Trade and Industry & Economic Development Budget: Committee Report

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Trade, Industry and Competition

09 July 2019
Chairperson: Mr D Nkosi (ANC)
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Meeting Summary

The Portfolio Committee met to review the Committee Report to the House of Assembly on the 2019 proposed Budget Vote 25: Economic Development and Budget Vote 34: Trade and Industry.

A draft report was presented to the Committee which then worked on the conclusions and the recommendations in the meeting. The conclusion which welcomed the phased approach being taken with the B-BBEE policy was problematic for the ACDP because, while it recognised the need to address the challenges of the past and, in particular, economic divisions caused by apartheid, the ACDP’s policy on B-BBEE differed from that of the ANC and so giving credence to B-BBEE policy would be problematic for the ACDP. It was noted that other parties also disagreed with aspects of the B-BBEE policy. There was some disagreement amongst Members who felt that the ANC did not respect the policies of other parties.

The proposed recommendation that a Sugar Amendment Bill be introduced to address a lack of market diversification in the industry led to a debate amongst Members about the difference between market diversity, relating to products, and economic transformation. The Committee finally decided that it should be recommended that both economic approaches be pursued to assist the sugar industry.

It was agreed that the Committee would meet the following day to approve the recommendation as the Budget Votes were being tabled in the House that week.

Several of the new Committee Members were not familiar with the Legacy Reports from the Fifth Parliament on Trade and Industry and Economic Development and it was decided that the Committee should review those reports as soon as possible.


Meeting report

Opening remarks
The Chairperson greeted everyone and presented the agenda.

He noted that the Committee had to address the draft Committee Report. The draft report had been submitted to Members the day before and they had been requested to submit comments, concluding remarks and recommendations for consideration by the Committee. Political parties had submitted inputs into the report and those had been distributed to Members that morning. The Committee would only be considering concluding remarks and recommendations at the meeting. Any amendments would be effected by the Secretariat, and the Committee would do a page-by-page formal adoption the following day.

Ms P Mantashe (ANC) suggested that the Committee adopt the agenda.

The Chairperson agreed and Mr S Mbuyane (ANC) proposed the adoption of the agenda with the amendments. It was seconded by Ms M Moatshe (ANC).

The Committee Secretary stated that the time of the meeting on the following day would have to adjusted as the National Assembly had scheduled a plenary from 9:00 to 9:30 and the meeting would start immediately after the plenary. He added that inputs had been received from the ANC, ACDP and DA. The inputs were not in the detailed report as the Committee would first have to accept or reject the inputs. Parties would speak to their proposals.

Committee Report on the Budget Votes 25 and 34

Mr Mbuyane presented the input of the ANC into the Conclusions:
1. While the Committee acknowledged the uncertainty regarding the merger between the two departments, it is of the view that they share a number of synergies and can strengthen each other’s mandates to improve economic policy certainty, particularly in terms of economic transformation, investment promotion and facilitation and job creation. The Committee looks forward to a reviewed organisational structure and annual performance plan to improve alignment with government’s objectives.

Mr W Thring (ADCP) said that the ACDP proposal was similar to the ANC proposal and suggested that perhaps the two could be tied together.

Mr Mbuyane presented points 2, 3, 4, 5, 6:
2. The Committee welcomed government’s initiatives to regenerate the domestic economy, with priority productive sectors through the new envisaged industrial strategy and focused allocations to support industrial competitiveness. It also supported that the Departments adopt a more evidence-based approach in developing this strategy.

3. There is a recognition that industrial policy is cross-cutting and that coordination across departments is critical for its successful implementation. In this regard, efforts to ensure policy coherence and certainty is necessary to attract domestic and foreign direct investment to achieve inclusive economic growth and decent job creation as per our mandate. 

4. A strong social compact between the government, the private sector and labour cannot be underestimated in terms of creating a sustainable economy. Each party must contribute by providing an enabling regulatory environment, investment and increased productivity respectively. 
5. While the Committee acknowledged the Departments’ initiatives to facilitate the ease of doing business, such as the establishment and roll-out of One-Stop Shops, it was of the view that the Ministry should review initiatives to ensure their efficacy.
6. Although the tariff for sugar has been increased, the Committee remains concerned about the sustainability of the sugar industry and its impact on small-scale cane growers. The Committee welcomed the Minister’s endeavours to develop an appropriate long-term strategy to ensure a sustainable sugar industry.

