DTIC Portfolio Audit Outcomes; DTIC Annual Report 2021/22, with Ministry

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Trade, Industry and Competition

11 October 2022
Chairperson: Ms J Hermans (ANC)
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Meeting Summary

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Trade, Industry and Competition

The Portfolio Committee on Trade and Industry met on a virtual platform to receive a briefing from the Office of the Auditor-General (AGSA) on the 2021/22 audit outcomes of the Department of Trade, Industry, and Competition (dtic).

The AGSA reported that it audited the dtic and six entities: Companies and Intellectual Property Commission (CIPC), Competition Commission (CC), South African Bureau of Standards (SABS), National Regulator for Compulsory Specifications (NRCS); National Credit Regulator (NCR); National Lotteries Commission(NLC). Of the seven auditees, six received unqualified audits and only the NLC received a qualified audit and had material findings on the Annual Performance Plans which resulted in material findings in its Annual Performance Report.

The Department performed well in achieving 91% of its targets. However, the few targets not achieved might have an overall negative impact on the portfolio. The CPIC achieved 81% of its targets. The SABS had underperformed and there was a risk that planned outcomes and outputs of service delivery would not be met, impacting its service delivery to citizens. The NRCS and the NCR achieved 92% and 94% of their targets respectively.  No material irregularities were identified in the dtic portfolio.

The AGSA’s message for the Portfolio Committee was that there were still auditees in the portfolio that submitted Annual Financial Statements not prepared in accordance with the prescribed financial reporting framework.

Members had few questions arising from the Auditor-General’s report. Was there a system whereby the Auditor-General could identify the challenges in real-time, that is, before the audit was conducted at the end of the financial year? How did the Minister plan to implement the Auditor-General’s recommendations on reducing or reviewing the external legal services bill at the Lotteries Commission which had consumed 31% of its goods and services budget? What, if any, were the timelines for appointing a permanent CEO and a fully functional board to lead and govern the South African Bureau of Standards, as recommended by the Auditor-General?

The Minister of Trade, Industry and Competition informed the Committee that, taking into account audits by independent auditors, the Department and 16 of its entities received unqualified audits, with the National Lotteries Commission being the only exception, having received a qualified audit. The Department hosted the 2021 Investment Conference on behalf of the Presidency and worked with other departments to secure R366 billion in new investment pledges to facilitate 79 projects. He indicated a commitment of R1.1 trillion in total pledges over a four-year period towards the R1.2-trillion five-year target. Loans and grants made to citizens in the 2021/22 financial year by the dtic entities of the Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF) and the Export Credit Insurance Corporation of South Africa Soc Ltd (ECIC) were the highest ever. The Master Plans were proving very effective and counted as a highlight of the year, as did the work accomplished by the Competition Commission. The South African economy had begun to recover from the first wave of Covid-19, growing at 2,7% during the reporting period. GDP was valued at over R6 trillion (in 2021 prices) and manufacturing exports were the highest in at least a decade, while the agriculture and parts of the auto-value chains had their best export performance yet. However, unemployment stood at 7,8 million persons looking for work and 3,7 million discouraged work-seekers.

The Minister faced many questions arising from the Annual Report. Members noted a significant implementation of committed pledges, but just how many had materialised and in what sectors? How many jobs had the investments created? To what extent had the master plans started supporting new entrants into the industry, and how had the master plans ensured the viability of small and medium enterprises? If things were functioning as well as suggested by the Department in the report, did the Minister have a view on why that had not translated into economic growth and job creation? How did that performance translate into economic realities? What was the missing link?

Members asked to what extent imports from China were undermining industrialisation and impacting local industries. What had been done practically, outside of discussions held with the Chinese Embassy? What was the impact of the structural adjustment programme? What were the International Monetary Fund and the World Bank contributing to deregulation?

Members enquired whether the South African economy had derived any direct benefits from its localisation policy. What was the Department doing to improve the efficiency and growth of the industrial parks as they were critical in creating jobs and driving industrial competitiveness? Was there any way in which the hand of the Department could be strengthened in respect of the management of industrial parks? What were the plans of the Department to look at labour-intensive initiatives to reduce unemployment, rather than capital-intensive initiatives? What had the Department done in terms of job creation? Why did it seem that the Department was unable to live up to its mandate of developing manufacturing capacity and creating jobs?

