DTIC 2023/24 Annual Performance Plan; with Ministry

Meeting report

The Chairperson asked for apologies to be read out. He was informed that the Minister would be joining between 10:30 and 11; he was engaged in the launch of a fund. The Minister would be present to answer questions. The purpose of the meeting was to get a briefing from the Department of Trade, Industry and Competition (DTIC) on its annual performance plan (APP) for 2023/24, as well as the budget. The Select Committee (the Committee) was supposed to have met with the Department two weeks ago, but due to the absence of executives, the meeting was cancelled. It had been rescheduled for that day.

Mr Fikile Majola, Deputy Minister of the DTIC, was in Jagersfontein for a meeting. The Acting Director-General would be presenting.

Annual Performance Plan 2023/24

Ms Malebo Mabitje-Thompson, Acting Director-General (DG), DTIC, presented the APP.

She introduced the DTIC delegation: Mr Stephen Hanival, Deputy DG (DDG): Chief Economist; Ms Susan Mangole, DDG: Head of Incentives; Ms Nontombi Matomela, Chief Operations Officer (COO); [name unclear 21:23], Head of Strategy; Ms Elizabeth van Renen, Chief Director (CD): Trade; Ms Sarah Choane, DDG: Internal Administration in the Department; Dr Evelyn Masotja, DDG: Regulations; Ms Lerato Mataboge, DDG: Exports; Ms Irene Ramafola, Acting CFO; Ms Liezl Reinecke, assisting in the Trade Branch; Dr Nimrod Zalk, [unclear 22:14]; Mr Sadiq Jaffer, present on behalf of Mr Yunus Hoosen, Head: Investments and Special Industrial Development; and Ms Tanya van Meelis, DDG: Transformation and Competition Policy.

 

There were ten core targets.

- R200 billion in investment pledges secured across the state;

- R40 billion in additional local output committed or achieved;

- R700 billion in manufacturing exports;

- R300 billion in manufacturing exports to African countries;

- R2.5 billion in exports of Global Business Services (GBS);

- R40 billion in black industrialist outputs achieved;

- 1 million jobs covered or supported by Master Plans;

- 100 000 jobs to be created (50 000 SEF & 50 000 full-time jobs);

- 23 000 jobs in black industrialist firms;

- 20 000 additional workers with shares in their companies.

 

A fundamental shift was to measure the number of jobs created. Other big shifts requiring a different strategy included responding to the geo-political landscape, new technology, and climate change. Ten core targets represented the real impact the DTIC aimed to achieve in the economy and would ensure the measurement of crucial indicators like local output, job creation, and the performance of black industrialists. The core targets were the apex priorities for the Department, and all programmes of the DTIC were expected to contribute to the achievement of the essential outputs. These 10 core outputs were part of 45 outputs in the APP and targets had been clustered into 12 functional focus areas: Investment; Industrial production; Industrial support; Transformation; Energy; Jobs; Green economy targets; Stakeholder engagement and impacts; Addressing crime; Red tape and state capability targets; Improving the capacity and responsiveness of the state and social partnerships; Exports.

An Energy Action Plan was included in the DTIC’s APP. The energy outputs were part of the DTIC group’s eight high-impact interventions to support the presidential Energy Action Plan to close the energy gap. Eight action groups included:                                                                                               

Speeding up processes to accelerate private-sector investment in electricity generation;
Enabling regulatory flexibility on transformation;
Introduction of an Energy Resilience Scheme to assist firms to mitigate the impact of load shedding;
Measures to encourage energy efficiency;
Interventions to support the industrialisation of renewable energy components.

The implementation of the new approach would require the Department to develop plans for results and impact; and not for good audit outcomes. It would require a break in the DTIC's traditional ways of working, and the discontinuation or reduction of certain existing activities to refocus resources. The DTIC plans and functions had to account for the economic returns against public resources.

Key to operationalising the new approach was the need to enhance delivery. A number of internal refinements of functions and resources in the DTIC would be made and would include:
-The re-assignment of human resources and provision of specialists for identified core outputs.
-A focus on skills in key areas e.g. project management, monitoring, and financial evaluation.
-25% of critical vacancies to be filled per quarter, based on new skills required.
-Re-prioritisation of the funding through shifting and virements of the budget to the core programme.
-ICT automation of manual customer-facing systems and provision of reliable internet capability.
-Reduced bureaucracy on staffing and finance.
-Integrated reporting internally and externally.

