DTIC Q1 & 2 2022/23 Performance, with Minister

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Trade, Industry and Competition

01 November 2022
Chairperson: Ms J Hermans (ANC)
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Meeting Summary

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The Committee held a virtual meeting to receive a briefing from the Minister and Department of Trade, Industry and Competition on the first and second quarter financial and non-financial performance for the 2022/23 financial year.

The first report was presented in a new format, constituting a shift from measuring activities to measuring impact and outcomes in various sectors including jobs, manufacturing, local content, investments, and industrial funding as well as Budget Vote Commitments. The key areas were industrialisation, transformation, and building a capable state. Case studies were also provided to illustrate the work done by the Department during the reporting period. The new format resulted in a very long presentation of 228 slides, containing an enormous amount of detail relating to the activities of the dtic.

Several domestic challenges were noted. The South African economy was affected by global developments including inflationary pressures, export market weaknesses, and exchange rate volatility. In addition, Quarter 1 and Quarter 2 of the financial year had been negatively impacted by the floods in April 2022, which had affected large parts of KwaZulu-Natal, a key manufacturing backbone and logistics hub for South Africa. A further concern was an extended period of ‘load-shedding’ which significantly disrupted manufacturing production and weighed on business confidence. The emerging inflationary pressures were a challenge, although the South African Reserve Bank had responded to those pressures. In the period under review, three Commissioners, and one Acting Commissioner had been appointed. 47 board members had been appointed to the boards of entities falling under the Department, including the newly constituted Financial Reporting Standards Council (FRSC) that was established in terms of the Companies Act. While slower-than-projected spending was reported, the revival of business activities was starting to show, especially as in-trade negotiations had opened new markets and opportunities for South African export, and enabled investment missions to support foreign direct investment flows and promote domestic investment. In the area of incentive programmes, slower incentive disbursements were being reported in certain areas as some of the companies were affected by the KwaZulu-Natal floods. Nevertheless, 39 projects, with a projected total investment value of R8.7 billion across all incentives, were approved.

All Members commended the Minister on a comprehensive report and the energy required to present such an extensive report. Members noted that as a result of the challenges at Eskom, South Africans had experienced 100 days or 2 400 hours of electricity outage in 2022. In line with the Minister of Finance’s comments, was the Department re-considering empowerment policies? Would the Department consider the views of the Minister of Finance that merit should play a larger role than empowerment? Why were the first quarter targets so low? Was the Department putting in low targets so that it could overachieve? Would the Minister consider looking at some of the targets in comparison to the high unemployment rate and measure the Department against a reduction in the unemployment rate? Was the Department sufficiently concerned about the inflationary pressure on food, in particular? Was any research being done to enable a move away from copper as a form of transmission of electricity and energy to other cheaper metals, or metals not so susceptible to theft?

What had localisation, the master plans for designated industries, and all other interventions together contributed to the country’s GDP? Had the Minister and his Department investigated the impact of localisation on the inflationary pressures currently being experienced? When would a decision be forthcoming on the scrap metal policy? Why had a Commissioner and Deputy Commissioner for the International Trade Administration Commission of South Africa not been appointed? The Department urgently required a permanent Director-General and several Deputy Director-Generals. When would that happen? Was political certainty, policy certainty and stable leadership of government institutions not important for investment in the country?

What was the Minister’s personal view on the African Growth and Opportunity Act (AGOA) trade policy of the USA?  Did he want to lobby for that agreement to be extended? Had the attitude of South Africa to the war between Ukraine and Russia impacted other trade relations? Had the investment conferences held with the President yielded any results? What jobs had been created? Did the people who made pledges come back with the money?
 

Meeting report

Opening Remarks
The Chairperson welcomed the Members to a briefing by the Department of Trade, Industry, and Competition (dtic) with the purpose of enabling Members to check its performance and expenditure in the first and second quarter of 2022/23. The delegation was led by the Minister.

