee on what is being done to make the registration process easier.

Dr Kaplan said that the BEE program is under discussion and that there were vexing issues which have not been resolved yet.

Dr Kaplan ended by saying that the DTI is trying to work on making allocations transparent.

The meeting was adjourned.

Appendix 1:

In this year's State of the Nation Address, His Excellency President Mbeki urged us to expand access to service delivery and a better life for all. My Department has made several contributions towards this goal by improving on our service delivery with the aim of "Rendering World-class Service" to millions of South Africans, from rural villages to city suburbs. To this end, my Department has integrated its priorities into the various Government clusters and obtained allocation of funds for key projects, due to our participation in intergovernmental structures and processes. We have begun operating in terms of the required planning framework and have tabled our second strategic planning document, while seeking to optimise the allocation of public resources through co-operative governance and intergovernmental relations. I must add, however, that under-funding will inevitably result in budget shortages. Despite reprioritisation, key aspects of departmental activity remain underfunded and adversely affected.

The key considerations in the departmental budgeting process and the reprioritisation undertaken to address funding deficits have been tied to our strategic priorities set out in our Strategic Plan and their link to the Government's National Programme of Action, as well as to the priorities determined by the Cabinet and FOSAD Clusters of which the Department is a member. However critical priorities affecting our ability to provide a world-class service remain un-funded, adversely impacting on overall governmental performance in many spheres.

As it is becoming increasingly important to work smarter, the Department is moving from manual processes to electronic systems, gradually computerising more and more offices. This could allow for the devolution of Civic Services delivery to municipalities and one-stop government facilities, so that our citizens will eventually be able to obtain identity documents, registration of births, deaths and marriages, and related certificates from a variety of points, including municipal offices.

My Department has also embarked on a process of re-evaluating the present location of its network of offices so as to endeavour to align this with the new municipal areas. This is obviously a long-term exercise but is part of the ongoing efforts to improve the Department's service delivery to the public of South Africa.

We will investigate the devolution of the delivery of civic affairs functions to municipalities in order to provide a long-term stable and sustainable solution to the problem. This is an essential part of the overall strategy of reforming and restructuring our Department. Minister Buthelezi intends soon entering into a discussion with the chairperson of the Governance and Administration Ministerial Cluster on the issue of Devolution of Services. There is no reason why, in our country, one should not be able to receive birth and death certificates, identity documents and other civic services from municipalities, as one can in many countries of the world. It is also cheaper and more effective to build capacity and employ resources in municipalities, rather than building our own Home Affairs capacity wherever it is required. In fact, the capacity which can be built into municipalities by transferring to them the resources which we would otherwise utilize can also be employed by municipalities for other services, for instance either other government delegated functions, such as the delivery of welfare services or other municipal services.

Once the delivery aspect of civic affairs is devolved to municipalities, the central government will probably maintain all the powers and functions relating to the Population Register, the National Identification System and any policy and legislation relating thereto. In this context, our Department will help build capacity in municipalities, maintain the integrity of the system and access protocols, ensure the uniformity of equipment used and, generally speaking, monitor how municipalities perform their functions, and assist them as and when required. Simply put, as far as civic affairs are concerned, the functions of Home Affairs could be concentrated in Pretoria and in regional offices, without having to employ own officers to deliver to the public.

The Department has nevertheless embarked on a process of negotiating with local and rural authorities for cooperation in the rendering of civic services. These negotiations have met with positive responses from several quarters. My Department is also cooperating closely with the GCIS initiative to establish Multi-Purpose Community Centres (MPCCs) to integrate service delivery at community level, especially in rural areas. MPCCs have allowed for close collaboration between national, provincial and local governments, as these centres are homes for government services in different spheres. The Department will participate in all MPCCs and will ensure that appropriate staff is made available for these purposes, as far as funds and manpower allows.

Furthermore, the Department of Home Affairs is busy implementing an Electronic Document Management System within civic services, which will implement effective, real-time online automated document management from capture to business transaction, improving business process efficiency. The system will make Home Affairs records and archiving information immediately available for access to any authorised individual at workstations in the entire system, both nationally and internationally. The contract for the development of the E-DMS was entered into in October 2001 and commissioning of phase two of the new system is scheduled for October 2002.

