26 May 2020
22 May 2020
01 May 2020
The Portfolio Committee on Trade and Industry met on a virtual platform to receive an update on government’s COVID-19 interventions from the Department of Trade, Industry and Competition.
The Department of Trade, Industry and Competition had followed a multi-faceted and multi-pronged approach and had hit the ground running as from March 2020 to change its strategy, activities and interventions to deal with the unprecedented crisis. Key interventions prioritised by the Department included an economic impact assessment and the establishment of measures to mitigate the situation; supporting health measures such as the supply of PPE stocks; ensuring food and hygiene product supply-lines; solidarity and social protection measures to assist the vulnerable; regulatory support to facilitate cooperation and keeping firms in business. The Department had worked closely with the Consumer Council and the Competition Commission to protect consumers against unfair price rises. The Department had plans for reopening the economy and reconstructing the industrial sector.
The Department informed Members that the R500 billion Covid-19 fund had been slow to get off the ground, but National Treasury was working hard to get that going. The Department of Trade, Industry and Competition had approved applications for grants of R476 million for its Essential Supplies Service, particularly the Ventilator Development Project which had a focus on the production of non-invasive Continuous Positive Airway Pressure devices (CPAPs) The project had seen the fastest development of technology in SA in decades and 2 000 CPAPs had been produced to date. R38.5-billion had been disbursed from the UIF and TERS funds so far, with another R500m scheduled for payment on the 11 August 2020. The Covid-19 TERS benefit scheme would be extended in keeping with the period of disaster to August 15, 2020. 190 large scale retrenchments had been lodged with the Commission for Conciliation, Mediation and Arbitration (CCMA) and there had been 1 307 small scale retrenchments referrals.
The Competition Tribunal had confirmed 30 consent orders in favour of the Competition Commission which has resulted in settlements for fines, donations to the Solidarity Fund and to other organisations, refunds to customers and immediate price decreases on essential goods. The National Consumer Commission responded to 1 800 complaints concerning price gouging by consumers.
The Department noted that government had introduced a price preference system in the scrap metal industry to ensure that steel mills were given first refusal of scrap metal before the scrap was exported. The Department admitted that some illegal activities were continuing in relation to scrap metal. An export tax been proposed. It was included in draft tax regulatory measures.
Members asked why only private businesses and no state-owned enterprises had been investigated for price gouging. Was SA Airways permitted to charge more than double the price for a seat on a repatriation flight? Members wanted more information on the regulations implemented at each stage and how the regulations had been decided upon. A Member stated that he was aware that cadres, comrades and politically connected people had supplied health and PPE goods to departments at prices that ensured thousands of percent increases. What had been done about that? Why had only 10% of the R 200 billion loan scheme been taken up. How much money had been spent by government on research, production and delivery of the ventilators?
Members asked about the impact of Covid-19 on investment commitments made at the SA investment conference. How would the Department stimulate manufacturing in the industrial sector given that the sector had been hit hard by the Covid-19 pandemic? What plans were there to finalise the African Continental Free Trade Area Agreement (AfCFTA)? Which companies in rural provinces had been assisted to produce personal protective equipment? Could the Department not change the Competition Act to give the Competition Commission the power to impose much higher fines than the current 10% which did not seem to deter larger firms?
A Member asked what had informed the logic of stopping exports. Was the government trying to run scrap metal dealers out of business?
The Chairperson greeted the Committee Members, Director-General Mr Lionel October, and Chief Economist, Stephen Hanival from the Department of Trade, Industry and Competition.
The Secretary confirmed that the meeting was quorate. The Minister and the two Deputy Ministers had sent their apologies.
The Chairperson noted that the agenda focused on an update on government’s Covid-19 interventions.
Mr D Macpherson (DA) sought permission to raise an issue before the commencement of the presentation. He noted that the Committee was going to be discussing the government’s Covid-19 response measures, expenditure, etc. He reminded the Chairperson that, at the beginning of the process, Members had been given an assurance that the Minister would be reporting to the Committee and Members would be able to question the Minister and interact with him on government’s response to Covid-19. To date that had not happened and the Minister, although he was the political head, had been thin on the ground. He meant no disrespect to the Director-General, but government had assured Committees that Ministers, who were the extensions of Cabinet, would keep Members informed of the situation as government tackled Covid-19. It was not good enough that neither the Minister nor even one of two Deputy Ministers were available to answer questions.
Mr Macpherson registered his extreme frustration and disappointment that the Committee was again unable to question the Minister on the Covid-19 response. It was not acceptable.
The Chairperson noted Mr Macpherson’s comments. He pointed out that the Committee had had discussions on that matter before. He accepted the Minister and Deputy Ministers’ apologies and assured Mr Macpherson that when the Minister was in attendance, he would take the process forward and Members could follow up on the issues. The Chairperson also promised that if there were questions that the Department could not answer that day, written questions would be submitted to the Minister.
