The Portfolio Committee on Economic Development was briefed by the International Trade Administration Commission (ITAC) and the Department of Economic Development (EDD) on their Annual Performance Plans (APPs) for the 2018/19 financial year, in the presence of the Minister. ITAC presented its APP to the Committee wherein clarity was provided on their Baseline/Annual targets and performance indicators as demanded by the Committee in the previous meeting. In terms of their annual targets, ITAC stated that Phase 1 of the anti-dumping investigation should be finalised within 6 months of initiation in 80% of the cases investigated while in Phase 2 investigation should be completed within 10 months of initiation in 80% of the cases investigated. During the 2014 MTEF period, ITAC’s baseline budget for 2015/16 and 2016/17 financial years was reduced by R4.8 million and R7.3 million respectively, resulting in a total reduction of R12.1 million. Again another reduction to the tune of R8.3 million was expected during the 2018 MTEF period.
Members asked about progress made on the creation of rebates for downstream manufacturers of primary steel that was not locally manufactured while others asked of the steps being taken to prevent dumping by other countries in South Africa. Members were also concerned about South Africa importing chicken and also asked some questions around tariffs.
The Department then presented its 2018/19 APP to the Committee with an opening remarks provided by the Minister. The Minister thanked the Committee for the opportunity to present the strategic and operational elements of the Department’s performance. He further said this presentation was not completed the last time they were in parliament because of the lack of time and that has given the Department the time to provide more information in the this presentation. He said that the Department’s appropriated total budget for the 2018/19 financial year amounted to R1.1 billion out of which the budget for the direct utilisation for the Department’s operations was R139.7 million while transfers to its entities amounted to R932.9 million.
Members were concerned with the number of entities the department has oversight duties over and wondered if the allocations to these entities were enough for them carry out this function. Others asked about the promotion of black contractors and if such help are centred in the form of skills training or actually funding their operations.
The Chairperson welcomed all present and reminded the Members that this presentation was an extension of a process started before the last parliamentary recess. The last time the Committee sent ITAC to redo the document submitted to the Committee and their diligence was appreciated and it showed the respect ITAC has for this Committee.
In his presentation, Mr Meluleki Nzimande, Chief Commissioner, in his presentation said according to National Treasury‘s framework for Strategic Plans and Annual Performance Plans (APPs), the baseline target was the level of performance recorded in the year prior to the planning period. At the time of planning, the latest audited figures of 2016/17 were used.
The number of investigations conducted by ITAC in any financial year was determined by the number of properly documented applications received by ITAC from industry in that year. ITAC cannot determine this number beforehand. For this reason, the annual target was set as a proportion of the number of investigation actually conducted during the year under consideration. As an example, the target of 80% meant that for every 10 investigations conducted in that financial year, eight should be completed within the prescribed time.
For the same reason mentioned above, performance indicators have been defined in terms of the turnaround times. That is, the “speed of execution and finalisation of a particular investigation”
New anti-dumping investigations are conducted in two phases:
-Phase 1 involved (amongst other things) consideration of the anti-dumping application and compliant responses of those interested parties which responded timeously to ITAC. One of the significant decisions made in Phase 1 was whether or not to grant the Southern African Customs union (SACU) industry interim relief in the form of provisional anti-dumping measures whilst Phase 2 of the investigation continued. The ITA Act referred to such decision as the “preliminary determination”.
-Phase 2 involved consideration of compliant responses of those interested parties which responded timeously to ITAC during Phase 1 and 2 of the investigation. Phase 2 culminated in a recommendation to the Minister of Trade and Industry as to whether or not to grant the SACU industry final relief in the form of final or “definitive” anti-dumping measures. The ITAC Act referred to such decision as the “final determination”.
No preliminary determinations were made within six months of initiation. No final determinations were made within 10 months of initiation. No new investigations were initiated during the 2016/17 financial year. Accordingly, there was nothing to report under this indicator for the 2016/2017 financial year.
80% of preliminary determination made within six months of initiation while 80% of final determinations within 10 months of initiation and finally 80% of properly documented application accepted, initiated within 2 months.