Presentation by the Department of Trade, Industry and Competition
Minister Ebrahim Patel, Minister of Trade, Industry and Competition, stated that the report was unusual in that it contained a six-month report, separated into two quarters, but, nevertheless, a half-year view. The report contained the Performance Plan indicators and a compliance perspective of those indicators, but it went beyond compliance to report on goals. The dtic had reviewed the way in which it would pull data together to report on the goals. The compliance part of the report (parts 7,8 and 9) had been circulated to the Committee, but the dtic had worked over the preceding week on a different approach to organising the data; the approach would be refined in the next quarter. It was measuring the activities, as that was necessary, but the report also looked at output and outcome. The report included case studies to indicate the work done by the dtic over the reporting period. The key areas were determined as industrialisation, transformation and building a capable state.

The Minister presented the framework of the presentation:
Introduction
Part 1: Six-Month Overview
Part 2: International
Part 3: Master Plans
Part 4: Trade And Competition
Part 5-6: Case Studies
Part 7: First Quarter App Performance
Part 8: Second Quarter App Performance
Part 9: Financial Performance

The new format resulted in a very long presentation of 228 slides. Minister Patel introduced the report and briefed the Committee on parts one to six; the dtic reported on the performance of the Department. The presentation was well-prepared and presented, containing an enormous amount of detail relating to the activities of the dtic, including pictures showing the activities so that Members received both a verbal and a visual account of activities.

Several domestic challenges were noted. The South African economy was affected by global developments including inflationary pressures, export market weaknesses, and exchange rate volatility. In addition, Q1 and Q2 of the financial year had been negatively impacted by the floods in April 2022, affecting large parts of KwaZulu-Natal, a key manufacturing backbone and logistics hub for South Africa. An extended period of ‘load-shedding’ had significantly disrupted manufacturing production and weighed on business confidence. The emerging inflationary pressures were a challenge, although the SA Reserve Bank had responded to those pressures.

The period under review had seen many appointments made by the Minister. Four Commissioners had been appointed: Adv Rory Voller was re-appointed CIPC Commissioner for a second term on 6 July 2022; Mr Tshediso Matona was appointed as BBBEE Commissioner on 21 September 2022; Doris Tshepe was appointed as Competition Commissioner from 1 September 2022; and the former Director-General of the dtic, Mr Lionel October, was appointed as Acting Commissioner of the National Lotteries Commission from 1 September 2022, pending the Board recommending a permanent Commissioner.

In total 47 board members were appointed to the National Lotteries Commission, the National Consumer Tribunal, the Companies and Intellectual Property Commission, the Competition Commission, the BBBEE Council, the Broad-based BEE Commission and the Financial Reporting Standards Council.

The Financial Reporting Standards Council (FRSC) was established in terms of the Companies Act to receive and consider any relevant information relating to the reliability of and compliance with financial reporting standards; adapt international reporting standards for local circumstances; advise the Minister on matters relating to financial reporting standards; and consult with the Minister on the making of regulations establishing financial reporting standards.  Seventeen Members of the FRSC were appointed from 1 July 2022 for a period of 3 years.

Report on financial and non-financial performance for Quarters 1 & 2 of the 2022/23 financial year
Mr Shabeer Khan, Acting DG, dtic, presented the report. Detailed data was provided per dtic programme. In Q1 there were 54 planned targets of which 50 were achieved. Four targets were not achieved: one each in Administration, Industrial Policy, Trade Policy and InvestSA. In Q2, the dtic had planned 76 targets, of which 72 were achieved. Two targets were not achieved in each of Programme 1: Administration and Programme 2: Trade Policy.

Working on a R10.87 billion Adjusted Budget, R 2 123 953 000 or 19.6% had been spent by 30 June 2022, while as of 30 September 2022, R 5.6 billion or 51.5% had been spent.  By 30 September, R2 billion or 39% (i.e. business incentives and infrastructure) had been disbursed to the beneficiaries across the various incentive programmes; R1.6 billion or 30% transferred to the public entities; R864.7 million or 15% disbursed to the various external programmes at the IDC and CSIR; while non-profit and international organisations’ membership accounted for R115 million or 2%. Spending on operational costs was R778 million or 14%.

While slower-than-projected spending was reported, the revival of business activities was starting to show, such as in-trade negotiations that opened new markets or opportunities for SA export, and investment missions to support foreign direct investment flows and promote domestic investment. In the area of incentive programmes, slower incentive disbursements were being reported in certain areas as some of the companies were affected by the KwaZulu-Natal floods. Nevertheless, 39 projects were approved, with a projected total investment value of R8.7 billion across all incentives.

(See Presentation)

The Minister added that the work on the new approach to capturing the report was ongoing. He appreciated the time given to him and his team to show what the Department was doing.

Discussion
Mr F Mulder (FF+) understood that people were living in an ever-changing world and environment and, especially in South Africa, so many things the Minister had mentioned in his presentation were influencing the country, and that would most surely influence the next report to be presented to the Committee. Together with the FF+, he was very concerned about the situation that the country was in with the challenges at Eskom. All of the work could be undone if the government was unable to save Eskom and have more constant electricity in South Africa. He had realised over the weekend, that if one added all the hours of load shedding experienced in SA in 2022 to the end of October, it totalled 100 days of darkness and that had had a negative impact on the economy. It was 2 400 hours of electricity outage. On average, the country was at stage three and it had cost the economy R64 billion, if one took that time into account. Now Tongaat-Hulet had gone into business rescue. In extraordinary times, extraordinary measures were necessary. Something that the Minister of Finance had mentioned in his mini-budget the previous week was empowerment, which was a main topic and exercise of the dtic, BBBEE specifically. Even one of the new board members of Eskom, Mr Mteto Nyati, had stated that South Africa’s empowerment rules hampered the power utility’s performance, so that had to be considered if Eskom was to be saved.

Mr Mulder was delighted to see how many people had been empowered by projects by the Department. He was concerned about the large number of people and institutions that had not been empowered. Was it not time that the Department also considered getting in line with the Minister of Finance’s view that merit should play a larger role than empowerment?

Mr W Thring (ACDP) stated that the ACDP supported the focus on jobs but there was a challenge. While the jobs covered might look impressive in terms of the presentation, what was important was the actual number of jobs created in comparison to the high unemployment rate. Would the Minister consider looking at some of the KPIs or targets in comparison to the high unemployment rate and perhaps achievement within the Department should be measured against reducing that unemployment rate? Could the Department reduce unemployment by an "X" percentage?

Mr Thring was also concerned about the declining growth projections in developing countries, particularly those that SA exported to, coupled with the low growth in China. China was one of SA’s large trading partners, so it would be interesting to see what systems would be put in place to mitigate the effects of the forthcoming, or projected, growth projections, particularly within the developing economies. Some were predicting that 2023 would see another financial crash.

Mr Thring welcomed the attempt to remove red tape but was concerned about inflationary pressure on food. His wife constantly complained about increased prices in the supermarket. The inflationary pressure on food, in particular, needed to be a cause for concern.

He also referred to the scrap metal and cable theft that the Minister had mentioned. Was any research being done to enable a move away from copper as a form of transmission of electricity and energy to other cheaper metals, or safer metals in terms of theft, like aluminium or so forth? The first and second quarter reports spoke of red tape reductions within 43 high-tech areas as a key priority area for unlocking economic growth, as mentioned by the President in his State of the Nation Addresses, but the targets were not achieved. The targets had only been two reports and yet there was a failure to reach even those targets.

Speaking of targets, Mr Thring noted that slide 20 showed a R24 billion annual target for the value of projected investments to be leveraged from the private sector, but the quarterly target was only R1 billion. Surely it should be R6 billion per quarter? The second quarter target was R 8.7 billion. That was an increase, but why was the first quarter such a low target? Slide 26 showed a similar situation in respect of the investment target of R120 billion. The planning seemed to be a little bit out if one used a purely mathematical model. Was the Department putting in low targets so that it could overachieve?

Mr M Cuthbert (DA) asked about the broader impact of localisation on the master plans for designated industries, and all interventions together. What had they contributed to GDP? That would be indicative of whether or not the policy itself had been successful thus far. Had the Minister and his Department investigated the impact of localisation on inflationary pressures currently being experienced, and whether or not that was a cause for concern in the Department?

Mr Cuthbert asked about the appointment process of the DG. He had previously raised the issue and it was his understanding that the Acting DG had been appointed as the Accountant-General. When could the Committee expect the appointment of the DG? Several entities of the Department had acting officials in the executive structures, and he thought it was important to finalise the human resource issues, one of which was the International Trade Administration Commission of South Africa (ITAC). What was happening in terms of sourcing a new Commissioner there? His understanding was that the Deputy Commissioner had also left and there was an imminent change within the organisation itself. The lack of leadership impacted on leading the organisation in its new direction.

Thirdly, he asked when a decision would be forthcoming on the scrap metal policy. The submissions had closed on 26 August 2022, which allowed sufficient time to apply the demands from a Cabinet point of view as well as from a ministry point of view. When would the decision be forthcoming because the longer it was held back, the more uncertainty it created?  Industry players would not invest because they needed certainty, whether it was a good or bad policy.

He asked the Minister what his personal view was on the African Growth and Opportunity Act (AGOA) trade policy of the USA.  Did he want to lobby for that agreement to be extended? Did he want a partial trade agreement, if he was not going for an extension? Or was he looking at a full trade deal between the USA and SA with developing concessions and the like? Could he make his position clear, particularly because SA would be hosting the AGOA forum later in the year? Considering that it would expire in 2025, SA needed to have a clear position on the agreement, in light of the large-scale nature of SA trading with the USA.

Mr Z Burns-Ncamashe (ANC) impressed the Minister on the importance of making appointments. The Minister had moved swiftly in terms of various entities concerning appointments. In situations where there were uncertainties, whether in terms of political leadership or policy uncertainty, that would not augur well for investment opportunities, so it was good to be stable concerning the leadership of those institutions. It gave confidence to anyone who sought to invest in South Africa. In fact, it positioned South Africa as the most investor-friendly country.

Mr Burns-Ncamashe suggested that the Minister could also talk about the impact of SA's foreign policies as articulated by the South African government, to the extent that it had an impact on trade relations. For instance, the attitude of South Africa to the war between Ukraine and Russia had been consistent in its stance that multilateral institutions had to be given space to deal with the challenges they had and encouraged dialogue and negotiation between the parties rather than taking sides, which had the potential to exacerbate the situation. How had that impacted other trade relations, whether continentally or at the level of the European Union? It was important to show the extent to which such positions had an impact in terms of how the South African economy had performed.

Dr M Tshwaku (EFF) said that he did not have much to ask but he needed some clarity on a couple of points. He believed that the government needed to put more money into movies that raised the consciousness of the people, starting with the events that happened in South Africa because the country was not doing enough to fund those movies about political heroes and what happened before. People needed to understand the past that the country had gone through and that what had happened in the past would never repeat itself. The “ama2000s” were the new guys on the block and they did not understand the history of the country. It would be very nice if more movies were supported. Some of the freedom fighters should narrate their stories before they passed on.

He asked the Minister about the investment conferences that had been held with the President. Had they yielded any results? Which jobs had been created? Did the people who committed to investments, come back with the money? Had they produced the jobs that they had said they were creating? Had the Minister seen any manipulation? Was there any improvement based on the yield of those things? He thought the conferences were not for black industrialists. It would have been nice if he had been invited because he could have seen for himself but when he saw a notice of it, it was too late because he was already committed to an event. He knew it was an internal department event, but if the Minister could let the Committee know about such events, some of the constituency people would be interested in viewing those events.

Concerning the jobs that the Department had created in totality through its entities, he asked if the Minister thought that there was an impact in terms of job creation in comparison with the demand for jobs in the country. Was the Minister feeling happy, or was there something more that could be done? The Committee had just attended an industrial policy workshop, which was excellent, and he thanked the Committee for the workshop in which Members were schooled about industrial policies and European schools of thought. Some very good suggestions and presentations were made. Perhaps the Chairperson and the Secretariat could share with the Department in terms of looking at how other countries had increased job creation through industrialisation. Maybe the Minister’s researchers could compare notes with the Committee’s researchers to see what could be done better. The country was spending billions but was that money yielding the millions of jobs needed? The government budgeted quite a lot to create jobs, but in terms of the performance, it seemed to him more like report-producing, and giving suggestions, but he saw no tangible, massive-scale job creation on the ground. The Department could not say how many jobs it had created and at what cost, like a return on investment. The dtic was getting 400 or 300 jobs there, 1 000 jobs somewhere else but the country was looking for massive industrial-scale job creation.

