A joint virtual meeting of the portfolio committee on trade and industry and the select committee on trade and industry, economic development, small business development, tourism, employment and labour was briefed by the Department of Trade, Industry and Competition on its Annual Performance Plan 2020/21 and Strategic Plan 2020/25. After an opening statement by the Minister, the question of whether to receive the briefing at all was raised, in light of the fact that the Annual Performance Plan would have to be amended in response to the Covid-19 pandemic. It was clarified that that a new special appropriations bill would be tabled in July that would take account of the impact of the Covid-19 pandemic on the country as a whole. The impact of the government’s response to the pandemic on the budget would be factored in once this bill was presented. Despite the disagreement of some Members, the briefing was received.
The Department’s presentation included a global and local overview of the economic effects of Covid-19, looked at the work of each of the its ten strategic programmes, and included a budget allocation, although it was noted that much was subject to change due to the new special appropriations bill that would be tabled in July.
The Department had a total budget of R11 billion for the 2020/21 financial year, of which 61% or R6.8 billion is expected to be transferred to public corporations and private enterprises for incentives programmes. Of the total budget, 19% or R2.1 billion will be transferred to the departmental entities for the fulfillment of the set mandates.
The Department reported that the country’s economy was expected to shrink by approximately 6%. The risks to the Outlook included, amongst others, the outbreak and rapid spread of the COVID-19 pandemic; rising geopolitical tensions, and constrained fiscal space in the Emerging Market and Developing Economies.
To improve growth prospects for the domestic economy, interventions include amongst others included implementation of the R500 billion COVID-19 economic recovery package and the implementation of the automotive sector, poultry industry and retail - clothing, textiles, leather and footwear industries Master Plans, while others are being developed.
Members asked questions about the Department’s support for businesses affected by the lockdown and its support for black industrialists, argued for and against the continuation of black economic empowerment during the state of disaster, and sought detail on special economic zones, industrial parks, value-added industrial development and international trade strategies
[PMG missed the start of the meeting where the Committee approved the agenda for the day].
Co-Chairperson Nkosi invited Mr Ebrahim Patel, Minister of Trade, Industry and Competition to introduce his delegation.
Minister Patel said that the presentation would be given by Mr Lionel October, Director-General, Department of Trade, Industry and Competition (DTIC). Mr Fikile Majola, Deputy Minister, DTIC, would remain in the meeting to respond to members’ questions.
Minister Patel explained that the Strategic Plan (SP) had been in preparation since the middle of 2019, after the Sixth Administration was constituted. The Annual Performance Plan (APP) had been prepared as part of the Department’s 2020 budget bid. The world had changed dramatically due to the Covid-19 pandemic, and this would impact the APP substantially, as well as the SP. South Africa had learnt the importance of local supply chains for critical medical supplies. The wisdom of policies to ensure food security was being revealed. The APP was an instrument to help create an economy that served the needs of all South Africans, which remained an absolute goal. He committed to returning to the committees to present changes to the APP and SP in response to the pandemic. The presentation would deal specifically with the APP.
Co-Chairperson Nkosi said that a new special appropriations bill would be tabled in July that would take account of the impact of the Covid-19 pandemic on the country as a whole. The impact of the government’s response to the pandemic on the budget would be factored in once this bill was presented.
Mr D Macpherson (DA) asked for clarity on whether it was in order to consider the APP given that it was certain to be changed in response to the pandemic.
Ms J Hermans (ANC) said that although the APP had been prepared before the pandemic had begun; the Department should be allowed to present it as is and give some concluding remarks on the way forward.
Ms S Boshoff (DA, Mpumalanga) agreed with Mr Macpherson. Earlier in the day the Department of Tourism had postponed the presentation of its APP, and this had not conflicted with the Division of Revenue Amendment (DORA) Bill.
Mr M Cuthbert (DA), Mr J Mulder (FF+) and Mr W Thring (ACDP) also agreed with Mr Macpherson.
Ms P Mantashe (ANC), Ms N Motaung (ANC) and Mr M Dangor (ANC, Gauteng) agreed that the meeting should proceed as planned
Mr M Mmoeimang (ANC, Northern Cape) agreed that the meeting should proceed according to the agenda. The case of the Department of Tourism was different. In that case, the Minister had written a letter to the Speaker of Parliament and the Chairperson of the National Council of Provinces (NCOP) to request a postponement, and consideration of this letter had been on the agenda of the meeting.
Ms Y Yako (EFF) spoke (remarks inaudible)
Ms R Moatshe (ANC) agreed that the meeting should follow the agenda.
Ms Hermans observed that no-one had objected to the agenda when it was tabled. Mr Macpherson’s point had been raised at the wrong time. When the amendments in response to the pandemic were made, the Committee would then consider them.
Mr T Brauteseth (DA, Kwazulu-Natal) suggested putting the matter to a vote.
Co-Chairperson Rayi said that several departments had presented APPs with the understanding from National Treasury that they may need to be amended in response to the pandemic. He reiterated that the Minister of Tourism had written to the Speaker of Parliament and the NCOP Chairperson asking to withdraw the APP because the tourism sector was so deeply affected by the pandemic that its APP was irrelevant. The DTIC should present its APP and revise it when the new special appropriations bill is tabled.
Co-Chairperson Nkosi asked Mr October to proceed with the presentation.
Mr Macpherson objected and pointed out that a vote had been requested.
Co-Chairperson Nkosi reminded Mr Macpherson that he had asked a question for clarity, and he was now clarifying that the presentation would be received.
Mr Andre Hermans, Secretary, Portfolio Committee on Trade and Industry, read a letter from the Speaker of Parliament regarding departmental budget votes. The letter explained that the Minister of Finance would table an adjustment budget but only after the current budget was adopted, and committees should proceed with the work before them.
Co-Chairperson Nkosi accepted this explanation and proposed continuing with the agenda of the meeting.
Mr Macpherson asked that the DA’s objection to the presentation going ahead to be noted.
Mr Thring and Ms Mantashe accepted the explanations for proceeding with the presentation.
Mr Mulder said that it would have been useful to have heard this information earlier. He reiterated his position that the presentation should not be given.
Co-Chairperson Nkosi asked if there were any further objections to receiving the presentation.
Mr Macpherson still wanted the Committee to have a vote.
Mr Hermans reminded the Committee that the agenda had been adopted and about the contents of the Speaker’s letter. The Committee could, however, vote on the matter.
Co-Chairperson Nkosi noted Mr Macpherson’s request for a vote, and called for the presentation to be made.
Mr Macpherson repeatedly interrupted Co-Chairperson Nkosi with calls for a vote.
Ms Mantashe objected to Mr Macpherson’s conduct.
Co-Chairperson Nkosi observed that the agenda had been adopted without objections, but the objection of Mr Macpherson, Mr Cuthbert, Ms Boshoff, Mr Brauteseth and Mr J Londt (DA, Western Cape).
Briefing by the Department of Trade, Industry and Competition on its Strategic Plan 2020/25 and its Annual Performance Plan 2020/21
Mr October said that the global economy was expected to shrink by 3% in 2020 due to the Covid-19 pandemic, according to the International Monetary Fund (IMF), and South Africa’s economy was expected to shrink by approximately 6%.
