Economic Development Department 1st Quarter 2015/16 performance; Quarterly Labour Force Survey: Statistics South Africa briefing, with Minister present

Economic Development

01 September 2015
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The presentation revolved around two topics -- a briefing by the Economic Development Department (EDD) on its first quarter performance, and by Statistics SA on the Quarterly Labour Force Survey.

The Minister of Economic Development spoke about the economy. From October 2010 to June 2015, employment had risen from 13.6 million to 15.7 million, and youth employment had grown by 600 000, or 10.6%. Employment growth had been faster than gross domestic product (GDP) growth. From 1994 to 2008, the economy had grown at a faster rate than the preceding 15 years. The 2008/9 economic crisis had resulted in a loss of one million jobs in South Africa. A New Growth Path (NGP) plan had been developed to address structural constraints and create 11 million jobs by 2030.

Infrastructure was a priority jobs driver under the NGP, and the government was playing a major counter-cyclical role in jobs creation through the public sector. Construction was another avenue for growth. Construction jobs had risen by 283 000 from October 2010 to June 2015, or 25%. In June 2015, construction accounted for 9% of total employment.

There was a nine-point plant to address the economy focusing on agriculture, agro processing, manufacturing through the Industrial Policy Action Plan (IPAP), advanced beneficiation through local processing, unlocking the potential of the small, medium and micro enterprises (SMMEs), growing the oceans economy, resolving the energy challenge, reducing workplace conflict, and scaling up private sector investment and supporting infrastructure.

A steel industry panel had been set up to address the glut in commodity prices due to China’s slow down and its shift to a more consumer-led economy. African regional integration was another key area of focus. An Africa Day symposium had been held to tell the good story with youth, community, business, academics and the public attending. A Youth Employment Accord had been signed in 2013. 377 000 youths had been employed since this signing and R707 million had been disbursed to youth enterprises. Unblocking infrastructure projects had been targeted, with four environment impact assessments (EIAs) and one Air Emission Licence, affecting five infrastructure projects, being fast tracked. A Criminal Matters Amendment Bill had been developed, to make cable theft more punishable. The draft Investment Bill had been finalised and R23 billion had been set aside to support the growth of black industrialists.

The main discussion points revolved around the increasing public wage bill -- which was driving employment -- being unsustainable, the impact of the tourism visa issue, and the Skills Accord. The Minister responded that research and development was the way forward, and the Department was collaborating to stimulate private investment. On the visa regulations, there was an inter-ministerial group considering the matter, as tourism was a quick job generator, and was being looked at in context of security. On the Skills Accord, the EDD was looking at providing support to 12 colleges.

The Statistician General presented on the triple challenge of inequality, poverty and unemployment. Growth had declined to 1.5% in 2011 from 4.7% in 2002, and the poverty gap had decreased from 17% to 10.7% during the period 2000 to 2009. Inequality was still at 2.7%, and had remained unchanged from 2000 to 2011. There was still large-scale unemployment, with over 6 million people unemployed. Average household incomes were R103 204 for a family -- for a white family it was R365 134, black R60 613, coloured R112 172 and Indian/Asian R251 541. Colleges and training schools had been closed down, which had had a bad impact on employment. Employment was directly linked to education. Amongst the black 25-34 age group, the percentage of workers in skilled occupations had declined between 1994 and 2014. In the age bracket 15-34, 55% of the youths who were looking for jobs had an education below matric.

The discussion centred on whether the education system was doing enough in SA. The Statistician General responded that consumption must be focused on to drive the country’s economy. Education was the key, with science and mathematics needing to be prioritised. Support at the family level was vital in children’s education and needed to be addressed.

Meeting report

Presentation: Economic Development Department (EDD)

Mr Ebrahim Patel, Minister of Economic Development, presented on the annual performance plan (APP) of the EDD. A strategic plan had been presented to Parliament in March 2015, with three programmes supporting 23 key performance indicators (KPIs).

