Minister of Economic Development on their 2015/16 Strategic Plan

Economic Development

14 April 2015
Chairperson: Ms EColeman(ANC)
Share this page:

Meeting Summary

The Committee heard a briefing by the Minister and Deputy Minister of Economic Development on the Department’s Strategic Plan and Annual Performance Plan.

The Minister spent time outlining the context within which the Department operated before moving on to give details of the three programmes of the Department: Administration; Growth and Jobs Drivers; Investment Competition and Trade.

The focus of the Department's work has shifted from policy development to implementation and this would lead to a restructuring of the organisation with programmes reduced from four to three and also demanding new skill sets from its staff. The former Director General has been redeployed to the Department of Women and a new Acting Director General was appointed.

The budget for the year is R 885.8m for 2015/16 which would drop to R685.7m in 2016/2017 because R204m for SEFA’s economic competitiveness package would cease at the end of the financial year.

Members were concerned that the Department would underperform because of its vacancies and whether the Department could get the skills that were required from outside. Was there value for money in government programmes? Was there a time frame for the development of coherent systems? What was the status of the Umzimvubu Dam project? Was the 28% decrease in beneficiation of chrome ore at Middleburg Steel because of a lack of electricity supply? Members said that the chief of the South African Bureau of Standards had said that government itself did not follow SABS standards when procuring goods. Members complimented the Minister for moving the Small Enterprise Finance Agency (SEFA) to the Small Business Development Department and also for the shift in emphasis at the Department from policy development to implantation. Members asked whether the Department could enforce implementation of strategies designed to unblock blockages. Members questioned whether the Department would be able to do all the things it set out to do as it appeared too unrealistic. How did the National Development Plan (NDP) and the New Growth Path (NGP) complement each other. Members wanted to know if the Departments technical expertise capacity had been measured. What could be done to mitigate the tumbling price of iron ore? Would township enterprises be managed to such an extent that they became profitable? Members said addressing the inequality of power was a basic tenet of economic justice and that when the people judge government, it would be with reference to their livelihood, their poverty and economic injustice. The fundamental problem was that poverty was specific and localised. What would the memory of people in Umlazi and Soweto be of the Department? Members asked about regional integration work. How did the Department see the role of infrastructure enhancing that project. Could the Minister expand on the topic of the Kgalagadi Mine and the railway line to Coega.
 

Meeting report

Briefing
Minister Ebrahim Patel informed the Committee that Ms Jenny Schreiner had been redeployed to the Department of Women, in the Office of the Presidency and that Mr Kumaran Naidoo was made the Acting Director-General of the Department.

He expounded on the context in which the Department was doing its work. The South African economy was deeply integrated into the global economy, with SA exports equivalent in value to 30% of GDP and thus developments in the global economy materially impacted on domestic growth and jobs. In the previous year the global economy grew by only 3,3% and Europe was battling to get a 1.5% growth rate. Consequently the domestic economy has been impacted and the demand for South African exports was affected. There was a sharp decline in demand and price for platinum, and more recently, for iron ore. Other key contributors to lower growth in the domestic economywere industrial relations conflict and energy shortages. The Department would be also looking at provincial jobs performance and its impact on overall development, including that of poorer regions and aligning public agencies and regulators to the national vision.

A total of 15,3 million South Africans were employed, 1,7 million more than when the NGP was adopted in 2010.Youth unemployment was a critical concern in SA and across the world. The growth rates for the SA economy in 2014 was 1,5%, lower than what was needed to achieve national development goals.

The Strategic Plan and Annual Performance Plan (APP) detail the Department’s Key Performance Indicators (KPI)s and outputs. There were three programmes comprising six strategic objectives to provide direction and 23 Key Performance Indicators KPIs to give effect to the strategic objectives producing 164 outputs.

Key outcomes of the Medium Term Strategic Framework (MTSF) for the Department were decent employment through inclusive growth; a skilled and capable workforce to support an inclusive growth path and an efficient and a competitive and responsive economic infrastructure network.

The Department would focus on advancing beneficiation and adding value to mineral wealth as noted in the nine point plan in SONA.

Programme 1 dealt with administration and how it supported the work of the Department.

Programme 2 dealt with growing and coordinating jobs drivers and the implementation of the New Growth Path economic strategy in support of the National Development Plan. In the current year it would provide strategic support for two jobs drivers of the NGP Agriculture and agro-processing and mining and beneficiation.

The third programme was to facilitate social dialogue and implementation of social accords and to promote investment, industrial funding and entrepreneurship for jobs and inclusive growth and to promote competition, trade and economic regulation in support of job creation, industrialisation & social inclusion.