The following targets should be reached: (i) Phase 1 of the anti-dumping investigation should be finalised within six months of initiation in 80% of the cases investigated; (ii) Phase 2 of the anti-dumping investigation should be completed within 10 months of initiation in 80% of the cases investigated. Initiate an investigation in the government gazette within two months after an application was deemed to be properly documented for 80% of those applications.
ITAC has a total of 131 funded positions within its establishment. This number excluded 14 contract and internship positions categorised as follows:
PPS Contractors: x 8 (2 x Administrators; 2 x Assistant Managers; 4 x Senior Investigators)
– Internal Audit Contractors: x 3 (2 Administrators; 1 Assistant Managers)
– Finance x 1 (Administrator)
– HR x 1 (Administrator)
– Trade Remedies x 1 (Administrator)
The staff complement as at March 2018 was 119 with 12 vacant positions, excluding contract positions. Of the 119 employees, 66 are in core business; and 50 in support services. There are 3 executive management positions.
The following is the break down in terms of the employee profile:
– Gender: Males (43%); and Females (57%). SMS (13): 6 Females; and 7 Males.
– Race: African (86%); Whites (8%); Coloured (2%); and Indians (5%)
ITAC’s grant from National Treasury over the past 3 years increased (on average) by 4.7% annually, while employee related costs increased (on average) by 7% annually as per the previous multi-year salary adjustment agreement; rental costs increased by 56% in 2015/16; and 10% annually since then.
During the 2014 Medium term Expenditure Framework (MTEF) period, ITAC’s baseline budget for 2015/16 and 2016/17 financial years was reduced by R4.8 million and R7.3 million respectively, resulting in a total reduction of R12.1 million. The shortfall caused by that reduction was financed from ITAC’s accumulated surpluses, which are now depleted. ITAC’s budget allocation was further reduced during the 2018 MTEF period by R8.3 million. The total budget for the 2018/19 financial year amounted to R104 million.
For the 2018/19 financial year, employee related costs accounted for 90% of the total budget and ITAC anticipates a shortfall of R3.3 million. Over the past years, other operating expenditure such as office rent and legal fees have increased significantly. The following are the priority projects for the 2018/19 financial year:
- ITA Amendment Bill;
- Finalising the Review of AD Regulations;
- Strengthening Reciprocal Commitments; and
- Impact Assessments.
After the presentation, Mr Nzimande then dealt with the questions asked in the last session.
Dr M Cardo (DA) previously asked for an update on Price Performance Systems (PPS).
Mr Nzimande replied that guidelines in respect of PPS was first published in 2015 taking into account legal advice and public comments that was received and the document was sent to the Minister in August 2016. ITAC was still awaiting a feedback from the Minister. This question should also be put to the Department and the report will have to be published later when received.
Mr I Pikinini (ANC) had asked how ITAC was progressing on the creation of rebates for downstream manufacturers of primary steel that was not locally manufactured.
To that Mr Nzimande responded by saying that the interventions made with regards to steel were by design meant to protect the primary steel sector in South Africa. The thinking was that this was for the products that are not made here; rebates will be used so as not to open up the market and expose markets to damaging effects. Some of these rebates have been implemented; some were approved in the last Commission meeting while two are in the process of investigation but a lot work has already been done on it.
There was another question on how dumping could be prevented.
In response Mr Nzimande said ITAC has an anti-dumping instrument that tried to make imports expensive into SA market to the extent that it was priced at par in the country of origin of the product. If for instance a particular good was sold for R1 in China, when exported to South Africa it must also be sold to the local industry at R1. If they were to sell it for 10 cents, it then amounted to dumping because South African manufacturers cannot match that price. Interventions by ITAC are to impose provisional measures as quickly as possible after an investigation has been initiated. If there was a case then an interim relief was given which lasted for nine months. A final relief has to be given later if ITAC was satisfied with all the measures which could make the anti-dumping duties permanent or final. Anti-dumping duties remained in place for five years in terms of South African laws and its commitments to the World Trade Organisation (WTO). It also might be renewed for a further five years if the industry brought irrefutable proof that it might be harmed if not renewed.
