Economic Development Department on its 2016/17 Annual Performance Plan, with Minister & Deputy

Meeting report

Opening Remarks

The Chairperson welcomed Deputy Minister, Mr Madala Masuku and the officials from the Department. She said the day was not going to be an easy one and would not go as had been anticipated. The meeting would break at 10.45 am for the plenary session, and would reconvene in the evening

The Deputy Minister read apologies from Minister Ebrahim Patel, who had to attend to some urgent tasks. He announced that the Acting Director General (DG) had suddenly become ill and had to have a heart operation. Mr Malcolm Simpson had been appointed to stand in for him. The Department had also appointed Mr Mohammed Vawda as Acting Deputy Director General (DDG) for Policy, Mr Duma Nkosi as Acting DDG for Social Dialogue, and Ms Tanya van Meelis as Chief Economist.  Mr Steve Hlahane was the Acting Chief Financial Officer (CFO), as the previous CFO had left.

The Chairperson wished the Acting DG a speedy recovery and hoped the Acting CFO had more information for the Committee.

Briefing by Department of Economic Development Departmen

Mr Masuku said the overall objective of the annual performance plan (APP) was to seek new and more effective ways of implementation, the smart use of resources to attain maximum value for money, enhanced coordination and partnerships within government, and a strong focus on real impacts and outcomes of the Department’s work and key performance indicators (KPIs). He referred to the 14 outcomes of the medium term strategic framework (MTSF), which included quality basic education, decent employment through inclusive growth, and an efficient, effective and development-oriented public service. He also mentioned some of the State of the Nation Address (SONA) Nine Point Plans, such as resolving the energy challenges, unlocking the potential of small, medium and micro enterprises (SMMEs), co-operatives, and township and rural enterprises, and encouraging private sector investment.

The first strategic objective was to provide guidance to the Department and technical and administrative support to the Ministry and the Department in order to achieve the other five strategic objectives. There were two KPIs – an unqualified audit and numerical targets to be set on customer satisfaction. In the current financial year, the KPI to be achieved in the first quarter was to respond to the Auditor General’s queries on audit 2015/16.

Strategic objective 2 was to coordinate job drivers and implement the New Growth Path (NGP) economic strategy in support of the National Development Plan (NDP). There were five KPIs for this objective, which included macro and micro economy policy and infrastructure integration and strategic support for jobs drivers of the NDP.

Strategic Objective 3 was to facilitate social dialogue and implementation of social accords. There was only one KPI for this objective.

Strategic objective 4 was to coordinate infrastructure development and strengthen its positive impact on the economy and citizens,for which there were six KPIs.

Strategic objective 5 was to promote investment, industrial funding and entrepreneurship for jobs and inclusive growth, with 5 KPIs which addressed matters such as investment initiatives facilitated, fast tracked or unblocked, and infrastructural connection with productive investment and growth.

Strategic objective 6 was also to promote investment, industrial funding and entrepreneurship for jobs and inclusive growth. There were four KPIs, which included the strengthening of economic regulators across the state and addressing the abuse of market power through competitive actions. He added that the situation that had happened in Dubai had been a tight one and had been handed over to the new Acting DG to handle in the next two to three months.

The Department’s budget for 2016/17 was:

Programme 1: Administration - R79.2 million;

Programme 2: Growth Path and Social Dialogue - R36 million;

Programme 3: Investment Competition and Trade - R559.4 million

Discussion

The Chairperson asked the Acting DG for further clarity on the presentation. She said the Deputy Minister, as a politician and overseer would generally speak on the overall picture, while the Acting DG, as an administrator, would usually speak on the specifics.

The Acting DG Simpson replied that he had been only two days in the job, and he would learn along the way.

The Chairperson remarked that there was still no signed organogram and this made it difficult to follow up on reports forwarded and presented to the Committee. What was happening on the staff establishment in order to understand who was who in the Department? The task ahead was huge and it could not be done without the necessary body.

