Economic Development Budgetary Review and Recommendations Report

Economic Development

30 October 2018
Chairperson: Mr E Coleman (ANC)
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Meeting Summary

Economic Development Budget Review & Recommendations Report at Budget Review & Recommendations

The Committee considered and adopted its Budget Review and Recommendations Report (BRRR) on the Economic Development Department and its entities: Industrial Development Corporation (IDC), Competition Commission, Competition Tribunal and International Trade Administration Commission (ITAC).

Meeting report

The Chairperson said the Budget Review and Recommendations Report (BRRR) assesses progress made with the recommendations in the 2017 BRRR; outlines the mandates of the Department and its entities (Industrial Development Corporation, Competition Commission, Competition Tribunal, International Trade Administration Commission of SA) and review their financial and non-financial performance for 2018.

The Chairperson said they would go through the report page by page to see if they agreed with what is reflected and if they want, they can add to the observations and the recommendations.

Mr S Tleane (ANC) said page 22 notes Committee was informed that the IDC CEO term is coming to an end. He asked what the implications of this were because they say in this report that the CEO resigned.

The Chairperson replied that the Department coined the sentence “he resigned” but of course with the rider that the Department and CEO reached an agreement he would utilise three years only instead of finishing the five year term.

Mr Tleane said the entities are under scrutiny. His concern was once they say the CEO has resigned, that would raise eyebrows and people would think there was something wrong. They need to find another way of coining that so that they did not attract unnecessary attention.

The Chairperson pointed out that the IDC Board and the Minister had held a press conference about it and that is how it was phrased.

The Committee went through the Observations and Recommendations:
 
Economic Development Department (EDD)
The Committee:
(a) Applauds EDD for achieving a clean audit outcome in 2017/18 and encourages the Department to maintain this level of performance annually.
(b) Expresses concerns over the regression of the audit outcomes of the Competition Commission due mainly to an increase in irregular expenditure. In addition the delays in transferring penalty funds to the EDD are troubling.
(c) Acknowledges the improvements in the filling of funded posts, particularly at senior management level. However, serious concerns remain about the Director-General’s post which has been vacant for too long and the Committee is not pleased with the number of employees who are in acting positions in the Department.
(d) Notes women are underrepresented at senior management level.
(e) Expressed displeasure at EDD’s failure to finalise its organisational structure which is long-overdue.
(f) Notes EDD gazetted the long-awaited Competition Amendment Bill in 2017/18.
(g) Is cognisant that the term of office for six of the 11 tribunal members including the chairperson is coming to an end on 31 July 2019 around the election period.
(h) Requests an update on progress made by EDD and Departments of Tourism and Arts and Culture in addressing the tourism infrastructure challenges and plans to take tourism at the Cradle of Humankind, Vilakazi Street in Soweto and Port St. Johns to a higher level.
 


The Committee approved the Observations.

The Chairperson read the Committee Recommendations:
The Committee recommends to the National Assembly that the Minister of Economic Development and the Accounting Officer implement the following recommendations:

Consider recommendations of the Committee in the 2016/17 Budget Vote Report as outlined in sub-heading 7 of this report on the strengthening of institutional arrangements and provide a progress report on these to Parliament by the next Budget Vote cycle.

 (b) EDD is urged to work expeditiously to ensure a smooth transition of leadership at the Tribunal. A progress report on these must be provided to Parliament by the Fourth Quarter of the current financial year.
 (c) Requests EDD to conduct an extensive review of the enterprise development funds that are within its purview and brief the Committee on its outcomes by the fourth quarter of the current financial year.
(d) Facilitate collaboration between the IDC and the CSIR Innovation Hub to enhance the support for the CSIR projects.
(e) Monitor and support the Competition Commission in addressing issues raised by the AG in the regulator’s financial statements.
(f) Enhance their oversight and scrutiny over the finances of the Competition Commission.

The Committee approved the recommendations.

Industrial Development Corporation (IDC)
The Chairperson read the Committee findings on the Industrial Development Corporation:
(a) The Committee remains concerned about Scaw, Foskor and Sefa that are making losses.
(b) It is concerned about the IDC assets at the Shiva Uranium Mine after reports of property damage there.
(c) It noted that IDC has no targets and plans for providing support to businesses of people with disabilities.
(d) It urges the IDC to do more to support Fourth Industrial Revolution initiatives.
(e) It notes that the IDC has replaced KPMG with Sizwe-Ntsaluba-Gobodo.
(f) It will hold a special meeting for a briefing on the Black Industrialists programme.

The Committee agreed to the findings.

The Chairperson read the recommendations of the Committee. The IDC should:
(a) Develop plans and targets to support enterprises owned by people with disabilities.
(b) Provide detailed quarterly updates on plans and progress to protect Scaw, Foskor and Sefa from further losses.
(c) Develop a comprehensive strategy to ensure that IDC assets at the Shiva mine are not damaged by vandalism and provide the Committee with regular updates on the Shiva Uranium Mine court case, jobs and security at the mine. This should be done before the end of the current financial year.

