The Department of Trade and Industry conducted an induction session, focusing mainly on the following divisions: International Trade and Economic Development (ITED), Trade and Investment South Africa (TISA) and Invest South Africa (InvestSA).
After the divisions had presented their objectives and strategies, the Members expressed their concerns. These included the crisis in the sugar industry as a result of the flood of imports, what the Department was doing to improve cross-border infrastructure development, and how South Africa was benefiting from its membership of BRICS (Brazil, Russia, India, China and South Africa). This because its trade with BRICS was still very skewed towards the export of primary products from South Africa.
Other issues raised were the impact of a significant drop in the budget for the clearing of investments, the need to clarify whether the InvestSA one-stop-shop (OSS) was linked to economic zones, and what criteria were used to determine in which provinces OSS offices were located. The Committee also said it needed an overview of what countries South Africa was currently dealing with, what products were involved, and the scale of the trading.
The Committee agreed that there was a need to improve its global “ease of doing business” ranking, and the Chairperson proposed a joint meeting with the Department of Employment and Labour and other departments in order to improve facilitation, or for unblocking “red tape” areas.
The Chairperson said the meeting was not about looking into an in-depth policy debate nor was it a big engagement but rather to just familiarise Members on the structure of the Department and to know the officials who were responsible for the divisions. The focus of the meeting was to look at the overview of the following divisions:
- International Trade and Economic Development (ITED);
- Trade and Investment South Africa (TISA); and
- Investment South Africa (ISA).
International Trade and Economic Development (ITED)
Ambassador Xavier Carim, Deputy Director General (DDG): International Trade and Economic Development, said that this was a policy division in the Department of Trade and Industry (DTI) which was responsible for trade and investment policy, conducting trade negotiations, investment treaties, managing bilateral trade relations, and advancing South Africa’s trade and developmental agenda in Africa.
He went on to describe what their objective priorities were, going forward. (See presentation).
The DDG said that promoting trade, investment and exports required coordination between divisions in the DTI, as well as inter-departmental coordination between the Department of International Relations and Cooperation (DIRCO), the Department of Agriculture, Forestry and Fisheries (DAFF), National Treasury (NT) and South African Revenue Services (SARS). There was a need for coordination between the National Economic Development and Labour Council (NEDLAC) and the Agricultural Trade Forum. Also, there should be engagements with other governments -- the DTI co-chaired the economic committees of the Bi-National Commissions (BNCs)/Inter-Ministerial Committees (IMCs). There was also a need for coordination with the Southern African Customs Union (SACU) member states. Regular reporting to Parliament was also another form of coordination which was required.
Trade and Investment South Africa (TISA)
Ms Lerato Mataboge. DDG: Trade and Investment South Africa, said TISA was a division of the Department of Trade and Industry, and was tasked with growing the national exporter base and the volume and value of exports by South Africa. The National Development Plan (NDP) had set a target of growing exports by 6% per annum by 2030. At the moment, exports accounted for 32% of South Africa’s gross domestic product (GDP). Exports therefore had the potential to increase labour productivity, improve labour absorption in the economy and improve the terms of trade for South Africa.
The investment drive and the US$100 billion target may not be reached if the value-proposition presented to investors was not linked to exports. She explained that companies invested where they had access to economies of scale and diverse markets for their goods and services.
Their alignment to the NDP and Medium Term Strategic Framework (MTSF) was that South Africa had to grow in total exports by 6% a year, and exports of manufactured products should grow by 7% per annum, thereby doubling in value in 10 years. Exports of manufactured products should constitute 40% of total manufacturing output by 2030 in value, and exports of services should also constitute 40% of total services supplied by 2030 in value. South Africa aimed to capture 1% of total world exports by 2030 in value.
The DDG described their strategic objectives to achieve this. (See presentation)
Investment South Africa (InvestSA)
My Yunus Hoosen, Acting Head: InvestSA, said that the entity had been formally established on 1 April 2016 in the National Investment Agency of government to support foreign direct investment flows, to promote domestic investment and to establish a one-stop-shop (OSS) service to perform investment promotion, investor facilitation, and aftercare support to investors.
Since its establishment, it had made strides towards attracting and facilitating large scale investments and had since been the focal point and conduit for domestic and foreign direct investments for South Africa. InvestSA had also gained global recognition and had received numerous global accolades in efforts to promote investment in the country.