Ms D Rantho (ANC) said the presentation was quite interesting and showed that there was work that the Department wanted to do. On the 170 outcomes for 2016/17 and 14 outcomes of the MTSF, she said it was not the EDD that usually implemented the outcomes. For instance, the first outcome was quality basic education. This meant that the Department of Education should get involved. What was the plan towards achieving the objectives of the Department, and how would it link up with other Departments in order to achieve them?  In the last presentation, the Minister had indicated that the Department had had a summit to link the nine-point plan with all the relevant stakeholders. Had work been done in this regard? The stakeholders here were dealing with the damage of 354 years that had been inflicted on the country. What was the move towards achieving this? In unlocking the potential of SMMEs, co-ops and township and rural enterprises, were they creating jobs and changing the lives of the people? She questioned if there were departmental visits to EDD’s local offices so that it could be aware of what was happening.

Mr S Tleane (ANC) appreciated the constructive presentation. The key issue was capacity -- did the EDD have the capacity to carry out the tasks outlined in the KPIs, such as going into specific provinces with specific programmes? He questioned why, on the KPI 1 for the second quarter, the Department was not confident to say it would completely eradicate the repeat findings of the Auditor General, but had rather said it would reduce the numbers. What reassurance could be given that the KPIs could be properly implemented?

Ms C Matsimbi (ANC) said she hoped the system and capacity was in place to implement the KPIs. The issue of vacant positions should be addressed. On KPI 4 -- job drivers (agro-processing) -- she asked if the EDD was aligning with the Department of Water and Sanitation to address the challenges of drought in the country.

Dr J Cardo (DA) said that during the presentation on the budget just before the recess, it had been said that 45% of the targets for outcome 4, and 46% for outcome 5, had been achieved. What kind of interaction had there been had with the Parliamentary Budget Office (PBO), and was the EDD in a position to confirm or negate the findings of the PBO? Where did the EDD’s reports on Strategic Infrastructure Projects (SIPs) go to? In the weekend press, it had been reported that there was a meeting with various municipalities that had been affected by the collusion of contractors for the 2010 FIFA World Cup, and that the Presidential Infrastructure Coordinating Council (PICC) would negotiate an overall settlement for the affected municipalities. Where did the EDD stand on this, as the Minister and the EDD had been very supportive, and the claims would expire in July this year?  Slide 37 had talked about envisaged changes to the Competition Act -- what were those changes? What was the rationale to increase assessment of the public interest clause? The 15-day deadline shift for SAB Miller and AB Inbev had been implemented. Why had today’s deadline not been met?

The Chairperson replied that with regard to the PICC report, she had explained at a previous meeting that there was a process. The House Chairperson on Committees was still busy with the report. The Infrastructure Act had been processed by the Portfolio Committee on Economic Development. In terms of the activities, other Committees were involved. The procedure was still in the Parliamentary process. That question was therefore not subject to a reply from the EDD.

The Chairperson questioned the EDD on the impact of localisation. The President had acknowledged that it was not easy to achieve a 5% growth. The Department, through the NGP, had taken a decision on the various drivers that would help in growing the economy. The intervention and coordination tasks allowed one to see things before they happened, through research and analysis. The EDD had presented Key Performance Indicators (KPIs). The report had given a general picture, but the process had not been given and this made it difficult to hold the Department accountable. There was a need to give a clear approach on the issues of development. There had been a lot of criticism that the KPIs of the EDD were not clear, as they were not tangible. The Committee wanted improvement. The Department was one of those that South Africa depended on to unravel its challenges, and if the EDD was not equipped to face up to them, it would become a very big challenge to the country indeed. It had become very difficult to pin the Department down to its targets.

Mr I Pikinini (ANC) said the Committee wanted to see the effect and progress made so far on Operation Phakisa. During the apartheid era, there had been drives in support of the SMMEs and co-ops which had been successful. There were immense drives taking place now, but they were not assisting as much as in the past.

The Chairperson expressed concern that the targets in Programme 2 were quite vague. There was no capacity at the moment unless, as promised by the Minister, the Department used consultants and seconded staff. The issue of capacity was very serious, and not much could be expected from the quarter 1 report as a result of that. She warned that unless the issue was addressed, the impact on the work would be felt.