The Committee agreed to the recommendations.

Competition Commission
The Chairperson read the Committee’s observations about the Competition Commission:
(a) The irregular expenditure amounting to R126 million.
(b) Overspending and the budget deficit.
(c) Poor alignment between planning and budgeting capacity.
(d) The Memorandum of Understanding (MoU) between the Commission and the National Prosecuting Authority (NPA) has not been finalised.

The Chairperson said that they should flag the irregular expenditure concern and come back to it later.

The Committee agreed with the observations.

The Chairperson read the Committee’s Recommendations:
(a) The Commission should take measures to improve its planning and budgeting capacity so as to align its expenditure demands with available financial resources.
(b) It should do a presentation on its proposal for a sustainable funding model .
(c) It should brief the Committee on the outcome of its engagements with National Treasury and the AG on supply chain management processes and procedures that will be appropriate for the unique needs of the Commission. The briefing should take place before the end of the current financial year.
(d) It should update the Committee on progress made in the finalisation of the MOU between the Commission and the NPA on how the two will work together to implement the criminal provisions of the Competition Act against hard core cartels and report to the Committee on progress before the end of the current financial year.
(e) It should conduct a desktop benchmarking study on the fees charged by different competition experts in other countries.
(f) It should present the SSA findings on the Commission’s need for protection services, as soon as the SSA finalises its report.
(g) National Treasury should brief the Committee on the procurement process that the Commission is expected to follow for its sector-specific needs. This should happen in the current financial year.

The Committee agreed to the recommendations.

Competition Tribunal
The Chairperson read the Committee’s observations on the Competition Tribunal:
a) The Committee applauds the Tribunal for obtaining a clean audit opinion.
b) It notes that the Tribunal only met 64% of its targets mainly due to capacity constraints.
(c) It is satisfied with the report of the Tribunal on the internship programme.
(d) It is happy appointment of additional Members has improved efficiencies at the Tribunal.
(e) It acknowledges the efforts of the Tribunal to shrink its deficit significantly from R3.2m the previous financial year to R320 000 in the current financial year.

The Committee agreed with the observations.

The Chairperson read the Committee’s recommendations:
The Tribunal should;
(a) Keep up the good work and carry on its tradition of obtaining a clean audit outcome.
(b) Closely monitor its performance against predetermined targets and is expected to reach at least 90 per cent when it gets additional capacity in accordance with the proposed legislation.
(c) Consistently strive to improve its internship and outreach programmes to help address transformation challenges in the competition policy sector.

The Committee agreed to the recommendations.

International Trade Administration Commission of South Africa (ITAC)
The Chairperson read the Committee’s observations and findings on ITAC:
(a) The Committee is concerned about the high wage bill at ITAC which makes up 78% of expenditure .
(b) It observed that ITAC does not have a strategy for recruiting people with disabilities.
(c) It notes the differences between EDD and ITAC’s response on Port Elizabeth as a sole port of entry.
 
The Committee agreed with the observations.

The Chairperson read the Committee’s recommendations:
(a) ITAC be intentional about employing people with disabilities.
(b) ITAC should report on progress made on the finalisation of the PPS recommendations. This should be done before the end of the current financial year.
(c) ITAC should report on the expenditure budget for its SACU operations.

The Committee agreed to the recommendations.

The Chairperson asked the Committee Secretary about ITAC’s proposed amendments to the Price Preference System (PPS) policy guidelines.

The Committee Secretary replied that following their meeting with ITAC, the Committee does not have anything yet from ITAC in terms of the market concentration study. This is something they need to follow up.

Secondly, on the irregular expenditure of the Competition Commission, there was communication between the Commission and Treasury about whether a deviation was granted and there is no proof that a deviation was granted. In fact the Treasury response noted that the institution should consider a competitive bidding process when the need for legal experts arise within the established panel. If the institution is certain that the requirement would not exceed the threshold of R500 000 a minimum of three quotations could be sourced and be evaluated accordingly. However, if the institution is not certain of the costs, a competitive bidding process with objective evaluation criteria must be used.

The Chairperson said the Commission just needs a letter from Treasury that gives the Commission authority to do what it did. But unfortunately it cannot say it clearly received that letter from Treasury.

Dr J Cardo (DA) said that the Competition Commission must provide a progress report on this matter.

The Chairperson said that the recommendation of the Committee is that the Commission should brief the Committee on the outcome of its engagement with Treasury and the Auditor General on its supply chain management procedures that will be appropriate for the unique needs of the Commission. The briefing should take place before the end of the current financial year. The Committee cannot just leave this to Treasury and the AG to look at this matter. The Commission needs to have Treasury give them a procedure and a way forward on this.
 
Mr I Pikinini (ANC) moved for the adoption of the BRRR with amendments.

Ms A Mfulo (ANC) seconded the move.

The BRRR with amendments was adopted.

The meeting was adjourned.
 

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