Was the Competition Commission playing its role in preventing such commercial concentration?  What collaborative efforts had the Commission undertaken with the relevant stakeholders to ensure that small and medium-sized businesses were able to participate in an inclusive main economy? Were proactive measures being adopted by the Commission to ensure that markets did not get overly concentrated? Had the Commission considered conducting a market inquiry into the real estate sector, in terms of the Competition Act, to consider whether there was any distortion or restriction of competition in the real estate sector?

Members also had questions on issues that had not been raised in the briefing. Where was the Auto Green Paper in terms of adoption by Cabinet? Where did trade agreements fit into performance indicators, particularly the review of the African Growth and Opportunity Act Trade Agreement with the USA, and the Economic Partnership Agreements? How did the Department measure its performance in securing the renewal of those agreements?
 

Meeting report

Opening Remarks
The Chairperson presented the agenda and requested the officials from the Office of the Auditor-General (AGSA) to commence immediately as there was much to cover in the presentations.

Presentation by Briefing by the AGSA on the 2021/22 audit outcomes of the DTIC and its entities
Mr Tshepo Shabangu, Divisional Manager, AGSA, introduced the team from the AGSA.

Mr Tsulo Possa, Senior Manager, AGSA, made the presentation. He focused on the dtic and six of its entities audited by the AGSA. Other entities were audited by independent auditors. He indicated that he would be pointing out some areas of concern but there was an improvement from the previous year with NRCS moving from qualified opinion to unqualified with findings. The improvement was largely thanks to the CFO. He cautioned that the CFO had since left the organisation, but hoped that the systems established by the CFO would be maintained.

The AGSA audited the Department of Trade, Industry and Competition(DTIC) and six entities:
Companies and Intellectual Property Commission (CIPC), Competition Commission (CC), South African Bureau of Standards (SABS), National Regulator for Compulsory Specifications (NRCS); National Credit Regulator (NCR); National Lotteries Commission(NLC). Of the seven auditees, six received unqualified audits and only the NLC received a qualified audit and had material findings on the Annual Performance Plans which resulted in material findings in its Annual Performance Report.

Other entities were audited by independent auditors. There was an improvement from the previous year with NRCS moving from qualified opinion to unqualified with findings. The improvement was largely thanks to the CFO. He cautioned that the CFO had since left the organisation, but hoped that the systems established by the CFO would be maintained.

The Department performed well in achieving 91% of its targets. However, the few targets not achieved might have an overall negative impact on the portfolio. The CPIC achieved 81% of its targets. The SABS had underperformed and there was a risk that planned outcomes and outputs of service delivery would not be met, impacting its service delivery to citizens. The NRCS and the NCR achieved 92% and 94% of their targets respectively.  No material irregularities were identified in the dtic portfolio.

During the year under review, auditees incurred irregular expenditure amounting to R78.7million, which was disclosed in the financial statements. The analysis of irregular expenditure showed that irregular expenditure increased by 239% compared to the prior year. Also, during the year under review, the auditees incurred fruitless and wasteful expenditure amounting to R3.8 million, which was disclosed in the financial statements but an analysis of fruitless and wasteful expenditure showed a significant increase when compared to the prior year.

Other important matters included the investigations and allegations of fraud at NLC. The Special Investigating Unit (SIU) investigations were ongoing, the Commissioner resigned with immediate effect when media allegations surfaced that she had used the lottery money to purchase one of her properties. The allegations were first confirmed by SIU when briefing the audit team. In the 2022/23 financial year, the audit team was planning to use performance auditors to determine if there was value for money in some of the Lotteries projects. The CFO also resigned before the audit sign-off. The reasons for the resignation of the CFO were not disclosed. On 25 August 2022, there were media reports indicating the Chief Operating Officer (COO) of the NLC had resigned pending a disciplinary hearing into allegations of abuse of grant funding to benefit himself and his family members.

The AGSA’s message for the Portfolio Committee was that there were still auditees in the portfolio that submitted Annual Financial Statements not prepared in accordance with the prescribed financial reporting framework. The balance of irregular expenditure had increased and some irregular expenditure was not fully dealt with. Audit action plans at NRCS were effective, but there was a very slow response to audit action plans at NLC. The performance of the dtic and its entities was generally an improvement.

Another concern at NLC was the legal fees up by 91%, while at the SABS there were issues caused by a lack of a board of directors and the lack of a permanent CEO, some governance issues and a decline in revenue. AGSA called on the Minister to appoint a board and a CEO at SABS.

(See presentation)

Presentation of the Dtic Annual Report 2021/2022
Minister Ebrahim Patel introduced the dtic team led by Acting Director-General of dtic, Shabeer Khan. The Minister informed the Committee that the Department had submitted the Annual Report to Parliament and the presentation would only cover highlights.

He began the briefing by proudly announcing that the dtic and 16 of its entities had received unqualified audits for the financial year 2020/2021. The only entity to receive a qualified audit outcome was the National Lottery Commission (NLC). The dtic had subsequently taken action in respect of the entity, including replacing the board and some members of senior management.

The Minister announced that the dtic had hosted the 2021 Investment Conference on behalf of the Presidency and had worked with other Departments to secure R366 billion in new investment pledges to facilitate 79 projects. He indicated a commitment of R1.1 trillion in total pledges over a four-year period towards the R1.2 trillion five-year target. He also noted that loans and grants made to citizens in the 2021/22 financial year by the dtic entities of the Industrial Development Corporation (IDC), the National Empowerment Fund (NEF) and the Export Credit Insurance Corporation of South Africa Soc Ltd (ECIC) were the highest ever. R16 billion was approved in loans and equity support by IDC; R1,3 billion in approvals by NEF; US$250 Million in approved transactions by ECIC; R6 billion in industrial financing approvals by the dtic.

The South African economy began to recover from the first wave of Covid-19, growing at 2,7% during the reporting period. GDP was valued at over R6 trillion (in 2021 prices) and manufacturing exports were the highest in at least a decade, while the agriculture and parts of the auto-value chains had their best export performance yet. However, unemployment stood at 7,8 million persons looking for work and 3,7 million discouraged work-seekers.

The Minister presented highlights across the portfolio and DG Khan briefed the Committee on the activities of the various programmes within the Department and provided an overview of the financial status of the Department’s R11.6 billion budget.

(See presentation)
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Discussion
Mr C Malematja (ANC) noted that the AGSA report had highlighted the non-compliance of the NLC, especially with the PFMA, but he was happy that compliance management had been recommended. It was up to the Committee to ensure that it was implemented. He expressed concern that SABS did not have a CEO, which meant that someone was not doing his work. It could not be correct to have an entity that did not have a full-time CEO, but the recommendation was very clear that the matter had to be addressed with a sense of urgency.

Mr Malematja expressed satisfaction with the attainment of the targets by the dtic and its entities which made him proud. If all departments achieved the same level of success, the citizens would be satisfied. He called on the Department to keep it up. However, the findings or results of those targets had not translated into much.  He had a few questions about the investment pledges. There were pledges made of R1.1 trillion since the first investment conference. That was an indication that a significant number of committed pledges had taken place, but just how many had materialised and in which sectors? How many jobs had the investments created? To what extent had the master plans started supporting new entrants into the industry, and how had the master plans ensured the viability of the SMMEs?

Ms N Motaung (ANC) asked to what extent imports from China were undermining industrialisation. How were the imports impacting local industries? What had been done practically, outside of discussions held with the Chinese Embassy?

She knew that the Department had limited authority in respect of Industrial Parks as they were mainly the preserve of the provincial government, but what was the Department doing to improve the efficiency and growth of the industrial parks as they were critical in creating jobs and driving industrial competitiveness?

Mr Z Burns-Ncamashe (ANC) expressed concern about the audit irregularities, especially at the NLC, that the Auditor-General had identified as challenges. Was there a system whereby AGSA could identify the challenges in real time? Identifying the challenges after the fact was becoming a problem. The Covid pandemic and the conflict between Russia and Ukraine have shown the need for internal resilience through localisation and beneficiation. What direct benefits had the South African economy derived from its localisation policy? What was the impact of the structural adjustment programme? How did the International Monetary Fund (IMF) and the World Bank contribute to deregulation? What direct benefits had the South African economy derived from its localisation policy?

Mr W Thring (ACDP) asked the Minister how he planned to implement the Auditor-General’s recommendations on reducing or reviewing the external legal services bill at the NLC which had consumed 31% of its goods and services budget. Such spending on legal fees was particularly relevant, especially as he noted that the Commission had an internal legal unit of some eight employees with a wage bill of R8.9 million per annum. What, if any, were the timelines for appointing a permanent CEO and a fully functional board to lead and govern the SABS, as recommended by the Auditor-General? While the pledges of hundreds of millions of rands for various projects and industrial development in South Africa in an attempt to drive industrialisation and hence, also increase employment, were appreciated, the pledges and projects were insufficient to turn around or make a dent in SA’s huge unemployment burden, which was set to exceed 40%, according to some predictions. That was especially so when viewed against the current unemployment rate, where the Department's policies were failing to cause the unemployment rate, and hence poverty and inequality, to decrease. What then were the plans of the Department to look at labour-intensive initiatives to reduce unemployment, rather than capital-intensive initiatives?

Ms R Moatshe (ANC) asked how the Steel Master Plan had supported downstream industries and what opportunities had been created in the downstream industry. Noting that the government was the biggest procurer of goods and services, to what extent was the government supporting the procurement of locally produced vehicles to ensure the sustainability of the automotive industry?

Mr S Mbuyane (ANC) observed that as one looked at the report, one needed to look at the impact made by the achievements of the Department. What had they done in terms of job creation? Why did it seem that the Department was unable to live up to its mandate of developing manufacturing capacity and creating jobs? What are Trade Leads and the Centre for Export Development (CED)? What was its role in terms of the transformational agenda and industrialisation?

Mr Mbuyane noted that the Minister had spoken of the “WHO IS WHO” versus the transformational and industrialisation programme of the Competition Commission. The increase in the concentration of the SA economy posed a serious threat to the existence of SMMEs, which undermined inclusive economic growth and the potential for job creation. Was the Competition Commission playing its role in preventing such concentration?  What collaborative efforts had the Commission undertaken with the relevant stakeholders to ensure that SMMEs were able to participate in an inclusive main economy? Were proactive measures being adopted by the Commission to ensure markets did not get overly concentrated? He noted the high degree of inequality in the distribution of income, where the share of turnover of the largest 10% of firms was, on average, 85.8% of all turnover in South Africa, while the bottom 50% of firms, which were all SMMEs, shared in only 1.6% of the total turnover in the country. That was very concerning in a situation where the Department was struggling to transform the economy. Perhaps that was the reason the economy was unable to create jobs. What was the role of the Commission in transforming industries?

He added that the concentration and lack of transformation in the real estate sector and the services sector were particularly disturbing. The three largest real estate firms held 59% or 60% of all assets under management. The sector was highly concentrated, notwithstanding the fact that all real estate firms were listed. Had the Commission considered conducting a market inquiry into the real estate sector, in terms of the Competition Act, to consider whether there was any distortion or restriction of competition in the real estate sector?

Mr D Macpherson (DA) asked the Minister if things were functioning as well as suggested by the Department in the report, and whether he had a view on why that had not translated into economic growth and job creation. What was the missing link between that and how the Department presented its performance? How did that performance translate into economic realities?

Mr Macpherson also asked where the Auto Green Paper was in terms of adoption by Cabinet. Was it linked to a performance outcome, because the Paper had been outstanding for more than a year? Where did trade agreements fit into performance indicators, particularly the review of the African Growth and Opportunity Act (AGOA) Trade Agreement with the USA, and the Economic Partnership Agreements (EPAs)? Those were coming up pretty quickly. How did the Department measure its performance in securing the renewal of those agreements?

Concerning the investment drive, he noted that the numbers did not indicate what percentage of the R1.1 trillion was brownfield investment. What was completely new, never been in South Africa before, versus investment in existing projects, and investments already scheduled by businesses to take place? Also concerning investments, did the Minister think it was right to measure government entities that were expanding their investment, which was essentially taxpayers' money being used to create the impression that there was an investment, as with Transnet and some others that were often cited as investments?

The Chairperson stated that the Committee would keep a special eye out for the NLC roadmap as per its oversight role. The AGSA report was concerning, as was the Annual Report on the NLC. Was there any way in which the hand of the Department could be strengthened in respect of the management of industrial parks? Many of them were not functioning optimally, as seen in the Annual Report on industrial parks. An example was the industrial park in Mpumalanga, Ekandustria, that paid Tshwane for utility services. What was the Department's plan in that regard?

Response by AGSA
Mr Possa responded to the question on the irregularities identified in the NLC and whether it was possible to identify challenges in real-time. By the very nature of an auditor’s work, it had to be done after the financial reports had been finalised but, as was done during the Covid pandemic, it was possible to identify issues during the financial year instead of waiting until year-end. AGSA was always open to a request by a ministry or Department to monitor or support specific aspects during the financial year. The Office was open to engaging with management if there was an incident that created a need to do an audit in real-time before the actual audit. It was something that could be agreed upon, looking at the resources of AGSA and the temporal lag times. It was possible to review the controls that were preventative in nature to ensure that fruitless and wasteful expenditure did not happen or was detected before the amount escalated.

Response by the Minister of Trade and Industry
Minister Patel responded to questions in clusters. Regarding the investments, he stated that the pledges received to date amounted to R1.1 trillion. Some R360 billion of that had already flowed, meaning that it was in projects that were completed. An example of a completed project would be Mercedes Benz, which made a commitment in 2018. It took them a couple of years to get the implementation going because it meant re-organising the shop floor, getting new machinery, changing the new model, and then implementing it. Some of the projects were large mining developments, where over a couple of years, they had to dig the mine, build the structures to support it, get the machinery in there to move the ore up, and so on. In a case like that, the full project might not be completed within the available time or to date, but it would be rolled out. That was why a pledge was typically over a five-year period. Some were realised sooner, but generally, companies worked on them for five years from the moment when they decided to invest.

He referred to the sub-questions of how to distinguish between what was already planned and what was not previously planned, brownfields versus greenfields, and public entity versus private entity investments. Firstly, on the drive to get investment going, the dtic was trying to expand the overall output of the South African economy and with that, the number of jobs and economic opportunities. There was no artificial line between a brownfield and a greenfield. If an existing plant produced 100,000 pins per month and recapitalised its business and acquired new technology, it would upgrade the skills, the management, and its ability to increase its output to say 200,000 pins per month. That was a real increase in the productive capacity of South Africa with all the other benefits that came with that; in the same way, a new factory set up to produce say 100,000 pins or even 50,000 pins would provide those benefits to the country. There was no reason why a greenfield investment was better than a brownfield one. The dtic was trying to strengthen the investment commitments by firms that could increase aggregate output in the economy, whether through expanding an existing capacity or building new capacity. The dtic was keen on looking at new opportunities in areas South Africa had not been involved in, such as some of the green energy areas, the production of components for green energy, some of the digital technologies, and so on.

He added that if a country had a weak investment environment, a company may ordinarily invest, but when that environment was very weak, it paused all investments. So part of the drive in South Africa was to help improve the investment environment, which gave companies the confidence to publicly say they would undertake to invest. When a factory, a production line or a new facility was opened, the Minister would indicate how that was linked to the investment conference. There were many examples of where that had happened. In the reporting for the six-month period, the dtic was going to indicate the connection between what was announced and the investment conference. The media did not always report on that so the dtic was going to do more on that.

On the question of public and private investment, Minister Patel stated that both were drivers of growth. So if Transnet increased its investment level, it was something that should be reported on. In the period from about 2015 to 2016, there was a sharp decline in public investment, which most economists would say was one of the contributors to slowing economic growth. There had been quite a significant boost in infrastructure spending from the period about 2007/ 2008 through to about 2014/ 2015 and some of it was around the 2010 World Cup, but some of the growth was in industrial activities. He added that all over the world, everybody was looking at levels of public investment. In the United States, China, and the European Union, it was seen as an important complement to private investment, so it was helpful and valuable to increase public investment. In fact, part of the challenge was the weakness in maintaining the levels of investment required to maintain plants. Plants very often broke down because the necessary investment to upgrade, make improvements, do maintenance, and so on, had not been done. Investment was not only about greenfields, as important as that was; it was also the complimentary levels of investment that together ensured the ability to achieve what was needed. 

Concerning SABS, the Minister informed the Committee that board positions had been advertised but there were not sufficient suitable people in the original list proposed by the Department with the requisite technical expertise. It was his intention to announce the new board of SABS before the end of the current financial year. It was an important area now that he could see progress being made on the NLC front, which had been the major challenge in the past.  The focus could shift to improving governance at SABS and the new board would then play a key role in helping to appoint a new CEO. He would be moving much faster in the period ahead.

The question of imports from China, as per slide 44, showed the level at which the Minister and Department were working with the Chinese authorities to try to address several challenges. An example was that oysters were not on the list of products that SA was able to export to China but that was resolved and SA was getting South African oysters back into the Chinese market, which saved jobs in the industry. Concerns had been raised around illegal imports and there had been some collaboration with the Chinese authorities in dealing with a group of companies that imported from China, and just completely misrepresented the value of the products. Information received from the Chinese authorities was used by the SA Revenue Service (SARS) in a court case that was resolved in June 2022.  

The issue of industrial parks was one of the challenges faced by dtic. The Minister explained that the national government had very limited power in respect of industrial parks, so work was proceeding on a new spatial development programme that was intended to link the national government’s support to the right of the national government to help improve governance and to ensure that the appropriate people were appointed to help the parks and there was a coordinated drive to get more investment into them. In several instances, Deputy Minister Majola and Deputy Minister Gina visited the parks and shared the outcome with him. Many parks had just not been maintained well enough for investors to want to use them. He did not want to pre-empt the outcome of the review that the Department was doing, but he had asked the Department to look more carefully at an appropriate role for the private sector in industrial parks. It did not have to be a publicly-owned model or publicly-managed model; the dtic could look at a partnership to get the parks working better and being more effective. Of course, the buy-in of provinces and, in some cases, local authorities, was essential, so it was a process of engaging with them. At some point, the dtic would have to finalise a view on it and then adopt that policy after taking it through Cabinet.

Concerning the benefits of the localisation policy, the Minister stated that there were a number of real benefits. As an example, having successfully localised the industry meant a bigger portion of clothing was manufactured in South African firms or in firms located in South Africa and that clothing was now bought by South Africans. Benefits included an increased number of jobs for South Africans, particularly for young people and, secondly, the GDP output of the economy was increased, allowing SARS to get a higher tax take, which assisted with payments for hospitals and water infrastructure, energy, infrastructure, etc. Localisation provided more economic opportunities for small businesses and new entrants in the market. He referred to Toyota as another example of successful localisation.

The Minister turned to Mr Macpherson’s query about things supposedly functioning well, but evidence not being seen in the macro data, the growth rate, and job creation.  He pointed out that several different factors influenced the outcome of an economy. Managing a modern economy was, as all Members of the Committee knew and had pointed out in the past, a complex thing. It was affected by external things. For example, oranges exports could be doing well, and suddenly, there would be a trade restriction imposed by, for example, the European Union. That would dampen growth. A war could break out in Ukraine and interrupt the supply of citrus fruit to markets affected by the conflict, etc. Another set of circumstances that could happen onshore could be energy shortages, challenges with logistics, and sometimes decisions by local authorities limited the impact of an investment. InvestSA was building up the ability to unblock administrative decisions and administrative procedures that held back growth and job numbers. If one took the dtic out of the equation, a significant number of jobs would be lost in the South African economy and a huge amount of output would be gone.

He said that the dtic tried, in the areas where it could either influence greatly, and in areas within its control, to make a difference. Sometimes benefit was gained from external factors which helped to boost the economy, i.e. the tailwinds. Sometimes external factors obstructed the economy, i.e. the headwinds. At the end of the day, while the dtic could not control the external environment, the domestic external environment outside the dtic, or the global external environment, it did make a difference to the overall growth rate and the overall jobs numbers and that meant it was doing what it could control and influence as efficiently as possible, avoiding corruption in any of that and avoiding maladministration and inefficiency. But he had told the dtic staff repeatedly that they should not rely on those factors as excuses, just to do as best they could. External circumstances sometimes became more difficult; sometimes they improved. Decisions were informed by the overall strategy as set out previously to the Committee in the Annual Performance Plan.

Concerning labour-intensive initiatives, Minister Patel explained the need to do a combination of various things, but it was important to focus also on the labour-intensive sectors. In the master plans, the dtic had tried to select a combination of master plans for sectors that were more capital intensive, like the steel industry, and those that were more labour-intensive, like the clothing and furniture industries. The Department tried, within a sector like the auto sector, to do a lot of coordination so the large auto assemblers worked increasingly with the downstream component makers because that was where the big job numbers were. For every one job in auto assembly, there were two jobs in the production of components for those factories. So even in a sector like car-making, with a top part having a degree of capital intensity, the component parts made it more labour-intensive. The entire budget of the dtic was absolutely tiny compared to the scale of the challenge, so it found other ways of doing things and he would give many examples in the quarterly reports. He added that in the new quarterly reports, examples could be lifted out more clearly so that the focus was not on what the Department contributed as per the amount of industrial funding, etc. because that was simply a means to an end. The new reporting would focus on the impact of what the dtic had achieved through that. That was what the dtic was going to focus on.