The Committee would give the Deputy Minister time so that he could respond after the plenary session. It would also go into the financials at that time. 

The meeting adjourned for lunch.

Discussion (continued)

The Chairperson, at this stage, welcomed the Minister and noted that some responses still needed to be heard to questions previously posed.

Minister Ebrahim Patel responded to the question of Mr Cardo about companies which were found to be involved in construction cartels and where the Department stood on the matter in relation to civil claims. The Competition Commission had taken on the breaches of the Competition Act and had imposed fines of some R1.4 billion. The state, the public sector, had also lost money as a result of collusive behaviour by these firms and there were discussions with these firms on a possible settlement so it was therefore not appropriate to go into the detail at this stage. With questions relating to various aspects of the Competition Act posed by Mr Cardo, as indicated in the presentation this morning, the Department could be coming into consultation with the competition authorities, including the judiciary, and this may affect specific proposals tabled so the Member was urged to give the Department the opportunity to complete the discussions. There was also a question about the increase in the number of public interest cases and the potential for delay in competition cases – the Competition Act had two broad sets of issues that it required before a merger or acquisition was either approved or rejected. The first was the impact of that merger on competition and if it would reduce the number of participants in the market or if it reduced choice to consumers – this was called classic standard competition policy. The second part of the Act was that it introduced tests on competition which included public interest like jobs, small business development, Black Economic Empowerment and industrialisation. For a number of years, competition authorities tended to focus on standard competition issues but over the past five years, it had become important to ensure that competition evaluation dealt both with public interest matters and with standard competition issues – this was quite fundamental from a legal point of view. Over and above that, in a country with such huge levels of unemployment and inequality, it was vital that government intervened in these matters to ensure jobs were not lost unnecessarily, that small business was not squeezed out of the market, that barriers to entry were not created which meant black South Africans could not get in and, above all, that levels of industrialisation were not reduced in the country. Government made no apologies for this approach and were quite proud that this was focused on – if it meant that parties and companies to the competition process had to provide information, formal hearings were needed, experts appointed to give evidence in matters, then so be it. There would be an increased focus on public interest issues. The Walmart issue was taken right up to the Competition Appeal Court (CAC) – the CAC recognised the consideration of public interest was as vital as and as important as considering whether to approve or reject a transaction. This also meant the law Parliament passed was being used to the full. He suggested that the matter of AB InBev not be discussed at this stage as it sat before the competition authorities and the Commission requested additional time to complete its work -a half-baked position could not be put forward and the requisite consideration was needed. 

The Chairperson explained the work of the PBO in relation to a question posed by Mr Cardo – Committees could ask the Office to provide briefings on the work of departments. The Committee had done so and there were areas of compliance and areas which the Committee felt still needed to be beefed up. The matter should be left at that and in terms of the law - there was nothing that forced interaction between the Department and the PBO.

Deputy Minister Masuku answered a question asked by Ms Rantho relating to how the Department intended to achieve its targets when the actual work was implemented by other departments. He indicated the work of the Department involved coordination. Areas were identified and focused on and the work was done collectively with the other department. The Department also worked within a cluster where there was collective work for the achievement of targets. On the question of the nine-point plan, the plan was consolidation of medium term focus on the areas that required acceleration in the National Growth Path. 

The Chairperson asked how initiatives were identified or what kind of projects the Department would be looking at. It was important to be specific and not vague when it came to targets and indicators.

Deputy Minister Masuku responded that when problems were picked up in some areas, other areas were checked as well.