He asked about the industrial policy. If the country needed four million jobs, then it should be determined how government was going to ensure that they were created so the policy did have an impact.  On the economic research component, the Department should be looking at other techniques or other schools of thought that could be applied. The dtic should be looking at other countries that had developed from developmental states. How had those countries managed to industrialise and create masses of jobs because people in SA were getting tired? There needed to be a lot of emphasis on locating jobs close to townships so when people got those jobs, they were able to walk there. There was no money to spend on transportation. Dr Tshwaku believed that the Minister needed to look at job creation aggressively and look at other countries that were similar and find out what they had done to industrialise. To create jobs, there had to be aggressive state intervention, and the state had to be at the centre of kick-starting the economy. After COVID-19, things had become much worse.  

Dr Tshwaku said that the Minister needed to look at the entities and how they handled the applications of the black industrialists. It was difficult for people who were looking for funding from the Industrial Development Corporation (IDC) and National Empowerment Fund (NEF), but the funding was critical. People that had approached the EFF spoke of unfair treatment. So, the Minister needed to zoom into it and look at it. Maybe there was a need to have an independent assessor if an applicant was rejected by the Department or an entity for funding. An independent person could look into the complaints and determine the problem. Some individuals had spent months and months and a lot of money to come up with business plans and applications for funding, just to be told that they were not going to be funded. They were just declined. There had to be a sensitive approach because those people sat in meetings, they conceptualised and they applied, but the insensitivity displayed by some within these institutions, let much to be desired. People had put their soul into the work but the Committee would throw in the towel. The EFF had raised it and the entities were looking into it but he had taken the opportunity to have his say as well. The Minister had to have a look at this issue or it might blow in his face. After all, he said the people were receiving assistance with financing but there were rotten apples there that are doing bad things. He had other allegations which were very sensitive. Applicants put forward an idea but the officials go behind that individual’s back and go and talk to the person selling that technology or providing what was necessary for that idea as those officials wanted to take the idea. It was becoming a problem on the ground. Those were his contributions. He would put those points and any other thing he could think about in terms of presentation on paper because he had a lot of information about job creation.

Minister Patel was quite sure that the results were going to be positive if Members wanted to know his thinking about the situation. The Department was going to try to find a monetary metric because that was the target set. However, he and the Department had to do it in a way that was rigorous and calculated. It was not about things done in the past just being re-purposed.

On the question of localisation and inflation, the Minister said that it could cut both ways, as Mr Cuthbert knew. He would call it the more neoclassical concern about localisation and its impact on pricing, but there was another part to it: countries that had very little agricultural production had seen a much bigger spike in the food basket than South Africa had to date. He explained that he was responding guardedly because no one knew what the future held. The Competition Commission was actively monitoring food prices and taking such steps as it reasonably could to deal with those issues. However, when a country was subject to imports, then whatever happened on global markets immediately impacted the country, and when there were shortages. For example, during COVID-19, SA needed a very large number of medical-grade face masks for doctors in ICU, etc. and during the pandemic, the country could not find sufficient stocks, despite the solidarity fund doing its best to try to get masks from all over the world. Because SA had some local industrial capability, the Department was able to work with local companies to re-purpose their production and produce the masks. It was a similar case in respect of the ventilators. When the Aspen plant in Gqeberha was bought, it was not as a COVID-19 vaccine plant because there was no COVID-19 at the time, but when the company put in the application to the dtic for effectively creating a partnership with committed sums of capital, eventually giving a return after a period of time, the dtic had in mind that it would be a sterile facility, but not that it would be one capable of producing vaccines for a pandemic. However, the fact that SA had that facility enabled the country to be able to bring the masks into production fairly quickly.

Minister Patel explained that a significant consensus was emerging globally. In the past, everybody just looked at competitiveness, currently, more and more businesses and governments were looking at resilience and how to make sure that the economy was capable of taking knocks. The dtic would keep an eye on it because anything taken too far could have negative effects, but the dtic needed to do what it could to build the South African economy, to create industrial capacity and to create jobs.