Implementation
He said implementing the 23 KPIs and achieving the 164 outputs would require that the Department worked smartly. The key issue was that the Executive focus on the impact of the work and not only on processes.

The organisational structure of the Department was revised and the focus was more on implementation than policy development as had been the case in the past. This also meant that staff had to have a different skill set.

Organisational Structure
The main changes were that the erstwhile four programmes of the Department have been consolidated into three programmes. Policy, planning and social dialogue were integrated into a programme focused on the jobs drivers, shifting from policy development to principally implementation.

Regulators in competition and trade, the Development Finance Institutions and the work on infrastructure wereconsolidated into a new programme so as to integrate these areas of focus.

SEFA was intended to remain a wholly-owned subsidiary of the IDC but strategic responsibility for its operations would be shifted to the Minister of Small Business Development

Staffing And Capacity
The funded establishment for the current financial year was 149 persons, of which 127 posts were filled.
Staffing of full-time employees will be complemented by the setting up of Expert and Advisory Panels to provide high-level capacity. These panels may be constituted on areas such as economic policy, infrastructure development, social dialogue and competition policy. The Department would also commission work through public institutions and universities where appropriate, to source additional intellectual and practical expertise/

Budget
The Departments total budget was R 885.8m for 2015/16 which would drop to R685.7m in 2016/2017.
Transfers to agencies were R733.2m and operational expenses were R152.6m. The reduction in the budget was because R204m for SEFA’seconomic competitiveness package would cease at the end of the financial year.

Next Steps
The work programme for the Department was ambitious and the focus has shifted to integrating departmental outcomes within the wider MTSF. This is part of an approach across government to provide greater coherence and a common planning framework.Many strategic objectives and KPIs require work and coordination with other departments, public agencies and different spheres of government and much of the work requires infrastructure coordination and delivery, which remains critical to the development of the country. As the economic environment constantly changed, the Department might undertake actions during the year that were not foreseen in the APP.

Discussion
Ms D Rantho (ANC) said she was concerned that the Department would underperform because of vacancies in the Department and whether the Department and could it get the skills that were required from outside. Was there value for money in government programmes. Was there a time frame for the development of coherent systems.

Mr P Atkinson (DA) asked, regarding KPI 4 on mining, what the status of the Umzimvubu Dam project was. Was the 28% decrease in beneficiation of chrome ore at Middleburg Steel because of a lack of electricity supply. On KPI 14 he said that the chief of the SABS had said that government itself did not follow SABS standards when procuring goods.

Mr S Marais (DA) complimented the Minister for moving SEFA to the Small Business Development Department and also for the shift in emphasis at the Department from policy development to implantation. He asked however whether the Department could enforce implementation of strategies designed to unblock blockages. He also questioned whether the Department would be able to do all the things it set out to do as it was too much. The plans should be more realistic. He said the NDP and the NGP were still seen by some as separate plans. How did they complement each other.

Mr S Tleane (ANC) said the SONA 9 point plan included encouraging private sector investment. He wanted to know if the Departments technical expertise capacity had been measured. What could be done to mitigate the tumbling price of iron ore. Would township enterprises be managed to such an extent that they became profitable.

Mr M Mbatha (EFF) said addressing the inequality of power was a basic tenet of economic justice. He said that when the people judges government it would be with reference to their livelihood, their poverty and economic injustice. He said that the fundamental problem was that poverty was specific and localised. He questioned what the memory of people in Umlazi and Soweto would be of the Department.

The Chairperson said that not much had been said on regional integration work like for example the Inga Dam. How did the Department see the role of infrastructure enhancing that project. Could the Minister expand on the topic of the Kgalagadi Mine and the railway line to Coega.

On the issue of integration, Deputy Minister Mr Madala Masuku said the Department looked at areas of strength and critical areas of weakness that needed tot be improved and strengthened. If necessary issues were taken to the cluster level. On the matter of the synergy between national and local government, he said it was a matter of appraising the annual performance plans (APPs) of provinces and seeing how it integrated with that of municipalities. And identifying why there were not synergies between the two.

Regarding Ms Rantho’s questions, Mr Patel said the Department was able to meet all its targets because they had been able to identify capacity in state structures that were not fully utilised. On the question of getting the skills needed from outside, he said the Department could get outside staff but that some did not want to work full time in government and that consultants were not the ideal solution as there was no accountability so flexible contract work on an as needed basis was the model the Department was working on. As for internal skills, he said the Department was in the process of getting the right mix of skills and there were gaps. For government as a whole, the Department should establish a group of technical people in the Department to help municipalities identify its skills requirements. The Deputy Minister, Mr Masuku, was leading work at the provincial level.The Department was leading work with provinces in dealing with the provincial APPs. Using consultants to develop an APP resulted in the changing of the wording but did not fundamentally change the APP. Changing for example the agricultural outcomes of a province did not arise from documents or from speeches but rather through changes to the budget. The Department was in the process of doing a pilots in different provinces of such changes and wouldlater roll them out to other areas.