Minister Patel added  that this year, the Department would not go to an area where there was nothing happening and do a theoretical study – what the Department would do was look at the IDC and money spent by it so that some of it began to transform township economies and enterprises in townships. One of the Department's staff members would sit down with the IDC to go through a list of all township enterprises that the IDC was involved in. From that list, the Ministry might decide on the enterprises to be monitored, studied and looked at. From about six or seven studies, perhaps the one project where it was found the IDC dropped the ball, the Department could guide them. It could also be found that the IDC did very well and that project could become a case study that others could emulate. With the Department getting involved, the stand-out examples could then be seen. Coming to the questions of the Chairperson on smart indicators for better accountability, because the Department tried to cover projects in many different parts of the country, it may be a bit harder but perhaps something like the township economies, since it had been running for three years now, could be made a bit more concrete next year in terms of an indicator – this was not a definite but it may be possible. An example of where the Department succeeded was with the jobs drivers – EDD had ten jobs drivers at the moment and in the past financial year, two were identified where work would commence on them. Before that the focus was on infrastructure while last year focus was given to mining and beneficiation and agriculture and agro-processing. In the mining driver, the Department was fortunate enough to know that a mining phakisa would be done where a lot of work was done with the mining sector, Chamber of Mines, black mining companies and organised labour. In agriculture, EDD worked with the Department of Agriculture, Forestry and Fisheries (DAFF) and the IDC on agro-processing so all this work was pulled together. While this was being done through the year, there was a big challenge with tourism with visa regulations and effort had to be put into how to get tourism going again but this was not in the Department's APP. This year, a bigger group will be drawn from – out of ten job drivers, six were chosen and two would be brought to a conclusion during the course of the year. This would not just be attending of meetings but completing a product so that there was substantial work to show for the end of the year. With some there could be more precision in terms of indicators while for others a little more flexibility was needed because they were a work in progress.  Looking at the products produced last year, targets were met by and large – this year, he expected a significant improvement in the quality and the community and social impact. This meant the standard set would be higher to put a tougher test before the Department before projects or products were approved. With the Department of Human Settlements for example, the Department knew before hand how many houses were to be built and which communities were most in need but for a coordinating Department like EDD, each day was different but more could be done to move toward meeting some indications.

At this point the Minister had to excuse himself.

Deputy Minister Masuku then responded to the question posed by Ms Rantho on unlocking the SMMEs and how the entrepreneurs were assisted to realise their initiatives. He already reported on the monitoring of township economies. With identifying initiatives, the Department interacted with provinces and local authorities to establish who their stakeholders were and discussions were then facilitated between stakeholders and other players. Stakeholders came from big and small business and others who were involved. In this way, potential and aspirations were linked with the work government was doing. A particular way of working on a monthly basis was put in place by the DG. 

Ms Rantho noted a decision was taken to reduce the number of programmes – will the new organogram taking into cognisance these issues? She sought more explanation on how these changes would be factored in. Was there a possibility that people were being overworked?

A Department Official replied that staff had raised their frustration – [inaudible]

Financial Information

A Department official then took the Committee through the Department's MTEF allocation – the EDD's total allocation over the MTEF period amounted to R2.1 billion – this consisted of Departmental operations as well as transfers to entities over the period. Allocations were also outlined for the programmes of the Department namely, Administration (R79.2 million), Growth Path and Social Dialogue (R36 million), Investment, Competition and Trade (R30.7 million excluding transfers to entities – transfers amounted to R528.9 million).

The Committee was then taken through economic classifications where compensation of employees amounted to R93.9 million, goods and services amounted to R48.9 million, transfers and subsidies to entities amounted to R428.4 million and payments of capital assets amounted to R2.9 million which amounted to a total Departmental budget of R674.7 million (excluding transfers it came to R145.9 million).

Discussion

The Chairperson was concerned that analysis showed that a lot of money was being hidden in goods and services with the result of dumping some funds to the entities – she hoped this would not happen this financial year.

Ms Rantho welcomed the financial report but was concerned about what was raised earlier about the organogram of the Department which the Committee did not have. Would the budget be enough to cover the permanent posts planned?

A Department official replied that Treasury made several budget cuts to departments one of which were to compensation of employees – there was a capping of compensation of employees for all departments for all funded posts.

The Chairperson hoped that these challenges would be overcome as the lead Department in job drivers – it was expected that EDD led by example to ensure that impediments were unblocked to create jobs and deal with issues of poverty. It might be time for some introspection on these issues.

The Committee meeting tomorrow would begin at 09h00 and it would be another long session.

The meeting was adjourned.