Department of Trade and Industry 2018/19 Annual Performance Plan

Meeting report

Election of Acting Chairperson
In the absence of the Chairperson Mr E Makue (ANC, Gauteng) the Committee elected Ms M Dikgale (ANC, Limpopo) as Acting Chairperson.

Briefing by the Department of Trade and Industry (DTI) on its 2018/19 Annual Performance Plan (APP)
Mr Lionel October Director General stated that the three main areas of work for the DTI were industrialisation, regulation and transformation. From a global economic context, economic growth was expected to reach 3.9% in 2018/19 from 3.7% in 2017. From a South African perspective the economic outlook had improved and the DTI was cautiously optimistic that growth of more than 1.5% would be seen in 2018. Unemployment in SA was also expected to drop from 27% to 26.7%. Key interventions which were put into action in its APP were elaborated upon. On industrial development it was hoped to leverage investments from approved projects/enterprises to the tune of R15bn and to create 10 000 new jobs from approved enterprises. The number of enterprises /projects approved for financial support across all incentives was to be 850. On trade investment and exports the DTI had set up Investment SA and hoped to attract investment in targeted sectors to the value of R50bn. On broadening participation the DTI increased investment through Special Economic Zones (SEZs) and Industrial Parks. There was also implementation of the Broad-Based Black Economic Employment Act (B-BBEE) and the Code of Good Practice for B-BBEE. Black industrialist development programmes were implemented as well. On regulation efforts, policies and bills had been drafted to enforce fair business practices. On the organisation itself efforts were being made to attract, develop and retain professional and skilled officials.

On the APP itself detail was provided on targets set for 2018/19 across the eight Programmes of the DTI:
Programme 1: Administration
For 2018/19 the targets for staff turnover rate, people with disabilities employed and women employed in senior positions were 6.8%, 3.6% and 50% respectively. The intention was also to pay 100% of eligible creditors within 30 days.
Programme 2: International Trade
On regional economic integration the plan for 2018/19 was to have two status report produced on progress for Tripartite Free Trade Area (T-FTA) and Continental Free Trade Area (CFTA) negotiations. The target was also to have two reports on the implementation of the Southern African Development Community (SADC) – European Union (EU) Economic Partnership Agreement (EPA).
Programme 3: Special Economic Zones (SEZs) and Economic Transformation
The planned target for 2018/19 was to have one SEZ submitted to the Minister of Trade and Industry for designation. There was also to be the submission of two implementation reports on Industrial Parks submitted to the Minister. The intention was to have two reports on the implementation of the B-BBEE Amendment Act and Regulations submitted to the Minister. On the number of interventions to support black industrialists, 90 interventions were planned.
Programme 4: Industrial Development
For 2018/19 the planned target was to have the Annual Rolling Industrial Policy Action Plan (IPAP) 2019/20 submitted to the Minister for tabling in cabinet by March 2019.The intention was also to have four implementation reports on IPAP prepared for the Minister’s Review Meetings per year. Two designation requests prepared for the Minister per year was also to be done.
Programme 5: Consumer and Corporate Regulation
The intention for 2018/19 was to have one Socio-Economic Impact Assessment System (SEIAS) report on the Companies Bill developed for the Minister’s approval. There was also to be four progress reports on the development of the Gambling, Liquor, Credit, Performers and Copyright Amendment Bills developed for the Minister’s approval. In addition 24 education and awareness workshops on policies and legislation were planned and to have a report produced for the Minister’s approval.
Programme 6: Incentive Development and Administration
The planned target for 2018/19 was to leverage investments from approved projects/enterprises to the value of R15bn and to create 10 000 new jobs as well as to retain 20 000 jobs from enterprises approved. The target for the number of enterprises /projects approved for financial support across all incentives was 850.
Programme 7: Trade Investment SA
With the baseline being set at having export sales to the tune of R2.78bn facilitated, the planned target for 2018/19 was R4.25bn. The intention was also to have a total of 864 companies financially benefitted from Export Marketing and Investment Assistance (EMIA) funding.
Programme 8: Investment SA
The plan for 2018/19 was to have investment projects facilitated to the value of R50bn in the pipeline.
On the financials of the DTI the total budget for 2018/19 sat at R9.96bn.

Discussion
Mr J Parkies (ANC, Free State), on international agreements and bilaterals with the European Union (EU), said that he was the convener of the African, Caribbean and Pacific (ACP) focus group in Parliament. The DTI at international level engaged with the European Union in the context of the ACP. He noted that in the context of the ACP there were projects coming to SA. Were projects being tracked down and quantified? He also asked how many jobs were created by the projects. The impact of the projects was considered important as it would affect the standards of living of people. The DTI was asked how the imposition of sanctions by the United States of America (USA) against Iran impacted upon its work. What was happening on the issue of steel tariffs that the USA was imposing on South African steel imported into the USA.