Remarks by DG
Mr Lionel October, Director-General (DG), DTIC, thanked the Committee for its guidance and support during the five months of the Covid-19 pandemic.
The dtic had followed a multi-faceted and multi-pronged approach and had hit the ground running as from March 2020 to change its strategy, activities and interventions to deal with the unprecedented crisis. The presentation would be done by Stephen Hanival.
The DG assured Members that the overriding objective with the multiple interventions, from the competition interventions, the consumer interventions, to assisting distressed firms and international companies to come to SA with investment, was informed by what Ernest Oppenheimer, the founder of Anglo-American Corporation, had said after the Great Depression and the Spanish Flu: “The key job was to preserve the company so that when the recovery came, the firm could stand up again.” The primary concern of the dtic had been to preserve the industrial base so that when the recovery came, and the economy was currently in the phase of recovery, dtic would be able to support industries and get the industrial champions moving again. That had been dtic’s aim. He believed that the Department had preserved the essential fabric, although industry had suffered a tremendous blow. Many companies were standing with excess capacity and obviously there had been some pullback on investment.
Presentation on Government’s COVID-19 interventions by the Department of Trade, Industry and Competition
Mr Stephen Hanival, Chief Economist, dtic, briefed the Committee on the details of dtic’s involvement in managing the Covid-19 epidemic.
Government and the dtic had prioritised nine key interventions, including:
-economic impact assessment and measures to mitigate;
-supporting health measures: essential health and PPE stocks;
-food and hygiene product supply-lines: from farm to shop;
-solidarity and social protection measures to assist the vulnerable;
-regulatory support to facilitate cooperation and keeping firms in business;
-protecting consumers: action against unfair price rises;
-global coordination and engagement;
-reopening the economy and reconstruction; and
-internal dtic processes to manage outbreaks amongst staff.
A lot of detail, including Competition Commission cases and Consumer Council cases, had been included in the annexures to the presentation to provide detailed information.
Mr Hanival presented an overview of the global situation in respect of Covid-19. He noted that the cases per million people in SA was high, but the impact had not been as severe as in the Unites States of America or Brazil. He showed a graph to explain how government had been able to reduce the lockdown level to level 2. He noted that SA had experienced a high rate of infections as a result of its open borders.
He provided details of the R500 billion Covid-19 fund. It had been slow to get off the ground but National Treasury was working hard to get it going. He referred to the health stocks and how those had been managed with various interventions. The dtic had provided funds to Small Business and the Independent Development Corporation to ramp up production of the health products, including personal protective equipment (PPEs).
Dtic had approved applications for grants of R476 million for its Essential Supplies Service Project. He noted, particularly, the Ventilator Development Project in which dtic had appointed the South African Radio Astronomy Organisation (SARAO) to serve as project managers. Based on international clinical experience in Covid-19 epicentres, SA had been advised by senior critical-care physicians to focus on the production of non-invasive Continuous Positive Airway Pressure devices (CPAPs). Final assembly of the device was taking place at the Akacia Medical facility just outside of Cape Town, and from there it will be distributed to hospitals across the country.
Mr Hanival stated that dtic had worked with a number of companies and associations to ensure food and hygiene supply lines, especially during the first lockdown. In particular, dtic assisted with getting supplies through international airports so that goods could be imported into SA.
R38.5-billion had been disbursed from the UIF and TERS funds so far, with another R500m scheduled for payment on the 11 August 2020. The Covid-19 TERS benefit scheme would be extended in keeping with the period of disaster to August 15, 2020. 190 large scale retrenchments section 189 lodged with CCMA and 1 307 small scale retrenchments referrals. Working with NEDLAC to try and ward off a significant number of retrenchments. NEF was assisting black-owned companies that had been approved to produce essential products and had provided a short-term holiday to those owing money with zero-interest loans, unlike the banks.
Mr Hanival stated that the Competition Tribunal had confirmed 30 consent orders in favour of the Competition Commission which has resulted in settlements for fines, donations to the Solidarity Fund and to other organisations, refunds to customers and immediate price decreases on essential goods. The National Consumer Commission had responded to complaints by consumers, especially as a result of the 3 000 calls on the free line, 1 800 of which referred to price gouging. Other complaints were about workers who had returned to work but had not been given PPEs. Those complaints had been referred to the Department of Labour.
The dtic was also involved in global co-ordination to ensure that SA received all supplies required during the pandemic. The G20 Forum and the World Trade Organisation (WTO) had advocated for the free-flow of measures to fight Covid-19.
In the re-opening of the economy and re-construction of the economy, SA had to “Build it back better” as President Ramaphosa had said. It was going to be difficult, but transformation would remain an important factor in re-developing the economy. Critical challenges would include addressing structural problems that were holding back job creation and inclusive growth. Transformation had to be a key objective to ensure a fairer economy and the inclusion of larger numbers of South Africans (youth, women, black industrialists).