Regarding the coherence of agencies in the three spheres of government, Mr Patel said it was being developed in one province to see what the challenges were and suspected that it was principally political rather than technical issues. If the issue was political, it would result in duplication and waste. The role of the Department would be to avoid a proliferation of structures.

Regarding value for money in the departments regarding their subsidies and programmes, he said there was value for money but he believed the Department could be more efficient and put money into higher performing programmes.

He said agriculture should play an important in reducing the level of unemployment. There were many programmes targeting this in this sector. Coordination and integration was important to prevent double dipping and in infrastructure development, for example. In the case of the Umzimvubu Dam, Minister Mokonyane would be making an announcement regarding the dam in her budget vote speech. He said the eastern part of the Eastern Cape had been historically neglected.

Energy constraints were making beneficiation tougher. The energy constraints challenges was being addressed but it had to be noted that beneficiation took years to get off the ground. There would not be beneficiation projects completed by the end of the year therefore but the Department would know what the price differences of iron ore inputs were for example and what the constraints on chrome production other than energy was.

He said he would need specific details regarding the SABS issue. If it was a question of localisation, then there was a programme to increase the localisation content. If it was functional like the procurement of foodstuff or freighting equipment for example where safety standards was at risk then action had to be taken immediately.

Regarding Mr Marais' question on the challenge of government bureaucracy, he said it was a challenge for governments around the world and was about how departments integrated. The Malaysians for example had said sent an official over to assist in Operation Phakisa and how to get things going quickly as Malaysia had done. In practice, government bureaucracy was not a big constraint as there was lots of peer support and vested interest in assisting removing blockages.

On the question of whether all the work that had been set out could be done, he said public discourse should change from not looking at setting realistic targets but to setting stretch targets that aims to overreach. In addition results should not be assessed on the achievement of targets but rather on the impact it had on a community.

The NGP was a strategy which fitted into the NDP. The NDP set out a vision to develop a South Africa by 2030 in which 10m new jobs had been created; with a balanced economy; with a growth rate of similar other economies; was integrated into the continent and where children could go through the educational process and get jobs. The NDP included elements of what could be done but was broader in scope than just looking at the economy.

The NGP in essence consisted of two things. One was that growth had to be geared to creating jobs and there were ten job drivers and policies to support this was competition. NDP and the NGP were high level documents and were not policy documents.The theme of the NGP was to take one step at a time and see if it worked as espoused by Deng Xioping, the former Chinese leader, who when asked about China’s development plan, said “it was like crossing a river by feeling for the stones with your feet”.

Regarding the role of private investment, he said government incentives did create jobs but not efficiently.

Regarding technical expertise he agreed that the more external capability EDD brought into the country the more the internal capability had to be increased.

Regarding commodity prices, he said the government could only mitigate by improving the competitiveness of mining extraction and to beneficiate more as the value add was higher in beneficiation than in mining. It would be dangerous if the economy was to remain dependant on mining only so the economy needed to be balanced.

He said he would look at training regarding the development of sustainable township enterprises.

Regarding Mr Mbatha’s question, he said that that there had been a substantive increase in industrial funding which created the beginnings of a green energy sector through substantial IDC investment and tackling cartels which distorted markets. Economic justice was a function of decent jobs, of combating income inequality, of the youth being able to become entrepreneurs.

Regarding regional integration, he said infrastructure was critical to integration,it could not just be tariffs. There was no smart rail networks and the ports were not well connected to each other. He had met with bankers in Davos to raise money to help with infrastructure in Africa.

The Grand Inga hydroelectric scheme would be an important energy provider while in the short term the Lesotho Highlands water project would pump water to Gauteng and generate hydroelectric power for Lesotho itself.

Regarding the Kgalagadi – Coega railway line, This was in SIP 3. Coega was being developed by the building of a manganese terminal and in the long term they want to build a smelter there. A sinter plant had been built in Hotazel and the third phase would be steel making. In the short term the iron ore lines were being used for manganese but the manganese line would be the rail line to Coega. He said the Saldanha port would be expanded in SIP 5 as the long term future of the port lay in gas exploration and extraction.

He said the jobs issue was the key issue they would be focussing on and there would be challenges because they anticipated headwinds in the global economy. This would imply a stronger focus on Africa. African integration was a key part of vision of South Africa’s future.

The meeting was adjourned.  

 

Share this page: