Committee Reports on DTI & EDD Quarter 2 performance; Quarter 1 Programme for 2020

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Trade, Industry and Competition

03 December 2019
Chairperson: Mr D Nkosi (ANC)
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Meeting Summary

The second quarter performance report of the Departments of Trade and Industry and Economic Development (EDD) was considered by the Committee, leading to a discussion on the recommendations which would be submitted to Parliament.

One of the issues raised was the continued contraction of the economy, particularly in the agriculture, transport and construction sectors. Members wanted to know how the EDD’s R1.1 billion budget was impacting on those sectors. R549.8 million had been spent thus far, and 87.7% was on transfers and subsidies, but they did not know how successful this expenditure had been.  90% of small businesses in South Africa were under stress, but many did not know that there was relief available, so more work needed to be done to raise awareness of support offered to struggling businesses. Some departments had been returning unused money to Treasury because targets were not being met, and the government had to ensure that money got back into the economy

The matter of high salaries and bonuses being paid to executives and board members of the DTI and EDD was discussed. There were 14 entities that reported to the Committee, with chief executive officers and board members who were earning millions of rands, including bonuses, and this was an important issue that it should address.

The Committee accepted that it was important for the Committee to realise that the steel industry as a whole was in trouble in South Africa, not only taking the Arcelor Mittal situation and Saldanha into account. It agreed that master plans were needed for the entire steel industry. Therefore it was important that the Committee’s recommendations were included, especially when associating it with its first recommendation: “The Committee raised concerns with the continued contraction of economy, in particular the manufacturing and agricultural sectors, as these had the potential to contribute to job creation and poverty reduction.”

The Committee adopted its oversight programme and the first quarter programme for 2020, as well as the minutes of its past five meetings.

Meeting report

DTI and EDD: Second Quarter Report

Ms Margot Sheldon, Committee Content Advisor, gave a brief summary of what was in the second quarter report for the Department of Trade and Industry and the Economic Development Department.

The Chairperson said he would go through the report page by page and Members could ask questions, give comments and corrections if need be.

Mr S Mbuyane (ANC) expressed concern that three key performance indicators had been omitted.

Mr W Thring (ACDP) said that the KPIs were obviously a concern, but the report did indicate that they would be covered in the third quarter, so this should be waited for. He referred to the R549.8 million of the R1.1 billion annual budget spent so far, of which 87.7% was on transfers and subsidies, and asked how the success of the these transfers were measured in terms of small businesses developed, for instance. Without this, the Committee was just getting figures and would not know whether or not the spending had been profitable.

Ms Sheldon responded and said that on the first issue, the Committee would have to get that information from the Economic Development Department (EDD) itself if the Members felt that it was needed to be incorporated in the report. On the second issue, the transfers of the EDD were primarily to its entities, so the success would be related to what their performance was.

Mr Thring said one of the issues raised on pages 4 and 5 was the continued contraction of the economy, particularly in the agriculture, transport and construction sectors. How was the EDD’s R1.1 billion budget impacting those sectors? Did the Committee have any concerns regarding the Department’s policy towards those sectors? What were the barriers in those sectors, and could they be removed?

Mr Mbuyane said corrections had to be made on page 4 on the issues raised during the deliberations. The report that was received, attached to the minutes, responded directly to the issues that Mr Thring had raised

Mr Andre Hermans, Committee Secretary, said the responses would be submitted to both the EDD and DTI, although they were captured in the report.

Mr Thring said there had been an upsurge in the macadamia nuts export business in Mpumalanga, which was highly irrigation intensive. Previously, there had been forestry farming in the area, which was weather-dependent, and there was concern that this new activity would cause a reduction in available groundwater. As South Africa was a water scarce country, that was something that needed to be monitored.

With regard to pages 6 and 7, it was reported that some 90% of small businesses in South Africa were under stress, but many of them may not know that there was relief available. Was the EDD communicating this to the small, medium and micro enterprise (SMME) sector? Although participation and awareness was being talked about, was it being done? 

The Chairperson responded that this also involved the DTI, which also worked with small businesses, and its impact should also be measured, and perhaps how it cooperates, partners and works with the Department of Small Business Development (DSBD). The Committee may have to look at a joint approach to get sense of how those projects were actually succeeding, and what the challenges might be.

Mr Mbuyane said Members of Parliament could use their constituency offices to inform and educate small business enterprises to access the various incentives and grants, because it was part of the responsibility of their offices to share and give information to the public. With regards to page 8, the Department must be acknowledged for the revised parameters for Industrial Development Corporation funding, as these were measures that the EDD was trying to implement that would assist the Committee to deal with the challenges.