Mr Hanival mentioned the scrap metal industry. Government had introduced a pricing preference system to ensure that steel mills were offered scrap metal first before it could be exported. He acknowledged that some illegal activities were continuing in the gathering of scrap metal. An export tax been proposed. It was included in draft tax regulatory measures. That would allow businesses to determine whether the profit would be greater if the metal was sold abroad, despite the additional tax or whether it was more profitable to sell locally.
There had been 25 cases of Covid-19 in dtic and its campus. 18 cases were active at the time but there had been no deaths of officials in dtic. Mr Hanival presented the dtic spending on PPEs and offered information on companies from which supplies had been obtained.
The Chairperson offered Members an opportunity to pick up on the issues.
Mr M Cuthbert (DA) said that the Department had paraded the Competition Commission’s exploits in making sure that the capitalist pigs were not exploiting the masses, which was the way that the situation was framed and the narrative driven, but very little had been done about State-owned Enterprises (SoEs) involved in price gouging, even subsequent to he and Mr G Cachalia (DA) laying a complaint with the Competition Commission for price gouging by SAA for repatriation flights. There had been increase of over 100% in the cost of flights back to SA. He found it a problem that such a harsh stance was taken against private companies but no action had been taken against SoEs to ensure that they also played by the rules. It did not impress him when government said that those people in private business had to contribute to the solidarity fund and take corporate social responsibility measures but nothing was done to curb those in the purview of government, the SoEs. He wanted to see action on that front.
Mr Cuthbert was also concerned about the situation in the scrap metal industry. Minister Patel had gazetted a two-month block on exports, and mills and foundries largely found themselves full with scrap and billets. What had informed the logic of stopping exports? Was the government trying to run scrap metal dealers out of business? He could understand when it came to the stealing of cables and the like that was sold to scrap metal dealers, but could government not put a measure in place to stop the sale of stolen cables, instead of blocking off the market entirely and destroying the industry? It sounded to him like government was following the North Korean Juche economic model by trying to protect everything in that respect. The same went for the export taxes. Surely government understood that market fundamentals in that particular industry were good for the industry and government should ensure more competition to bring down the price of steel.
He did not understand the push, despite the prevailing logic that it was not a good idea. He found it problematic and requested a response on that particular issue.
Mr F Mulder (FF+) asked about the regulations during the different levels of lockdown. There was insufficient information in the report about the regulations. He wanted more information and he wanted to know how the regulations had been decided upon. He had had a difference of opinion about the matter in the past because the FF+ was of the opinion that a lot of the regulations had been irrational and unnecessary. They were rushed decisions that had gone on for too long. He cites, as an example, the prohibition on the sale of hot food. He believed that there should be more information in the report about the regulations and what the intended or unintended consequences were.
Mr Macpherson stated that it had been an interesting presentation because everything put on the table had been predictable. The country had entered the pandemic in a recession but no comment had been made on the disastrous policies that had led the country into the recession going into the pandemic and were now playing themselves out on steroids. What action had been taken against price gouging on goods supplied to government? Dtic had been robust on the private sector but had done nothing in the public sector. He knew that cadres, comrades and politically connected people had supplied health and PPE goods to departments and had increased prices by thousands of percent. What had been done about that?
Mr Macpherson disagreed that the lockdown had succeeded because the whole point of the lockdown had been to build healthcare capacity but outside of the Western Cape, not a single province had been able to build healthcare capacity. The only thing that the lockdown had been able to do was to destroy the economy and force three million people into unemployment. He found the trumpeting of lock-down as successful, deeply insulting to the three million people who gave up their jobs and their livelihoods in the belief that government would play its part but had failed dismally to do so.
He added that the loan scheme had been a total disaster. Only 10% of the loan scheme had been taken up. Businesses were required to give surety to banks at double the amount to be loaned. Which businesses could do that when their businesses had not operated for three months? The dtic had done very little in terms of engagement with National Treasury. It had not negotiated for changes but had sat on its hands and watched the disaster unfold, even though it had been obvious from the beginning that the lending requirements were simply not going to work.
Mr Macpherson referred to the much fawned about National Ventilator Project. How many ventilators had been built and delivered to date? How much money had been spent by government on research, production and delivery of the ventilators? He noted that numbers regarding production kept changing: in April, the dtic had said that 10 000 ventilators would be built by the end of June; in May, 15 000 ventilators were to be built by the end of July; in June, Minister Patel had said that 10 000 ventilators would be built by the end of August; the previous week, dtic said that it would distribute 10 000 by the end of September. For months and months, the project had failed to get off the ground to the point that the Western Cape had now said that it did not need them as the pandemic had passed the peak. By government’s own statistics, cases were declining and deaths were declining. So, who would use the ventilators and to what extent?