The new approach had obvious political risks as it required a shift in the foundations of the economic-social compact to one based on more openness and engagement. There was a risk in not investing in change management which would mean that work would be done in the old ways and the results would reflect that. Factors external to the Department were significant: the global and domestic environment, the energy supply, the visa system, good market access, a consistent water supply; and stability in the supply chain.
 

Budget at a Glance 2023/24- 2025/26

The budget allocation for 2023/24 would be approximately R10.9 billion; the allocation for 2024/25 would be approximately R10.5 billion; the allocation for 2025/26 would be approximately R11 billion.

 

The Department will prioritise funding towards the 45 key targets that have been set for

the Department.

• Impact-focused APP provides the framework in which the department will align and utilise its financial and human resources more effectively to achieve impactful targets.

• To drive the integrated work of the department, R10.9 billion is allocated for the 2023/24 financial year.

• The Department will focus on key priorities across the DTIC group; improve coordination within the Department; align resources to priority areas; and increase implementation efficiencies by drawing on the available resources of the DTIC.

• The department will optimise the financial resources to actively support the work of the DTIC by identifying where resources are needed for the output targets and deploying resources to the critical needs.

 

• The Department’s total expenditure is expected to increase at an average annual rate of 0.5 percent, from R10.9 billion in 2023/24 to R11.1 billion in 2025/26.

• The Transformation and Competition programme’s baseline is expected to decrease at an annual average rate of 17.3 per cent, due to the Social Employment Fund for the Presidential Employment Initiative not being extended beyond 2023/24.

• Spending in the Incentives programme is expected to increase at an average annual rate of 3.2 percent from R5.3 billion in 2023/24 to R5.8 billion in 2025/26.

•  Allocations to the Incentives programme account for an estimated 51.1 percent (R16.9 billion) of the Department’s expenditure over the medium-term expenditure framework (MTEF) period, is mainly to fund incentive programmes.

(See Presentation)

Discussion

Mr J Londt (DA, Western Cape) wanted to start off with a compliment. Compared to previous years, but also other departments that had briefed the Committee, the Department’s report was “refreshing”. He hoped that would also translate into outputs.

The new approach appeared to move in the right direction, and those outcomes were needed. He agreed with that. He was “a little bit worried” about the comment that said there would be less focus on audits, and then more on the outcomes. He felt that both could be done, and both could be achieved. The Department could still meet its requirements and the threshold that it set itself, and get the audit outcomes it wanted, as well as the target usage. Regarding the timeline to get everything in place for the new approach: What measures were put in place to ensure that it did not negatively impact any of the current programmes? “Human beings by our very nature are resistant to change” and he was specifically worried about the staffing section, and what pushback the Department would get, and how it might affect the current programmes. How would the Department ensure that that did not negatively impact anything that was currently ongoing?

In output 42, the metal trading system developed to identify the stolen public infrastructure was mentioned, which was commendable. Hopefully, that could be put in place quite quickly, because such theft added an unnecessary burden on South Africa’s fiscus, including replacing what was already in place to service the country. But linked to the export ban that was put on scrap metal, it seemed “a bit like a blunt instrument”. Was that ban effective, given that there had not really been a downturn in vandalism? In fact, it appeared that it had been on the same level or even on the increase. How did the Department measure that and determine that? If there had been an increase, what were the steps being put in place to address that?

 

Mr Londt observed that a high-level delegation from South Africa was sent to the United States of America (USA) recently. But South Africa’s participation in the African Growth and Opportunity Act (AGOA) was at risk. It was all good and well having those grand plans but if South Africa’s stance on the Ukraine-Russia situation put its participation in something AGOA at risk (where participation was critical to South Africa’s economy), would it not be wise to temper the approach, and “maybe be on the right side of history”? Additionally, had there been any success in those talks to mitigate the risks to South Africa’s participation in AGOA?

 

With the energy resilience that was being spoken about, his concern was that the Committee had seen that in a few places in Government. How did the Department ensure that it did not work in isolation, and make sure that everybody pulled in the same direction? There were the “low-hanging fruits” that the Department spoke about, including taking out the red tape and making sure that the necessary legislative requirements were met. But was the Department aware of the possibilities that there were around Petro SA, and getting those gas energy systems in place? If the Department was not aware, would it be able to check in on that, and make sure that the process was sped up? That was an area where, slowly but surely, the Department could get areas a lot less dependent on Eskom, and that can then be utilised elsewhere.

 

With the output of jobs created, it was “frustrating” to get those presentations year in and year out, yet the Department kept moving backwards in the fight against unemployment. He suggested that the Committee should at some stage look at what was promised on job creation over the past three to five years, and actually then measure that because ultimately that was how one measured one’s success. Unfortunately, across the board, departments were failing in that area. It was good to put those figures on the board, but that was one of the critical areas where one needed to keep oneself accountable.

On the R1.3 billion in finance to support small, medium and micro enterprises (SMMEs): The Committee had a similar presentation from the Department of Small Business Development (DSBD). How would the two departments ensure that they did not “trip over one another”, and critically, what criteria would the DTIC use? It was much more difficult getting a small business started and operating successfully. Those that had actually crossed those first few hurdles and survived should be the ones that got prioritised. Those enterprises needed to be looked after so that they could keep the jobs and possibly expand. Was there any criteria that the Department could apply, or was it something that any small business, irrespective of its sector, could be eligible for, if it had proven that it was established, creating jobs, and contributing to the economy?

How would the DTIC Energy Action Plan align with the new Minister of Electricity and his roles? It appeared that he did not have full authority and a full job description. How much of the action plan would the Department slot into what his roles would be? How much of it would there be a “territorial fight” about who needs to look after what?

Mr Londt observed that there were people that did charity work in the Eastern Cape who had applied for the necessary import permits, and they had containers stuck in Coega. Could the Department perhaps put him in contact with the right person, so that that loop could be closed, and those people could get their containers through? The people had done all the necessary approvals. It would also be appreciated if somebody reached out to him offline.

Mr M Mmoiemang (ANC, Northern Cape) appreciated how the Department had emphasised the distinction between the previous APP in the new APP. The criticisms that were identified, and how the Department responded, were a bit confusing, because the presentation talked about the core outputs, and the three outcomes, and also talked about the ten core targets after the outcomes. The presentation then talked about the ten core outputs of the 45 outputs. He asked about the effects on the outcomes given the fact that the Department was only left with 12 months of the sixth administration. He recalled that from the State of the Nation Address (SONA), the take-home message of the Department focused on facilitating increased localisation; he agreed that that was one of the outputs “inclusive economic growth and employment opportunities”, “attracting investment” and also “increasing the African Continental Free Trade Area (AfCFTA)”. An area that was missing from the ten core targets was the implementation of the master plans that were mentioned in the priorities from SONA. Perhaps he missed that in the presentation, and perhaps the Department could point out where that implementation target was located. With the previous implementation target, there was an emphasis on the automotive master plan, and also the master plans for textiles, poultry, sugar, agriculture, and global business services. Perhaps there could be more interventions in ensuring that those areas found more pronouncement in the ten core targets that formed an integral part of the new APP, as part of the Spatial Development Framework, which in terms of the new APP was combined with investment. There was a reference to two new Special Economic Zones (SEZs). While Members appreciated the new SEZs, it would probably be important to bring to the fore the issue of whether those new SEZs would have an effect in terms of the existing SEZs, and the “bottlenecks” that were happening there. He asked for an elaboration on where the new SEZs were located, given the fact that, in terms of the Committee’s mandate, it was more focused on local municipalities and provinces, and on the effects of national priorities on local municipalities and provinces.

 

Mr Mmoiemang asked about the output that spoke to jobs and energy, which was a response by the Department in light of the crisis South Africa was faced with. He also asked about the energy action plan of the Department, and those eight interventions. One of the areas that had been identified with regard to the Northern Cape transmission development plan as being the capability of the network to handle the forecasted load in generation in the province over the last two years. Regarding the limitation in relation to the infrastructure to evacuate the energy from the current renewable plants: He recalled that the first three to four were mainly developed around the Northern Cape. Building the capacity of the transmission to be able to evacuate that energy could help, because if one strengthened the capacity, it would help the ability of the transmission line to evacuate a large concentration of renewable generation that was anticipated in the province. The presentation raised the matter of capital investment. If one made a comparison between the transmission line between Upington and Gauteng province, and Upington and Western Cape, in terms of investment, it had been skewed towards the Western Cape. Without necessarily pitting provinces against each other, he thought that if the capital investment was skewed, it could have been a delivery problem of the board of the previous year to ensure that the battery storage was more biased towards the Western Cape. To a larger degree, it had weakened the capacity of the transmission line to be able to evacuate the energy from the Upington area towards Gauteng.

 

On the District Development Model (DDM): He expressed appreciation towards the Minister for taking the [unclear 1:58:00] to the Northern Cape. It was not just Northern Cape, but also an area that was “part and parcel” of Mr Mmoiemang’s constituency. The ministry worked hand in hand with the Northern Cape constituents to ensure that there was synergy between the work that the Department was doing with Members’ constituency offices in their respective provinces.