The Chairperson asked what measures are in place to ensure that goods confiscated at border posts are not circulated in the country.
Mr Dumisani Mbambo, Deputy Chief Commissioner, ITAC, responded by saying that goods can be confiscated by SARS at ports of entry only when they are illegal, e.g. counterfeit goods. If for instance they are Nike sneakers, they will have to call someone from Nike to ascertain its genuineness. However, ITAC was not at the ports of entry, that was the job of SARS. Nevertheless, ITAC has an enforcement department that focused on this kind of infringements and this unit could as well request SARS to close any gaps identified. Coordination with other government agencies was an ongoing process at ITAC.
Ms K Hlonyana (EFF) had asked why ITAC was waiting for the Minister’s response in the trade remedy investigations. This was in relation to safeguard duties in relation to the import of chickens from the European Union (EU).
Mr Nzimande tackled this question by saying that this investigation was a unique one because it was conducted under the economic partnership agreement between the EU and South Africa. The parameters that govern government action are drawn from this bilateral agreement. This agreement provided for safeguard measures and ensured that South Africa first informed other SACU members whenever it sought to impose tariffs on any product. Whenever the Minister makes a decision on safeguard duties, he also has to consult his fellow SACU members before duties can be imposed. The Minister of Trade and Industry was presently consulting. The poultry industry was presently having a reprieve because of the avian flu affecting that industry in Germany and the Netherlands. As a result, SA put in measures to ban poultry from those countries. The lower level of imports from those countries could be a factor in the slow response from the Minister.
Mr S Tleane (ANC) had asked why the low import duties on maize, sugar and wheat.
To that Mr Nzimande said that the nature of tariffs on these three products was based on a formula, because South African producers of these commodities had to compete with those imported. If for instance the maize price dropped significantly in the international market; South Africa will be forced to also drop its price in South Africa. Sometimes that is good for the consumer but can be bad for the farmers and millers. What is then put in place is an international reference price for maize. When the international market price was high, the duty goes to zero but when it goes down to dangerous levels, duties are increased to protect SA producers from those imports. As a result the duties will always vary.
Ms C Matsimbi (ANC) asked why SA was importing chickens from abroad. Is there anything wrong with SA chickens?
Mr Nzimande replied that nothing was wrong with South Africa’s chickens, because the standard the industry observed in producing chickens here was one of the best; South African monitoring was better than the US. The two reasons why SA imported chickens are; firstly chicken was imported on a dump basis. The nature of the chicken consumed here was brown meat which was chicken with bones (thighs and wings) unlike in Europe where they mostly consumed breasts and boneless. Europe sold those bony parts in markets like South Africa at an extremely low price. ITAC then leveled the playing field for the local producers.
Ms A Mfulo (ANC) then asked why do SA have to take those. Is it because our people are hungry? Or they will eat anything given to them?
Mr Nzimande said chicken is the cheapest form of protein in SA especially amongst the lowest income segment of the society. Secondly, SA cannot ban imports because it was part of the agreements signed by the country under the WTO that it will allow free trade subject to when imports became harmful to the domestic producers of competing products.
The Chairperson was concerned on tariffs on emerging farmers and if this was allowed to continue, within a few years to come, no emerging small scale farmer would be found in the sugar industry.
Mr Nzimande replied that it was important that some form of relief be given to the sugar industry. Duty on imported sugar will soon be raised from 42% to 55%.
Economic Development Department (EDD)
Opening remarks by the Minister
The Minister of Economic Development thanked the Committee for the invitation and reminded Members that the purpose of the meeting was to complete the APP presentation wherein the strategic and operational elements of the Department’s performance will be provided. The presentation was not previously completed because of time and that had given the Department the opportunity to provide more details in the presentation. He went further to breakdown the allocations in detail. He stated that EDD has three programmes which are Administration- Economic Classification, Growth Path and Social Dialogue and Investment, Competition and Trade. He further said that EDD was established in 2009 with the core mandate of identifying priorities for job creation, inclusive growth and industrialisation and it supported the alignment of the EDD’s appropriated total budget for the 2018/19 financial year which amounts to R1.1 billion. Appropriated budget for direct utilisation for EDD’s operations was R139.7 million while transfers to its entities amounted to R932.9 million.