Lastly, Mr Macpherson asked what Mr Hanival’s views had been on the alcohol ban which had decimated the alcohol industry across the country and many wine farms across the Western Cape. He understood that Mr Hanival had been central to the discussion on the alcohol ban. Did Mr Hanival support the ban? Did he lobby for it to be lifted? Or did he lobby for an extension of the ban?
Ms P Mantashe (ANC) said that Mr Macpherson was … Ms Mantashe lost connectivity and she was unable to engage in the discussion.
Mr S Mbuyane (ANC) appreciated the presentation. He asked that the Department brief the Committee on companies that were considering cutting investment. What was the impact of Covid-19 on investment commitments made during the SA investment conference? The manufacturing industry had been depleted by the lockdown, especially in the automotive sector. How would the dtic stimulate manufacturing in the industrial sector, given that it had been hit hard by the Covid-19 pandemic? What plans were there to finalise the African Continental Free Trade Area Agreement (AfCFTA)? Which companies had been assisted, per province, as he did not know anyone in Mpumalanga that had been assisted to produce PPEs, etc? In terms of localisation, in which provinces had companies been assisted generally? He reminded the Department that he had to answer to his constituency. Were any companies in Mpumalanga producing PPEs? He wanted to track them. He asked about the proposals received for the National Ventilator Project. Were the proposals received from local companies or from companies outside of SA? How many companies had been assisted to establish themselves as producers of ventilators? Those were his questions.
Mr Mbuyane recalled that the last time that he had checked, the Competition Commission had been having challenges because it did not have “teeth” because the 10% that the Commission was able to fine companies was not enough. Big companies knew that they could pay that 10% out of their profits. Could dtic not change the (Competition) Act to give the Competition Commission the power to impose much higher fines? The 10% was not enough.
He asked how many black industrialists had been assisted to produce the PPEs.
The Chairperson attempted again to contact Ms Mantashe but to no avail.
Ms J Hermans (ANC) suggested that Ms Mantashe capture her issues on the chat forum and she would raise the questions on her behalf.
Mr W Thring (ACDP) said that he was experiencing load shedding at his location and might go off-line. He had asked the Minister some time ago to see what assistance could be given to NGOs. He saw the Commission Tribunal had given some assistance to NGOs but he had had no feedback from the Department with regards to other NGOs. There were thousands of NGOs doing incredible work to assist those in dire need, but some NGOs were preferred above others. He had had no feedback as to why some were preferred over others.
Mr Thring asked about the National Empowerment Fund. What was the current risk exposure? How many companies were being assisted but were still in serious trouble because of Covid-19? He asked for some statistics on that matter. Regarding the R200 billion loan guarantee scheme for small businesses, he explained that a small business owner had told him that bank guarantees for Covid-19 loans were not fully forthcoming from the Reserve Bank. Banks were on their own and so the banks could not give Covid-19 loans on reduced risks. Loans were being given based on normal lending practices. Basically, the net result was that there were no Covid loans as the government was not backing those loans. Effectively the R200 billion loan guarantee scheme was not working and small business owners were on their own. What interventions were in place to assist small businesses? He had heard on SAFM radio that only R14 billion of the R200 billion had been paid out. That was a small fraction of the R200 billion. There was a case to answer for how government was supporting small businesses.
Mr Thring referred to the National Ventilator Project. He noted that medical staff were moving treatment from the ventilator to the CPAP. He agreed that the ventilator was far too invasive a method of treating Covid-19. However, as Mr Macpherson had noted, there was confusion about production. How many ventilators had been manufactured and where was the country in terms of moving away from ventilators to Continuous positive airway pressure machines (CPAPs)? How far was the process and how much had been spent on the project? He asked if the CPAPs were necessary. He agreed that the CPAPs were better than ventilators as over 95% of the people who went on ventilators did not survive.
He spoke to the loss in gross domestic product (GDP) which had been anything from 5% to 15% in the last quarter. What systems were in place for dtic to work with the other departments? Mr Thring indicated that he was also a Member of the Portfolio Committee for Public Works and Infrastructure. There he had heard about an entity called “Infrastructure South Africa” which was a new initiative, and he knew that there was a huge drive to invest in infrastructure. What engagement had there been with dtic and other departments to ensure seamless growth?
Mr Thring believed that the hard lockdown had not been necessary as countries such as Sweden, Switzerland and Taiwan, that had not engaged in a hard lockdown, had come out of the pandemic with their economies almost unscathed. The hard lockdown was a manmade disaster.
