Economic Development Department on its 2015/16 Strategic and Annual Performance Plan, in presence of Minister

NCOP Economic and Business Development

06 May 2015
Chairperson: Mr L Suka (ANC- Eastern Cape)
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Meeting Summary

The Minister, Deputy Minister and Department of Economic Development (EDD) briefed the Committee on the 2015 Annual and Strategic Plans. The Minister noted the importance of considering national and provincial development together, and said that NCOP was a key organ in ensuring oversight at provincial levels. The country had to adapt to global challenges to operate locally, regionally and on the Continent and internationally. The Deputy Minister stressed that the mandates of the EDD related to job creation, inclusive growth and industrialisation, and for this reason the EDD must give strategic direction to development finance institutions on competition policy and trade administration. The GDP of R3.8 trillion was the same size as Malaysia and Denmark, but the biggest difference was that only 15.3 million of South Africans were employed. South Africa exported up to the value of 30% of the GDP. Certain economic activities had declined, impacting upon the domestic economy, with sharp declines in demand for platinum and iron ore, whilst industrial relations, high levels of income inequality and energy shortages added to the problem, and growth was below targets in South Africa, by 1.5%. Youth unemployment was a critical concern. The largest contributors to growth were Gauteng, KwaZulu Natal and Western Cape, but Limpopo had increased its contribution to 7.3%,and other provinces had shown growth above the national growth rate, emphasising the importance of focusing on the provinces. Specific focus areas would continue to be the 18 strategic integrated projects (SIPs), meant to trigger rapid economic development, industrialisation, and fulfilling the President's Nine-Point Plan set out in the recent State of the Nation Address. Some of the targets and figures for the individual programmes were then set out. It was noted that some of the initiatives and organisational work would move to the Ministry of Small Business Development, which would mean a reduction of budget.

Members asked what economic interventions there had been in other countries, and the outcomes, asked if there was a conducive environment for job creation, and what was being done about corporates who were not aligning with agreed outcomes. Members asked for clarity on employment figures, and asked about lines of reporting, the appetite of the private sector for investment and how South Africa was dealing with scrap metal and beneficiation. One Member noted the difficulties with a solar power project in Upington, and questioned whether the Department was happy with tariffs and how they affected economic growth. Members questioned the larger allocations to the Administration programme, asked what was being done to ensure unqualified audits and commented that vigorous strategies were needed to combat unemployment. Members also were worried about negative impacts of AGOA on Swaziland and cautioned that it should not impact in this way in South Africa.  
 

Meeting report

Minister of Economic Development Opening Remarks
Mr Ebrahim Patel, Minister of Economic Development, noted that May marked Africa month and Workers month, and Economic Development month in South Africa. He noted that it was impossible to think of development without partnerships with provinces, for the implementation took place at those levels. The NCOP was a key organ in ensuring oversight. He noted that the Deputy Minister had been visiting provinces, engaging with MECs and municipalities and seeing how the relations with provinces could be strengthened. The global market was challenging the country to realign its policies to meet and address obstacles in the markets, the country and the Continent that were of serious concern for the rest of the world.

Economic Development Department: 2015/16 Strategic and Annual Performance Plan
Mr Madala Masuku, Deputy Minister Masuku, introduced the presentation by noting that the core mandates of the Economic Development Department (EDD or the Department) related to job creation, inclusive growth and industrialisation. The EDD must give strategic direction to development finance institutions on competition policy and trade administration. The current contexts of its work were that it was aware of issues of poverty, unemployment and inequality, and needed to ensure long term change in these realities. South Africa’s GDP is R3.8 trillion, the same size as Malaysia and Denmark. However, only 15.3 million of South Africans were employed. South Africa exported up to the value of 30% of the GDP. In 2014, the global economy grew by 3.3%, which was lower than the 5.7% growth in 2007. In South Africa, certain economic activities had declined, impacting upon the domestic economy. There had been a sharp decline in demand for platinum and iron ore. Other factors included industrial relations, high levels of income inequality and energy shortages. The growth of the economy last year was 1.5% lower that the targets. Youth unemployment was a critical concern in South Africa, and there had to be more focus  put on the youth.

The Deputy Minister reported that Gauteng remained the largest contributor to the national GDP, at 33.3% with Kwa-Zulu Natal contributing 16,0% and Western Cape 13.7%. He specifically noted Limpopo’s increased contribution, from 6.2% in the previous year to 7.3% in 2013. The increase had a significant impact for the outcome of employment in the country. Some of these provinces increased above the national growth rate of 3.7%, which showed the importance of economic development focused on provinces.

Gauteng and Kwa-Zulu Natal attracted more employment than any other province in the country. Significant price changes were seen in Western Cape and it was becoming more expensive in terms of the Consumer Price Index report of March 2015, with the least growth evident in Kwa-Zulu Natal.

There were 18 strategic integrated projects (SIPs), meant to trigger rapid economic development in those specific regions. The Industrial Development Corporation had spent about R120 million, mostly in Gauteng, for various projects, since the money was requested by 40% of clients based in Gauteng. This informed the EDD of the need to industrialize other provinces, create capacity and sufficient infrastructure. R11 billion had been spent on clients for industrial development in the past few years. The Nine Point Plan of the President in the 2015 State of the Nation Address had included moderating workplace conflict, and encouraging private sector investment.