Mr Thring said that with the economy performing poorly in general, and certain sectors in particular,  page 10 highlighted that 163 out of 250 enterprises or projects approved for financial support across all incentives had not reached their targets, and the economy needed every bit of help that it could get. Some departments had been returning unused money back to Treasury because targets were not met, so government had to ensure that this money got back into the economy.

Ms P Mantashe (ANC) referred to the second last paragraph on page 10, and said she wanted the Committee to receive feedback at the end of the financial year on whether the Department had kept its plan and promise of recruiting more companies by then.

Mr Mbuyane said people needed to be educated on how to apply for assistance, because the fewer applications received, the fewer that get approved. The Committee had a responsibility to inform people about the incentives and encourage them to apply.

With regard to Ms Mantashe’s point, the Department had to be more aggressive towards achieving its targeted recruitment, and the Committee had a responsibility to make sure that the target was reached by informing and educating the constituencies.

The Chairperson referred to anomalies such as annual targets being exceeded, even though there were no milestones for the second quarter. 

One of the five targets that had been missed was a quarterly implementation report on the Industrial Policy Action Plan (IPAP), which should have been prepared for the Minister’s Review Meetings, but had not been prepared. This was due to the Re-imagined Industrial Strategy having been approved by the Cabinet Lekgotla in June 2019, which emphasised the development of Sector Development Plans (Masterplans). The Chairperson said that without the report, the Committee could not check whether what needed to be done had been achieved or not. The same applied to the target for designation requests being missed. These were important areas for the Committee to look at.

Ms Sheldon said the Committee should note that in the case of the quarterly implementation report on the Industrial Policy Action Plan (IPAP), this was now falling away because of the policy shift to the re-imagined industrial strategy, so there was a need to adjust the annual performance plan (APP). but this could not happen until probably after the medium term expenditure framework (MTEF) period.

Mr M Cuthbert (DA), said that when the Companies and Intellectual Property Commission (CIPC) came to brief the committee, it had report it had sent a team of developers to the Department of Employment and Labour to get the Unemployment Insurance Fund (UIF) and Compensation Fund (CF) registrations down to one day, so this page in the report had to be corrected, because it created the impression that they were going to be able to do it, but were still investigating whether or not it was, in fact, possible

Ms Sheldon said she was a little bit concerned as to whether the Black Industrialist Scheme (BIS) portal actually did have these services available, irrespective of whether they were within a two to three day type of time frame. However, there was obviously work that needed to be done to improve the time frame.

Mr Cuthbert said he had to correct Ms Sheldon in this particular instance, as the CIPC had informed the Committee that they were not able to do the UIF or the Workmen’s Compensation Registration Fund on the BIS portal at the moment, so it was a factually incorrect to say they could do it within a specified period of time, or that they were able to do it in the first place, because they had not yet been able to integrate that into their online system, so that point had to be corrected.

Mr Mbuyane said that this had been possible since 2 November -- that it would take only one day to register a company

Mr Cuthbert said this was slightly incorrect, because the CIPC had told the Committee previously that there were certain functions that had a limited amount of functionality, but the UIF and CF were surely not working at this point in time. They were not tested in the pilot project, because when the Committee went to Wesgrow for the presentation, the CIPC had said that those were the two elements that they were still working on. The Committee could verify with the CIPC before concluding on the statement.

Mr Hermans said that he would verificaty the situation.

Ms Mantashe asked about the budget for the Industrial Development Division (IDD), as she wanted clarity has to whether with the remaining funds it would be able to continue with its priority programmes until the end of the year, or whether they would be requesting additional funds.

Mr Cuthbert asked if Ms Mantashe’s comment was slightly premature, considering this was one of the DA’s suggested recommendations and conclusions, and her comment should maybe just be left until that part of the report

Mr Hermans said that the ANC had also submitted concluding remarks, and the other parties would have to look at them and either indicate their agreement to what was being proposed, or their disagreement, or propose amendments to them.

The Chairperson went through the concluding remarks of the ANC page by page.

Ms Sheldon said that it was realised that the matter of high salaries and bonuses being paid to executives and board members of the DTI and EDD had not been addressed on 12 November, and there was no record of discussions related to it. However, the understanding was that the matter was raised one or more of the entities’ discussions, so this item should perhaps be moved to the entities’ report.

Mr D Macpherson (DA) said it was astounding that there was no record of that discussion, because he had a very clear recollection that discussion with the Director-General (DG). In fact, the DG had made the point himself that he had worked as the DG for many years and had never received a bonus, so it was a very pertinent discussion of this Committee. It was vitally important that the Committee was aware that the public sector wage bill was one of the biggest threats to the economy and the indebtedness of the country at the moment. The Committee was therefore perfectly equipped to make this one of its recommendations, because there were 14 entities that reported to the Committee, with CEOs and board members who were earning millions of rands, including bonuses.