Ms Hermans commented that Members should hold Mr Mbuyane to his “last” as he had mentioned three items after he had announced his last point! She had been covered by Mr Mbuyane but she commended the Minister and the Department for doing an excellent job during a difficult time. It had not been easy but the government had come up with a good plan to protect lives. That was what had driven the government stance on lockdown. Given the economic fall-out and the fact that the country had been in a recession before lockdown, she suggested that the Committee should have a special session on the recovery plan, given the inputs by Members on businesses in dire need of assistance. Each of the Members knew families that were destitute as a result of businesses closing. Dtic and the Portfolio Committee had to take SA into their confidence as to the plan to reboot the economy.
Ms Y Yako (EFF) said that the presentations on Covid-19 from the dtic were disturbing because they lacked specific information. The Department did not know what had been done and what had not been done in terms of the delivery of PPEs. There was no centralism of power or management. Members had been given a broad “sky view” of nothing and the Department was not in control of any action in terms of its entities or the economy of SA. The Department was the engine room of SA industry but it was not in control and there would be an economic meltdown.
She wondered how the Competition Commission could be given more powers so that it could operate fully without the interference of the Minister or of the Department.
She commented that without a centralised company that made PPEs for the country, the Committee could not track what the Department had done and nor could it track the PPEs produced in the country. There had been a lot of corruption in the procurement of PPEs. That left a lot to be desired and, for her, it was a concern.
Mr Hanival responded to Mr Cuthbert. He promised to investigate the price gouging at SAA but he was aware that price gouging referred to excessive increases in prices without associated costs. At SAA, there had been extra costs involved in disinfecting the planes, providing PPEs to crews and flying at less than full capacity. He would, nevertheless, engage with the Competition Commission and he would come back to the Committee on that matter. He responded to the concerns regarding scrap metal saying that it was a difficult situation but the government did not want to fully block the export of scrap metal and so it was addressing the economics of the matter by raising an export levy. The increase in cost for exporting scrap metal would allow the scrap metal dealers to determine whether it was better to sell locally or whether they could still make a profit abroad despite paying the additional costs. There was nothing, apart from economics, stopping someone from exporting scrap metal. He was aware of the criminal activities and that infrastructure in the country was being undermined but he reminded Members that SA needed to support the steel sector and the dtic did not want to see a situation reach where SA had to import all its steel. SA did not have the logistical capabilities to import all its steel requirements if the steel mills had to close as a result of the economic environment. It was a very difficult balancing act.
Mr Hanival stated that he would have to come back to the Committee to provide the detail requested by Mr Mulder on the regulations at the various levels. If SA had not implemented a hard lockdown at level 5, the counterfactual was that there was no knowing where the country would have been and there might well have been a situation where many thousands of South Africans could have lost their lives if the pandemic had taken hold in SA on the same scale that it had taken hold in Brazil, the USA or the United Kingdom. It was easy to consider the matter after the event and there could be a discussion around whether the restrictions were too harsh. However, when there had been a risk of literally hundreds of thousands of people losing their lives, government had made a careful calculation based on the epidemical analysis and modelling provided by a range of professionals and the view was that there was a need for a relatively hard lockdown. He would argue, and he would be backed by a number of professionals, that the lockdown had been effective, particularly in impoverished areas.
Mr Hanival would have to come back with exact numbers for the ventilators project. He reminded Members that the country had developed a local manufacturing capability for a relatively sophisticated piece of equipment, and to do so in such a short space of time was unusual. There was a possibility that the need for the CPAP machines would not be as great as dtic had thought when the ventilator project had been developed but, even if the products were not needed in SA, there would be an opportunity for export as there might be a development of the disease in neighbouring countries. In any event, there was a need for CPAP machines in the country and the skills developed would be beneficial. One could argue that the process should have got going in a shorter period of time, but the reality was that getting the project off the ground in three months had been the fastest development process in SA in decades. The developers had been working from a low base as CPAPs, ventilators and other respirators were largely imported and even parts of the machines were imported. Government had to de-risk such innovations, and the Department of Science and Technology had to take the opportunity to address what could have been a significant crisis in the economy and in SA’s healthcare sector.
Regarding the “booze ban”, Mr Hanival informed Mr Macpherson that his personal view on the alcohol ban was not really relevant. Government had needed to assess both the risks and the potential impact of implementing the ban. He could say that from a dtic perspective, serious research had been undertaken and significant discussion had taken place. However, the decision was taken at the National Command Council and he was sure that all inputs, including dtic’s inputs had been taken into account, but the risk to health had been given the highest priority because people’s lives were at stake. One had to respect that Cabinet had taken the best view in terms of the health of the people. He was happy to provide his personal view on the booze ban, but it was irrelevant as government had taken the decision.
He would have to come back to Mr Mbuyane with the hard information that he required. Ms Mabitje-Thompson, DDG for the Industrial Financing Division, could add information and Ambassador Xavier Carim, DDG: Trade Policy, Negotiations and Cooperation, could talk on the African Continental Free Trade Area Agreement. They were both on the call.