The Department of Home Affairs was mandated by the Government to develop and implement a secure biometrics-based computerised identification system, as the current manual identification system proved to be susceptible to fraudulent attempts. The Home Affairs National Identification System, (HANIS), which will replace the manual fingerprinting process with an electronic process and which will replace identity documents with identity cards, was approved by the Cabinet on 17 January 1996. The original HANIS Project Plan identified four phases, namely Requirement Definition, System Design, System Build and Basic System Commissioning. For the HANIS Basic System, these phases were successfully completed by 18 February 2002. The Identity Card component of the project is still outstanding. The envisaged smart ID card will provide a common platform for the integration of government services centred on the verification of citizens. The Department has consulted with other government departments to identify their needs and to integrate these into the smart ID card solution. The smart ID card project will be aligned with other government initiatives such as e-governance, the Gateway project and the proposed Electronic Communications and Transactions Bill.

During a most recent discussion it was suggested that in promoting the issue of the procurement of a new identity card, the way forward would be to establish a joint committee, consisting of Home Affairs and Treasury officials. The brief of the committee would be to discuss and analyse the pros and cons of the broader PPP feasibility as opposed to a view that maintains that a public tender procurement model should be used. Based on the analysis of the facts, the committee must then propose the approach that will best satisfy the main goals mentioned in the previous paragraph. It is the Department's view that it will be possible to do the business plan and this particular investigation in parallel.

The Department of Home Affairs has engaged a number of National Treasury officials in talks on the intended new secure electronic national identity card (SENIC). The main topic for the discussions has been the model, and the funding thereof, that should be used for the procurement of the card. It was decided that the Department of Home Affairs should produce a business plan to assist National Treasury to fully understand the Home Affairs approach. The business plan would also have to be signed-off by other role players, so that a firm commitment from all stakeholders is obtained.

Although the Department's views differ from those held by Treasury on which is the best approach (model) for the procurement of the SENIC, it has been clear all along that our two Departments are in full agreement on the main goals that should be achieved by the procurement process. We agree that the model used should be effective, cost efficient and that whatever decision prevails should be the result of an objective and scientific determination.

The Department of Home Affairs aims to process and approve immigration applications and applications for work and study permits in line with South Africa's skills and investment needs and with due regard for the country's economic social and cultural interests.

The events of September 11, 2001 have increased the responsibilities of my Department to ensure that persons seeking entry into our country are properly screened from a security point of view before being admitted. Poor facilities, where the infrastructure is not conducive to the correct, swift and separate channelling of incoming and outgoing traffic, create loopholes enabling persons to enter the country without reporting to an Immigration Officer for the necessary checks and controls.

The Department progressed further with the implementation of a computerised visa system at all missions abroad and at critical ports of entry. The system has high security features and, once implemented, will expedite the clearance of travellers at ports of entry and will curb fraud.

The Department of Home Affairs is established to serve the entire population including foreigners by providing essential services such as issuing of identity documents, passports, travel documents, visas, work and study permits as well as other migrations matters in the most effective way. In order to ensure efficient service delivery and thereby enhance the quality of life, it is of utmost importance that sufficient funds are allocated.

I thank you.

Appendix 2:
Department of Trade and Industry Submissions with regard to THE MEDIUM TERM BUDGET POLICY STATEMENT


1. The MIDP

There will be an extension of the MIDP to 2012. The details will be announced at the end of November. No major changes are expected. The current architecture of the MIDP is to be retained. The dti and the industry are currently engaged in extensive and productive discussions on the precise terms of the new arrangements.

2. The SIP

There has been a very positive response. First applications were received in April. A total of 17 applications have been received. 3 applications were not approved. 6 applications have been approved. The total amount involved is R1.55billion. The impact on the tax revenue foregone would be approximately R467,7 million. The major sectors entailed currently are Chemicals and Metals. While it is very difficult to predict investment, there is some indication that the amount allocated for the SIP may be exhausted before the end of 2005.

3. The IDZs

13 expressions of interest have been received by the department. 9 of these have been extensively discussed with the Minister. 4 have been designated - Richards Bay, East London, Coega and Johannesburg airport. 2 provisional operator licences that allow applicants to proceed with infrastructural development have been issues - to Coega and East London. The other 2 are still in the process of submitting their applications for a provisional operator permit.