Ms Mantashe said she remembered that she was one of the people who had raised this point with the DG, and she was not sure why it had not been captured. She agreed with Mr Macpherson that it had been raised

Mr Mbuyane proposed that this point be made a recommendation to the Department, and not a concluding remark, because the Committee might also want to follow up regarding what was being implemented in the Department.

Mr Hermans said that they were not disputing that there had been engagement on the matter. They were saying that the report that the Committee was dealing with referred to the proceedings of 12 November, and the issue had not been raised then. A report was being prepared on the Department’s entities, and this report would capture the concluding remarks as well as the proposed recommendation that the parties were making.

Mr Macpherson said that nevertheless, there was absolutely nothing that stopped the Committee from putting it in a report that went to the House -- which the Minister needed to act on -- so it was strongly suggested that the Committee ws within its rights to include it as a recommendation. Once the report was adopted in the House, a separate report would come to the Committee on those entities. It did not have to be one or the other -- it could be both.

Mr Hermans said that ultimately it would be the decision of the Committee on where it would be put, but the entities’ report would also be submitted to the House for consideration, and there would most likely be recommendations and conclusions 

The Chairperson suggested that the Committee proceed, because the DA’s input was mainly recommendations.

The Chairperson went through the recommendations page by page.

The Chairperson handed over to an official to speak about skills.

Skills and knowledge improvement

Mr Dube said the Members had responded very well and cooperated encouragingly to the assessment form that had been distributed, showing they had a clear to improve their skills and the knowledge. Ten responses had been received, which meant only one had not responded.

Of the 10 who responded, nine Members had a matric, three had honours degrees, one had an undergraduate degree, and three had diplomas. The skills gap areas that the members highlighted in order of priority were governance and leadership, management in general, project management and development, policy formulation, conflict management, public finance, trade and industry-related training, research, and economic development. When the diverse nature of the population was looked at in terms of the level of skills, it was recommended that it would be better to start off with a National Qualify Framework (NQF) Senior Certificate qualification, because the main aim was to get a recognised qualification. Of course, general training was also important, but in this particularly case the brief was to target a recognised qualification. It was therefore determined that the starting point would be an NQF 6/National Senior Certificate that was targeted towards trade and industry matters. Once the Members completed this, the diverse group would be on an equal footing and then there would be an opportunity to proceed to a postgraduate diploma (NQF 7 to 8), and beyond that the master’s qualification was available. The NQF 6 Senior Certificate in trade and industry should not be viewed as a limitation, as there were other possibilities beyond that.

There could be an option that institutions of higher learning could provide a ready-made off the shelf packaged programme that could address these requirements. The programme that had come closest was the one that came to the Committee previously from the Nelson Mandela School of Public Governance at the University of Cape Town (UCT), which they no longer offered. However, what they do have could be modelled more easily than the other institutions of higher learning. The best outcome would be if UCT could provide a programme that was already available, and that did not require further applications through the university’s faculty of economics, then the university council, and then the National Qualifications Authority (NQA). This would be a long process, because whatever they submitted, the NQA would always request certain adjustments and certain alignments so that everything was up to their standards. The determination of the faculty was being awaited at this stage, and the Committee secretary was liaising with them in an effort to shorten the time frames that the university was trying to give.

The Chairperson said that because it was just a presentation, questions would not be asked but it was a submission.

Ms J Hermans (ANC) said that Mr Dube spoke about time frames, but she did not see reference to this in the document, and asked if it was proposed that the time frames would be added.

The Chairperson agreed that there should be specifics so the Committee actually got a sense of what was involved for each of the Members, with concrete proposals of what options there were, and it would be taken from there

Ms Y Yako (EFF) wanted to know whether the time frames were they expected to apply from next year, and what the Committee need to do from now.

Mr Dube said were two options. One was where there was an already existing programme that could be taken off the shelf, and this would be implementable immediately. The second option was if there was no already existing programme readily available, where applications would have to be made, so this option would take quite long. 

Ms Hermans said it would be useful for the Committee to get a presentation when things were in place. Mr Dube should come back when there was a firm proposal from which the Committee could choose.

The Chairperson thanked Mr Dube, and said that Mr Macpherson could go through his document and then get the Committee to resolve on the recommendations..

Recommendations

Mr Macpherson went through the DA’s recommendations.