Mr Hanival explained to Mr Mbuyane that the intention of the Competition Commission was not to punish bad behaviour but to change bad behaviour, so it was not a punitive approach. The 10% fine might be too low at the moment, but it should not be so high as to force companies out of business. What had to be done was to change the conduct of the companies and be forceful where the conduct of a company was out of line with the Act.
He responded to a point made by both Mr Macpherson and Mr Thring about the R200 billion guarantee fund. He had alluded to it in the presentation but the fund was located outside of dtic. It was located with the SA Reserve Bank and National Treasury and dtic had provided input and comments based on its views as to the fact that the fund could be operating more flexibly. The dtic had not received any funding from the R200 billion. The funding that dtic had put into the economy had been from dtic’s own budget. He agreed that elements of learning would unfold. Many countries had not got the guaranteed loans mechanism right. The dtic would continue working with National Treasury to improve the loan system and to address the risk aversion of commercial banks. He was, however, not aware that government was not providing the guarantee and support as agreed when the fund was first conceptualised.
Mr Hanival reminded the Committee that the Constitution enabled three equal spheres of government at national, provincial and local government level. It was not a tiered system and there was not a centralised system of procurement as National Treasury was not legally in a position to set up a national procurement system. Some commentators argued that a de-centralised system of procurement allowed for corruption. A centralised procurement system for PPEs might be best but the tools were not available. The Department could designate products as it had done in the past and then procuring units of the various departments and entities of the state would have to follow those prescripts.
Mr October promised to follow up on legitimate concerns raised by Members. He addressed the thorny topic of procurement. The dtic had responded to Parliamentary Questions and had given full disclosure to Parliament about dtic procurement and he could guarantee that there was zero corruption within the dtic and its entities.
Mr October said that dtic was only one department in the Economic Cluster and in the Joint Command, although dtic had been very active in the Joint Command which provided reports to the National Command Council based at the Reserve Bank, and a number of the dtic staff members had been working there practically full-time, including Mr Hanival and Dr Evelyn Masotja, DDG: Consumer and Corporate Regulation Division. The dtic had been pushing hard for local procurement of PPEs and direct purchase from suppliers to cut out the middle men. The dtic had been pushing hard for centralised procurement. Because of the current laws, there could not be centralised procurement and those laws would have to be amended. Where dtic had had an influence was, for example, in working with the DG of Basic Education to ensure the direct procurement from local manufacturers of over one million masks for the Department of Basic Education. The dtic had brought together textile manufacturers, suppliers, the Department of Basic Education and a special team from InvestSA to ensure that work was given directly to the manufacturers. The dtic was not so successful in other cases because of the procurement laws that allowed provinces and local government to act independently.
Mr October stated that, with regard to the overall package of R500 billion, there were legitimate concerns. He admitted that the dtic had not always been successful but from day one dtic had pushed for government to provide a support package to firms and had pushed hard for government to provide support for workers. The R40 billion paid out by the Department of Labour was partially as a result of the constant pushing by dtic for the opening up of the Unemployment Insurance Fund (UIF) and the Temporary Employer-Employee Relief Scheme (TERS fund). The enhancement of the Child Grant and the benefits to the informal sector was a result of the statistics that dtic had been able to provide. The dtic had not always been successful and he agreed with Ms Yako that SA had to move away from the discourse of a do-nothing state to an activist state, which was why the dtic had been actively pushing industrialisation and localisation.
In response to the concerns of Mr Mbuyane and others about investment commitments, the DG confirmed that certain companies had stalled their investments, citing SA Breweries, Heineken and Consul Glass, but the dtic was in contact with those companies. While they had said that they were not going ahead with the investments, one had to recognise that economics was driven, not by charity or subject to feelings, but by the hard economic facts of supply and demand. If demand returned for bottling, companies like Consul Glass would upgrade their investment.
There was, however, some positive news: Mercedes Benz was proceeding with the expansion of its plant and the production of the C-Class Mercedes Benz. The dtic had arranged for experts to come into the country on two flights in order to take the process forward. The DG informed Mr Thring, especially, that in KwaDukuza/Stanger, Chief Luthuli’s home town, Hesto Harnesses had acquired land from Transnet and would employ an additional 3 300 workers, over and above the current 2 300 workers, to produce harnesses for Ford assembly. He was also pleased to announce a very successful meeting with the Public Private Growth Initiative (PPGI) which had resulted in a decision to bring the Master Plans back on track. Ford had announced that SA would be the sole supplier of the new Ford Rangers for the next 50 years. On 7 August 2020, construction had commenced in Silverton and additional new factories would be built to supply the plant. About 6 000 workers would be employed in the construction of the Ford plant. 12 000 people would eventually be employed in the Tshwane SEZ.
Mr October was pleased that the country had got through Covid-19 without losing all its prospects for growth but he admitted that the GDP would fall and consumer demand was likely to fall.