Mr October, on the ACP issue, said that the EU was important as a great deal of donor support funding emanated from it. Donor funding used to be from government to government. A few years ago it was changed. There was a programme in place and the money was controlled by National Treasury. There was an Employment Creation Fund (ECF). All the funds had to go to rural projects. Good progress had been made. The money went directly towards recipients. In the Eastern Cape Province there was the planting of macadamia nuts and in the Northern Cape Province there were grain silos. Some of the projects had come to a halt and been delayed as National Treasury had kept back the second tranche of funds. National Treasury needed to come to the party. He said that the global economy was picking up. The big risk was Italy and Europe where there was the rise of the Right. The USA had acted erratically. It had been a good sign when sanctions against Iran had been lifted but now with the renewed sanctions things were back to square one. SA was collateral damage between the USA-China trade war. SA was hard hit by the USA tariffs on steel and aluminium. The DTI was holding meetings with the South African companies that exported steel to the USA. The DTI had also approached American companies like Tesla who bought South African steel and aluminium to lobby its government to drop the steel/aluminium tariffs.

Mr Hoosen responded that the sanctions on Iran did hit SA hard. The DTI worked with the Department of International Relations and Cooperation (DIRCO) and reverted to what the status quo had been. The DTI looked at areas outside the sanctions. SA was bound by decisions taken at the United Nations. The DTI would be receiving feedback from the DIRCO Minister on what exemptions it could work on.

Mr B Nthebe (ANC, North West) was impressed that the DTI, on the employment of persons with disabilities, had achieved 3.6% compared to the suggested 2%. The figures on women within the DTI were also impressive. In as much as he appreciated the good performance by the DTI he felt that it could do better. He noted that Sustainability Development Goal 9 spoke about having a resilient infrastructure and vigorous industrialisation. The DTI was asked when the Committee was going to see things that could be done and felt. He pointed out that the Economic Development Department (EDD) had a cut of R857m in infrastructure. It was a problem as infrastructure was really needed as an enabler in order to attract investment. He would have liked the DTI to inform the Committee about what was impeding it and what was being done to deal with the impediment. 70% of Sub-Saharan Africa depended on agriculture and SA on the other hand depended too much on commodity exports. Nigeria was dependant on the export of petroleum. Agriculture was important but it was seasonal. SA’s trade balance with the rest of the world on manufactured goods had reduced slightly from Quarter 3 to Quarter 4. He said that there was no economy in the world that did not take trade balances into consideration. He observed that the DTI’s working relationship with other departments could be improved as it seemed as though each was going in a different direction.

Mr October responded that Mr Nthebe was correct on infrastructure. Nobody would invest in a country without there being infrastructure. At Coega in the Eastern Cape Province benefits were only being reaped fifteen years later. There were in total 38 investors. A R12bn project on an automotive plant was being completed. The DTI was therefore doing work on SEZs in the various provinces. The DTI stimulated provinces to do work on SEZs. It was the provinces that owned the SEZs. The projects were driven by the provinces. The DTI tried to provide as much support as possible. It was only the North West and Northern Cape Provinces that SEZ work was still to be done at. The rest of the provinces had been covered. In the Northern Cape Province work was being done at Upington be it at a slow pace. Upington relied on solar power. The DTI continuously supported the provinces. In the North West Province efforts were initially focussed on the platinum valley but later moved towards agriculture. Now it was back in the platinum valley. Efforts were being made to get things going again.

Mr M Mhlanga (ANC, Mpumalanga) stated that on international agreements he did not hear anything about United Arab Emirates (UAE) trade deals which he understood were there. He asked that the DTI provide the Committee with information on the UAE trade deals. He asked why some of the trade agreements which were three or five years old had not yet been ratified. Was there a Broad -Based Black Economic Empowerment (B-BBEE) monitoring system to check on compliance? He asked what was being done on industrial parks in Mpumalanga Province.

Mr Yunus Hoosen, Deputy Director General: Investment SA,DTI, responded that the DTI did not have a trade agreement with the UAE. There was a bilateral with the Middle East but there was no trade agreement.

Mr October on B-BBEE compliance stated that in 2014 the Act had been amended. Legislation no longer called for a general commitment to B-BBEE. After the amendment every procurement that the DTI and every government department made, B-BBEE had to be ensured. He noted that the big telecom companies were coming on board. The DTI had offered incentives.