The Director-General, EDD, went further to present the rest of the APP highlighting the entities and their % of budget allocation, i.e. Competition Commission (26%),Tirisano Fund (via IDC) 23%, SEFA (21%), EDD (13%), ITAC (10%), Competition Tribunal (3%), Steel Development Fund (via IDC) 3%, and PICC (via IDC) 1%.
The Competition Commission’s revenue was mainly derived from transfers from the Department, accounting for 78.9% (R931.6 million) of total projected revenue over the medium term
Due to the labour intensive nature of the Commission’s work, expenditure on compensation of employees was expected to account for 61.6% (R722.8 million) of total expenditure over the medium term, increasing at an average annual rate of 8.3% from R216.9 million in 2017/18 to R261.7 million in 2020/21. Market inquiries into the private health care, data and grocery retail sectors will be concluded in 2018/19.
Over the medium term, the Commission aimed to conduct a further three market inquiries at a projected cost of R45 million in the policy and research programme, and enforcements and exemptions programme. Over the MTEF period, the Commission planned to investigate 42 cartels in priority sectors of the economy, such as construction and infrastructure, health care and energy. R241.3 million has been provided for these investigations in the cartel programme.
The Tribunal was set to receive 66.6% (R111.2 million) of its total projected revenue over the MTEF period through transfers from the Department. The remaining revenue will be generated though filing fees charged for merger applications
Over the medium term, the Tribunal will continue to focus on adjudicating cases effectively and efficiently. This core function has been allocated R83.3 million, reflecting 48.7% of the Tribunal’s total projected expenditure of R175.1 million over the medium term. Compensation of employees constituted 58.3% (R102 million) of total projected spending over the period.
As the Commission relied heavily on skilled personnel, spending on compensation of employees constituted a projected 78.1% (R263.6 million) of the total budget over the medium term, increasing at an average annual rate of 5.5% from R83.3 million in 2017/18 to R92.3 million in 2020/21. Spending on monitoring activities was expected to be R27.7 million in 2018/19
The Commission will aim to reduce turnaround times for investigations into customs tariff amendments, and permits for rebates and drawbacks, including an estimated 28 sunset reviews over the MTEF period. These activities are provided for within the import and export control programme, which accounted for 12.5% (R42.4 million) of the Commission’s total projected expenditure over the medium term, and the trade remedies programme, which accounted for 17.4% cent (R58.9 million).
Industrial Development Corporation (IDC)
The Corporation was set to derive 52.6% (R42.2 billion) of its revenue over the medium term from interest income on loans. Other revenue was derived from fees and dividends from equity investments, which accounted for 46.4% (R32.7 billion) of revenue over the period; and transfers from the Department for SEFA, which accounted for 1%.
To improve equipment or working capital to increase production and create or protect 84 714 jobs over the medium term, disbursements to priority sub-sectors such as metals and mining, chemicals and pharmaceuticals, agro-processing, and agriculture are set to increase from R14.5 billion in 2017/18 to R21.9 billion in 2020/21. An estimated 63% (R35 billion) of the Corporation’s expenditure over the medium term was allocated to developing value chains in the priority sectors.
More than R16.5 billion over the MTEF period was expected to be provided to black industrialists who operate within the metals and mining, chemicals and pharmaceuticals and agro-processing and agriculture sectors.
Small Enterprise Finance Agency (SEFA)
Transfers from the Department comprised 47.3% (R725 million) of total projected revenue over the MTEF period.
Over the medium term, the agency planned to expand its reach to township and rural economies by providing support to an estimated 236 655 informal and micro enterprises through loan approvals.
Direct lending was expected to contribute to the creation of 4 438 jobs, with disbursements increasing from R170 million in 2018/19 to R225 million in 2020/21; while wholesale lending was expected to contribute to the creation of 7 256 jobs by 2020/21, with disbursements increasing from R460 million in 2018/19 to R566 million in 2020/21.
