The Select Committee met the Minister of Trade, Industry and Competition and his Department on a virtual platform for a briefing on the Department’s Strategic and Annual Performance Plan for 2021/22.
The Minister introduced the Acting Director-General of the Department following the deployment of the previous Director-General to a newly established unit at the Industrial Development Corporation of South Africa to provide support to the Special Economic Zones and the Industrial Parks. The Minister referred to the key theme of his budget speech which was on deeper integration of the work of government. That meant connecting the different divisions within the Department itself to deliver a more integrated service, but also between the Department and its 18 reportable entities that did work on behalf of the Department. It also meant more integration between different departments of national government and the three spheres of government. Deeper integration between the public sector, the private sector and the union movement was also envisaged to grow the economy, expand jobs and deal with the challenges that South Africa was facing. The intention of the integrated approach was to galvanise inclusive growth and build local industrial capacity. To achieve its goals, South Africa had to unite growth with transformation. The Minister indicated that he had issued a number of policy statements relating to Localisation, Industrial Development and Employment Growth, a Competition Policy for Jobs and Industrial Development, an Auto Green Paper on the advancement of new energy vehicles in South Africa and a Practice Note on Broad-based ownership schemes.
The Department indicated that a priority for 2021 was to finalise the 10-year Special Economic Zone Development Roadmap and to fast track the development of new Special Economic Zones. The Department would support foreign direct investment flows and InvestSA would promote domestic investment by providing a one-stop shop for investment promotion, investor facilitation and aftercare support for investors. The Department would also undertake economic research, contribute to the development of trade and industrial policies apex, and guide policy, legislative and strategy processes to facilitate inclusive growth in the country.
The departmental budget was extremely constrained at R9.7 billion for 2021/22. A critical part of the economic reconstruction and recovery plan included interventions to build catalysts for investment through infrastructure development and that included the development of special economic zones, the provision of critical infrastructure activities, and the rollout of infrastructure within industrial parks in support of the district development model. The 2021/22 allocation to the special economic zones was R1.5 billion, R130.9 million for industrial parks and R113.6 million for critical infrastructure.
Members were particularly interested in the provincially based special economic zones and the industrial parks. Could the Department provide a straight answer as to where things really stood with the Nkomati Special Economic Zone in Mpumalanga and what steps the Department would take to get it up and running? Was the Mpumalanga Economic Growth Agency, the body appointed to run the Zone, in a position to do so? Had development begun on the Messina-Makhado Special Economic Zone, when would it be finished and had a solution been found to resolve the disputes taking place in the area? How could the Department help ordinary workers at Witklippe, one of the Augrabies Falls Workers Empowerment Trust Farms, to keep the farm going? To what extent could the Namaqualand Special Economic Zone grow in that area of the country? What could be done to maximise the envisaged Namaqualand Special Economic Zone to ensure the competitive and comparative advantages in the area were maximised? Could South Africa produce labour-intensive manufacturing jobs that had always been the mainstay of industrialisation? Could Special Economic Zones address the structural aspect of unskilled and low-skilled workers?
What was happening to the Dimbaza Industrial Park that did not seem to get beyond Phase 1? If one phase took two years and there were five phases, what happened to the people who were unemployed? How would the Department allocate the R1.5 billion for the Special Economic Zones across the provinces? Would the majority go to provinces like Gauteng? Was there an analysis of the cost benefit of a Special Economic Zone?
Members also picked up on broader areas of the Department’s work. Could the Department provide an analysis of the external economic context from a global perspective as it had done in the past? Had all 55 countries ratified the Africa Continental Free Trade Area? Could the Committee be apprised of the situation regarding the Gauteng – Eastern Cape Freight Train Corridor? What was the worker participation model to which the presentation had referred? Were workers to participate on boards of directors? Would the departmental policy briefs be made public?
The Chairperson welcomed Members and everyone on the platform. He apologised that the meeting had been re-scheduled from the previous week but it was a matter of time available and electricity availability to ensure connectivity. Deputy Minister Fikile Majola, Deputy Minister of Trade, Industry and Competition, was to have led that briefing and had agreed to make a presentation at the current meeting, but he had just been taken ill. His colleague, Deputy Minister Nomalungelo Gina, had already been assigned to another task and was unable to attend the meeting, although would attempt to join later. Although the Minister had a meeting with the President that afternoon, he had been able to delay his attendance at that meeting by 15 minutes and would introduce the briefing to the Committee. Thereafter the Acting DG of the Department of Trade and Industry and her colleagues would make a presentation.
Noting that the Committee had a quorum, the Chairperson invited the Minister to make his opening remarks.
Opening remarks by Minister of Trade, Industry and Competition (dtic)
Minister Ebrahim Patel greeted everyone and thanked the Select Committee for the opportunity for the Department to present its Annual Performance Plan and budget as he and the Department took the engagement with the Committee very seriously.