The programmes of the EDD for this financial year included administration, growth and job drivers, investment, competition and trade. In the Administration Programme, the main challenges were to get unqualified audit reports, and respond to the Auditor-General's queries. Another objective was to introduce targets for customer satisfaction, also to support the New Growth Path economic strategy in line with the National Development Plan. Stakeholders would be invited to a summit that would look at all aspects of the economy that might need to be adjusted. Agriculture and agro-processing, mining and beneficiation were important new avenues for economic development in South Africa. Green economy and jobs through the Green Economy Accord had already proceeded with geysers, and there was focus on manufacturing of green technologies and local production. The Department was focusing also on entrepreneurship of black women and youth, strengthening of programmes directed at youth employment and accords on provincial levels linked with the National Development Plan. The focus on township economic initiatives would be funded and the facilitation of long term plans would be put forward. There was improvement of the link between infrastructure and productive investment. The Department would have a conference with BRICS countries to examine and share expertise on capacity building in job creation. Some of the organisational work of the Department would be shifted to the Ministry of Small Business Development.

Ms Semphete Oosterwyk, Chief Financial Officer, EDD, indicated that there would be a reduction of the budget in some allocations. R885.8 million had been allocated to the 2015/16 financial year but a reduction of R204 million would be evident in the 2016/17 year, earmarked for the cessation of the Economic Competitiveness package.

Mr Kumaran Naidoo, Deputy Director-General, EDD, set out that the challenges were aligned to the work of other governmental departments in the country, as the Department must also look to other policy indicators. The Department gave guidance to the economic success of the country.

Discussion
Mr S Mthimunye (ANC, Mpumalanga) asked the Deputy Minister to inform the Committee on economic interventions in other countries, and what had been the diplomatic outcomes of that? In terms of job creation, he wondered if there was a conducive environment to promote this, especially in light of the expectations in the National Development Plan? He asked what steps were taken against corporates that were still committing "atrocities" in terms of their relations with workers in South Africa?

Mr M Khawula (IFP, KwaZulu Natal) asked about the relationship between job creation and loans offered for entrepreneurship. He referred to the figure of 1.8 million jobs created, and asked if this included temporary jobs or whether they were only permanent ones that were counted.

Mr E Makue (ANC, Gauteng) mentioned that the presentation was intensive and it was delivered very well. He noted that it was desired that the Department should stick to time frames but this would not be dealt with right away. He wondered if those structures such as the agencies who received money were reporting directly to Parliament, or rather to the Department.

Mr Makue asked about the appetite of the private sector for investment. He also wanted to know what the Department was doing about the metal resources in the country.

Mr B Nthebe (ANC, North West) commended the Department for bringing its senior officials to appear before the Committee. He commented on the recent project in Upington, under a Spanish company, for installation of solar panels, but said that there was misalignment on what needed to be done, there was no transparency in some of major infrastructural projects, and there was very little skills transfers, which was not good for the people of the area, and he felt that this should not be allowed. The growth of the export base must be in line with tariff rates,and he wondered if the Department was sufficiently clear that the tariffs were in the interests of domestic economic growth. He also was not happy about the budget, saying that the Administration programme should not be getting more than was allocated to dealing with the core mandate of the Department.

Dr Y Vawda (EFF, Mpumalanga) asked about the intention to gain and keep an unqualified audit report, and asked how exactly that was to be done consistently. He also asked what more would be done with the provinces to try to showcase the same model.

The Chairperson noted the high unemployment rate, above 30%, and said a vigorous strategy must be put in place to overcome that. South Africa was also showing figures below the global economic growth, said it was a nation that needed to work, and more dynamic approach was  needed. He questioned whether social services nets, taken as a whole, were not motivating people to work hard and be economically active.

Ms Oosterwyk noted that R204 million had been given to the Small Enterprise Finance Agency (SEFA) but that payment would cease and it would not be part of the baseline in this new financial year. That money would thus not be relocated, but would stop, as the SEFA was to be transferred to the Ministry of Small Business Development, following the correct protocols. She commented that the Department was not intending to grow expenditure nor "bulking up" money into the administration of the Department, and rather an evaluation would be done.

Mr Naidoo indicated that there had been increases in the tariffs on chicken and on metal scrap, and this may be agreed upon in September. South Africa would take its stand on most global economic issues in a way that would promote African integration and the level of competitiveness in the country. The Department would keep to its time frames in the future, and one of the goals of this financial year was to closely look at the progress of each objective. Commenting on the amount allocated to the Administration programme, he noted that it was compliance issues dealt with under this programme that accounted for most of the funding, and it was not correct to suggest that the Administration programme was not part of the core mandate of the EDD. The Minister was addressing the issue of the communities not being able to benefit from private sector development on their land, and the Ministry has pressurised corporates to initiate funds for skills development. He noted that the EDD would continue to focus on investing in Africa.

Deputy Minister Masuku responded that the focus of the National Development Plan was a priority and something on which the Department was engaging, as a priority, so that all negotiations would be done in line with the Plan. Agreements were constantly changing, and some concessions had been achieved but the balance of industries was a paramount consideration. The framework of economic negotiations was being handled better by the Department, and hence some positive outcomes were evident. The alignment between national and provincial departments was crucial in terms of strategic planning, as it was important to have a coherent national plan that had factored in provincial plans and goals in economic development.

Mr Makue mentioned the negative impact of the African Growth and Opportunities Act (AGOA) in Swaziland, and said this must not happen in South Africa. The United States of America had a different agenda on the negotiation table, and there must be serious engagement on this matter.

Deputy Minister Masuku responded that this was discussed in the previous meeting in this Committee. The Nine-Point Plan included moving with more speed, and focusing on the conversion of minerals into something more valuable through beneficiation. These matters needed to be attended to.

The Chairperson thanked and excused the Minister, Deputy Minister and delegation.

Other Committee Business
Adoption of Committee Reports

The Chairperson asked the Committee members to consider a Committee Report, but it was agreed that it would be presented again for adoption in the next meeting.

Minutes of previous meeting
Members adopted the Minutes, subject to the correction that there had been an Acting Chairperson duly elected by Members.

The meeting was adjourned.
 

Present

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