The risks to the Outlook were as follows:
- The outbreak and rapid spread of the COVID-19 pandemic;
- South Africa (SA) is likely to feel the effects of COVID-19 from various facets – of both domestic and international;
- Rising geopolitical tensions, notably between the United States and Iran;
- Higher tariff barriers between the United States and China;
- Weather-related disasters such as tornados, tropical storms, floods, heat waves, droughts, and wild fires which have imposed severe humanitarian costs and livelihood loss across multiple regions in recent years;
- Constrained fiscal space in the Emerging Market and Developing Economies (EMDEs)
To improve growth prospects for the domestic economy, interventions include amongst others:
- Implementation of the R500 billion COVID-19 economic recovery package;
- The implementation of the automotive sector, poultry industry and retail - clothing, textiles, leather and footwear industries Master Plans, while others are being developed;
- The implementation of the Integrated Resource Plan 2019, which will open the way for considerable investments in renewable energy generation (particularly wind power) and related components manufacturing;
- The implementation of investment projects announced at the second Investment Conference in 2018 and 2019
The APP and SP targets will be reviewed to ensure better alignment to the response strategy to economic downturn and COVID-19 pandemic. COVID-19 will impose significant costs on the economy. Departmental priorities and budgets will all need to be reviewed as soon as the scale of the challenges and the costs have been better determined, based on success with flattening the curve and enabling the step-by-step reopening of the economy. Additional funding may be required to assist affected sectors in the economy and stimulate investment by easing the cost of doing business while sustaining existing jobs. This could take the form of a combination of grant and loan funding towards working capital, machinery and equipment, targeting manufacturing and its related sectors. Discussions are underway with National Treasury.
Mr October gave an overview of the Department’s ten key strategic programmes, noting in particular where they were expected to be impacted by the Covid-19 pandemic. Priorities, budgets and targets would have to be reviewed.
There are 4 output indicators for Programme 1. Over the next 5 years, the employment of people with disabilities is targeted at 3.5%, women at senior level is targeted at 50% and interns at 162.
There are 3 output indicators for Programme 2 which contribute towards 90% of tariff lines reduced by 20% per year over the next 5 years.
There are 4 output indicators for Programme 3. They contribute towards the targeted achievement of 10 implementation reports on SEZs and 10 Industrial Parks respectively, 27 Industrial Parks revitalised and 10 implementation reports on B-BBEE legislation over the 5 year period.
There are 4 output indicators for Programme 4, which contribute towards the 5 year target of: 5 Master Plans developed by end of 2021, 20 progress reports on the implementation of Master Plans, 10 products designated by 2025.
There are 2 output indicators under Programme 5 that contribute towards the development or review of legislation in the areas of gambling, companies, consumer protection, credit and lotteries or any legislation announced by Minister and at the State of the Nation Address (SONA).
There are 4 output indicators under Programme 6 contributing to the 5 year target of R75 billion private sector investment leveraged and annual targets on jobs and enterprises achieved. The target is reduced due to discontinuation of 12I tax allowance and the economic impact of COVID-19. The division is in discussion with Treasury for additional funding for tax allowance and an economic responsive package to assist companies in distress as well as to stimulate investment while retaining existing jobs.
The Department had a total budget of R11 billion for the 2020/21 financial year, of which 61% or R6.8 billion is expected to be transferred to public corporations and private enterprises for incentives programmes. Of the total budget, 19% or R2.1 billion will be transferred to the departmental entities for the fulfillment of the set mandates. Operational expenditure, which comprises mainly of compensation of employees, and goods and services is 18% or R2 billion of the total budget.
Co-Chairperson Rayi said that members would have three minutes each to ask questions.
Mr Macpherson commended Mr October for doing incredible work during the lockdown. He was one of the only people to respond to correspondence. Did the Department agree with National Treasury’s projection of a 6% contraction of the economy? The Minister had earlier called it a thumbsuck in the Sunday Times.
Mr October replied that the Department used IMF data for global economy projections and South African Reserve Bank (SARB) data for local projections. By all accounts there would be a significant contraction of the economy.
Mr Macpherson asked what the Department was doing with the National Credit Regulator (NCR) to invoke Section 11 of the National Credit Act, in order to allow desperate South Africans access to credit.
Mr October replied that the Department and the NCR were working together and looking into this.
Ms Mantashe called on the Department to strengthen BBBEE legislation. There were concerted efforts to undermine BBBEE by Afriforum and Solidarity, who were recently been defeated in the High Court.
Mr Brauteseth pointed out that it was the constitutional right of every South African to approach the Courts for relief. He asked whether distress funding would follow BBBEE guidelines, and what would the Department say to employees who were unable to feed their children as a result? BBBEE policies should not be applied during a crisis.