Addressing the question of the Steel Master Plan and its support for downstream industries, Minister Patel said that the reports given in the past had highlighted increasingly the work done, for example, on trade where the example of wheelbarrows was given. The car industry was another opportunity to use South African steel downstream. Toolmaking was quite important for procurement. State procurement had to comply with all National Treasury prescripts. He drove a very good locally-made vehicle. Many South African products were world-class; produced in SA, but sold all over the world. One example was the anaesthetics that SA made and was used in hospitals right across the world.

The Minister explained the role of trade leads. When the dtic held an exhibition, private sector companies attended and engaged with people who came to the exhibition: retailers, global traders, people who imported from different countries in the world, and industrial companies. Those trade leads were generated in the discussions between that company and its customer or supplier. Sometimes dtic got trade leads from South African embassies abroad who were approached with an enquiry as to whether South Africa would be able to provide a particular product to a local market. Trade leads came from the work done on the visits that the President made to different countries, such as the recent trip to West Africa or the imminent one to Saudi Arabia and Kenya.

He moved on to the question of the Competition Commission Concentration Report and what steps the Competition Commission was taking. He identified four steps that the Commission was taking. Firstly, it focused carefully on market inquiries, such as the major market inquiry on online platforms and one on fresh produce. The second one was on mergers where the commission looked at whether a merger would increase concentration, and if so, whether there was a compelling public interest reason to permit that merger, or whether the merger should be prohibited. The third focus was on cartels because in concentrated markets it was easier to get collusion going than in highly competitive markets. Finally, the Commission looked at abuse of dominance where large firms were able to use their market power to keep smaller players out or to visit high costs on consumers. The early version of the Competition Commission report was produced in 2017 and that had contributed to a major review of competition policy and changes to the law were introduced in 2019. Regarding the property sector, he agreed that it was quite an important sector, but the Competition Commission had a large number of sectors potentially subject to a market inquiry, so it had a range of criteria to identify a sector, taking into account available resources. The new Commissioner was building on the really good work of the previous Commissioner and was looking to expand capacity in the conduct of market inquiries.

Minister Patel stated that the Auto Green Paper had been published the previous year, after careful work evaluating public comments. The costing exercise based on the expectation of the industry showed that it was not going to be affordable to South Africa in the form originally published, including the proposals made by some of the stakeholders in the public comments. Quite a few meetings had been held with the auto industry subsequently to look at different options to make the shift to electric vehicles more affordable. Many of the issues had been resolved and the key issue currently was the budget. Discussions between the dtic and National Treasury would enable dtic to finalise the roadmap on electric vehicles. The dtic had looked at the commitments made by partner countries, France, Germany, the UK, and the United States as they had put some resource commitments on the table, although not the most generous offers. Given the challenges that Treasury faced, there was not much funding for the green paper. The dtic had done the work; it was a matter of getting the resource envelope in place.

On the question of trade agreements, and the performance indicators, he agreed that the dtic was working on AGOA and he would be meeting with African trade ministers and the US Trade Minister in December 2022 to talk through the ugly issues, and South Africa would then host the AGOA forum in 2023. It was about putting the social case, an economic case and the diplomatic case, but at the end of the day, it required a decision by another party. The American political system was complex, and a lot would depend on the USA mid-term elections and the mood of the new Congress. The Minister and the dtic would put the best case forward for South Africa. They were complex negotiations and the dtic measured its performance in how well the team was able to make a compelling proposition. But all of those were ultimately political decisions that governments made. EPAs required a political decision that the 27 European Union countries would make There were many and complex trade-offs each time a minister or head of state met and he and his team put the South African argument very, very strongly.

The Chairperson thanked the officials from AGSA and the Minister and his team.
                                                       
Closing Remarks
The Committee Secretary informed Members that the following meeting would be on Wednesday 12 October 2022: a follow-up on issues raised during the Committee’s oversight visit to Mpumalanga in April 2022.

The meeting was adjourned.

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