The programme focusing on the growth path and social dialogue had looked to support the green economy, local provincial initiatives, and job drivers, and to integrate with the New Growth Path (NGP) framework. From 1994 to 2008, the economy had grown at a faster rate than the preceding 15 years. The 2008/9 economic crisis had seen a loss of one million jobs in SA. The response from the government had been to have short-term interventions based on a social accord and develop an NGP to address structural constraints. The NGP had been adopted in October 2010, and the plan was to create 11 million jobs by 2030.

There had been limited jobs growth to date due to the global economic slowdown, energy shortages and labour issues. From October 2010 to June 2015, employment had risen from 13.6 million to 15.7 million people, and youth employment had risen by 600 000 or 10.6%. Employment growth had been faster than GDP growth. The overall trend had been a gain of two million jobs during this period. Jobs growth has varied per sector, though. Government played a counter-cyclical role, with the public sector accounting for one-third of all new jobs. Business services and construction accounted for another third. Typically, if the GDP grew at 1%, jobs growth would be 0.5% to 0.7%.

Infrastructure was a priority jobs driver under the NGP. This could be leveraged through construction, operations, inputs, maintenance and increasing the overall productivity of enterprises. Construction jobs had risen by 283 000 from October 2010 to June 2015, or 25% growth. In June 2015, construction accounted for 9% of total employment. Construction jobs in Limpopo had grown by 357 000 from October 2010 to June 2015 and in Mpumalanga it had grown by 209 000. Gauteng had accounted for the largest share of new employment (almost a third); Limpopo had had the highest growth rate at 38%. The Western Cape had had a 13% growth, or 267000 jobs, during this period.

South Africa has a predicted a gross domestic product (GDP) growth of around 2%. China, the USA and the Euro Zone had all gone from high growth rates in 2010 to low growth rates in 2015. The end of the commodity boom, with an average fall in price of over 50% in SA’s export prices from 2011, would make job creation difficult.

A nine-point plan announced in the State of the Nation Address (SONA) in February 2013 had covered agriculture, agro processing, manufacturing through the Industrial Policy Action Plan (IPAP), advanced beneficiation through local processing, unlocking the potential of small, medium and micro enterprises (SMMEs), growing the oceans economy, resolving the energy challenge, reducing workplace conflict, scaling up private sector investment and supporting infrastructure. This plan would be used to address growth.

The third KPI had covered amendments to the Competition Act. KPI 4 had covered the “War Room” development strategy.

China was now shifting to a consumer-led growth path, from an infrastructure-led growth path. Under the infrastructure-led path, SA had been able to sell a large amount of commodities and raw materials. SA now had a glut in steel and iron ore as a result of this change. Due to this glut, there had been steel industry interventions, including a panel of experts providing finance options, a competition probe into pricing, liaison with ministers, and a meeting with regulators.

The largest commercial soya plant in Africa had become operational in December 2013. The turnover from December 2013 to July 2015 was R1.2 billion, and 128 people had been employed. They were bringing black smallholder farmers into the mix.

KPI 4 had dealt with African regional integration. Research had been done on the impact of this integration. 244 000 jobs were sustained by exports to Africa, and one out of five bakkies made in Pretoria were sold into Africa. An Africa Day symposium had been held to tell the good story, with youth, community, business, academics and public attending.

KPI 5 had been work based on the Green Economy Accord. A fashion industry meeting had been held to look at reducing energy. A sock manufacturer had reduced energy consumption by R2.5 million, while growing at 53%.

KPI 7 had looked at work completed on provincial plans in the Free State, Mpumalanga and Limpopo.

KPI 8 had focused on bolstering industrial relations through dialogue with business, labour and the community. There had been an exchange of experiences on minimum wages with other countries, such as Brazil. A Youth Employment Accord had been signed in 2013. 377 000 youths had been employed since this signing. The Small Enterprise Finance Agency (SEFA) had disbursed R568 million to youth enterprises and the Industrial Development Corporation (IDC) had dispersed R149 million to these enterprises.