On the appointment processes of the DG, he said that the inter-ministerial committee was working on it and he hoped that it could move fairly rapidly because that would help enormously for longer-term planning. So he was moving as fast as he could and would give a specific date as soon as he could. Similarly, on ITAC. Interviews had been conducted, a shortlist developed and he was looking at the next steps that needed to be taken. On scrap metal, he knew that Mr Cuthbert was looking forward to the outcome with anticipation and he hoped that Mr Cuthbert would like the outcome, as it had taken an enormous amount of work. It had been through various processes, legal comments had come from economists and others, and the last leg was to get a final set of comments from the security cluster. Thereafter, he would take it to Cabinet. It had to be done thoroughly, but he was hopeful of a decision very soon. The Minister looked forward to the press release when Mr Cuthbert praised government for the measures taken to address cable theft.

Concerning AGOA, Minister Patel said there would be further discussions with the US Administration in December 2022 and then SA would be inviting African Trade Ministers and the US Administration to come to South Africa in 2023. SA had met with African Trade Ministers and the unanimous view on the African continent was that all countries should be seeking an extension of AGOA. The previous afternoon, he had met with the newly appointed trade minister of Kenya - it was his second day on the job and he had already flown to South Africa to discuss trade. So, his own view was that the optimal solution or the optimal policy choice for the longer term for the United States and Africa would be in extending the partnership with the US. Obviously, any agreement was subject to a lot more engagement and discussion.

Minister Patel appreciated Mr Burns-Ncamashe’s points on the appointment of persons to entities, but it was about making sure the Department took the time to find talented people who did not always apply. A degree of thorough work was necessary to get state capability back because the state had lost a lot of capability and it served no one to deny it; SA had to confront it, deal with it and do what could be done to improve capability in the entities.

On foreign policy, he said that, generally, what the dtic did was to communicate with everybody and reach out to everybody. South Africa had probably been visited by a range of people with many different interests from across the globe. In terms of heads of state, SA recently had the President of the Spanish government, otherwise known as the Prime Minister, spend time in the country with President Ramaphosa talking through several issues. That would come up in the Quarter Three Report. Essentially South Africa put forward a view consistent with the role it had always played of not picking fights with others. SA tried to see a world at peace with itself because that was a world in which human development could be better achieved, poverty could be tackled, unemployment could be tackled and the world would generally be better off. But in all of those things, SA did want to talk to all sides and deal with issues in a mature way.

The Minister responded to Dr Tshwaku, appreciating his support for the way in which dtic was dealing with the movies. It was one of the areas that the President was very passionate about, and it was really important that South Africans had an opportunity to tell their stories. It was not just one story but many stories that made up the nation and part of that story was the story about a better past and telling it in a way that both inspired hope and brought other Africans together in the end. But it did not brush difficult things under the carpet because obviously, it was a difficult history that could now be confronted via movies. Neither the story of the South nor the stories of Africans had not been told and so support was not only for the telling of South African stories but also African stories so that the continent felt more confident about itself, its history and the future. Those were not only stories of black South Africans, but also stories of white South Africans and some were very moving stories at the human level. He hoped the stories were being told with a lot more confidence. Young filmmakers were coming in and many of them were supported by the work that dtic did in the investment conferences and other efforts at raising funds.

He said that, in many slides, the dtic pointed to the fact that an announcement was made at an investment conference. That was four years ago, two years ago, and currently, he was seeing the jobs, seeing those investments taking place, and so on. If Dr Tshwaku had an opportunity to look at some of those earlier slides, they would draw that line very well. And so, without any question, the investment conferences did have a positive effect, although the point was taken that more things could be done; the dtic had to do more. There was no choice when SA had young people without hope. The Department and entities had to find the inner strength to be able to do more all the time, although it was hard on some of the really hard-working officials for whom it was not uncommon to have meetings with him, late at night, early in the morning, and so on. He relied on them to do it. If the dtic had a bigger budget, it could do more, but it was a relatively modest budget compared to the scale of the challenges faced, and not all of the problems could be solved with money. Many of the problems required other innovative ways. It was also about trying to get the state to partner differently with the private sector, to be able to unlock many more jobs, sometimes just removing unnecessary red tape, or just putting a real obligation on a company that received public resources, insisting that the company needed to do more to grow jobs was often more helpful than making financial incentives available.