Expenditure on goods and services comprises an estimated 59.3% (R1.2 billion) of total expenditure over the medium term, and consisted of loan financing provided to clients, and consulting and marketing costs.
Presidential Infrastructure Coordinating Commission (PICC)
Through PICC’s secretariat, the Department provided support for the implementation of the National Infrastructure Plan and its 18 strategic integrated projects, which included the construction of power plants, schools, health care facilities, roads, ports, water pipelines and bus route systems.
The Department planned to unblock infrastructure projects ranging from easing regulatory challenges to ensuring municipal services are made available for new and existing investments. The allocation amounted to R45.8 million over the MTEF..
Steel Development Fund
The IDC will receive the R95 million in the form of grant funding from EDD which will flow as follows over the period:
- R30 million in the first year (2017/18)
- R30 million in the second year (2018/19); and
- R35 million in the third year (2019/20)
The Fund will be applied to finance the following initiatives, which directly address competitiveness issues:
-Modernisation of plant machinery and equipment;
-Upgrade of plant machinery and equipment to meet quality assurance requirements
-Capacity expansion of existing plants
- Process improvements for cost efficiencies and productivity and assist with plant optimisation;
-Working capital requirements or revolving facility
-Assist firms to achieve appropriate industry quality certification and standards including environmental standards
-Establishment of start-up enterprises; and
-Development and testing of prototypes, as well as the testing and certification of new products (for example by SABS or international certification where appropriate)
Tirisano Fund Transfer
The objectives of the trust are to:
-Contribute to the transformation of the construction industry through the development and promotion of construction firms owned and managed by black people;
-Provide bursary funding to previously disadvantaged people in the fields of engineering 3; building science or quantity surveying
-Provide bursaries to previously disadvantaged people training to be artisans;
-Support and enhance mathematics and science education at public schools;
-Fund the Department’s social infrastructure build programmes; and appoint professionals to provide government with assistance in engineering, project management and other services.
The trust was expected to fund an estimated 75 engineers and 135 artisans through its bursary scheme over the medium term, and more than 24 000 learners are expected to benefit from the mathematics and science programme. The trust was also expected to support 12 emerging contractors through its enterprise and contractor development programme.
The budget will enable the Department to implement its mandate. Over the medium term, the Department intended to focus on supporting provinces’ economic planning, facilitating interventions in infrastructure initiatives, and providing strategic support to development finance institutions and regulatory bodies
The Department will mitigate the impact of the Cabinet approved reductions by reducing spending on items such as catering, venues and facilities, and communication.
The Chairperson asked of the number of Key Performance Indicators (KPIs).
Dr Cardo asked about the allocation to the competition commissions and if the Bills being considered are passed whether such allocations would be enough for them carry out their duties?
Mr Tleane wanted clarity on the trustees of the new Trisano fund that was initiated by the IDC.
Ms Mfulo’s questions were centred on the envisaged promotion of black contractors; whether such promotion will be in form of skills training or making funds available to them. Is it not a duplication of duties when SEFA and the Small Business Department are dealing with the same thing?
The Chairperson thanked the Department for the clarity in the presentation and asked on the budget and transfers to the entities. She further noted that what the Department does is only monitoring the entities which were a huge responsibility under programme three. Looking at the compensation of employees under this programme, it amounted to only 1.7%. In terms of numbers towards this programme, she asked if the Department was satisfied that these numbers are able to accomplish its stated mission in monitoring the entities. On the functions of SEFA, she asked if SEFA’s was lending benefitting the previously disadvantaged persons and if there was any positive impact in terms of the development of SMMEs.
The Minister in his reply thanked the Committee for the opportunity to present their APP. He said that the KPIs are 23 in total.