Ms Mantashe noted that the DA’s input was encompassed in item 5.

The Committee Secretary stated that the DA input related specifically to the Recommendations, which would, of course, have to be the recommended actions based on the conclusion.

Mr M Cuthbert (DA) concurred with the Secretary and proposed that the Committee acknowledge that the recommendations spoke to the conclusion without jumping the gun and discussing the recommendations at that time.

The Chairperson noted that the DA was ahead as its input was more to do with the implementation side of things but that it agreed with the ANC’s input. Because the DA was in agreement with the ANC, the DA would make complete sense when the Committee arrived at that point. The DA’s input would be discussed when they arrived at the discussion on recommendations.

The Committee concurred on the above points.

Mr Mbuyane presented point 7.

7. The Committee was encouraged by the reported progress in addressing audit challenges facing the National Regulator for Compulsory Specifications and the South African Bureau of Standards, as these entities play a critical role in enabling industrialisation and trade as well as ensuring consumer and environmental protection.

Mr Thring stated that the ACDP had made inputs on that point. The one point he wished to add was in relation to the appraisal with regard to NRCS and SABS. That appraisal would come from the Department with regard to the progress being made as the Minister had said that they were both on the path to a clear, clean audit. The ACDP would like that to be noted as well.

The Secretary had noted the ACDP’s input and said that, as it was an operational matter, he would add it to the conclusion rather than the recommendations. He would add that the Committee would like quarterly updates on the progress of NCRS and SABS to give effect to what Mr Thring had raised.

Mr Thring noted that he had got his tongue around colloquia and colloquialisms and so he was comfortable.

There was consensus by the Committee to conclusion No 7.

Mr Mbuyane presented points 8 and 9.
8. The Committee recognised all efforts to strengthen intra-African trade and integration through the conclusion of the African Continental and Tripartite Free Trade Areas. This provides the foundation for African economic integration and increase intra-African trade that would benefit the South African economy. The Committee awaits the finalisation of the relevant annexes that would underpin these arrangements, such as the rules of origins and the schedules for tariff concessions.

9. The Committee is encouraged to see ongoing negotiations with the United Kingdom, as it finalises its exit from the European Union, that would ensure a bilateral agreement beneficial for South Africa and members of Southern African Customs Union.

There was consensus on points 8 and 9.

Mr Mbuyane presented point 10:
10. Deepening economic transformation is imperative to alleviate income inequality among previously disadvantaged black people. The Committee welcomed the phased approach being taken with the B-BBEE policy and was especially encouraged by the progress that had been made with the first 100 black industrialists thus far.  

Mr Thring stated that with regard to B-BBEE, the ACDP recognised the need to address the challenges of the past and, in particular, economic divisions caused by apartheid. However, the ACDP’s policy, and other parties, he supposed, on B-BBEE differed from that of the ANC and so he could not give credence to a B-BBEE policy might be problematic.

Ms Mantashe heard what the ACDP said but the ANC was the ruling party and therefore the B-BBEE policy would remain as it was. That was what ACDP believed in, but the ANC stood for the previously disadvantaged people and the B-BBEE would remain in its current form.

The Chairperson suggested to Ms Mantashe that the ANC might have a partner in caring for the downtrodden people and maybe the Committee should look at the wording and the interpretation.

Ms Mantashe stated that the ACDP differed from the ANC and the ANC was the ruling party so the others should just follow suit.

The Chairperson suggested that there should be a level of engagement.

Mr Thring said that the ACDP respected the ANC policies on any matter but asked that the ANC should respect the policies and preferences of other parties. The Members were all bound to uphold the policies of their parties and so the respect should go both ways. He understood that the ANC was the ruling party and that was how it was but the respect for the policies of other parties had to be considered.