Mr F Mulder (FF+) referred to the first recommendation of the DA, “that the House requests that the Minister of Trade and Industry should consider engaging the Minister of Small Business Development to develop a Masterplan to revitalise township and rural economies within two months of the adoption of the report,” and said this was very important when related to the Committee’s conclusions. It had pointed out that the situation at Arcelor Mittal and Saldanha, the steel industry as a whole was in trouble in South Africa. Therefore it was important that the DA’s recommendations were included, especially when associating it with its first recommendation: “The Committee raised concerns with the continued contraction of economy, in particular the manufacturing and agricultural sectors, as these have the potential to contribute to job creation and poverty reduction.”

Ms Mantashe said, with regard to the first recommendation, her understanding was that the Department had already started looking into a master plan for all sectors, and she was uncertain as to whether it would be correct to say that the Department must commission a master plan when they had already started, so she wanted to check if the word ‘commission’ would be appropriate. The second recommendation addressed the question she had posed earlier regarding the outstanding or remaining funds in entities or departments, where there could be a movement of funds to programmes other than those intended before the end of the financial year, or earlier than the third quarter,

Mr Macpherson said the Minister or the Department needed to present all the master plans to the Committee because there had not been sight of all of them, and that would allow it to come up to speed and address specific issues like the steel master plan, and rephrase the recommendation to make it more inclusive. Both recommendations 1 and 2 deserved to be in the recommendations because unless the Committee recommended to the House that the Minister did what was recommended there was no compulsion on the Minister to do so. It would allow the Committee to do its work better if concrete resolutions were being sent to the Minister.  

Mr Mbuyane said because there was already a master-plan in place, the Committee was not going to deal only with the Arcelor Mittal situation, because there was also Saldanha in the process. Therefore  there had to be one inclusive master plan for the whole steel industry. Secondly, regarding the adjusting and channelling of unused funds, the issue was there could not be other departmental programmes channelling funds to the Industrial Development Department (IDD), only IDD programmes being channelled to other programmes that had funds that were not being used on industrial development. The Departmental programmes must be removed. in terms of the proposal.

Mr Hermans said the Committee would be receiving a detailed response on the status of the master plans shortly from the DTI.

Mr Mbuyane said that in a nutshell, the Committee was agreeing on the report. The report should be moved and supported, and the secretariat just needed to look at the grammar and how it was presented. He proposed adopting the report as it was.

Mr Macpherson said that he agreed with Mr Mbuyane’s approach. The report could be adopted in principle, and then a final draft with the correct wording could be sent out.

Mr Hermans said he had no issue with the proposal, but some issues had been raised about the legislative programme, which were in-house matters that could be dealt with in a letter to the Department requesting the necessary details.

Mr Macpherson said that these were issues that the Committee had asked for repeatedly, but had not been provided to it. No matter how many letters or how many times it had requested the Department about this, these were views and decisions of the Committee, and that was what had to be respected.

Ms Mantashe said she acknowledged what Mr Macpherson was saying, but requested that the Committee wait for the response coming from the Department, which was promised for the end of the week at the latest. If the Department did not answer the question about which legislation it was going to put on the table, the Committee should then decide on what to do instead of putting it on the report now.

Mr Macpherson said that if was not in the report and not agreed to now, the Committee would be having the same discussion next year when considering the next quarterly report, and then all of a sudden it would be told that there was another letter that was coming. Every time the Committee considered these reports and wanted to do something, it was amazing how there was always a letter coming from the Department to answer questions. Therefore, there was no harm in putting it in the recommendations and if the Department failed to respond, which to date they continued to do, then the Committee was covered. If they did happen to respond, then the issue became moot.

The Chairperson said that he was picking up that there might be a problem with the reporting to the Committee from the Chairperson and the secretariat regarding communication with Ministry and the Department. This was an issue that the Committee may need to sort out in a way, such as accountability for correspondence that the Committee might have sent through.  There was work that was being done through secretariat and the office of the Chairperson which the Committee was not being informed about, so maybe it would be very helpful for the secretariat to make a submission on the communication situation, and get a response from the Department or ministry on the specific issues involved. It might be found that what was required had actually been done, and if not, it could be picked up from there as a Committee

Mr Hermans said he wanted a clear instruction from the Committee, that the issue of the master plans and the legislative programmes must be included as part of the recommendations, because if that was the instruction, it would be included

Mr Mbuyane said that it had been agreed upon.

Mr Macpherson said that he was comfortable with that, and seconded the adoption of the report.

Committee matters

The Committee minutes for 11 October, 12 November, 13 November, 19 November and 27 November 2019 were considered and adopted by the Committee.

The oversight programme for 2020, and the first quarter programme for next year were agreed to

The meeting was adjourned.

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