He added that the dtic was actively working to get the AfCFTA back on track and it was hoped that the Agreement could be concluded by December 2020. A colleague from dtic, Mr Wamkele Mene, had taken up his post as Secretary-General of the AfCFTA in Ghana. The dtic hoped to position SA as the principal supplier of PPEs in Africa.
The Chairperson explained that the agenda containing the remitted Bills had been moved to the previous day as the Minister had to be in Cabinet that morning. That was the reason that the Minister was unable to attend the Covid-19 report-back. The Chairperson requested Mr Cuthbert share with the Committee the engagement that he had had with SAA on price gouging so that when the DG came back with the information on the pricing of SAA flights, Members would have an understanding of why Mr Cuthbert had raised the matter as a Member of the Committee.
The Chairperson stated that he thought the DG could assist with issues of oversight and how the Committee could best get updates from the Department and its entities. He suggested that it would be easier if there were clear areas and issues to be looked at. He would speak about the areas in which the Committee required updates on progress. He also requested the Secretary to consider those matters calling for updates.
The Chairperson called for a final round of questions from Members.
Mr Hanival asked if the relevant DDGs could provide further details on their areas of interest. He could also provide an update on the ventilator numbers as he had received the information from the Minister’s office.
The Secretary requested permission to read Ms Mantashe’s questions into the record. He noted that other Members also had questions.
The Chairperson determined that the dtic would complete its responses and thereafter the Secretary could read Ms Mantashe’s questions and Members could raise their additional questions.
Mr Hanival confirmed that the funds for the ventilator project had come from the Solidarity Fund. He reminded Members that dtic had provided funds to kickstart the Solidarity Fund. 2 000 CPAP units had been produced and further production was continuing. The 10 000 units had not yet been produced but the economies of scale would allow the number produced to increase rapidly.
Ms Mabetji-Thompson, DDG, indicated that she was looking at the take-up of the R200 billion Reserve Bank Fund. The dtic did not manage the fund, but dtic was involved because the Fund supported some of the work that dtic undertook. The dtic had had engagements with Standard Bank, First National Bank, ABSA Bank, Nedbank and Al Baraka Bank to discuss the funding support that the banks ought to receive from the Reserve Bank and how issues could be overcome. The issues related to the guarantor scheme where the Reserve Bank had to ensure that funding was not provided to people who did not qualify because it had to guarantee the funding provided. That had to be balanced against supporting industry in a challenging period. As the Chief Economist had said, there were learnings and it was not only in SA but across the globe that people were engaged in difficult decisions of stimulating economies and having to adjust risk appetite in a reducing economy. The dtic would work directly with the banks to assist them to adjust their risk appetites by elaborating on specific projects, especially in manufacturing which, because of the reduced demand, had become a very risky sector for the banks. She would provide a full report on all support given, including that given to Black Industrialists.
Ambassador Xavier Carrim, DDG, stated that the timeframes had been delayed from February to the end of May 2020 but negotiations had then been suspended due to the lockdown and the inability to travel. The Heads of State had moved the implementation date of the AfCFTA to 1 January 2021, depending on the spread of the pandemic across Africa, but it was a target date for the completion of the work on the AfCFTA. The current work was largely on rules of origin and making tariff offers. There were ongoing discussions and every effort was being made to meet the date of 1 January 2021.
The Chairperson presented a number of issues that he said should form the basis of the Committee’s oversight responsibilities for the Department and its entities. He clarified how he wished to manage the process moving forward in terms of oversight responsibility. In the report there were a number of important areas. The first issue would be the impact of the funding provided to business for reviving the economy. That would be the main pillar and the detail would be about the progress and challenges in that space. Second was the matter of ensuring localisation and manufacturing of local procurement of essential goods required for minimalizing the spread of Covid-19, such as PPEs. It would be helpful to have that as a focus and to see what had been done and how the oversight could be improved. The Committee needed to see the impact and progress. Thirdly, the issue was broadening the aspect of funding to support businesses in all provinces. Members noted that certain provinces seemed to obtain greater support while other provinces were neglected. Fourthly, the Committee needed to monitor the proper use of funding targeted to the use of resources. Funding had to be targeted to essential interventions where there were challenges. Interventions were crucial and the Committee could identify the important interventions and monitor the funding channelled to those interventions. Fifthly, he suggested the importance of monitoring the effectiveness of the set of objectives. The Committee might want to look at the impact on the set of objectives that had been agreed upon. The DG would have to pick up on the five areas. The Committee had received a number of presentations from dtic but it had become important to create a structure for reporting and that structure could be created out of the five blocks that he had identified.
He noted that there were critical areas that needed oversight and so there needed to be continuous engagement with the Committee and, between the Committee and dtic, a way had to be found of processing the details on those issues. That should be way forward.