Mr Cuthbert said that where he and the Chairperson came from. He had been a Chairperson of Economic Development Committee in Ekurhuleni and he had, if not outlawed, certainly frowned upon, pushing one’s weight around based on one’s party. He added that each one was there serving as a Committee Member for the Departments of Trade and Industry and the Economic Development. He cautioned against saying things like “the ANC was the ruling party”, etc. as the reports were Committee reports and not party positions. He would like Members to approach things in a more magnanimous fashion so that they could reach some form of concession when crafting both conclusions and recommendations in those reports. Subsequent to that, they should ideally submit a minority report on a particular issue. He did not like the idea that the Chairperson sitting in front of him would say, “I am the ANC and I am going to do x, y and z.” He would rather that there was respect for one another on the Committee and asked that Members respect one another going forward.

The Chairperson said he loved the passion, and the Committee Member had expressed himself well, but because of what had been said in item 10, the Committee had to focus on how to take the process forward.
He liked the fact that Members loved what they did. The way that point 10 had been captured gave the Committee a sense of what it was actually dealing with and the Committee would have to look at the process of taking the issues forward. It was well and good that each party was able to express how it felt at some point, but it should be in a form that helped the Committee to move forward.

Ms Mantashe said that the ANC respected the views of other parties because Members were in a multi-party democracy, but her point was that the B-BBEE was the ANC policy and that was how the ANC viewed it. The manifesto of the ANC was the one accepted by the people of SA. In its current form the B-BBEE policy was the best. The ANC respected the views of other parties and did not say that they were unimportant but the B-BBEE policy in its current form served the people of SA best.

The Chairperson re-read point 10 saying that it merely captured the current situation and what the sector intended to do. It was actually just an entry point. He was sure that the Committee was comfortable with it. He asked for comments from the Secretariat.

The Secretariat had no comment.

The Chairperson said that point 10 captured the current situation and the Committee could proceed. It made complete sense as it was a very important issue for the country, and something had to be done.

Mr Thring said that, to a large extent, the ACDP was comfortable with the first line and the latter parts of that particular point. The issue was that the ACDP had difficulties in accepting the policy as is. There were differences with regard to the B-BBEE policy and he would have to raise that at some time in the Committee.

The Chairperson asked that item 10 be agreed upon on the basis that it simply captured the current status and it would be a starting point for latter discussions. The point simply stated that the policy existed in the current form. He assumed that the Committee could agree to start at that point. It did not raise any issues with regards to the policy. There might be changes and other engagements at a later point. He would take into account the ACDP disagreements with policy but there was no specific policy issues arising. He asked if there was consensus to point 10 as it captured the gist of what the Committee had to address.

The Secretary said that the DA had given input in respect of recommendations. The wording in brackets was what Mr Macpherson had proposed but the wording on top was the wording suggested following a discussion about semantics, etc. between Mr Macpherson and the Secretariat. If the recommendations were accepted by the Committee, they would be put into the report.

The Chairperson said that in point 1, the ACDP addition would be included.

The Secretary agreed that it would be included in the new version. The Committee could then say whether the Secretariat’s wording captured the spirit of the Committee.

The Chair stated that items 1 to 10, with the agreed addition from the ACDP to item 7, had been agreed to by the Committee. The Committee moved on to recommendations.

Mr Mbuyane proposed the following:
The Portfolio Committee on Trade and Industry, having considered the 2019 proposed Budget Vote 25: Economic Development and Budget Vote 34: Trade and Industry, recommends that the House adopts Budget Vote 25: Economic Development and Budget Vote 34: Trade and Industry. 

The Committee further recommends that the House request that the Minister of Trade and Industry should
1 Engaging with the Ministers of Finance and of Health to review the impact of the Health Promotion Levy on Sugary Beverages on the sugar industry and sugar cane growers.
The Chairperson noted that if there were no objections, he would note that the Committee accepted the first recommendation which related to the first conclusion.

The Chairperson called on the Democratic Alliance to present its recommendations.

Mr Cuthbert pointed out that he would be reading a slight amendment to the document handed to Members as the editing had not quite captured what Mr Macpherson had presented to the Secretariat. He proposed the following recommendation, which would be recommendation no 2:
1. Tabling a Sugar Amendment Bill to address a lack of market diversification thus allowing for alternative products. 

The Chairperson asked that the point be examined for correct presentation and whether other parties agreed with the proposal.

Mr Cuthbert explained that “market diversification” and “economic transformation” were two different economic principles. There was a conceptual difference between the two and he was speaking about making certain items more competitive, making substitute items for the market. Economically they were two different principles.

The Content Advisor agreed that the DA focus was on market diversification but asked if other parties wanted to include economic transformation as that was a legacy issue.

Ms Mantashe said that from where she was standing, the DA spoke about work that had already been agreed upon in the previous term, i.e. that the sugar industry had to be diversified. Of importance to the ANC was economic transformation. The Fifth Parliament had agreed on it, and Mr Cuthbert was just repeating what had been said in the Fifth Parliament. She added that market diversification and economic transformation were inseparable, and one could not have the one without the other.

Ms R Moatshe (ANC) said that she thought that the DA was saying that there was a lack of diversification. She asked for a factual back-up of that statement because she was sure that the Committee had agreed that there was diversification. 

Mr Cuthbert clarified that it was not a negation of economic transformation but that the recommendation spoke to diversification of the products. That was why he had explained that it was a different economic principle. It was Economics 101. In order to diversify a market, one brought in substitutes and alternate products to make one more competitive when one went to the international market. It did not speak to the structure of the market, but to the diversification of products. The DA was not negating transformation.

The Chairperson asked if the recommendation could refer to both diversification and transformation of the industry. He did not think that the sky would fall.

Mr Cuthbert agreed that the sky would not fall.

The Chairperson noted that there was consensus by Committee Members.

Mr Cuthbert proposed a second recommendation:
2. Supporting measures to protect the sugar industry from imports that may be allegedly dumped into the South African market and to improve the industry’s competitiveness.

The Chairperson asked for comments. He noted consensus by the Committee.

Mr Cuthbert proposed a third recommendation:
3. Engaging the Minister of Finance with regards to the long-term budget allocation for the Manufacturing Competitiveness Enhancement Programme. 
Ms Mantashe said that it was a rehash of what was contained in the legacy report. It was a recommendation of the Fifth Parliament and that had already been addressed.

The Chairperson said that perhaps, with the things that Members were picking up, the Committee should do a backward check of the legacy reports of both Committees and pick up on some of the issues not covered so that the Committee follow through on them.

Ms Y Yako (EFF) said that the Chairperson had said exactly what she had wanted to say. Most of the Members were fairly new to the Committee and the issues being raised were from the Fifth Parliament and the new Members could not bring life to them because there was not a full understanding of the issues in their entirety. If a report was tabled, the new Members could put life into it and do their own research on the side, as well.  Perhaps the legacy report should be brought back because most of the issues were basically issues from the past.

The Chairperson agreed that the legacy report would have to be considered but Ms Mantashe had confirmed that the issue raised by Mr Cuthbert was a point from the Fifth Parliament and it was in order to carry through an issue that was relevant. There was no disagreement on that point.

Mr Cuthbert agreed, in irony, with the Member on his right (the EFF) but he had read the legacy report and it did address the issue. However, there was nothing wrong with repetition. Sometimes repetition was required in order to get a point across and he believed that the Committee should allow it in that report.

The Chairperson said that, in fact, Ms Mantashe had seconded Mr Cuthbert when saying that the recommendation came from the Fifth Parliament. It was just because of the English language that they could not support each other, but he heard both of them and agreed that it was incomplete business and the Committee supported them.

Mr Cuthbert proposed a fourth recommendation.
4. reviewing the Broad-Based Black Economic Empowerment (B-BBEE) legislation to enhance the economic empowerment of workers through ownership share schemes. 

Mr Cuthbert explained that redistribution and redress were concentrated in many respects and the recommendation was to try and ensure that redistribution and redress went down to grassroot levels so that people who were still suffering in abject poverty were able to lift themselves up through particular interventions.