The Minister introduced the Acting DG of dtic, Ms Malebo Mabitje-Thompson. Lionel October had been deployed following 20 years in government, with ten of those years as the Director-General of the Department of Trade, Industry and Competition. He would be working on the Special Economic Zones and Industrial Parks from a new unit established at the Industrial Development Corporation. The Minister assured Members that the Acting DG and CFO had led the presentation to the Portfolio Committee and were well-qualified to brief the Committee.
The Budget Vote of the Department had taken place on 18 May 2021 and in the budget, the key theme had been deeper integration of the work of government. That meant connecting the different parts of work within the dtic itself to deliver a more integrated service, but also between the dtic and its 18 reportable entities that did work on behalf of the Department. It also meant more integration between different departments of national government so that dtic worked with the Department of Mineral Resources and Energy in respect of beneficiation and with the Department of Forestry, Fisheries and the Environment if the dtic was looking to do work relating to the climate change imperative, and with the Department of Small Business Development if dtic wanted to work with the smaller players as well as the large players.
Integration also related to the three spheres of government and there would be tighter arrangements between national, provincial and local government where the flagship project was the roll out of district reports that would bring together the dtic work. It would be piloted in the course of 2021 and then evaluated. Deeper integration between the public sector, the private sector and the union movement was also envisaged to grow the economy, expand jobs and deal with the challenges that SA was facing.
Finally, integration referred to the various borders of the country and the African Continental Free Trade Area would allow for a massive platform for African trade.
Growth in Quarter 1 of 2021 was good news but the country had to do significantly better than that to reach the pre-crisis point. SA had to build back better after the crisis to build back an economy that was stronger, more resilient, more equitable and more transformed. The focus was on implementation, rather than many new plans.
During his Budget Vote, the Minister had presented various policy papers. That included a Policy Paper on Localisation, a Trade Policy for Industrial Development and Employment Growth and a Competition Policy for Jobs and Industrial Development. An Auto Green Paper on the advancement of new energy vehicles in South Africa was released. Industry had to transform into a greener industry. A Practice Note was issued on Broad-based ownership schemes dealing with women’s empowerment bodies, etc.
The intention of the integrated approach was to galvanise inclusive growth and build local industrial capacity. To achieve its goals, SA had to unite growth with transformation. It was not a choice of either one or the other. One had to grasp the two and find the connections. It was about boosting localisation which had to be at the centre of the President’s re-imagined industrial strategy. SA’s propensity to import was much higher than peer countries or even developed countries. More had to be done within the country, using the experience of Covid-19. Entire new industries were built during the Covid-19 pandemic, making masks, ventilators, etc. It was about growing exports and taking advantage of the African Continental Free Trade Area and the markets provided on the continent for women, for black companies, for large companies and for small companies to try to grow jobs and develop new production areas.
It was about increasing investment when many investors had pushed the pause button, not only in SA, but across the world. The President had secured commitments for investments for R110 billion at the Investment Conference in the previous year. The dtic had done work to identify the spatial dimension of that investment and in which municipalities those investments would be spent. Finally, it was about expanding the green economy. SA should not only build the jobs of yesterday and today but should see opportunities in the complex transition that the world was undertaking from carbon usage to greener technologies like the sun and the wind. Green hydrogen relied on platinum as a key catalyser and SA was well-positioned to unlock the green hydrogen with its massive resources of platinum. The state had to integrate its own work, that of the private sector and the Union movement into a more compelling growth and transformation story.
SA had to build state capacity. Municipalities had to work with national government to keep investors coming and expanding their businesses. One should not hear stories about companies closing because a local municipality was not supportive and was undermining businesses by imposing surcharges on utilities. A developmental state had to start at local government level and working its way through government.
That meant it was necessary to make extra efforts to combat corruption because corruption undermined the economy, limited the GDP and frustrated the effort to grow jobs. The effort to deal with corruption was essential.
The Acting DG would take the Committee through Joint KPIs (key performance indicators) which were really about how to capture all of the things that the Minister had spoken about and how the Department would bring the objectives to life. The Department had set itself clear goals for each month, such as opening new factories, programmes to be launched, the new hybrid engine to be produced in SA, pharmaceutical products, Special Economic Zone jobs, etc. They were not just plans, but steps along the way. Covid had damaged the economy but it had provided an opportunity to find growth and to develop the economy.
The Minister thanked the Chairperson for the opportunity to make some introductory remarks.
The Chairperson appreciated the Minister’s efforts to join the meeting and to make opening remarks. The NCOP was interested in special investments. He had seen the Joint KPIs of the National Empowerment Fund but needed more information to understand that fully. The NCOP was worried about the SoE’s and special investments. He hoped the District Development Model could get off the ground.