Mr Cuthbert also wanted to know whether industrial financing would be distributed along racial lines, or whether it would be distributed on a needs-by-needs basis in response to the pandemic.
Mr Mulder said that the FF+ was concerned about the amount of attention going to BBBEE in the midst of the pandemic. He called for a discussion on non raced-based legislation.
Mr October explained that the Department was staffed by civil servants whose job was simply to faithfully implement the legislation. If the legislation was amended, the Department would follow the amendments. A large number of companies had responded positively to the current legislation implementing empowerment programmes, and they would remain eligible for DTIC grants. All departmental incentive programmes were conditional on a BBBEE level. The private sector was cooperative and committed to transformation, and he didn’t anticipate exclusion from any programmes.
Ms Mantashe asked whether the localisation efforts the Minister had mentioned would include diversification to rural provinces. Were rural provinces involved in the production of protective equipment?
Mr October noted this. The Department was working with the provinces to allocate the budget. For the fulfilment of the Department of Education’s requirement of 23 million masks, priority would be given to small and medium sized enterprises and those owned by women or located in townships.
Ms Mantashe called for the Department to retain the pillars of the APP as presented, even if amendments would be required in response to the pandemic.
Ms Mantashe asked what specific plans were in place to ensure that raw material exports did not continue.
Mr October clarified that the Department was referring to the need to build value-added industrial sectors to add value to our raw materials. For example, platinum fuel cell production had recently begun in the Dube Trade Port SEZ.
Ms Motaung asked how the Department’s staff rotation programme was being implemented.
Ms Motaung asked what measures the Department was taking to reduce the cost of doing business and create an enabling investment environment.
Mr October replied that the Department had made it much easier to register a company and apply for related benefits such as the Unemployment Insurance Fund (UIF). The next step was to make it easier to register properties and process building permits.
Ms Yako said that the state capacity was not sufficient to deal with the crisis. She recalled that the Minister had said that he was not in charge of the R500bn economic recovery package, and asked how the Department was spending this money.
Ms Yako asked what Special Economic Zones (SEZs) were doing for their surrounding communities in this time of need.
Ms Yako asked why the furniture industry was not being included in plans for the steel, sugar and poultry industries.
Ms Yako said that she had been asking for details on the black industrialists being assisted by the Department. Who were they? She was concerned that money might be going to businesses that didn’t need it as much as others.
Mr October replied that the Annual Report would list each and every company that had received a grant or incentive from the Department. The Department’s industrial financing division also presented its own reports to Parliament, which would give more detail. He noted that the owner of the company always contributed the bulk of the funding for the business: the DTIC never contributed more than 20% of the investment.
Ms Yako called on the Department to be more thorough and transparent in its reporting to the Portfolio Committee. She felt that Minister Patel had not provided enough information on what the Department had actually done.
Mr Cuthbert asked why South Africa had not signed the World Trade Organisation (WTO) statement on global supply chains, despite many of our largest trading partners being signatories.
Mr October replied that he would get a report from the WTO ambassador and the deputy director-general.
Mr Cuthbert asked Mr October to explain the circumstances surrounding the discontinuation of the Section 12 allowance.
Mr Cuthbert asked Mr October to explain the drop of almost R1.2bn in funding for public corporations and private enterprises.
Mr October explained that the Manufacturing Competitiveness Enhancement Programme (MCEP) had been put in place following the 2008 global financial crisis to protect South African trade in the European Union (EU). This had been extended but the EU had insisted that the benefits of the MCEP be phased out.
Mr Cuthbert said it was not fair to say that there had been an improvement in the automotive industry. Since the onset of the pandemic, the industry had shrunk by 98%. What was the Department going to do to support this important industry?
Ms Hermans said that the APP should be aligned with the President’s State of the Nation address. She asked whether the Master Plans were anchored to the New Growth Path and the Industrial Policy Action Plan, which the Economic Development Department (EDD) and the Department of Trade and Industry (DTI) had been following before these departments merged.
Mr October said that these programmes had been integrated into a new industrial strategy, which was being championed by the President.