The core programme responsibilities included investment promotion to facilitate an increase in the quality of foreign direct investment and domestic and outward investment, by providing targeted lead generation investment attraction and recruitment. The other responsibility was investment facilitation through its OSS, which promoted and facilitated investment and provided support services. This sub-programme also provided a specialist advisory service, fast tracked and unblocked processes, and reduced red tape for investors. The last responsibility was investment support and aftercare to provide specialist advisory services through research, information, marketing, aftercare, and policy advocacy to facilitate new investment, and to retain and expand existing investment.
Mr Hoosen went on to state their functional objectives and key targets. (See Presentation)
InvestSA actively marketed, promoted and facilitated investment in key high-yielding growth sectors of the South African economy, such as the green industries, services industries, resource-based industries, manufacturing and advanced manufacturing.
It had been mandated by the Inter-ministerial Committee (IMC) on Investment and by the Presidency to champion the establishment of OSS. The purpose of the OSS was to serve as a focal point of contact in government for all investors by coordinating and facilitating the relevant government Departments involved in regulatory matters -- registration, permits and licensing. In March 2017, InvestSA had launched its national OSS in Pretoria, which was followed by the launch of three provincial one-stop-shops during 2017/18 in KwaZulu-Natal (KZN), Gauteng and the Western Cape.
Mr Hoosen said the President, in his State of the Nation Address (SONA), said the government was committed to moving South Africa to 50th position in the World Bank survey on the “ease of doing business” over the next three years. In the last 10 years, South Africa’s ranking had declined by 50 places, and it was currently ranked at 82. In 2006, it had been ranked in the top 30.
In March 2019, the DTI had signed an advisory agreement with the International Finance Corporation (World Bank Group) to formalise the work pertaining to the Investment Climate Reform Programme (ICRP). Improving South Africa’s “doing business” performance was key to strengthening the country’s investment performance, as annual ease of doing business results were used to position and market investment attractiveness to potential investors.
The key partners for InvestSA were the Presidency (Inter-Ministerial Committee on Investment), provincial Departments of Economic Development, provincial investment promotion agencies, local government investment promotion agencies, the World Association of Investment Promotion Agencies (WAIPA), the United Nations Conference on Trade and Development (UNCTAD), and the World Bank Group.
Ms P Mantashe (ANC) said that the country was currently faced with a crisis in the sugar industry as a result of the flood of imports, which had led to the weakening of the industry. One of the objectives mentioned was to protect South Africa’s industries. What role were they playing in the case of the sugar industry? What had they done in assisting with cross-border infrastructure development?
Mr S Mbuyane (ANC) said that TISA was proposing on doubling in 10 years exports of manufactured products so that they grew by 7% a year in value. He asked if they had any proposals on what they planned to do to achieve this.
Mr M Cuthbert (DA) asked at what level the DTI representatives sat in the respective embassies across the globe.
Mr Mbuyane asked the Department to clearly stipulate what strategy they had to sustain the Department going forward. He also asked where the 46 offices TISA had mentioned were located and how they could be accessed. Regarding international business operations, TISA had mentioned that they provided strategic commercial leadership in multilateral platforms, such as BRICS (Brazil, Russia, India, China and South Africa) and the G-20. In terms of BRICS, in what way was South Africa being assisted by this agreement? What strategy was in place to capacitate South Africa to beneficiate their raw materials, rather than just supplying raw materials to other countries?
Mr Cuthbert said that there had been a significant drop in the budget for the clearing committee – what was the impact operationally of not having an adequate budget to clear investments?
Ms Mantashe asked the Department to give an overview of what countries they were currently dealing with, what products were involved and at what scale they were trading. What was their plan to increase both the exports and the countries that they traded, since there were new Committee Members and they needed an understanding of what they were dealing with.
Ms Y Yako (EFF) asked if the InvestSA OSS was linked to economic zones, or if they were in different places. Why did they choose the five they had, instead of incorporating the others as well?
Mr Mbuyane asked what criteria the InvestSA used to decide in which provinces to establish the OSS offices?
Mr Cuthbert commented that workmen’s compensation added more days to the process that affected the ease of doing business, if one drew down into the index itself. What were they doing to engage the Department of Employment and Labour to hold them accountable?
The Chairperson suggested the possibility of a joint meeting with the Department of Employment and Labour in order to improve facilitation or for unblocking.