He came from the Eastern Cape and expressed concern that Transnet had not invested in the Port of Buffalo City in 50 years, even though it was the site of major exporting of SA products. He was worried about the lack of investment. People did not flock to the Eastern Cape. He was even worried about the freight corridor between Tshwane and Port Elizabeth that would lead to people from the Eastern side of the province flocking to the Western side, so both ports needed investment. He also sent his thanks to the President and mentioned that the President would speak in the NCOP at the end of the week.
The Minister thanked the Chairperson and would be taking those points on board. He noted that he would be visiting the Chairperson’s home area and would be at the car plant in the Buffalo City area. He recognised that those areas needed more investment.
The Minister asked to be excused.
Presentation on APP by the Department of Trade, Industry and Competition (dtic)
Ms Mabitja-Thompson stated that there were no major policy changes and that change was rather in the way in which the Department would be working, i.e. the Key Performance Indicators would cut across Divisions within the Department and even across dtic entities.
She explained how the Joint Key Performance Indicators would ensure that the Department achieved its apex priorities. It would develop and implement Joint Key Performance Indicators which require integrated planning, implementation and reporting across multiple branches and Departmental entities (e.g. the Industrialisation, Transformation, and the District Development Models) to create flexible and quick-response capacity that could be rapidly deployed to areas requiring urgent policy or programme support and to shift financing to the priority areas identified. Non-financial capacities would complement the financial allocations to industry, e.g. competition measures, and refocus, where possible, off-balance sheet financial resources to pursue strategic priorities, such as the Equity Equivalent Investment Programme.
The Industrial Parks programme was one of the key instruments utilised by dtic to establish and revitalise the
old state-owned Industrial Parks in the country. The key focus was to provide, amongst others, state of the art infrastructure, governance support and investment promotion support. The intention was to ensure that the country had new sustainable industrial hubs in all regions with economic potential, especially in rural areas and townships.
A priority for 2021 was to finalise the 10-year Special Economic Zone (SEZ) Development Roadmap (SEZ Strategic Framework: 2020-2030) and to fast track the development of new SEZs: Nkomazi SEZ (Mpumalanga), Tshwane Automotive SEZ (Gauteng), Musina-Makhado SEZ (Limpopo) and Atlantis SEZ (Western Cape). A further six SEZs were in the planning stage. The dtic planned to support foreign direct investment flows and InvestSA would promote domestic investment by providing a one-stop shop for investment promotion, investor facilitation and aftercare support for investors.
Ms Mabitja-Thompson referred, as had the Minister, to the intention of the dtic to undertake economic research, contribute to the development of trade and industrial policies apex, and guide policy, legislative and strategy processes to facilitate inclusive growth in the country.
Presentation of Financial Matters by the CFO
Mr Shabeer Khan, CFO, dtic, informed the Committee that 2021/22 budget of R9.7 billion would increase to R10.1 billion in 2023/24, i.e. it would increase around 2.9% per year over the Medium-Term Economic Framework. Allocations to the Industrial Financing programme accounted for 51.1% (R15 billion) of the department’s expenditure, mainly to fund incentive programmes. Spending in the Industrial Financing programme was expected to increase at an average annual rate of 1.6 per cent, from R4.9 billion in 2020/21 to R5.2 billion in 2023/24.
A critical part of the economic reconstruction and recovery plan included interventions to build catalysts for investment through infrastructure development and that included the development of special economic zones, the provision of critical infrastructure activities, and the rollout of infrastructure within industrial parks in support of the district development model. Spending in the programme’s Infrastructure Investment Support subprogramme was expected to increase at an average annual rate of 13.9 per cent, from R1.3 billion in 2020/21 to R1.9 billion in 2023/24. The 2021/22 allocation to the special economic zones was R1.5 billion, followed by R130.9 million for industrial parks and R113.6 million for critical infrastructure. An additional R369.4 million was allocated to the Competition Commission over the medium term to improve capacity to investigate cartels and conduct market inquiries, and for litigation, as per the Commission’s expanded mandate. The CFO presented the 2021/22 Budget by Incentives Categories
Ms Mabitja-Thompson introduced the members of her team on the online platform. All DDGs were in attendance.
Ms H Boshoff (DA, Mpumalanga) reminded the officials from the dtic that she was from Mpumalanga and since 2012, the province had been promised that the Nkomati SEZ would be up and running but every year, it was the same story and nothing happened. Could the dtic provide a straight answer as to where things really stood and what steps the Department would take? Was the Mpumalanga Economic Growth Agency (MEGA), which was the body appointed to run the SEZ, in a position to do so? She knew that MEGA was 373% in the red in its budget. People had been promised jobs with the SEZ but nothing had arisen. Already seven investors had withdrawn. The Acting DDG had spoken of improving the climate for investment but how would a body such as MEGA establish an SEZ? Mpumalanga was a food basket and perfectly positioned to trade with Mozambique and Swaziland.