On whether funds for competition commission are sufficient for them to carry out their duties; he said that he did not think the present budgetary allocations will enable the Competition authorities to fully cover the new mandate. As the new mandate was expanded, money will have to flow with the mandates because an unfunded mandate would mean a poorly performed mandate. As the Commissions are asked to strengthen their work against cartels, their work not only ended with that because they also have to do investigations into markets where parties are uncooperative. This has led to an increase of the Commission’s own income to cartel investigations. On looking at marketing inquiries, they provided an opportunity to say what the state of the competitions was in a market. It was even made more complex because there are both economic and legal issues involved and that has to be taken into account by the Commission all of which requires special expertise. Should this not be taken into account, the Commissions have to have strong power and ability to discern that the exercise of this power was founded on the evidence and proper understanding of the law otherwise such decisions will be overturned in the courts. So to have that mandate and carry out the mandate responsibly, the institutions have to be properly resourced. The vision was that in the years ahead, they have to become even more centres of best practice in SA. Looking at the market and competition authorities in the UK and elsewhere, they are able to attract the brightest and the most energetic economists and lawyers in the society to work in the authority for a period. Even though the Department have some f bright persons now (“which is why we win so many cases”), there was room and scope to bring in more expertise. The Department, during the budget process, will make a case for more resources. Treasury has always been made aware that the competition authorities are a big money spinner for the State. All the fines that are levied are significantly higher than the budget of the authorities so it made sense that they are well equipped because they actually recovered the cost. Hopefully more resources can be allocated to the competition authorities. Another thing to consider was what the right funding mechanism was. Do we for instance take a portion of the fines and levies and re-invest them in the Commissions? These ideas should be tested; obviously there are pros and cons. The pro was that as you are more successful in prosecutions and impose more fines, a portion of that comes back to fund the activities while the con was the dedicated funds because of the accumulation of massive surplus in them. The Commission has been urged to go for top class economists and lawyers rather than large scale lower and middle people will be outgunned by the economists and lawyers the corporates have in their kitty.
On the Trisano fund, the Minister said the fund was established last year with all the technical details sorted out. The first contributions have started flowing in on the income side. Trustees have been appointed. Government has nominated people from that side same with the construction companies. The Department will make their names available in the next sitting of the Committee. Since the income side was operational, it was now looking on the expenditure side on what kind of projects it should support.
When the companies were made to acknowledge involvement in the cartel, they were told that by way of turning a new leaf and starting afresh, they should support the entry of black construction companies into the industry and SETA does the training of the staff of the company. Construction companies like WBHO was to attach three black owned companies as partners in which they give high level support as to how to draw up a major honest legal tender documents especially the costing aspect because that can make or break a company. These are high level skills that SETA cannot offer.
On whether EDD has the right number of staff to oversee oversight duties in programme three over the entities, the answer was that the caliber of staff should be strengthened and not the numbers per se. EDD did not have anyone in its books to do the technical work on the IDC account. IDC was the largest corporate entity in the country; its asset base was more than R1 billion and an annual investment approval of R14 billion. It was enormous and employed a CFO that was quite senior in the industry. If EDD has to strengthen its oversight, especially over programmes of the entities it will definitely need the caliber of staff that fits. It was at this level that EDD has its challenges. If a person with a modest skills set have to sit with an IDC staff that was way better skilled, then there was not much of an oversight that can be done because oversight required a technical ability to follow the money and to see that it was utilised for what it was intended for. The very few staff with this technical ability that EDD has easily gets overstretched and tire and some leave. This was an identified medium term risk that needs to be mitigated.
On SEFA, he said SEFA needed to spend money on a regular basis. In 2012/13, the bulk of money SEFA had (90%) was given to intermediaries and there were two problems with intermediaries. The first was the high interest rate at 20-29%. There were hidden fees which even escalated the fees higher. Secondly, the State had no ability to assess the impact of its lending; this led to the introduction of the SEFA direct model. Over the years more money began to flow inside SEFA towards the SEFA direct model. This was a good policy model but the problem was SEFA began to carry the risk of making the right decision on loans. Over the last few years, it was the EDD’s impression that this is an area SEFA has invested enough to build the capability. Looking at impairment ratio, it was very high. Even EDD believed that someone has to step forward to help small businesses without asking for too much security. Money too should also not be thrown away so the right balance must be struck. This is an area that must be managed with a degree of sensitivity because policy responsibility has shifted. So the Department sat with IDC demanding a more explicit paragraph in their corporate plan dealing with SEFA. This meant that that IDC had to strengthen SEFA risk assessment abilities because SEFA has not got the tools to do so.
