Economic Development Budgetary Review and Recommendations Report

Economic Development

24 October 2017
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

2017 Budget Review & Recommendations Reports – BRRR

The Portfolio Committee on Economic Development deliberated on the contents of the Department of Economic Development’s Budgetary Review and Recommendations Report, making recommendations and changes to the draft report. The meeting was conducted on a page-by-page process, as it was assumed that Committee Members had received the draft in due time and had taken pains to read through and note their respective recommendations.

The atmosphere of the meeting was one of familiarity and indicated the strong working relationship between the Members. Issues consisted mostly of minor grammatical and sentence structure changes. Some serious concerns were raised on the Industrial Development Corporation’s spending patterns, specifically the financially troubled company it had been funding. There were also some issues around the time frames for the appointment of senior management positions within the Competition Tribunal and the tabling of the second report.

Amendments were accepted and the draft report was adopted.

Meeting report

Draft Economic Development Budgetary Review and Recommendations Report

The Chairperson thanked Mr P Atkinson (DA) for attending the meeting to form a quorum. As it was assumed that Members had read over the draft report, the order of the day was to officially table the draft report for discussion and adoption. She requested that the Committee commence with considering page one of the draft report.

Mr S Tleane (ANC) referred to the first sentence of the fourth line of the introduction and suggested that technical changes be made to the structure of the sentence. He was interrupted by the arrival of a new Member of the Committee, Ms A Mfulo (ANC).

The Chairperson welcomed Ms Mfulo to the Committee. She was an alternate Member to the Committee together with Ms C Ncube-Ndaba (ANC). She noted that the Committee had a strong working relationship despite differences in ideologies and approaches, and that is was hoped that the addition of Ms Mfulo would contribute positively to this.

Mr Tleane proceeded to propose technical changes to the structure of the first sentence of the fourth line of the introduction.

The Chairperson accepted the proposed amendment and further proposed to add that the financial statements mentioned in the sentence were audited financial statements. It was emphasised that these amendments were simply modifications and did not change the essence of the sentence. The Committee agreed to the statement and accepted the amendments.

Mr Tleane referred to the following paragraph, which stated that the report would include the opinion of the Auditor-General on the performance of the Department of Economic Development and its entities. The first amendment proposed was that “such as” be replaced by “namely”, as the latter implied a closed list of entities and assures the readers of the report that none had been omitted.

The Chairperson agreed to this suggestion.

Still on the same paragraph, Mr Tleane proposed that after the sentence discussing the role of the Auditor-General for the Department of Economic Development and its entities, a sentence stating that the Auditor-General would conclude by providing recommendations for the Department and its entities for the coming financial year. 

The Chairperson reminded the Committee that the Industrial Development Corporation (IDC) was not audited by the Auditor-General (AG), but by private auditing firms. It was suggested that this be differentiated in the report so as not to cause further confusion.

Ms Nwabisa Mbelekane, Committee Researcher, confirmed that the IDC was indeed audited by KPMG and SizweNtsalubaGobodo, and that this was mentioned at a later section of the report.

The Chairperson suggested that this point be mentioned in the beginning of the report and asked if the Committee agreed on that.

The Committee agreed, and Ms Mbelekane made the necessary changes to the draft.  

The Chairperson concluded the recommendations and changes on page 1 and proposed to move to the next section on the economic environment.

Mr Atkinson, referring to point c) on page 11, asked for clarification on the meaning of the term “toll treat” and whether it was a generally accepted term.

Ms Mbelekane confirmed that the term referred to an industrial treatment process of steel sheets and that it was indeed a generally accepted term.

The Chairperson asked whether the Committee was comfortable with that term in the draft, to which the Committee was. The committee continued moved to page 12.

Mr Tleane proposed technical changes in the second line of the first paragraph of the report, which were accepted by the Chairperson.

The Chairperson asked for clarification around a figure on page 14 regarding the compensation of employees. In particular, there was confusion as to what the figure of “92% of under-expenditure” referred to.

Ms Mbelekane explained that the figure of 92% represented the portion of the total amount of under-expenditure that belonged to the compensation of employees.

Ms Mfulo asked for further clarification on this point. It was not clear in the draft what portion of total expenditure under-expenditure represented. She proposed that it be made explicit that 10% represented under-expenditure, and of that 10%, 92% was attributed to compensation of employees.

Mr Tleane suggested that the use of percentages to represent under-expenditure be removed. It would be suitable to state that R8.9 million represents the under-expenditure of the budget, as this would cause less confusion. The Committee agreed that this should be amended in the draft.

Mr Atkinson pointed out that on the table on page 15, referring to the transfers to entities, the IDC’s expenditure exceeded the amount transferred. He asked for clarification on this point.

The Chairperson responded that it was unfortunate that no representative from the Competition Commission was present to explain the point, however the auditor’s notes made it quite clear that there was overspending in the IDC. This had been disclosed and it was highlighted that the IDC was the only entity that had overspent in a later section of the draft report.

Moving to the recommendations section of the report, The Chairperson suggested that the Committee go through the recommendations one-by-one. Referring to the recommendation on the expediting of senior management positions, it was stated that the position of Director-General should be filled by the end of the current financial year. She proposed that this should be changed to the calendar year rather, to account for the fact that the position had already been advertised and would need to be deliberated on in Parliament.

Mr I Pikinini (ANC) supported this suggestion.

Referring to point d) under the recommendations, Ms Mbelekane emphasised the need to include that market enquiries under discussion are conducted by the Competition Authorities. It was possible that other entities could conduct these, however for the purposes of this report it must be made clear that it was carried out by the Competition Authorities.

Mr Atkinson made a recommendation to restructure the sentence in question so that it emphasised the importance of the issue around funded mandates.

The Chairperson agreed with his recommendation.

Point e) of the recommendations referred to the conflict of interest cases in the Department. The Chairperson asked for the point to be qualified further.

Ms Mbelekane responded by agreeing that it had to be made clear that the conflict of interest cases was in relation to officials disclosing their financial interests. She made the relevant changes to the document.

Point h) of the recommendations discussed the need for the Competition Tribunal to gain the freedom to employ more staff to assist in its current backlog. The Chairperson highlighted that in its current form, the point suggested that it was the responsibility of the Department to make the necessary submissions to the Minister that would enable this. She proposed a change in the wording, such that it was clear that the responsibility was that of the Competition Tribunal.

Section 12.1.3.d) on page 24 discussed the financial troubles of newly established company United Industrial Cable, which was 90% black-owned. The Chairperson noted that the company’s financial troubles were in fact due to inefficient and irregular spending patterns; not due to a lack of skills as the point suggested. She recommended that this be corrected accordingly.

Furthermore, both the IDC and the Department were requested to assist. The Chairperson asked that this be included in the point.

The Chairperson suggested that the tabling of the second report be conducted earlier than the suggested October 2018 to allow time for the various recommendations to be considered and possibly implemented.

Ms C Matsimbi (ANC) supported this statement and recommended that the second report be tabled during the second quarter of the 2018/2019 financial year. She also asked for clarification of the word “technical”.

Mr Tleane proposed that the word be replaced with the term “financial support” in line with the challenges face by the company.

The Chairperson agreed with Mr Tleane and requested that Ms Mbelekane make the necessary changes.

On the issue of the IDC’s losses in its investment in United Industrial Cables, the Chairperson asked for assistance and guidance as to how to manage the matter.

Mr Tleane suggested that the responsibility should be on the IDC to ensure that all its lost investments are recouped.

The Chairperson remarked that the repayment of debts and loans was an issue that seemed to be well-handled by the IDC. She noted that it was an issue that arose again, noting that at least it occurred before the Committee officially concluded its work. She asked Mr Tleane to put his recommendation in writing for the drafters of the report.

Mr Atkinson recommended that the language used on the page 29 of the report be clarified, as it was not clear in its current form.

The findings of the Competition Tribunal were discussed on pages 30 and 31. Mr Tleane asked for the removal of unnecessary information pertaining to the activities of the company.

The Chairperson agreed to this.

Pertaining to the section of the draft on Itec on page 37, Mr Tleane noted that the emphasis of the paragraph should be on the office space concerns, specifically that the space remains small while a fee increment has been implemented.

Ms Mfulo agreed and further suggested that the paragraphs should be divided in two to deal with the fee increment and office space concerns separately.

The Chairperson agreed to these recommendations.

On the point of the South African Customs Union (SACU), The Chairperson suggested that it was obvious that the region was not assisting in financing the union. She suggested the omission of this politically sensitive point.

Mr Tleane proceeded to make minor grammatical changes in the last paragraph of the report, which were accepted by the Committee.

The Chairperson concluded the meeting, stating that since amendments had been affected, the report needed to be adopted. She proposed to follow the conventional page-by-page perusal of the document, but added that if the committee was satisfied with the report as is, this would not need to be carried out.

The report was adopted.

The Chairperson thanked the Committee for its commitment and hard work. She mentioned the reports to be deliberated at the next meetings, which were proposed to be held on the following Tuesday and Friday.

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