Mr T Brauteseth (DA, KZN) hoped (tongue in cheek) that the electric vehicles that the Minister had spoken of could spot potholes.
He said that a lot of the presentation was impressive but he did not see any indication of co-operation between dtic and Eskom regarding the supply of electricity, nor co-operation with labour to make labour more competitive, nor did he see co-operation with Constitutional Development around the incredible uncertainty created for investors by the question of Expropriation without Compensation. Could dtic comment on the fact that there did not seem to be any transversal collaboration about the real things that made SA investor friendly or competitive in local markets?
Mr M Dangor (ANC, Gauteng) talked about labelling from the country of origin. When in Dubai, he had found that local supermarkets had special, highlighted areas for local produce and foreign produce was shelved in another section of the supermarket. Local produce should be promoted in SA. Consumers should buy the bananas from KwaZulu-Natal for Mr Brauteseth’s sake and not the ones that came from Haifa. It was important to look at that. Supermarkets should do the same in SA. Labelling according to country of origin and promoting SA goods was most important.
Mr Dangor referred to the issuing of most favoured nation status. He suggested that awarding a country most favoured nation status should take into account economic factors as well as political considerations. That should be looked at carefully. Regarding SEZs, and he was thinking particularly of the one in the Vaal Triangle, he believed that the SEZs should be located in an area where place could be made for everyone - the candlestick maker, the cobbler and the tailor – so that people could become productive in that development. There should be collaboration and co-operation between dtic and people who build houses, infrastructure and so on, so that an SEZ did not become an isolated township as in the apartheid model. SA had to break the mould of separation. He referred approvingly to the Milton Keynes town model in which a cooperative living space was created in England after World War 2.
Ms B Mathevula (EFF, Limpopo) asked if there were timeframes for Industrial Parks (IPs), especially the Lebowakgomo IP. The SEZ in Fetakgomo Tubatse in Limpopo had challenges relating to water and the roads were not in a good state. What was the dtic doing in working with municipalities and other stakeholders because no investors would invest in such a place. Had development begun on the Messina-Makhado SEZ, when would it be finished and had a solution been found to resolve the disputes taking place in the area?
Mr M Mmoiemang (ANC, Northern Cape) appreciated the wonderful presentation. He referred to the slide on how the dtic Administration had found new ways of doing things and ensuring co-ordination and joint monitoring of key areas identified as a way of ensuring the dtic and entities spoke with one voice (slide 10). What was new; what had been introduced that would accommodate the modus operandi identified in slide 10? How different was the Administration programme?
He asked about two programmes in the Northern Cape. Near the Augrabies Falls was a business that exported citrus fruit. It was one of the Augrabies Falls Workers Empowerment Trust Farms named Witklippe. It was being consumed by the service debt and that made them vulnerable. How could the dtic help such ordinary workers to keep the farm going?
His third question related to the Namaqua SEZ for which, according to the presentation, the assessment had been completed. To what extent could that SEZ grow in Namaqualand? The anchor was Vedanta Gamsberg Zinc Mine. The Central Energy Fund had conducted an assessment around renewal energy in the Namaqualand and Upington area. Close by was the Kgalagadi Trans-border Park. He was looking at what could be done to maximise the envisaged SEZ to ensure the competitive and comparative advantages as those areas were close to each other and on the N14. He did not want to delay progress but wanted a sense of whether it was possible. He raised the point because of the worrying fact of the crisis of unemployment that concerned him. Even before Covid-19, the situation was dire; the situation was very bad as SA was a country of unskilled and semi-skilled workers waiting for work and so, an opportunity around a labour-intensive production should be the focus of any SEZ. Could an SEZ be used as a laboratory test to see if SA could produce the labour-intensive manufacturing jobs that had been the mainstay of industrialisation? SEZs had to address the structural aspect of unskilled and low-skilled workers. Can that SEZ be used to look at that?
Mr E Landsman (ANC, North West) stated that his questions had been covered.
The Chairperson had a number of questions. In the past (in previous presentations), the Department had provided an analysis of the external economic context from a global perspective. That was missing from the presentation and it had assisted in providing a context for Members to consider the departmental plans and the Annual Report. Perhaps the DG could provide it with the next report to the Committee? He was referring to information regarding countries that SA traded with, whether there was a deficit or surplus, investments, the unemployment rate, etc. Could dtic go back to providing those reports?
He agreed with Mr Mmoeimang and Ms Mathevula that the hope of the unemployed lay in the SEZs and the Industrial Parks but the dtic had provided no timeframes. That was concerning, even disappointing. He was particularly concerned about IPs. He had been deployed by his party to an area that had an IP about one kilometre from his constituency office, the Dimbaza IP. Phase 1 had closed but he did not know if they had even started phase 2 and there were many other phases to follow. He did not know how long it was going to take. He was glad some IPs had been finalised but some were in the planning stage and others were waiting for Cabinet approval. There was also no indication of the sector IP each would focus on. He was concerned about the speed of implementation. He did not know what the challenges were, but people did not have jobs. If one phase took two years and there were five phases, what happened to the people who were unemployed? In February, the Committee had asked what impact trade negotiations would have on the municipalities and rural areas. Listening to the plans for Joint KPIs, he had thought that the plans of local government, provincial departments and national government would be fused together, so that what national government implemented would be cascaded down to provinces and local government.
The Chairperson recalled that in the last meeting, the DG had been clear about how funds would be allocated, the and the weight of investment had been on Gauteng and such provinces. The Committee had indicated that it would like to see the focus on less favoured provinces. The dtic had acknowledged that. In the current report, no amounts had been given per province. The Members represented the provinces and so they would like to see the amounts reflected in the KPIs as well as the Annual Report.
He was also concerned about the state-owned enterprises (SoEs) such as Transnet and Eskom that were not playing their part in assisting industrial development. The collaboration with the District Development Programme (DDP) satisfied the Chairperson. He hoped that as it was implemented, there would be collaboration between the dtic and the SoEs which would inform them of the needs in the districts.
He was pleased that the Annual Performance Plan (APP) showed the key priorities for 2021/22 and in which provinces they would be located. People should not flock to those areas where economic development was already taking place. Was there an analysis of the cost benefit of an SEZ? Were the provinces and local government benefitting from the investments or were they just using up money from government? He was glad to hear about the SEZ support unit. Was there an IP support unit or was it embedded in the SEZ support unit?
Was dtic able to monitor job creation in the Master Plan areas, especially those that were already operational? How many workers were there in each sector? He would like that information.
Regarding the Africa Continental Free Trade Area (AfCFTA), the Chairperson had heard that Kenya had a bi-lateral free trade agreement with USA. Did it still have that agreement? Would it not undermine the entire concept of AfCFTA? How could one stop other countries from doing the same? Certain reports were to be made available on AfCFTA: were those reports for the Cabinet only or would they be available for MPs and for the public? Would they be available on the dtic website? Had all 55 countries ratified the AfCFTA?
Regarding the budget, the Chairperson pointed that the Committee’s advisors had worked out that it was, in fact, an increase of 5% in nominal terms but in real terms, it was only a 0.7% increase. In addition, there was no real increase in the Industrial Programme allocations. The Industrial Programme was meant to drive the reconstruction and recovery programme but there had been no increase in that programme. He was concerned about that.
Regarding the role of the NEF, which had joint KPIs with dtic, the Chairperson pointed out that the NEF always complained to the Committee that it had not been re-capitalised. Now the NEF had to play a major role but there was nothing about recapitalisation of the entity.
The Chairperson asked Ambassador Carim what the situation was regarding the trade agreement with the United Kingdom that was intended to address the Brexit situation.
He also noted that there was no timeframe for the Gauteng – Eastern Cape Freight Corridor. Could the Committee be apprised of the situation? What was the worker participation model to which the presentation had referred? Were workers to participate on board of directors?
Finally, the Chairperson asked about the policy briefs and the fact sheets to which dtic and the Minister had referred? Would they be shared with Members of the Select Committee?
Ms Mabitje-Thompson thanked Members for the considered questions and for the direction given as, in some areas, there were some really good pointers from the Members. They would assist in taking the work forward. She noted that load shedding was about to begin and asked if she should respond in writing or just go through the questions as best she and her colleagues could. (There were several points where connectivity dropped momentarily during her response and the Acting DG’s words were lost.)
The Chairperson noted that Ms Boshoff had been kicked out by load shedding, but he would provide her with a copy of the responses. The dtic should continue with the responses and the secretariat would indicate if other Members lost connectivity.
Ms Mabitje-Thompson DG stated that she had heard the appreciation of the plans for greater collaboration and explained that she had just highlighted dtic responsibilities and not all points of collaboration. It should be noted that even the Master Plans were forcing government departments to work together. She suggested that what she could do was to share the Master Plans with the Committee as they would show where there was collaboration with government departments and entities. She assured Mr Brauteseth that there was collaboration and that in the Master Plans, in particular, there was direct engagement with Labour.
Ms Mabitje-Thompson noted the point raised by Mr Dangor and assured him that retailers could choose to erect similar displays of local produce, but she informed him that government could not force retailers to do that because SA had to adhere to World Trade Organisation (WTO) rules or the country would suffer. Proudly SA was intended to do exactly that – promote locally produced goods and ensure that SA products were well labelled and placed at eye-level in the shops so that they became the product of choice.
Several Members had asked about timelines in relation to SEZs. Mr Molefane would respond in detail but what dtic had done differently was that it would not rush into declaring SEZs until the investors were on board. Once the investors were verified, dtic would start the process of designation as that would avoid the situation where SEZs could not get going because they could not find investors. It was a complicated process of dtic working closely with municipalities and provinces. The speed with which Tshwane SEZ had been developed was remarkable. The new problem was being able to find sufficient sites! The dtic was learning on the go but she heard the call for timeframes.
Ms Mabitje-Thompson pointed out that some provinces had more capacity than others, as Ms Boshoff had pointed out in the example of MEGA in Mpumalanga. The new unit would allow the dtic to assess capability of the proposed local institution so that SEZs were not collapsed by incapacity. The unit would determine with whom dtic should collaborate for successful implementation of the project.
She noted that the Chairperson had requested input on the economic climate assessment. The Acting DG assured the Committee that she would bring it back. The challenge was the timeframe, and how much one could present in the amount of time allocated to a Department but she would accommodate the request.
Mr Mmoeimang had asked about a specific project and how dtic supported black ownership. If she could have details, she would come back to him on that issue. The general point was about what could be done when there was ownership transfer to workers so that they did not sink in debt that would undermine the enterprise. The dtic was looking into how it could offer relevant support. At the moment dtic ensured that there was ownership representation in the board of a company so that there was not a situation of absent owners but active ownership. The dtic was looking at access to affordable funding and the affordability of such funds. The dtic was looking at expansion plans or plans to purchase equipment which was seen as working capital and that was how dtic was looking at supporting black empowerment going forward.
Ms Mabitje-Thompson referred to the point raised by Ms Mathevula about local disputes in the communities. In the Messina-Makhado area there were disputes about environmental certificates. The new unit would deal with the disputes. The Tshwane experience had taught the dtic how important it was to take the community on board. Ordinarily in the dtic budget, there would not be an allocation of budget per region but it was more about making sure that there was uptake by the local government. Some of the work for provinces was around export opportunities and opportunities for training and guidance for people. Economic activity was centralised around three or four provinces in SA and that was a challenge. The dtic was working directly with provinces and municipalities to ensure development and market communication in non-central places. She appealed to the Members to become allies of the Department in the Members’ localities so that they became aware of opportunities and also Members could provide dtic with recommendations.
She responded to the question of benefit cost analysis. Mr Molefane would go into details but it was constantly monitored. The key importance was getting an inflow of investments into SEZs and, as Members had said, space was being created for small businesses and not just the big businesses. The role of the NEF was to channel funds to formerly disadvantaged sectors of the economy, including women and youth. The APP showed that the dtic handed out ring-fenced money for women empowerment, production of pharmaceuticals for Covid, etc. The dtic had advanced over R0.5 billion in funding to the NEF. She clarified that the Joint KPIs and the structure of programmes was a work-in-progress. The dtic had started with optimising its own programmes. The process might not implicate the Administration Division directly because the focus was on the carrying out mandates and the function of the Administration was to ensure that all mandates were funded and well-resourced.
Ambassador Xavier Carim, DDG Trade Policy, Negotiations & Cooperation, dtic, responded to Mr Dangor’s concerns about labelling. There were no WTO rules on how retailers should stack and display goods. That was a retailer’s decision. Government could not enforce it but could encourage retailers to highlight local goods as is done in Dubai. The WTO regulations relating to country of origin labelling refers to the shipment of goods at the customs border of a country. That was a requirement that the country of origin be declared.
Regarding the question of Most Favoured Nations (MFN), there were 165 members of the WTO and all members were required to give “most favoured nation” treatment to members. That meant that a tariff offered to one country in the WTO needed to be extended to all. One could not distinguish between WTO countries. The exception to that was when countries entered into regional trading arrangements, for example SA could give preferences to the Southern African Development Community (SADC).
In response to the Chairperson’s question, Ambassador Carim stated that the intention was to ensure that the benefits of trade negotiations reflected on all citizens and businesses in SA. The trade negotiations and the outcome of the negotiations, such as with the AfCFTA, was such that export opportunities became available. The work of the trade negotiator was to find those opportunities; secondly the export promotion officials had to ensure that SA businesses and exporters were made aware of those export opportunities, including the countries and products in which opportunities arose. What was new in the integrated approach was to take that information and to make it known at a district level using the District Development model.
Referring to the question regarding Kenya and its agreement with the USA, Ambassador Carim explained that the agreement had been signed with the previous US administration. The US was currently re-thinking its future arrangements with Africa, including Kenya. The general feeling was that African countries should try to refrain from entering into bilaterals, but every country had the right to decide for itself. Many countries in Africa already had existing free trade agreements outside of the continent.
Regarding the reports on negotiations, the Department was obliged to make the reports available on a quarterly basis. Some reports were not very useful, but a method of updating the SC could be found.
He added that 36 countries had signed the ratification of AfCFTA and two more were currently getting ready to sign.
In response to the question on the Southern African Trade Union (SACU) and the recent agreement with the UK once it left the European Union, Ambassador Carim reported that that agreement had entered into force in January 2021 and it had ensured that trade with the UK had continued uninterrupted and it had, indeed, been continuing seamlessly.
Mr Maoto Molefane, Acting DDG for Spatial Industrial Development & Economic Transformation, dtic, agreed with Ms Boshoff regarding the delays in the Nkomati SEZ. The Nkomati SEZ had been initiated three or four years previously but had not got off the ground which had affected the investors. The capacity of the province was a central challenge. The dtic had had interactions with the province.
A key problem had been the turn-over of officials in the provincial Department and in MEGA. Currently MEGA did not have a CEO, nor had the Agency had a full-time board for quite some time. The province did not have a full-time Head of Department for the Department of Economic Development and Tourism and Mpumalanga MECs had been changed but dtic had developed a new approach, approved by Cabinet, that strengthened the role of national government in the SEZs and improved coordination and collaborations. Previously all dtic could do was to designate an SEZ and the province took responsibility for development. That reliance on provinces had been detrimental to development. The new approach had been experimented with in Tshwane and had been extremely successful in getting that SEZ up and running.
New systems had been put in place. Previously the dtic designated SEZs on the basis of promised investments. Now an area needed to be developed and a serious commitment to investment had to be made before a licence was issued.
He explained that Deputy Minister Majola was responsible for SEZs generally and for certain provinces, in particular, including Mpumalanga. Deputy Minister had already met the new MEC and board members would be appointed to MEGA. The former DG, Lionel October, was heading the new unit for SEZs and he would be visiting the SEZ in Mpumalanga in the coming week to finalise the implementation plan with the province. The land had been approved. In terms of funds, dtic would fund when the SEZ brought in the investments but, as Ms Boshoff had said, the Nkomazi SEZ was perfectly located to capture the Mozambican market and the Swaziland market. He assured Members that they would see some movement quite soon at Nkomazi.
In responding to Mr Dangor on using SEZs to change spatial planning, Mr Molefane assured him that the new approach would ensure the alignment of SEZs with other facilities, especially the city development approach and all the other amenities, such as SMME facilities, housing etc. The multi-facetted planning would lead to opportunities of work, play and stay in those areas. Planning was important and would include all those activities. That approach had been followed in Coega, the Tshwane SEZ and Messina-Makhado.
Discussions on the SEZ in Fetakgomo Tubatse had begun in 2012 and tremendous work had been done but designation was quite complex. Feasibility studies had been completed but commitments were required from other role players, e.g., roads, water, electricity and infrastructure as well as investment commitment and the province had been struggling with it. A technical committee had now been established and he, as Acting DDG, chaired the meetings to coordinate efforts of provincial and local government. The Amplats mines would be included in the zone. The area had over 40% of the platinum deposits and 20 mines were operating in the area, ensuring opportunities for upstream and downstream. The dtic was partnering with Glencor and their mining operation would collaborate with the SEZ. Deputy Minister Majola would be meeting with the mining houses on 5 July 2021. The dtic would focus on attracting investments and infrastructure would be developed, even while the area was awaiting designation. Ms Mathevula would see movement quite soon in that region.
The Messina-Makhado SEZ was in a sensitive location with baobab trees, etc. so there were difficulties with the environmental assessment (EA) of the area. The SEZ was intended to hold a power station. He anticipated that it would be an uphill process because of the EA process that the managers of the SEZ had been engaging with. However, there were two options for that SEZ and one area was on the border. It had been earmarked for light manufacturing and there were no major issues except for a land claim and he believed that the province and the Department of Agriculture, Land Reform and Rural Development were working well together on that matter. That would be a good opportunity to develop a cross-border SEZ.
Mr Molefane explained that Industrial Parks were driven by the provinces. Nkonguwa was driven by the Limpopo Economic Agency and dtic was working closely with the Agency. The Deputy Minister would be visiting the area in June to gather all challenges. Although the dtic was committed to fast-tracking the IP, sometimes the challenges lay with other bodies but with the new approach, the dtic would embark on a process of acceleration.
He responded to Mr Mmoiemang’s comment about experimenting with labour intensive jobs at SEZs. That was one of the major objectives of the SEZ. The SEZ were used to attract foreign investment but that was intended to create many decent jobs. The dtic looked at natural resources in the area because the processes involved were labour intensive and created many jobs. The plan was also to focus on component manufacturing to support the mines as those were also labour intensive activities. A fundamental objective was to utilise incubation programmes to draw in SMMEs and that created jobs. When companies left the country, they must have established domestic capabilities in SA.
Mr Molefane stated that dtic would work closely with provinces in respect of the new SEZs and get them going on stage 1 so that they could be pressurised to submit their applications.
He apologised for not including the focus areas of the new SEZs. They were focussing on agro-processing, mining and renewable energy. He thanked Minister Mantashe who had championed the District Development model and was now engaging with the mining houses to commit to the SEZ programme because the mines would provide opportunities for beneficiation both upstream and downstream. For example, local SMMEs could focus on particular components needed by two or three mines in a local area.
In response to the question on the cost benefit analysis, Mr Molefane explained that, as part of the APP, he was obliged to provide quarterly and annual reports on the SEZs, including the challenges faced. He would share those reports. As far as support for Industrial Parks was concerned, the Unit at the IDC was supporting both SEZs and IPs, as well as participating in the District Development model and the freight corridor between Gauteng and the Eastern Cape.
Mr Dangor requested permission to leave as he had another meeting.
Ms Mabitje-Thompson stated that she had responded to all questions. She recognised a few more dtic officials on the platform.
The Chairperson indicated that some questions had not been answered. The question of the worker participation model and the sharing of information on research, policy briefs and the district development model had not been responded to.
Regarding the sharing of information on research, policy briefs and the district development model, Ms Mabitje-Thompson said that the dtic would include the policy briefs as part of the Quarterly Reports to Parliament. She would speak to the colleagues in Parliament as to how that information could be shared.
Ms Mabitje-Thompson explained that dtic was focussing on worker participation in a new way. Workers would participate in the board of the company as part of the governance structure so that they were not absentee owners. She understood Mr Mmoiemang’s question as asking how the workers succeeded when they took over an enterprise and did not drown in debt. The dtic would look at the additional aspects of the transaction. If there was a need to purchase machinery or capitalise the operation, etc, dtic would help with getting orders at good prices. There was also a fund for those that needed finance to operate and grow.
The Chairperson noted that he had pointed out that the Committee’s budget analysis showed that, in real terms, the dtic increase was not 5% but 0,7% and industrialisation had not received an increase at all.
Ms Mabitje-Thompson explained that dtic was also concerned about the budget, especially in respect of funding the recovery of the economy. The dtic was looking at partnering with the private sector and was trying to do more with less. She was convinced that the dtic could perform its work although some methodologies might have to change. To reduce the dependence on the fiscus, some of the grants might become repayable loans. The dtic was engaged in ongoing discussion with National Treasury, while being mindful of the fiscal constraints, to assist with the 12I tax incentive which had come to an end but had been very supportive to businesses that had received a tax break when purchasing machinery. She added that the support of the Select Committee was very important. The dtic was aware that economic recovery required funding, and a lot more and for a lot longer than one might think necessary.
She stated that penalties from the Competition Commission settlements were being re-directed into industry. Some industries had been re-capitalised with that funding, so the funding went back as close to the source of where the damage had taken place as possible. The dtic channelled the funds through one of its entities, such as the IDC, that could raise revenue to house the funds and then channel it back into industry where the damage has occurred. Where damage was caused, those responsible had to make reparations to rectify the damage.
The Chairperson noted that, on 22 June 2021, the Select Committee was scheduled to receive a briefing by the dtic on the Automotive Master Plan and the Poultry Master Plan. It would have been the 23rd June 2021 but that day had been set aside to discuss the Expropriation Bill in the NCOP.
He stated the Committee wished to invite the provincial development agencies and the Local Economic Development (LEDs) agencies to brief the Committee on what they were doing, but he requested that a dtic representative attend those meetings so that, at a later stage, the dtic could respond to all the problems raised by the agencies. The Committee had asked the Department of Small Business Development whether the LEDs were active or whether they were dormant but that Department had said that it would be too much work for it to gather that information. He wondered whether the dtic, via the District Development model, could check whether the LEDs were working and whether they were adequately resourced and managed by people with relevant skills. The management positions were often juniorised and given to people with no economic skills. The SC would write letters to the provinces to invite the agencies and LEDs and the dtic could decide who to send as representatives based on the agenda for the meeting.
The Chairperson said that the Committee was unable to meet any of the departments for the Quarterly Reports. The Committee had time to meet for the Annual Performance Plan and the Annual Report only as the Committee dealt with four Departments, but he hoped that the dtic would be able to forward copies of the Quarterly Reports that were presented to the Portfolio Committee on Trade & Industry.
The Acting DG expressed her gratefulness for the consideration given to the dtic’s plans and she valued the inputs.
The Chairperson thanked the Acting DG, the Minister, the CFO, DDGs and other representatives of the dtic, particularly for their clear responses to the Members’ questions.
The meeting was adjourned.
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