He said that at lockdown level 2, issues of livelihood and lives had been raised by Members but the Committee needed to monitor what was happening. He had read that it had to be remembered that places were open because of the economy, not because it was safe.
The Secretary said Ms Mantashe had said that manufacturing, which was the backbone of the economy in the Eastern Cape, had been hard hit. She asked how the dtic would stimulate and manage the Eastern Cape recovery. Her question on the African Continental Free Trade Agreement had been answered by the DG and Ambassador Carim. She had asked about the process and when the Agreement would be implemented. She had made a number of statements but those were the only questions.
Mr Macpherson asked how much money had been made available to the ventilator project from the Solidarity Fund.
Mr Thring said that his question about NGOs had not been answered. How was money allocated to NGOs and how much had been allocated? He asked about the support for NGOs and how that support was vetted. What was the NEF exposure? That question had also not been answered.
Mr October noted the Chairperson’s comments and the points for reporting on as well as his request for further information on how to monitor the efficacy of the dtic’s attempts to preserve the industrial base.
Mr October informed Ms Mantashe that dtic had set up a structure with the provinces and had already had quite a few engagements. The dtic would be having a further engagement before the end of the month. As regards the Eastern Cape, as Ms Mantashe knew, the dtic was working on a number of sectors with the province, including the automotive sector which was an important industry in the Eastern Cape: Volkswagen in Uitenhage, Ford in Port Elizabeth and Mercedes Benz in East London and the agricultural sector as well as the Special Economic Zone (SEZ) in the Wild Coast. The dtic was working on Industrial Parks in Dimbaza, Mthatha and Queenstown and had also set up a structure with the technical MINMEC to work with provinces on companies in distress and around the revitalisation of SEZs and Industrial Parks.
Mr October promised that he would come back to Mr Thring on the question relating to the NGOs – he assumed that he was referring to NGOs supported by the National Lottery Commission (NLC) and he would ensure that the NLC responded at the scheduled meeting on 2 September 2020.
The dtic was working very vigorously to get the recovery underway and had convened with other departments. The programme was back on track and Master Plans were being finalised for various industries, including steel, the digital economy, agriculture and agro-processing. A few more Master Plans would be announced soon. He would also soon announce a few more plans designed to revive the manufacturing sector.
Mr Macpherson reminded the Chairperson that he had asked a question about the amount of money given to the Ventilator Project.
Mr October repeated that no money had come from the Department. However, he was aware that a media statement would be issued on the Solidarity Fund that day and he would check it. He added that Mr Hanival would probably know the amount.
Mr Hanival said R11 million had been spent on the development of the ventilator but that was not the full amount and he would have to come back to the Committee with the full amount.
The Secretary asked when the written responses from dtic would be submitted to the Committee.
Mr October assured the Committee that the written response would be provided on Friday by the latest.
Mr Thring asked whether government had guaranteed the loan scheme.
Mr October explained how the R200 billion Loan Guarantee Fund worked. In theory, in the very difficult times that business owners were facing, government stood as a guarantor or surety to the banks for the companies that borrowed from that fund. If the company did not repay the bank, the government was responsible for that money. Schemes of that nature had to be flexible but some of the demands of the Reserve Bank had been too onerous and therefore the fund had not been fully utilised. However, he understood that conditionalities would be reduced so that the fund would work better.
Consideration of the Committee Programme regarding Remitted Bills
The Secretary presented a proposed programme for the Committee to address the remitted Bills. Firstly, the Committee required a briefing by the dtic on the Copyright Amendment Bill and the Performers’ Protection Bill. Secondly, Members would need to deliberate on the procedural reservations, i.e. tagging and public participation. He suggested that the Committee consult with the corresponding Committee in the National Council of Provinces (NCOP) on the tagging issue. There was no prescript for how that should happen. The Chairperson could write to the Chairperson of the corresponding Committee in the NCOP or the Committee could have a joint meeting with the relevant Select Committee but he reminded Members that Committees could only make a recommendation. The Joint Tagging Mechanism (JTM) made the final decision. Thirdly, the Secretary advised that Adv van der Merwe should provide a legal opinion and then the Committee would have to deliberate on the issues.
He informed the Committee that 1 and 2 September 2020 were possible dates in addition to the dates set aside, i.e. 25 and 26 August 2020
The Chairperson called for comments from the Members. He asked for opinions on taking the four days to deal with the matter, although it would be much clearer after the first session how much time would be required.
Mr Thring approved the programme as suggested by the Secretary. His adoption of the programme was seconded by Ms Hermans. The programme was adopted by the Committee unanimously with no objections.
The minutes of 28 July 2020 were presented to the Committee and adopted unanimously without amendment or objections.
The Chairperson thanked the Members for their participation. The next meeting would be held on 25 August 2020 at 09:00.
The meeting was adjourned.
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.