4. Customised Support Developed for Targeted Sectors

The IMS establishes a broad framework for our further policies for industrial development. The framework has widespread acceptance. The priority sectors are identified in the IMS and the specific policies for the priority sectors are currently "under development." This has a number of dimensions. Sectoral teams are in place. Each of the sectoral groups have projects to support developments in their particular sectors. A major training programme to enhance our understanding and analysis of the sectors is to be implemented very soon. At the same time, a number of discussions are underway between the dti and the different sectors with a view to developing a joint vision for the industries and a way forward to achieve that vision. The IMS does not envisage the dti alone making policy. Rather we are encouraging those in the sectors to develop a possible strategy that is based on enhancing local value added production and that entails moving up the value chain - a process that entails a growing emphasis on knowledge-intensive activities. The dti will then engage with the industry stakeholders to see how best we can support the industry in these endeavours.


There are very close working relations between the dti and DST. DST presented the proposed R&D strategy at an early stage to the dti and we responded with extensive comment and suggestion. There are a number of features of the new national R&D strategy - most important, from the dti perspective is the identification of new technology missions. These new missions are the key technology platforms of Biotechnology and ICT; Advanced Manufacturing and developing new knowledge based industries from the resource-based industries. These technology missions link with our industrial strategy which lays considerable stress on the enhanced importance of innovation and with many of our priority sectors which will benefit directly from local innovation in these technologies.

The broad thrust of the new National R&D strategy therefore accords well with our industrial strategy as expressed in the IMS.

The national R&D Strategy also sets out some proposals for institutional developments designed to enhance innovation. There are many institutional modalities that could be utilised. There is probably a need for some further discussions between the two departments on the institutional modalities and identifying precisely the responsibilities of each department in a context where both have extensive interests and concerns relating to technological development, more particularly in the private sector.


Incentives for small business development

There is no magic formula for SMME development success. If we want to make a difference we need uniformity of action across departments in order effectively to renew our emphasis on SMME development which is a key area for equity and growth.

There are three critical aspects to this:

1. Greater coordination across government departments, with the dti taking the lead role to make this happen.

2. Working in partnership with the different tiers of government and with the private sector, with local government and the metros playing a particularly important part in improving the environment for small business to thrive. the dti is already at work on this.

3. Improving access to finance by a better coordination of the various financing instruments within the dti Group of institutions. There will be a targeted, project centred focus which is further informed by the Integrated Manufacturing Strategy, or initiatives such as Industrial Development Zones (IDZ's) and Spatial Development Initiatives (SDIs), and with a new emphasis on cooperatives.

Access to the dti for SMMEs is improving with the establishment of a call center that allows immediate access to advice.

Government has been criticized in the past for failing the SMME sector, but the statistics show a steady growth in SMME numbers. It has also taken time since 1994 to convert the SA economy from one focused on big business to one friendly to SMMEs. The benefits of that conversion are now becoming manifest.

Access to finance is a common difficulty for SMME's. The first step, as in other areas of SMME policy, is better coordination of existing resources. Khula and Ntsika, the dti - linked agencies that provide access to finance and training, are being restructured to work more closely under common direction. The dti has a task team working on this already, and is clarifying the product Tofferings across all the institutions. The aim is for SMME's to have access to assistance through a one-stop-shop approach.

Optimism for further SMME growth in SA, with all the potential for job creation, black economic empowerment, rural development and gender equity within a sustainable, growing economy is well founded. It is sometimes forgotten that we have had ten years of steady economic growth in SA. This has increased the basic wealth available in the economy. We see higher labour productivity, rising earnings for those in formal employment, more value-added economic activity and broader structural changes conducive to the SMME sector's growth. Economic conditions fluctuate, with interest rates on a short-term rise in the interests of broader macro-economic stability. Here again, grants and projects of the dti Group will support SMME's with their CAPEX needs, to help create a more robust, vibrant sector.

In conclusion, it is necessary first to emphasise the importance of local government and the metros for small business development. Local government is key in SMME development. It sets the most immediate environment in which SMME's operate.

Secondly, SA needs to develop solutions to the problems of finance for SMME's and facilitate lending from the formal financial sector.

Thirdly, skills-training is vital as skilled and experienced people have most success in building sustainable small enterprises. This needs increasingly to be combined with access to computers and the internet.

All in all, it is government's task to create an environment conducive to small business development. This is area in which a leading role is played by the dti.


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