Mr Mbuyane asked why the Committee was reviewing the B-BBEE. What did the scheme seek to achieve? B-BBEE was intended to address the triple challenge: poverty, inequality and also unemployment. If there was another scheme, it meant that the B-BBEE was not working. The B-BBEE scheme could not just be changed. What was to be reviewed about its current form?

The Secretary explained that in his presentation, the Minister had spoken about the different phases of B-BBEE and the challenges in each phase. That was captured in the Report. The next phase mentioned by the Minister was to make sure that workers, as mentioned by Mr Cuthbert, were also helped out of poverty.

The Content Advisor referred Members to page 19 in the Report which dealt with that point: The Minister alluded that the next phase of economic transformation would focus on the empowerment of workers as they are co-wealth creators.  In the conclusion, the ANC had said: The Committee welcomed the phased approach being taken with the B-BBEE policy. The Content Advisor suggested the recommendation tied in with that point.

Ms Mantashe agreed with what the Secretariat was saying. B-BBEE was work-in-progress. That was not a review.

Mr Mbuyane said that he was covered by Ms Mantashe. However, on page 19, the Minister could not be alluding to the Competition Act because that Act did not link to B-BBEE. The Competition Act looked at the mergers and acquisitions in business and what could be done to empower workers. B-BBEE had to be a separate entity because it had to be cross-cutting across all government departments and not restricted to the dti. The B-BBEE did not have teeth to ensure that people were compliant.

Mr Cuthbert stated that the Committee should be careful not to conflate issues. In the Western Cape, particularly, an incentive scheme promoted the concept that farm workers should not just be seen as labour on a farm but were able to participate in the benefits of their labour and gain some benefit on their return into a particular product and that was what that particular recommendation was suggesting. A legislative review would be necessary, giving details of what was required in terms of shares, etc. It might be included in an Amendment to the Companies Act.

The Chairperson said that there was no disagreement but perhaps that particular programme should be included in the Report so that the recommendation did not come up as a one-liner. In fact, he did not know if the point worked as a recommendation.

Mr Cuthbert proposed that the Secretariat make a proposal, including the Chair’s input.

The Secretary requested that the secretariat be permitted to make the proposal the following day as that was the first time that they had heard about it.

Ms Mantashe said that what was said to be a practice and policy in the Western Cape was actually a policy of the Department of Agriculture, Land Reform and Rural Development. It did not change the policy of B-BBEE. She agreed that the Secretariat had to craft it in a manner that would not change B-BBEE policy.

The Chairperson stated that the recommendation had to be at implementation level and not part of policy, but it to be had raised in the programme because if there was no context, there could be a wide-ranging debate and it would be difficult to implement something without the context.

Mr Cuthbert accepted the re-crafting of that recommendation. He had one further recommendation.
5. Requesting the Minister to instruct International Trade Administration Commission of South Africa (ITAC) to raise tariff rate for sugarcane products to $860 per ton to protect the industry from cheap imports.

The Content Advisor stated that the Minister could not instruct ITAC to review a tariff. Only the industry could request a review and the industry could only request a review once annually. The industry had requested a review the previous year. It was too soon for the industry to apply again for a review.

Mr Cuthbert asked for a copy of the particular regulation so that he could verify whether that was the case.

Ms Mantashe stated that the Content Advisor was correct, and the tariff had been reviewed less than a year previously.

The Chairperson had a problem with using a specific number in the recommendation. It was a risk as there could be changes that could find it difficult for the implementers would deal with a specific number. He asked what process was followed to adapt a tariff and whether the Committee sat to discuss the change in tariff.

Mr Cuthbert agreed to remove the specific number and he would consider a proposal from the Secretariat.

The Secretary informed the Chairperson that the ACDP had already commented on its input into the document

Mr Thring agreed that he was covered and would await the amendments from the Secretariat the following day.

The Secretary informed the Chairperson that there was consensus in the Committee on most of the points and that the Secretariat would amend, and re-word, where required. The following day, he would do a formal report on the changes and present the full report for adoption. The meeting could adjourn so that the Committee could go into the induction programme.

Closing remarks
The Chairperson reminded Members that a meeting would be held to review the report immediately after the House session the following day.

The formal meeting was adjourned.



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