Mr W Faber (DA, Northern Cape) pointed out that it seemed that there were zero manufacturing and service centres for the Northern Cape Province. He added that the Northern Cape had a coastline that was closer to the USA and the EU than other provinces did. He was pleased about projects that had been started around grain silos but unfortunately funds had run out. Nothing was taking place for over a year.

Mr October said that the grain silo project could be an Employment Creation Fund initiative. The delay in funding was from the EU and not the DTI. National Treasury was in charge of the funds.

Mr J Mthethwa (ANC, KwaZulu-Natal) was pleased that the economy was moving forward. The DTI was asked what more could be done to make the economy grow faster. He said that the DTI had a good plan to assist small companies. How were small companies to be assisted selected? He observed that much of the world perceived SA to be a corrupt country. He asked what the reaction of the world was after the Thuma Mina Project.

Mr October said that the DTI annually supported 4000 companies. The DTI dispersed government funds. Companies had to apply for funding and there were strict criteria in place. There were awareness programmes to make companies aware of programmes. The funds had to be used for a plant, equipment etc and not for luxury motor vehicles. The DTI did a due diligence by way of inspectors. The company needed to be sustainable. There had to be market demand for the product. Companies needed to get their project plans right. On projects like the Thuma Mina Project he responded that many investors had postponed their deals. The DTI had tried to sweeten the deal by saying that incentives would be given if investments were made. He did note that many projects were coming back on the table. Investment SA was busy. There was renewed confidence in SA.

Mr Parkies was concerned about black industrialists having problems around market access. The DTI was asked whether in its planning it had not considered the component of market access. He noted that the Department of Rural Development and Land Reform (DRDLR) had come up with Agri Parks but when dissected the Parks seemed not to be progressing. It was a concern since they were important for the structural transformation of SA’s economy. White males were still dominating the business market. It was evident that the DTI had a good relationship with the Department of Agriculture. Parliament had voted on land expropriation without compensation. There were persons who were against it. Agricultural organisations who opposed the expropriation of land had racist white leaders. On the transformation of the economy and in manufacturing he raised concern that previously disadvantaged persons were not benefitting from the subsector of milling. It was important for black persons to play their part as milling had its place on food scarcity in SA. Bread was a staple food in SA. Black people did not own mills.

Mr October responded that the biggest impediment was that SA had a skewed capitalist system that was distorted. Persons of colour could not access markets because markets were not accessible. 90% of the population was excluded from the economy. Every person should have the right to property, the right to do business etc. Black businesses were only really found in Industrial Parks. The problem was that in SA there was low demand for its goods. The wages of people were too low. SA relied on exporting its goods to Africa, the USA and the EU. In these countries there was 80% local demand. In SA consumption was far too low. Consequently, the DTI’s work on the continent was considered important. The coming into affect of the National Minimum Wage would raise disposable income. It would increase household spending which drove Gross Domestic Product (GDP). Transformation was the key thing. On improving access to grain markets ie milling there was a need to develop new SEZs.

Ms Malebo Mabitje -Thompson, Deputy Director General: Incentive Development and Administration, DTI, said that some projects were supported in the Eastern Cape from donor funding that was in the ECF. Some of the industries invested in were macadamia nut production, integrated waste regulation, fish and crayfish breeding etc. For the first time the DTI could in its incentives dictate that beneficiaries of funding should include workers in their shareholding. Worker trusts were created and workers had a stake in ownership. The projects were in very rural areas of provinces. Projects were spread across provinces and included the Northern Cape and the Limpopo Province. She pointed out that there were two huge projects on milling. Efforts were being made to correct things. Black farmers were unable to approach mills to purchase from them as mills already had an order book of persons that supplied them regularly. The Committee could be provided with information of how funds were spent. She reiterated that there had been a snag in the release of funds.
The Acting Chairperson too was pleased with the DTI figures on disabled persons and women. She asked for timelines when the remaining provinces would be getting attention on Special Economic Zones (SEZs). Was monitoring done over those provinces like the Limpopo Province where work had already been done on SEZs? She felt that 626 000 jobs created was still not enough. Unemployment in SA was still far too high. She asked for an explanation on the UK-Brexit issue.
Mr Parkies asked that the Committee be provided with information on the projects that the DTI had referred to. He asked whether people had to make application to the DTI.

Ms Mabitje-Thompson explained that projects were initiated by project champions. Thereafter an interdepartmental assessment was made by the Economic Cluster. Once the assessment was complete and there was go ahead the DTI took over the administration of the project. The funds for projects sat with National Treasury and not the DTI.

The Acting Chairperson thanked the DTI for a good briefing and a job well done.

The meeting was adjourned.