Ms Hermans asked the Department to consider developing incentive support for industrial parks alongside SEZs.
Mr October agreed that industrial parks needed to be treated in the same way as SEZs, and the Department was asking Treasury for funds to achieve this. He asked for support in moving this idea forward.
Mr Mmoeimang asked Mr October to give more details on the strategic planning for industrial parks and SEZs. Was the Department on track?
Mr October replied that the Department had defined ten SEZs and revitalised 26 industrial parks with demand for 50, which were fortunately located near townships, where unemployment was high.
Ms Hermans looked forward to seeing results from the Department’s new inward investment attraction, facilitation and aftercare programme.
Mr Thring asked what the Department was doing to reduce South Africa’s R26bn trade deficit with Brazil, Russia, India, China and South Africa (BRICS) trade partners.
Mr October replied that the Department had two strategies First, it insisted that these countries open their markets to value-added products from South Africa. Second, it encouraged these countries to use South Africa as a manufacturing base instead of exporting the finished goods to South Africa.
Mr Thring asked what the Department was doing to mitigate the effects of the Covid-19 pandemic on the negotiation of the African Continental Free Trade Agreement (AfCFTA) and the African Growth and Opportunity Act.
Mr Thring asked Mr October to expand on the 28 education and awareness sessions mentioned as part of programme 5.
Mr Thring asked Mr Mr October to elaborate on the use of Section 12i tax incentives for industrial expansion and greenfield investments.
Mr October said that although the Department would have liked to continue with it, the funding for this programme had been exhausted. The Department had written to National Treasury asking for funds to extend the programme and they would appreciate the committee’s support.
Mr Thring suggested that the Department consider additional relief funding for distressed companies, particularly in labour-intensive sectors.
Mr Thring suggested that the amount allocated to research and co-ordination should be more than 1% of the budget, as it was a lever for economic development.
Mr October agreed about the importance of research. Value-addition could only take place if the latest technology was adopted and research was conducted.
Ms Moatshe asked how the Department online applications for businesses would be rolled out to rural areas.
Mr October replied that the Companies and Intellectual Property Commission had been rolling out access in rural areas.
Mr Brauteseth asked how banning the sale of certain goods and the closing of businesses aligned with the stated values of the Department, which included building a “dynamic industrial, globally competitive South African economy.”
Mr October replied that a dynamic industrial sector was able to adapt to new market demands. Economies such as Germany and South Korea had strong industrial bases which had allowed them to resource their health systems.
Mr Dangor called on the Department to look out for opportunities in the midst of the crisis, especially local opportunities. He called on South Africans not to paint a negative picture of the economy and currency.
Mr October replied that even though the global economy would change in the wake of the Covid-19 pandemic, it would remain crucial to attract foreign direct investment and generate foreign exchange through exports. Luckily, South Africa’s economy was resilient.
Ms B Mathevula (EFF) asked how many black industrialists had been supported by the Department, and what had been done to assist black citrus growers, especially in disadvantaged communities, given the importance of citrus exports to the European market.
Mr October replied that roughly 150 black industrialists had been assisted. The Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF) had also assisted. He acknowledged that maintaining access to the European market faced constant challenges from some of the more protectionist countries, such as Spain.
The meeting was adjourned.
Members of the portfolio committee reconvened to discuss media statements made on behalf of the committee. This part of the meeting was not broadcast to the public.
Nkosi, Mr DM
Rayi, Mr M
Boshoff, Ms SH
Brauteseth, Mr TJ
Cuthbert, Mr MJ
Dangor, Mr M
Hermans, Ms J
Landsman, Mr ER
Londt, Mr J
Macpherson, Mr DW
Majola, Mr F
Mantashe, Ms PT
Mathevula, Ms B
Mmoiemang, Mr MK
Moatshe, Ms RM
Moshodi, Ms ML
Motaung, Ms NE
Mulder, Mr FJ
Patel, Mr E
Thring, Mr WM
Yako, Ms Y
Download as PDF
You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.
See detailed instructions for your browser here.