DTIC Quarter 4 2021/22 Performance; NLC Chairperson Shortlisting

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Trade, Industry and Competition

24 May 2022
Chairperson: Ms J Hermans (ANC)
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Meeting Summary

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Tabled Committee Reports

The Portfolio Committee on Trade and Industry met on a virtual platform to receive a briefing from the Department of Trade, Industry and Competition on its financial and non-financial performance for the Fourth Quarter of the 2021/22 financial year.

The Department said that the global economy had expanded by 6.1% in 2021 but global growth was projected to slow to 3.6% in 2022 as a result of the war in Ukraine. Overall risks had increased due to the emergence of more transmissible and deadlier COVID-19 variants, and the economic costs of war were expected to spread further afield through commodity markets, trade, and financial interlinkages. Fuel and food price rises were already having a global impact, especially on vulnerable populations in low-income countries.  In South Africa, the real GDP increase by 1.2% in Quarter 4 of 2021/22, following a decline of 1.7% in Quarter 3 of 2021/22, was largely the result of a rebound in consumer spending. Specific details relating to all the Programmes within the Department were provided. Spending for the Department for the 2021/22 financial year had been R11.6 billion or 98.3%.  Virtual platforms had resulted in huge savings for the Department under Goods and Services. 54 interns had been appointed for the two-year period of 2020 to 2022, of whom 40 Interns had subsequently been employed in the public service. The South African Chairpersonship of the African Continental Free Trade Area institutions had been extended from an expiration date of February 2022 to June 2022. Three investment pledges were made at the Fourth SA Investment Conference with respect to the Saldanha Bay Industrial Development Zone: R1.5 billion from African Quartz; R1.8 billion from Anchora Enterprises for solar technologies; and R2 billion from Cape Ocean Terminals. The Active Pharmaceutical Ingredients Cluster was launched with an investment commitment of R500 million made by Aspen at the Investment Conference held on 24 March 2022 and international Development Finance Institute Funding to Biovac towards increasing local manufacture of vaccines.

A Member asked about the legislation for the National Lotteries Commission. Was it to be a new Bill or an Amendment and when would it be brought to the Committee by the Department?

Members asked about the staff at the Department. What were the circumstances surrounding the suspension of a Chief Director? Why was a Deputy Director facing a disciplinary process? When would a permanent Director-General be appointed? What had happened to the interns after their internship?

Members expressed concern about the number of black industrialists supported by the Department who might have closed down during the Covid lockdown. Was there a plan to turn around the unemployment rate of 45%, as in the expanded definition, or almost 10 million unemployed people? Was there a plan to create jobs for the millions of people unemployed? How much did it cost to create one job? How many industries had actually been opened and had created jobs? What investment had been provided to support black industrialists that would give South Africa a footprint in Africa? Should South Africa not be targeting beneficiation in areas where raw materials were being exported as that would also improve the negative unemployment rate?  What were the spin-offs in terms of structural transformation and decentralisation of the economy following the allocation of resources to localisation? Did that deal with the three-point challenge of poverty, unemployment and inequality? Did it deal with the poverty alleviation programme of the government? What measures or interventions were there to train or upskill the millions of unemployable people to make them at least employable? Were there any processes in place?

Members also asked about the extent of investment support provided to local productions of films and documentaries telling SA stories. What direct benefit was expected to emanate from the departmental engagements with other countries and how would that assist South Africans to create jobs and reduce Covid? What was the Department’s business incentive? What was the Master Plan? When was the planning going to end and the work begin? Were there times and dates in the Master Plans?

The Committee considered the report initially presented to Parliament in March 2021 and recently returned to the Committee for review. The report contained the shortlist of candidates for the position of chairperson of the National Lottery Commission. As one of the nominated candidates had passed away, a decision had to be made as to who should be selected to replace the nomination of the deceased person and whether the revised shortlist should contain three or four names. The matter went to the vote and it was determined that the shortlist would be re-submitted with four names and that the name of Rev Dr F Chikane and Mr TTC Dlamini (who originally had the second highest score) would be added to the names of Dr B Pityana and Mr T Tselane. All four nominations scored over 80% in the original scoring process.

Meeting report

The Portfolio Committee on Trade and Industry met on a virtual platform to receive a briefing from the Department of Trade, Industry and Competition on its financial and non-financial performance for the Fourth Quarter of the 2021/22 financial year.

The Department said that the global economy had expanded by 6.1% in 2021 but global growth was projected to slow to 3.6% in 2022 as a result of the war in Ukraine. Overall risks had increased due to the emergence of more transmissible and deadlier COVID-19 variants, and the economic costs of war were expected to spread further afield through commodity markets, trade, and financial interlinkages. Fuel and food price rises were already having a global impact, especially on vulnerable populations in low-income countries.  In South Africa, the real GDP increase by 1.2% in Quarter 4 of 2021/22, following a decline of 1.7% in Quarter 3 of 2021/22, was largely the result of a rebound in consumer spending. Specific details relating to all the Programmes within the Department were provided. Spending for the Department for the 2021/22 financial year had been R11.6 billion or 98.3%.  Virtual platforms had resulted in huge savings for the Department under Goods and Services. 54 interns had been appointed for the two-year period of 2020 to 2022, of whom 40 Interns had subsequently been employed in the public service. The South African Chairpersonship of the African Continental Free Trade Area institutions had been extended from an expiration date of February 2022 to June 2022. Three investment pledges were made at the Fourth SA Investment Conference with respect to the Saldanha Bay Industrial Development Zone: R1.5 billion from African Quartz; R1.8 billion from Anchora Enterprises for solar technologies; and R2 billion from Cape Ocean Terminals. The Active Pharmaceutical Ingredients Cluster was launched with an investment commitment of R500 million made by Aspen at the Investment Conference held on 24 March 2022 and international Development Finance Institute Funding to Biovac towards increasing local manufacture of vaccines.

A Member asked about the legislation for the National Lotteries Commission. Was it to be a new Bill or an Amendment and when would it be brought to the Committee by the Department?

Members asked about the staff at the Department. What were the circumstances surrounding the suspension of a Chief Director? Why was a Deputy Director facing a disciplinary process? When would a permanent Director-General be appointed? What had happened to the interns after their internship?

Members expressed concern about the number of black industrialists supported by the Department who might have closed down during the Covid lockdown. Was there a plan to turn around the unemployment rate of 45%, as in the expanded definition, or almost 10 million unemployed people? Was there a plan to create jobs for the millions of people unemployed? How much did it cost to create one job? How many industries had actually been opened and had created jobs? What investment had been provided to support black industrialists that would give South Africa a footprint in Africa? Should South Africa not be targeting beneficiation in areas where raw materials were being exported as that would also improve the negative unemployment rate?  What were the spin-offs in terms of structural transformation and decentralisation of the economy following the allocation of resources to localisation? Did that deal with the three-point challenge of poverty, unemployment and inequality? Did it deal with the poverty alleviation programme of the government? What measures or interventions were there to train or upskill the millions of unemployable people to make them at least employable? Were there any processes in place?

Members also asked about the extent of investment support provided to local productions of films and documentaries telling SA stories. What direct benefit was expected to emanate from the departmental engagements with other countries and how would that assist South Africans to create jobs and reduce Covid? What was the Department’s business incentive? What was the Master Plan? When was the planning going to end and the work begin? Were there times and dates in the Master Plans?

The Committee considered the report initially presented to Parliament in March 2021 and recently returned to the Committee for review. The report contained the shortlist of candidates for the position of chairperson of the National Lottery Commission. As one of the nominated candidates had passed away, a decision had to be made as to who should be selected to replace the nomination of the deceased person and whether the revised shortlist should contain three or four names. The matter went to the vote and it was determined that the shortlist would be re-submitted with four names and that the name of Rev Dr F Chikane and Mr TTC Dlamini (who originally had the second highest score) would be added to the names of Dr B Pityana and Mr T Tselane. All four nominations scored over 80% in the original scoring process.

Meeting Report

Opening Remarks

The Chairperson welcomed Members and the Department of Trade, Industry and Competition (dtic).  The purpose of the meeting was to obtain a briefing from the dtic and then to discuss the report on the National Lottery Commission (NLC) chairperson.

Presentation by the DTIC on its financial and non-financial performance for fourth quarter of the 2021/22 financial year
Mr Shabeer Khan, Acting DDG, dtic, introduced his colleagues on the platform, and indicated that the presentation covered the Fourth Quarter of the 2021/2022 year. Once the Auditor-General had completed the audit, he would provide a comprehensive briefing on the Department’s activities in the previous year.

Mr Khan presented the economic overview explaining that the global economy had expanded by 6.1% in 2021, global growth was projected to slow from 6.1% in 2021 to 3.6% in 2022 and 2023 as a result of the war in Ukraine. Overall risks had increased due to the emergence of more transmissible and deadlier COVID-19 variants, and the economic costs of war were expected to spread further afield through commodity markets, trade, and financial interlinkages. Fuel and food price rises were already having a global impact, and were expected to continue to have a negative economic impact on vulnerable populations, particularly in low-income countries.

In SA, the real GDP increased by 1.2% in 2021Q4, following a decline of 1.7% in 2021Q3, with agriculture growing the most at 12.2% amid increased production in animal products. The GDP growth in Q4 was largely the result of a rebound in consumer spending. However, the first quarter of 2022 saw SA exports dwindling by 3.7%, while imports grew by 4.1%. At the dtic, of the 57 targets in Q4, only 48 or 84% were met owing to various delays in research projects and businesses not meeting the requirements for incentives. Spending of the budget, however, stood at 98.32%.

The Acting DG provided specific details relating to all the Programmes within the Department. Under Programme 1: Administration, he noted the successful internship programme in the dtic. 54 interns had been appointed for the two-year period 2020 to 2022; 40 of the interns had remained in the public service. The SA Chairpersonship of AfCFTA institutions was extended to June 2022. Three investment pledges were made at the Fourth SA Investment Conference with respect to Saldanha Bay Industrial Development Zone: R1.5 billion from African Quartz; R1.8 billion from Anchora Enterprises for solar technologies; and R2 billion from Cape Ocean Terminals. The Active Pharmaceutical Ingredients (API) Cluster was launched with an investment commitment of R500 million made by Aspen at the Investment Conference held on 24 March 202 and international Development Finance Institute Funding to Biovac towards increasing local manufacture of vaccines. The Nyanza light metals technical services centre and laboratory construction were completed in Richards Bay Industrial Development Zone, providing the first novel titanium dioxide processing plant.

A total of 101 enterprises of which 80 were black-owned; 52 women-owned and 25 youth-owned, were supported through the Workplace Challenge enterprise transformation intervention to enhance their productivity and competitiveness and boost their survival capability in current economic conditions.

The public and stakeholder submissions on the Companies Amendment Bill had been reviewed, following the publication of the Bill in the Government Gazette for public comment in Quarter 3. The Liquor Amendment Bill had been reviewed and inter-Departmental engagements were being held on the government measures and approaches to liquor abuse. The Lotteries Regulatory Impact Assessment (RIA) to review the provisions of the Lotteries Act, 1997, was finalised in February 2022 and the recommendations would inform legislative changes.

Ms Irene Ramafola, Acting CF0, dtic, presented the financial status. The R11.6 billion spent as at 31 March 2022 comprised R6.3 billion in business incentives and infrastructure had been disbursed to the beneficiaries across the various incentive programmes, while R2.1 billion had been transferred to the public entities. R1.5 billion was disbursed to various external programmes at the IDC. Spending on operational costs was R1.5 billion. Spending for the 2021/22 financial year had been R11.6 billion or 98.3%.

Ms Ramafola added that virtual platforms had resulted in huge savings for the Department under Goods and Services.

(See Presentation)

Discussion
The Chairperson reminded Members that the purpose of the briefing was to assess the performance of the Department against its budget.

Mr M Cuthbert (DA) appreciated the briefer, yet comprehensive, presentation. He asked about the legislation for the NLC. Was it to be a new Bill or an Amendment and when would it be brought to the Committee by the Department.

He added that he had submitted two written questions to the Minister but the response was not comprehensive. His question was related to employees of the Department currently under suspension and facing disciplinary action. A Chief Director had been suspended for fraud: what was the nature of the fraud and what was the current situation? He understood that an official from the Department of Agriculture, Land Reform and Rural Development was involved, but he had not received the full details in response to his parliamentary question. Secondly, a Deputy Director had apparently failed to disclose a financial interest: what did that mean and was it related to the awarding of a contract?

He also asked about the delay in the appointment of a new Director-General. He had been told by the Minister that the delay was a result of the July unrest and the need to complete the Annual Performance Plan. When would the process be concluded? He did not even know if the advertisements had gone out. It was important that both the Committee and the public were aware of that. Acting positions did not create the kind of stability that the Opposition liked to see and which he thought would suit the Department best.

Mr W Thring (ACDP) asked about the relationship with the BRICS partners and the relationship with Taiwan. China and Taiwan were not seeing eye-to-eye and military exercises were being carried out by China around Taiwan. What role was SA playing, if any, with regards to the difficult relationships playing out? What position would SA take if it came to a case of China engaging in a military invasion of Taiwan, although he hoped that would never happen? 

Regarding the industrialists supported by the dtic, Mr Thring asked how many of the total number had survived the lockdown as a going concern? How many had closed as a result of the lockdown?

He had heard talks of the Department of Small Business Development being assimilated into the dtic.  Was there any truth in the rumour and did the Department think that it was a good idea?

Mr Thring stated that the ACDP welcomed every job created and every job saved. He noted the creation of some 3 000 jobs and the saving of over 5 000 jobs, but it paled in comparison to the high number of jobs required. The unemployment rate was high: over 35% in terms of the narrow view and over 45% in terms of the expanded definition of unemployment. That meant almost 10 million people were unemployed. What was there to turn it around?  The country needed millions of jobs to turn it around. Was there a plan to create jobs for the millions of people unemployed?

The ACDP welcomed the positive trade balance but asked if it would not be increased if the policy of beneficiation were driven harder. He knew that positive strides were being made but if one looked at areas where the bulk of raw materials was being exported and sometimes the finished products were subsequently imported, should SA not be targeting beneficiation in areas where raw materials were being exported, which would also improve the negative unemployment rate? What measures or interventions were there to train or upskill the millions of unemployable to make them at least employable? Were there any processes in place?

Regarding the R7 billion investment target not met, Mr Thring asked if it were due Covid or was it an unrealistic target?

Mr C Malematja (ANC) asked what had happened to the interns post their internship? Could the Department absorb them, and, if so, how many could it absorb permanently? It became a problem if they were laid off after an internship.

Under Programme 9, the dtic attributed underspending mainly in delays to disbursement. He understood there were challenges in the Tirisano model and that had been a key challenge to underspending.  Could the dtic explain the challenges and what was being done to address them?

Dr M Tshwaku (EFF) noted that in Programme 3 there was an underspend. Could that be unpacked? In which areas were the underspend? In Programme 10, which studies were being done that had not been completed and what progress was being made in those studies? If one were serious about job creation, one should be spending on those programmes and not on Programme 1: Administration. He did not care about salaries and so on. Where was 40% of the budget going? What was the business incentive? What was the Master Plan? He had heard so much about master plans. Did the other plans not work? Was that a plan of other plans? A festival of master plans! When would all the master plans be completed? When was the planning going to end and the work begin? Were there times and dates in the Master Plans? He wanted something revolutionary to occur during his term of office.

He acknowledged that the Committee was getting numbers from the Department but he was asking for proof: which companies had opened up and which companies had closed down? He could not do a verification of numbers. He had asked for a list of all companies that the IDC and all other entities of the dtic were funding. The IDC said the companies were fine and were creating jobs, but they were actually closing down. For example, the vaccine company that the Minister had spoken about in Parliament was actually closing down. The digital migration in the Eastern Cape was closing down. He took the reports with a pinch of salt. He could not work with pie in the sky. The Department said jobs were being created but did the Department know that there were four or five million people unemployed in SA. Was the dtic making a dent in the unemployment rate? When was the Department going to do something about it? In Home Affairs, when officials were told that they had a problem with queues, they investigated and came back with information about hotspots where the queues were and how they were going to reduce them. What was the dtic going to do? Did they have a plan to address the reality of the situation? There was a bloodbath.

Dr Tshwaku asked the dtic whether it was in its mandate to do all the things that he did not understand. How many industries had actually been opened and had created jobs? Meetings were short because officials presented and left. Could the Committee have a workshop or a whole day meeting so that the Members could ask questions until they got answers, as was done in the Department of Economic Development in Gauteng? The presenters had to present and Members should ask questions until they had interrogated all reports properly. He wanted some of the companies to come and explain what they were doing. He did not want hearsay. He wanted to ask until he was satisfied. He was a social economist but he wanted other economists from other schools of thought to be invited. They should invite economists who could tell the Committee how to grow the economy.

He added that the Minister was hardly ever there and if he did attend, he left early. In other Committees, the Minister attended most meetings and stayed. He was speaking of hardworking Ministers like Minister Motsoaledi and Minister De Lille. They also had busy schedules. Minister Patel had to attend the meetings and not just come occasionally and present a wish list for 20 minutes and then disappear. He had to stay to answer questions.

The Chairperson said that Dr Tshwaku had been heard in respect of the request for a workshop.
 
Ms N Motaung (ANC) noted that under Programme 2, the Department had held engagements with various countries. Her question was: what direct benefit was expected to emanate from those engagements and how would they assist South Africans to create jobs and reduce Covid?

Secondly, she understood the dtic attributed underspending in most programmes to lower than expected to lower than expected compensation of employees due to lower cost of living salary adjustments. Could the DTIC expand on this?

Mr Z Burns-Ncamashe (ANC) agreed with Mr Cuthbert that the report was short and concise. The issue around the relations between SA and China and the extent to which they would impact on the trade relations with Taiwan was covered by Mr Thring. He wanted to know how the Department would navigate those muddy waters.

SA was part of Africa, hence it was part of the African Continental Free Trade Agreement (AfCFTA). Whatever SA did, it had to make business sense and create trade opportunities for the people of the Continent. In concrete terms, what opportunities had been created by the AfCFTA agreement for SA in the region and the broader continent? What investment had SA injected, especially in terms of black industrialists? What was the footprint of SA in the region and continent? What investment had SA provided in supporting black industrialists to give SA a footprint in Africa?

Regarding export, he noted that SA had minerals. (He was interrupted by network difficulties.) He explained that the network difficulties were one of the many challenges of living in a rural province. Exporting materials was a grave concern because exporting raw materials was exporting jobs. Why was it happening and what was being done about that economic exploitation?

385 construction jobs had been created in the construction of a R1.1 billion oil plant. In concrete terms, how much of the investment was private and what was the Department contributing? How much did it cost to create one job? Simple arithmetic showed that it seemed to be costing R2.8 million per job. Was there any value for money? The Department needed to come up with a clear and prudent system for using public funds.

Mr S Mbuyane (ANC) referred to Programmes 3 and 6. Under programme 3, the target to develop a report on one designated product was not achieved because designations were withdrawn to broaden public consultation before publication. What caused the DTIC to broaden public consultation in the middle of the project? In Programme 6: Industrial Financing resources had been allocated to a projected localisation project. What were the spin-offs in terms of structural transformation and decentralisation of the economy? Did it deal with the triple challenges of poverty, unemployment and inequality? Did it deal with the poverty alleviation programme of the government?

Ms R Moatshe (ANC) asked about the funding of R12.5 million approved to address the re-employment of 329 jobs and localisation of niche industrial textile material at Gelvenor Africa, as part of the Clothing, Textiles, Footwear and Leather Growth Programme. Were those permanent or temp jobs? What was the reason for the original loss of jobs? What was the extent of investment support provided to local productions of films and documentaries telling SA stories?

The Chairperson asked if the dtic could explain the resources required for the Review of the Governance framework to be completed as it was not completed as planned in the 2021/22 financial year.
The Chairperson noted 32 questions.

Mr Khan stated that he would answer as many questions as possible, but the senior management team was with him to answer some of the questions in detail.

He responded to the question from Mr Cuthbert who was referring to a formal response he had received from the Minister about the dtic employee who had been suspended and one who was facing disciplinary charges. Those matters were managed by the Corporate Services Division. The issue with the Deputy Director was that he had failed to adhere to a Department of Public Service and Administration (DPSA) requirement that all senior management and those working in the finance area had to disclose their financial status. It was a compliance matter that the Deputy Director had failed to comply with timeously, despite numerous reminders.
                                                         
Regarding the suspension of the Chief Director, there was not much that he could say as the Department was gathering information from witnesses, one of whom was from another Department. As far as the appointment of a Director-General was concerned, following the retirement of DG October, Mr Khan noted that the Minister could have provided a more comprehensive report, but he could say that there had been a pause due to work processes, although a senior leadership team had been put together to lead for that time. The appointment process had recommenced and it was hoped that it would be finalised within a few months.

As far as trade relations with Taiwan were concerned, he said that South Africa had a One China Policy. The Department of International Relations and Cooperation (DIRCO) ensured that everything was managed closely as it was sensitive. The bi-laterals were led by DIRCO.

Regarding the number of black industrialists and companies that had survived, he explained that the Department went through a rigorous audit process so the numbers were verifiable. In addition, the dtic provided an Annual Report of all beneficiaries supported by the dtic. Similarly, the IDC provided an annual list of beneficiaries supported. The dtic would provide a copy of the report to Dr Tshwaku via the dtic parliamentary office. The dtic was also willing to hold a workshop to provide information on the various programmes that the dtic conducted.

Mr Khan said that the dtic worked very closely with the Department of Small Business Development, particularly in the Economic cluster. The two Departments had worked in close coordination in response to the KwaZulu-Natal floods a month earlier and following the recent floods.

He asked the Chief Economist to articulate the dtic programmes that supported job creation. He was in full agreement with Mr Thring’s comments on the trade surplus and the need to develop beneficiation. The dtic was supporting a few projects to see beneficiation improve. In the recent mining indaba, the Minister had provided some details of mining projects that were promoting beneficiation. Mr Yunus Hoosen, Head of InvestSA, could perhaps provide details of some of the specific projects in that field. The whole idea of beneficiation was value-add and the intention was to always ensure value-add.

The skills question was a very important one. There were a number of programmes directly within the Department that dealt with skills development. A good one would be the Imsimbi Programme which trained young graduates in tool-making. The dtic also worked with the National Skill Fund on a programme called the Itukise programme, as well as another programme in which young graduates were taken through work experience and very rigorous training to prepare them to go into the job market.

The fact that the R7 billion target had not been met, did not mean that it was an unrealistic target. The dtic tried to manage the programme quite closely. Generally, the dtic had pipelines of investments to the value of R10 billion. Any disbursements or cash that left the dtic was released on the investment being realised, so there was careful attention to particular targets and timeframes. He admitted that it did cause difficulties from a cash flow perspective. Currently, the dtic had an investment book of R9 billion to R10 billion.

The dtic worked as per the DPSA requirements: 10%of the cost of employees had to go to incentives and 10% of the vacant posts had to go to recruiting and retaining graduates with potential, taking them into entry level positions in the public service after the internship. Some interns had been absorbed within dtic and others were absorbed in the wider public service.

The Tirisano Fund was an arrangement that had come about a number of years previously with regard to a competition matter in the construction industry. Following an investigation, there had been a settlement that led to an annual payment into Tirisano Fund. Since then, some of the construction companies had found themselves in financial difficulties and others were under financial distress and in business rescue. The flow of funds into the Tirisano Fund had been delayed. The dtic was working quite closely with its legal team as well as the construction companies to see how the Fund could be revived. Underspending in Tirisano was because of those delayed payments.

In responding to the question on trade bi-laterals and how they benefitted the job market, Mr Khan explained that all trade engagement was intended to broaden markets beyond SA which allowed companies to broaden their markets and thus increase productivity which, in turn, increased jobs and addressed poverty. The AfCFTA agreement was important as it would open the SA market to over one billion people and increase the potential for exports, thus creating jobs in the SA economy.

In responding to Mr Burns-Ncamashe’s question about AfCFTA and how broad investment in the continent could be ensured as well as how the dtic ensured value-added exports, the Acting DG stated that the dtic had a programme dedicated to that matter, i.e. Trade Invest Africa, and he would ask the DDG for the Division, Ms Lerato Mataboge to explain how the programme operated.

Regarding construction jobs for the Wilmot Plant, he could confirm that it was a private investment of R1.1 billion. The dtic was involved because it was providing funding for the SEZ and the top infrastructure, which meant the construction jobs. He said that the dtic measured the jobs within an SEZ differently but the dtic counted top structure construction jobs and could provide exactly how much each of those jobs cost.

He advised Mr Mbuyane that the dtic had intervened in the two projects, the Magalies Water Board Mafenya Pumping Station and Pipeline to Tlhabane Reservoir and the Umzinyathi District Municipality Nquthu Water Supply Scheme, to ensure that local content was being considered. In those cases, the tenders would have to be re-advertised with new terms of reference. Following the Constitution Court judgement confirming the constitutionality of the localisation policy, the dtic had been following up on local content and was engaging National Treasury in respect of the new Public Procurement Bill to see that localisation was addressed.

Mr Khan assured the Chairperson that the Governance Framework would be dealt with quite decisively in the 2022/23 financial year. It was an important review as there were many entities in the dtic family and the Department needed a governance framework to ensure good control. The work would be led by the Acting COO.

Dr Evelyn Masotja, DDG: Consumer and Corporate Regulations, dtic, replied to Mr Cuthbert’s question about the Lotteries Act. The regulatory impact review had been completed and the dtic would develop policy around the issues that had been identified and policy concerns that had been raised. She admitted that it was a lengthy process as they currently had only the report. The dtic was looking at the policy concerns first. The issues included the model of distributing agencies, the structure of the operator, some of the national constraints that had been identified and illegal or unlawful lotteries. The dtic was prepared to share the report with Parliament, but generally, the reports were kept internal until the legislative processes had been finalised. She would look into making the report available to the Committee. It was an ongoing process as the policy had to be finalised before the dtic looked at the legislation and considered the need for legislative changes.

Mr Stephen Hanival, DDG: Chief Economist, dtic, explained to Dr Tshwaku that Master Plans had come in when President Ramaphosa had put together the new Administration in 2019. There were around 20 Master Plans in government in total. The dtic was responsible for several Master Plans (MPs), including the Clothing, Textile, Leather and Footwear MP; Automotive MP; Sugar Value Chain MP; Poultry MP; Furniture MP, and Global Business Services MP.

The way that a Master Plan worked was that the government gathered all of the role players in a particular sector around the table to talk about what it would take to grow a particular sector. In the case of the Auto Master Plan, it had been clear that there were a couple of investments in the pipeline but there were a couple of issues some years back around labour market stability, the transition to electric vehicles, infrastructure to ports and, importantly, transformation in the sector. The Auto Master Plan brought Labour, Business and government together under Minister Patel to try and thrash out agreements on the issues that would lead to higher investment, stability in employment, growth in jobs and would lead to putting together a R6 billion transformation fund. The Master Plan was a means to get the three major role players, Labour, Business and government, to work together to increase investments, increase exports and transform the sector. Ten MPs existed outside of the dtic. All had a similar methodology.

The dtic view of the Master Plan was that success was visible, there had been a retention of jobs, industries that had been under threat from imports, such as sugar and poultry, had strengthen and so the dtic believed there had been really positive developments with new investment, new entrants in the sectors, e.g. black contract farmers supplying the big abattoirs, etc.  Master Plans outside of dtic were doing similarly well in retaining jobs and increasing exports.

Regarding unemployment, he explained that no one Department in SA was alone responsible for employment. All ministries in the economic and social clusters were effectively responsible for employment. Over the past two or three years, government as a whole had made the President’s Employment Stimulus a significant intervention to support job creation. It had a budget of R24 billion and had created over 560 000 job opportunities in the previous financial year. There were other interventions that fit within the Economic Reconstruction and Recovery Plan which included infrastructure investment, rejuvenation of the tourism sector and the commitment to local procurement. It was a combination of all those factors that would have an impact on employment. The dtic was focused on the industrial side which was a minor role compared to the other ministries that had important functions, such as the Employment Tax Incentive in National Treasury and the Youth Employment Service which was partially a dtic responsibility. Mr Thring was correct in saying that people did not have the skills required for the workplace, so programmes, like the Youth Employment Service, were in place to build the skills of young people.

Mr Hanival informed Dr Tshwaku that the Aspen plant in Gqeberha had not closed. The company had indicated that it was experiencing a lack of support and a lack of orders for vaccines. The dtic was sympathetic because Africa had not had the same support that other countries had. The company had been signalling that there needed to be support for the vaccination drive so that vaccine production could be localised.

Mr Yunus Hoosen, Acting Head: Investment Promotion, dtic, responded to the beneficiation question. He would highlight some of the projects introduced at the mining indaba. He highlighted some projects dealing in the minerals of the future, i.e. the electric vehicle (EV) storage and battery projects. The IDC was a funder and strategic partner in some of the projects, some of which would come online in early 2023. The IDC was supporting Bushveld Minerals which was a primary vanadium producer, supplying leading energy storage solutions and vanadium redox flow batteries storage technologies, EV materials and ionic battery materials for EV storage. It was also processing cobalt, nickel and copper for EV storage. There were several other beneficiation projects that would come online in the next 12 to 24 months.
                                                       
Ms Ramafola provided an explanation of the underspending in Programme 3. There was a process underway to make the B-BBEE Commission independent but, although the dtic had budgeted for the B-BBEE Commission to list and become independent by moving out of the Department space and paying rent, the process had not been completed by the end of the financial year. In addition, it was decided that under the current financial constraints government was experiencing, it was not wise to move to rented accommodation. Also under Programme 3 were funds for the SEZ Advisory Board. Although budgeted for, the Board had only recently been put in place and so those funds had not been expended.

She said that the research under Programme 10 was known as the Active Pharmaceutical Ingredients (API) research. The Project was not finalised by the end of 2021/22 which led to huge underspending in Programme 10.

Explaining the underspending in the Cost of Employees budget, Ms Ramafola said that there were, within the Department, several acting positions and vacancies, although the dtic busy with the process of filling critical positions, i.e. the posts for DG, DDGs. As soon as the critical positions were filled, the remaining budget could be assessed to determine which other important positions could be filled so that the entire structure was fit for purpose.

Ms Ramafola stated that the biggest spending was in Programme 6 which paid for incentives, such as the export market assistance, industrial innovation, services sector – film and television production incentives and business service centres incentives, as well as the manufacturing incentives which included the auto sector and technology partnerships doing research with Science and Engineering Departments in universities. Another incentive in that programme was the loan made to the IDC and which IDC distributed to expand various sectors of the economy. She had earlier spoken about some of the underspending in Programme 6, explaining that due to the economic downturn, some incentives could not be handed out. She explained that incentives worked in a re-imbursive manner and applicants had to comply with the guidelines on key performance areas, but if the requirements were not adhered to, funding could not be disbursed, resulting in under expenditure. She said that, if the DG agreed, she could meet with the Committee to unpack all the incentives that the Department managed.

Ms Lerato Mataboge, DDG: Export Development, Promotion and Outward Investments, dtic, responded to Mr Burns-Ncamashe. She said that fundamentally the dtic supported business abroad and contributed to them being competitive to help them access new markets. There were five ways that this was done:
a) Trade negotiations with various trading partners established a predictable environment with predictable rules and, where possible, special concessions.
b) Exporter development was another realm of action. There were not enough enterprises in SA that could export, so the dtic provided tools to new enterprises, and to some large companies, that had not yet exported.
c) The SA Promotion Realm provided access to new markets. The Export Marketing Investment Assistance Scheme supported businesses to go abroad. They could go on trade missions or to a trade exhibition. The dtic paid for the trips or reimbursed companies depending on various criteria.
d) The Export Credit Insurance Corporation was a dtic Agency that provided risk guarantees and insurance cover.
e) Lastly the dtic used its diplomatic capital by using government to government interactions, or asking the President and Ministers to raise issues experienced by SA companies in trading abroad with their counterparts.  The dtic hosted engagements on various platforms with the intention to carve out space for SA businesses abroad.

Ms Mataboge stated that those were the five key interventions but they were underpinned by the dtic’s economic research and analysis programme and by foreign on-the-ground market intelligence which was shared with the relevant companies. It was a definite commitment to assist SA companies.

She added that scale was vitally important because the SA economy was too small to support expansion.

Ms Reika Jeewan, Acting DDG: Industrial Finance, dtic, responded to the question about support for the film industry. SA was a favoured destination for foreign and local filmmakers. Very competent local technicians and companies had been able to offer support filmmakers in the areas of tracking equipment lights, sound and post-production. SA also had good actors. The film and television production incentives had attracted both local and international filmmakers. There were three areas that the dtic supported: foreign film and television production and post-production; SA film and television production and post-production; SA emerging black filmmakers.

She added that seven SA projects had been supported by a total of R44 million. 179 of the 329 jobs created had been through SA projects; the balance was created by foreign projects which had larger budgets and consequently employed more people.

She answered the question about localisation, structural transformation and job creation. The dtic partnered and co-shared with the business to achieve those objectives. The Support Programme for Industrial Innovation (SPII) and Technology and Human Resources for Industry Programme (THRIP) enhanced skills development and transformative capacity of the manufacturing sector. There was also the automotive investment support programme which supported productive assets in order to improve production processes and create job promotions. All incentive programmes had a B-BBEE requirement that led to transformation.


Programme 6 required companies to retain jobs for the entire support period.

Ms Jewaan said that generally, companies had survived the lockdown period. There was a general 20% fall-out rate where companies did not reach the disbursement stage as the project was never fully established; some companies were established but ended operations.  Sometimes companies had survived but did not remain on the dtic books because they delayed the start, others could not fulfil the requirements and yet others did not have verification and so that led to dtic not disbursing funds to those companies.

Mr Khan concluded the responses. He added that dtic had presented the new Annual Performance Plan and was looking forward to presenting the Annual Report.

Deliberation on the NLC Report
The Chairperson stated that the Legal Advisor from the parliamentary Constitutional and Legal Services Office had provided two options that it could consider in addressing the report on the appointment of the chairperson of the National Lotteries Commission that had been referred to the Committee by the National Assembly. The Committee had determined that parties should consult their respective caucuses and present their positions at the Committee meeting that day. The purpose of the meeting was to offer political parties an opportunity to express their views on each option and for the Committee to take a decision. She asked the Committee Secretary to present the referral and Ms Gangen to explain any legal impediments.

The Committee Secretary stated that the report had been adopted by the Committee on 12 March 2021. Four names were proposed for the parties to consider: Mr T Tselane, Mr TTC Dlamini, Dr Pityana and Dr MA Madzivhandila. The Committee had recommended Dr MA Madzivhandila, Mr Tselane and Mr Pityana to the House. One candidate had since passed away and the report was revived on 22 March 2022 and referred to the Committee to consider.

Adv Thiloshini Gangen, Legal Advisor, OCLS, addressed the principle of legality. The principle of legality demanded that the exercise of any public power had to be conferred upon a functionary by law. Lawfulness and rationality flowed from the principle of legality. Section 1 of the Constitution determined that SA was founded on the Rule of Law. Section 33 guaranteed that everyone had the right to administrative action that is lawful, procedural and far. The Constitution protected citizens by calling for transparency and accountability based on rationality and reasonableness. Important for the Committee’s purposes was section 195 of the Constitution which said that basic values and principles governing public administration were high standards of professional ethics and accountability and transparency must be fostered by providing the public with timely, accessible and accurate information. Section 59 of the Constitution provided that the National Assembly had to facilitate public involvement in the legislative and other processes of the Assembly and its Committees and that public administration had to be broadly representative of the SA people.

She said that what was important for the Committee was that the Lotteries Act made it clear that the shortlisting process was the mandate of the Portfolio Committee on Trade and Industry. That was clear. The requirements for fairness and transparency further supported that interpretation, namely that the Committee should deliberate on the matter and provide recommendations to the Minister.

Adv Gangen explained that the Committee had two options available, as she had previously advised. In making the decision in respect of which option to pursue, while there was no legal impediment in pursuing either of the two options, the Committee’s decision had to be rationally connected to the purpose that it sought to achieve, it had to be lawful, and it had to be line with the principle of legality. Shortlisted candidates were not ordinarily bumped up on the list in the event of a difficulty with the successful candidates but it would depend on the circumstances of the case and having regard to all relevant factors. It was the prerogative of the Committee to decide if the members could satisfy themselves as to the suitability of a candidate that had not made the initial shortlist. If the Committee was of the view that the remaining candidates on the shortlist were not preferable, the Committee would have to be in a position to justify and defend its position. If the Committee wished to start the process anew, it would have to consider circumstances surrounding the NLC, consider the effects of the delay in the appointment, the costs involved in starting afresh and the practical implications, generally, of starting the entire process again.

Adv Gangen stated that if she were to give the Committee any guidance in making the decision, whatever that decision was, it had to do it posthaste and finalise it as speedily as possible.

Mr Mbuyane explained that in the light of the legal and procedural position, the Committee had the following options available: the Committee could consider adding an additional name to replace Dr Madzivhandila and submit a revised report to the National Assembly for consideration; alternatively, having considered the developments since the initial report was published, the Committee could write to the National Assembly requesting that it write to Minister to request permission to start the process afresh.

He said that the ANC had consulted the constituents and obtained a mandate. The ANC was of the view that the stability of the NLC was paramount for the transformation of society and called on the Committee to expedite the process of finalising the appointment of a credible board. The ANC believed that there was no need to restart the process as a delay would be detrimental to the ordinary South African. The ANC recommended that the names of the remainder of the shortlist be submitted for consideration for the chairperson of the board. The names were Dr B Pityana, Mr Terry Mr T Tselane, Mr TTC Dlamini, and Rev Dr F Chikane to replace Dr M Madzivhandila.

Ms Y Yako (EFF) explained that Dr Tshwaku has connectivity problems. She stated that she had not been in the last meeting as she had moved to another Committee, but the process had to continue because she wanted to see a change in the NLC as soon as possible. She was in support of the names as the EFF supported Mr Terry Tselane.

Mr Cuthbert stated that the DA was in agreement that a name should be added to the shortlist. However, he had a procedural difference with Mr Mbuyane. When previously discussing the shortlist, the Committee had decided to discuss four names but to submit only three names. Because the Committee was following the same process, the Committee should only submit three names. The Committee Researcher, Ms Madelane, could share the scoring template received at the time. The average score showed that the person due to be included was Mr Themba Dlamini as he had scored the second-highest score. To go in line with the scoring would be the most objective manner to proceed as the scoring would ensure a merit-based process.

He added that he had an urgent matter about which he would appreciate the opinion of the Legal Advisor. There had been a recent assertion by an NGO and the media that the process of appointing board members had been irregular. The Chairperson had also been tasked with the matter. He understood that it was correct and in line with the Lotteries Act. He requested that he be permitted to ask Adv Gangen if the process had been correct and in line with the Act.

The Chairperson said she would not ambush Adv Gangen with the question but that Adv Gangen could attend a subsequent meeting and provide her opinion. She stated that if it were supported by the majority, the Committee could change the number of names as the Committee could submit up to five names. The Committee had to determine whether it was going with the ANC proposal to submit four names or whether it would submit three names as originally decided. She could ask the secretariat for the scoresheet.

Ms Yako said that it was the ACDP that had insisted on a fourth name and that was why the fourth name had been added. It was not necessary to add Rev Dr Chikane.

The Secretary stated that there were two proposals on the floor and each proposal needed a seconder.

The Chairperson said that Mr Mbuyane had proposed four names and called for a seconder.

Mr Burns-Ncamashe seconded the submission of four names. He added that the number was irrelevant as the Minister would only appoint one person.

Mr Macpherson seconded the proposal by Mr Cuthbert to submit only three names as originally decided.

The Chairperson put the first proposal to the vote:
That four names be included on the shortlist to be submitted by the Committee to the National Assembly.
Mr Mbuyane – Supported
Ms Moatshe – Supported
Mr Burns-Ncamashe - Supported
Mr Mulder – Abstained
Mr Macpherson – Against
Mr Thring – off the platform
Mr Cuthbert – Against
Ms Motaung – Supported
Dr Tshwaku – Abstained
Mr Malematja – Supported
Ms Hermans – Supported

The Secretary declared that there were six votes in favour; two against; two abstentions.

The Chairperson put the second proposal to the vote:
That three names be included on the shortlist to be submitted by the Committee to the National Assembly.
Ms Hermans – Against
Mr Mbuyane – Against
Ms Moatshe – Against
Mr Mulder – Supported
Mr Macpherson – Supported
Mr Thring  - off platform
Mr Cuthbert – Supported
Ms Motaung – Against
Dr Tshwaku – Abstained
Mr Malematja – Against
Mr Burns-Ncamashe - Against

The Secretary declared that there were three votes in favour; six against; one abstention. The proposal to submit four names was carried.

The Chairperson declared that four names would be included in the shortlist to be submitted to the National Assembly.

Ms Yako informed the Committee that a doctorate had been conferred on Dr Tshwaku.

The Chairperson congratulated Dr Tshwaku.

She stated that the four names would be proposed to the National Assembly. The names were: Dr B Pityana, Mr T Tselane, Mr TTC Dlamini, and Rev Dr F Chikane.

The Committee Secretary informed Members that the secretariat had prepared two reports so that a report would be ready to expedite the process. He flighted the report based on the re-submission of the shortlist with four names.

Mr Burns-Ncamashe asked the Secretary to note that it was Dr or Professor Pityana.

Mr Mbuyane moved that the report be adopted; seconded by Ms Moatshe.

Mr Cuthbert requested that the DA vote against the report be recorded and the reason, i.e. the variance in the report, be noted; the FF+ voted against the report; the EFF abstained.

The proposal to adopt the report containing a shortlist of the four names indicated was carried by a majority vote.

Report as adopted: ATC220525: Second Report of Portfolio Committee on Trade and Industry on Request by Minister of Trade, to recommend suitable candidates for appointment as the Chairperson of the Board of the National Lotteries Commission, dated 24 May 2022

Dr Tshwaku asked if it was intentional to list the additional names first.

The Secretary explained that the names were listed in alphabetical order.

Closing Remarks
The Committee Secretary informed Members that the following meeting would be on Wednesday 25 May 2022: deliberations on the remitted Bills would continue and the Committee would consider the First Draft of the Oversight Report. Members were requested to submit concluding remarks for consideration.

The meeting was adjourned.

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