Programme 3 covered investment, competition and trade. KPI 9 looked at Cabinet reports on investment, with R54.8 billion spent on infrastructure by the first quarter. KPI 10 looked at unblocking infrastructure projects. These included four environmental Impact Assessments (EIAs) and one Air Emission Licence, affecting five infrastructure projects.

Cable theft cost the economy tremendously. The EDD had worked on legislation with various stakeholders, which had resulted in a Criminal Matters Amendment Bill. With this bill, there was a now a new offence covering damage to essential infrastructure, stricter provisions for bail, and minimum sentences for offences and safeguards for infrastructure. The value of the cost would include all the linked damage from cable theft.

KPI 13 looked at the integration between the Northern Cape and Saldanha to expand iron ore mining and industrial beneficiation.

With KPI 14, the EDD had helped with the launch of the new Quantum taxi for the taxi industry, partnering with Toyota. 720 jobs had been created. The EDD had worked alongside Prestige Clothing to look at localisation initiatives in clothing manufacturing. The social investment into looking after the employees had benefited productivity -- for example, cleaning areas to reduce illness.

KPI 15 dealt with facilitating investment and unblocking it. A United Arab Emirates (UAE) minister had been invited to SA for trade relations purposes. There had been the finalisation of the draft Investment Bill, discussions with individual foreign and domestic investors, unblocking of five investment initiatives and participation in the World Economic Forum. The EDD had helped Pectogenic, an electronics company, with an Industrial Development Corporation (IDC) loan, which had saved the company – and 203 jobs. The Department had helped the Lekwa Municipality with a payment plan to prevent electricity outages. It had helped to set up a black-owned noodle making company to supply Massmart, creating 45 jobs. It had helped Colibri, a towel making company, to get funding through Massmart, and had helped Ashton foods with load shedding exemption, to prevent job losses.

With KPI 16, the EDD had looked at 28 township enterprises, with a survey analysis. Most of these enterprises were not registered. The next step was to engage the Department of Trade and Industry (DTI) to strengthen programmes assisting these enterprises.

KPI 17 focused on IDC funding, with R1.1 billion funds approved and R1.6 billion disbursed. The IDC had set aside R23 billion to support the growth of black industrialists.

With KPI 23, the EDD had looked at the SASOL excessive pricing case.

SAs main imports were crude oil, petrol, medicine, cars, and electronic goods. Exports to China had grown tremendously over the last ten years. Exports had grown from US$3.4billion in 2005, to US$44.6 billion in 2014. This was mainly due to raw materials, though, which represented a huge challenge. SA was now exporting more to China than it was importing. Exports were in gold, iron ore, diamonds and platinum (85% of exports).

Discussion

Mr P Atkinson (DA) asked about the public sector wage bill. To prevent a credit risk rating slide, the public sector job driver would have to be cut back, but this had been the main driver of jobs. This was a major concern. What was the EDD doing to improve manufacturing in SA? What had been done to engage people in the mining industry to invest?

Mr S Tleane (ANC) spoke about energy, asking whether the private sector was doing enough to create jobs. What would the impact of Medupi be? What was the follow up on the African Symposium? What was the story with the Northern Cape and its lack of job creation?

Dr M Cardo (DA) asked what the role of the EDD was in relation to job losses in mining and tourism, failing state-owned enterprises, and red tape issues such as visa regulations. Was there a link between the National Planning Commission (NPC), the EDD and the Department of the Presidency to consolidate legislation and policy? What was the EDD doing to drive the National Skills Accord in education? What was happening with the steel industry tariffs?

Mr I Pikinini (ANC) said that the EDD needed to be transparent, to share what was being done by the government.

Ms C Matsimbi (ANC) asked why there had been a delay in the Competition Commission and the panel of steel experts. What were the terms of reference and when would they report back? What had been the development from the black industrialists’ fund under the IDC?

The Chairperson queried what was happening with regard to Vodacom acquiring Neotel. She requested a report on the investment spend of over R50 billion.