On the impact of EDD’s work on small business development, he said the State did have an impact though not as big as should be expected. This was as a result of two factors; tight integration which was being done through SEFA which now provided more of its loans through two companies that also has a tender from the State. By so doing money was being put to secure customer because that customer already has an order from the State. The only problem was that it fostered dependency; meaning that the customer’s business was dependent on the State because both their order and funding depended on the State. Any change of this status quo will lead to that business accusing the State of killing its businesses. This also meant the State cannot release tenders to other people, but to feed only the existing - this is not a good long term model. What has to be done to turn it around was to say funding will only last for three years and ensure that they make profit so as to be able to pay back the loan. This will ensure that when the State stepped back, that business can go to a normal bank to obtain a loan and so that the next South African can also benefit. This was an area EDD was not doing enough.
On ITAC, the minister said that as their mandate was being adjusted, there will be budget pressures. EDD was not convinced that ITAC cannot re-prioritise. There was scope; it meant working with the staff and addressing some concerns raised by the unions. They have to make tough decisions on how to allocate staff - the only grounds for valid resources are on anti-dumping investigations. There was presently no such investigations carried out though it has to come from the private sector but ITAC was not active enough to ensure that when there was evidence of dumping, the private sector are helped to put together their case.
On the media case, the Competition Commission can impose a penalty and when that was done in terms of the Act, it cannot control what happened thereafter because that money goes to the National Revenue Fund. EDD can try and speak to Treasury but it cannot dictate where the money should go. Even though it collected R1.5 billion, that money goes to the general pot of the National Revenue Fund. Should Parliament decide that all that money should go to housing, so be it. What the Commission has done over the years was it started with a pioneer case, i.e. the bread and poultry cartel cases. EDD got involved when the Competition Commission was transferred to EDD. The Department sat down with the company for settlement and told the company that a component of the settlement will be for them to lower their prices. Secondly was that they have to contribute towards a fund that will support competitors and small businesses to get into agro-processing. An agreement was reached with the Commission and it went to the tribunal. Treasury then went to the tribunal and EDD then reminded Treasury that this was a fund that was outside the National Revenue Fund which became a big news story. EDD then agreed to change the terms so that the money will go to the National Revenue Fund but it then has to come from there back to EDD which will then be put into IDC for the agro-processing and competitors fund previously agreed to. It worked better and that fund had a very positive effect and the Department will at some stage take the Committee to see what was done with that money. With the current media case, the Competition Commission was concerned that if it only imposed a fine, the companies may object and take the case to the tribunal and then to the Competition Appeals Court. Again even if the case was won; there may be the challenge of the money going into the general pot.
The present cases involved the big media companies squeezing the little players such as the community newspapers out of the market. They did this by making their prices very low, undercut the small guy who goes out of business and then they raise their prices. This practice was not permitted in our laws. Prices can be brought down to win market share but not as a strategy to eliminate competition and then raise their prices later. They then agreed with the fine and to put the money into a fund managed by the Media Development and Diversity Agency (MDDA), a statutory body tasked with duties of media diversity. They chose this agency because it has more insight into media diversity and promotion issues which EDD did not.
Trisano fund was an agreement between EDD and construction companies. Though it is their money, it brought their money through to the public accounting process to ensure that an oversight existed. Though they might be unhappy, EDD insisted that the money should pass through a transparent process. A fund that has a twelve-year process cannot be designed without proper mechanisms in place for oversight and accountability.
Ms Irene Ramafola CFO, EDD, clarified that the transfers to the Trisano fund for 2017/18 are R117 million. Specific conditions have been outlined by National Treasury; one of which was that the MOU needed to be signed between EDD and the Trust administrators which was the IDC. This has been done; the only part left was for the Trustees to endorse the draft plan before funds can be dispatched to the actual projects.
The meeting was adjourned.
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