On the question of whether the money was yielding much, Minister Patel believed that it did yield a lot. He did not doubt that more could be done as not all of the dtic programmes were necessarily 100% efficient. No one needed to be defensive about it; no one could run any big programme and say they had done it perfectly; there would always be space to improve. On the issue around an aggressive job creation scheme, he explained that, other than public works programmes, the only other big things that a state could do was to strongly invest in infrastructure, energy, transport, logistics, water and ICT and also in skills for young people. The government was putting an enormous amount of money into investing in higher education with the fee-free system. The hope was that there would be a big economic return as the generation of young people who would otherwise not have been able to afford University began to enter the labour market as entrepreneurs and as job creators, not just as people who would be looking for work. They had to be people who would make work so that they could bring other young people in.

The other part was localisation, and the Minister knew that sometimes the media commentators got a little bit bored, and they would work themselves up on issues of localisation. But the more he travelled the world, the more he realised how many countries had localisation programmes. For example, a major ICT programme made in Saudi Arabia was run in the United States. Last year, when he visited the US administration, the officials talked about what they were doing as government using public resources to re-start American manufacturing capabilities. And so it was happening all over the world, not only in China. It was the same with the “Made in India “programme to create jobs for young people through localisation in India. SA had a lot of scope to do it but needed to have the courage to persevere, to do the right things, and when something did not make sense, to move on, leave it and work on the things that did make sense. But localisation was a big thing.  He said that the African Continental Free Trade Area would provide an enormous opportunity to create jobs.

Responding to the point about the entities and how they handle applications, Minister Patel had taken note of the comment. If, as Dr Tshwaku said, he knew of rotten apples or people going behind a promoter of an idea, he encouraged Members to let him know. Everyone had to be vigilant against corruption at all times. It was not a beast that one slayed only once, it had many lives and many heads and if one chopped off its head, it would grow another two heads. So it was a constant battle against any possibility of corruption. If Dr Tshwaku had any information, he would really like to receive it so that he could investigate and deal with it.

He said that the dtic was looking at an independent assessor, in an advisory role, because the dtic had received a number of complaints from clients of its development finance institutions and from the Department itself. It would save time if all complaints were administered formally. Complaints had come from clients of the IDC, asking the dtic to review things. The difficulty was that not every application was a good application and not every application would succeed. That was the nature of it. There were 60 million South Africans and only a tiny number could be supported by the dtic. The entities needed to have systems and he had to give their boards the freedom to set up the systems, the guidelines and so on. When Ministers got to the point of getting into that level of detail of determining who should receive a grant or a loan, it was a big mistake and the route to corruption and enormous misallocation of resources. No Minister had the time, energy or skill capacity to be able to do that, so they created systems that had to work. That meant that the boards for the two development finance institutions were principally responsible for loans and they had to recommend strong and capable people to deal with the applications and he had to give a degree of latitude and not challenge everything that a CEO or board did. It was a signal of loss of confidence. However, there was a pushback where there were inefficiencies in any of the development finance institutions and he had been very, very clear about that. But it was not right to question every decision that every public official took. He had to find the balance to make sure that the system did not result in frivolous or vexatious complaints that could tie him up and the resources of the Department because the limited budget had to stretch into the areas of importance to South Africans: jobs, economic growth, the inclusion of women and rural communities and young people. The Minister had asked the DG to look at the issue and he said there had been quite a bit of thinking about a need to reform the system. A system had to be devised that could undertake checks without complaints coming to a Minister, whatever the complaint was. It was a challenge to the institutional machinery that he had to deal with.

Minister Patel stated that the session had provided a lot of food for thought, and several issues were part of an ongoing conversation between Members of the legislature and Members of the executive, particularly in respect of policy choices. The session was different to many of the others in that the dtic team felt affirmed that the work it had done, was helpful to Members of Parliament. The new format and way of focusing on the work of delivering to South Africa's people had been helpful.

The Chairperson thanked the Minister, saying that the presentation met the challenge set by the Auditor-General that the Committee had to see the impact of the budget spend on South Africa. She noted that the meeting had, however, run well over time.
                                                       
Closing Remarks
The Committee Secretary informed Members that the following day the Committee would receive a briefing from the National Regulator of Compulsory Specifications, as well as the SA Bureau of Standards on the Annual Report, as well as the First Quarter Financial and Non-Financial Performance Reports. Also, the Office of the Auditor-General would give a short input on some issues for clarification.

The meeting was adjourned.

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