Mr Cuthbert welcomed the suggestion.
Ambassador Carim (ITED) referred to the issue of sugar, and said that South Africa’s sugar industry was reasonably competitive. When the industry felt that a product was not sufficiently protected they could lodge an application with ITED, as they had an Act that regulated the investigation, and then make a recommendation. The DDG noted that the international reference price which results in tariffs in South Africa, was set very low, meaning that if the world price of sugar was below the reference price then the tariff of South Africa ticked in. The tariff could go down, depending on the difference between the reference price and the actual world price.
The development of a plan for the sugar industry, together with the Sugar Association of South Africa (SASA) included not only the tariff issue but also various measures that the industry had to undertake in order to approach the whole sugar matter on a comprehensive basis.
Ambassador Carim said infrastructure development was not part of the mandate of the DTI -- they were not the department that was driving it.
On the issue of the BRICS, the DDG said that there was no BRICS agreement. It was a cooperation forum. There was no free trade in BRICS, and there were no talks of creating such an agreement.
Ms Mataboge said TISA had 46 offices, but they were capacitated differently. For example, they had sent 27 diplomats abroad. All of them were at a counsellor level, with four of them at the minister counsellor level in Washington, Brussels, Ethiopia and Geneva. The remaining offices were capacitated by marketing officers who were locally recruited personnel, and were experts in their field. The reason they had more local marketing officers was that it was too costly to send ambassadors abroad. She added that it would be ideal to have more foreign economic representatives in the African continent based on the strategies they had set, but they were mindful of their budget constraints.
The DDG commented that one of the reasons they had joined the BRICS around 2010, was that they had an understanding that BRICS was a very formidable enlarged economy which contributed a sizeable amount to global trade. Therefore it had been important for them to become part of that grouping, not only because of the market opportunities that it presented, but also because it gave them a voice in the global economy to be able to speak and influence certain policy developments.
They had noted an upward trend since joining the BRICS with their exports to BRICS countries. There was also a similar uptrend in terms of investments into South Africa. Interestingly South Africa’s investments into BRICS countries were higher than BRICS’s investments in South Africa. A number of South African entities had invested in the BRICS economy.
Although there had been a growth in trade with BRICS, the DDG observed that as mentioned by Mr Mbuyane, it was still very skewed towards primary products from South Africa. However, they were developing strategies to deal with this.
Regarding provincial coordination, one of the things that they did annually throughout the provinces was to conduct outreach programmes on how to create an export culture. Perhaps there was room for them to broaden the focus of these outreach programmes beyond export development to some of the instruments like export promotion and investment promotion. One of the things they were working on was the need to be closer to their customers in so far as export drives was concerned. The plan was to roll out offices and provide export information in the provinces.
On the issue of how they planned to double their exports, the DDG said the strategy was to spend more money while chasing less output, but having a bigger impact. It was also about strategically using bilateral platforms, and using diplomatic capital to resolve some of the marketing problems they had. A lot of the problems were regulatory, political and bureaucratic, so there was a need to use these platforms much more. Another strategy was having a sector and product selection going forward, which meant promoting much fewer products but promoting them much more aggressively and looking for greater impact.
Mr Hoosen responded to questions on the InvestSA OSS, and said they went to every province and engaged in deep consultations. They wanted the provinces to come to them with strategies and identify what they wanted for their provinces in order to own the process through the consultations. This year, they wanted to consult with Limpopo, the Northern Cape and Free State. Once a province was ready, they went to them so that they could start the process.
DDG Mataboge referred to the issue of cross-border infrastructure, and invited the Committee to come and see one or two of the projects they were working on. They had oversight over the Export Credit Insurance Corporation (ECIC), and supported quite a number of projects, including capital projects on the continent. They also had within the DTI a capital visibility fund for visibility studies to invest in infrastructure. They also had a cross-border infrastructure methodology they were rolling out.
Committee oversight plans
The Chairperson concluded by giving the Committee Secretary an opportunity to speak on some of the plans for the Committee.
The Secretary said that the Committee was going to conduct an oversight visit soon, during which they would go to all the practical sites in order for Members to see at first hand what was really transpiring.
In addition, they would conduct an oversight visit which would focus on the Department itself, where they would be shown how operationally things were done.
The meeting was adjourned.
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