Ms D Rantho (ANC) said under KPI 10, concerning the involvement of provinces in unblocking infrastructure, there was a project in the Chris Hani area. What was the EDD’s involvement in this project and the Transnet strategy? How much was the EDD involved in African internship programmes? What was the EDD’s involvement with jobs at South African Airways?

Minister Patel responded that the sources of jobs growth from 2010 to 2015 were where the public sector played the major role. The aim was to crowd in private investment to stimulate agri-processing, mining and manufacturing. With commodity prices down, incentives in research and development (R&D) would be encouraged for fuel cell technology. Agri-processing remained the biggest opportunity for job creation. Structural issues in SA remained in terms of the beneficiation of minerals. Chinese fixed direct investment (FDI) had increased in SA in technology products. There was a rising consumer base in China, and this would present an opportunity for SA to export. SA needed to innovate and to spend more on R&D. SA had a low dose X-ray technology which could be exploited. Africa was another source for growth.

On the unblocking of the Chris Hani project, the Minister said he would get back to the Members. The Transnet strategy could be a game changer in providing clean energy, and the EDD was heavily involved. The internship programme was running well and was providing skills. On the labour front, the challenge was to build a deeper partnership. Did the parties work together to increase the resources, or fight and reduce the resources? The talks were about minimum wages to reduce inequality, and labour relations improvements.

Visa regulations were the focus of an inter-ministerial group, as tourism was a quick job generator and it was being looked at in the context of security. On policy, Cabinet was the main driver of this. The EDD was part of the Investment Bill. On the National Skills Accord, it was looking at improving the infrastructure, as the pressure on the classes was huge. EDD was considering assisting 12 colleges with support. It would respond in writing to the rest of the questions.

Presentation: Statistics SA

Mr Pali Lehohla, Statistician General (SG): Stats SA, presented on the triple challenge of inequality, poverty and unemployment. Growth had declined to 1.5% in 2011 from 4.7% in 2002, and the poverty gap had decreased from 17% to 10.7% during the period 2000 to 2009. Inequality was still at 2.7% and had remained unchanged from 2000 to 2011. However, the Gini-coefficient had gone from 0.67 to 0.65, from 2006 to 2011. Construction and finance had shown positive growth.

There was still large unemployment, with 3.6 million unemployed and 2.4 million discouraged workers, bringing a total of close to 6 million people. Youth unemployment was very high. Discouraged workers had increased from 4.4% to 7.8% for ages 25-34, from 2008 to 2015. There was an 8% unemployment rate for tertiary skilled persons. In SA, 60% of fathers say they are married, versus 31% of women who say they are married.

The average household incomes were R103 204 for a family -- for a white family it was R365 134, black R60 613, coloured R112 172 and Indian/Asian R251 541. Colleges and training schools had been closed down, which had had a bad impact on employment. Employment was directly linked to education. Amongst the black 25-34 age group, the percentage of workers in skilled occupations had declined between 1994 and 2014. In the age bracket 15-34, 55% of the youths who were looking for jobs had an education below matric.

Discussion

Dr Cardo asked the SG to speak about the skills interventions which SA needed to address youth unemployment.

Mr Tleane asked whether the current SA education system was seen by the SG as assisting SA to meet the skills deficit.

Ms Matsimbi asked what the statistics were, broken down by gender, for small business development.

The Chairperson asked about the unemployment rate per province, and what was happening in Limpopo.

Mr Lehohla responded that single mothers suffered the highest unemployment rate and their children did not take part in the work/education system. China had a one child policy which had backfired, and they were now looking at two children to support consumer-led growth. For the SA demographic, there was a declining population supporting an uneducated ageing population, which was a major problem. Consumption must be focused on, to drive SA.

The black community did not have the same support in addressing children’s education. White and Indian families had much more support structures at home. This needed to be addressed. Education was the key, with science and mathematics needing to be prioritised. Men crowded out women in small business development. For Limpopo, unemployment fluctuated due to a seasonal work force, which moved from Limpopo to Gauteng.

The meeting was adjourned.

 

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