He also asked about the Social Employment Fund’s discontinuation, particularly in relation to its being an integral part of the Presidential Employment Stimulus Package (PESP). Was there any initiative that would be put in place to augment that fund, because it could have an impact on the Government creating jobs? It was quite clear that the continuation also had an effect in terms of the work done by the Department’s entities and its commitment to creating jobs. Regarding Programme 1: Administration, the employment equity targets in terms of 50% were no longer applicable in the Department’s targets, but also the 3.5% representation of people with disabilities. How would that help in terms of advancing the agenda of employment equity and Black Economic Empowerment (BEE)?

With the plan to amend the Companies Act, given the limitation on time, would the tabling in Parliament happen as soon as possible? Or would it be deferred to the seventh administration?

On investment incentives: The target to facilitate investment from investment pledges was reduced from R26.7 billion in the previous financial year to R25 billion in 2023. Could the Department give an explanation for those changes?

Ms H Boshoff (DA, Mpumalanga) remarked that for the first time in years, she enjoyed the presentation from the Department.  It really was a change from previous ones, and she congratulated the Department on a very comprehensive report. As Mr Londt said, the Department could achieve everything in the APP, but unfortunately, South Africa was sitting with an electricity problem. Without electricity, there was “absolutely no economic growth and job creation”, and the market was not conducive to investment. A capable state would definitely not be achieved under the present climate. The biggest problem South Africans were sitting with, especially the citrus farmers, was the European Union's (EU) regulations. She did not see any discussions taking place in that regard, bar the one where South Africa had a short interaction with the EU Parliament a month ago. Was there a renewed agreement to put at ease the minds of the citrus industry? She was reading an article the other day where the Department of Agriculture, Land Reform and Rural Development (DALRRD) said it was very sceptical about the EU's citrus import regulations that were resolved at the World Trade Organisation (WTO). A dispute was lodged last year, and still, the citrus farmers and others did not see any work being done towards resolving that dispute. Another concern raised by the citrus farmers was the extra cost involved in having to store citrus for longer periods and at lower temperatures. Members saw that previously Transnet Port Terminals (TPT) were not geared to accommodate those new EU regulations. Was South Africa now ready to be able to agree to those regulations, and could Members be given a percentage of what the citrus export was, and how much storage capacity was available currently? That information would put the citrus farmers’ minds at ease.

With the AGOA agreement, Ms Boshoff wanted to know where South Africa stood with regard to that because since 2000, South Africa had been getting “billions of rands” worth of discounts with regard to trade. Where did South Africa stand in relation to the SEZ in Mpumalanga known as the Nkomazi SEZ. It had been “the elephant in the room”.

Regarding output 8: There was to be R8 billion in financial support for SMMEs, women and youth. What about those with disabilities? Was the Department putting aside any budget for people with disabilities? It was about time that the Department reached out to that group of people to assist them. How much of the R8 billion would be channelled towards township SMMEs, especially in the rural areas?

Regarding output 1 (slide 15): With the R200 billion in investment pledges, how had those pledges assisted in the creation of projects and jobs, or how would the pledges assist in the creation of projects and jobs?

Mr M Dangor (ANC, Gauteng) observed that he was the convenor of that meeting with the EU parliamentarians, and it was interesting. Parliament had agreed to take that matter forward. He felt that it was also important that the Executive played its role in the question of agreements that were reached. If one looked at the citrus matter, the EU treated North Africa or the Mediterranean rim differently from the rest of Africa. The EU did not have the same restrictions on the Mediterranean rim, and possibly, the Committee could look at the question of the most favoured nations’ position with Europe when South Africa was dealing with Europe. If Europe was dealing with North Africa in a particular way, then it should be dealing with the rest of Africa and the rest of the world in the same way. However, he felt that sometimes politics entered into business, and it was “used as a lever to force people into a particular direction” that they needed to agree with or not agree with.

 

Mr Londt had made an interesting remark, namely that people were resistant to change. Mr Dangor felt that some people were still resistant to change from 1994. Having said that, he encouraged the Minister to look at how the trade agreements were reviewed, including AGOA. What had happened with AGOA and the chicken dumping situation? Was it possible for the Committee to look at the facilitation and funding of non-government organisations (NGOs) or cooperatives that could take advantage of AGOA so that South Africa could look at that particular export market?

 

Mr Dangor was listening to an interview on the BBC the other night with the Prime Minister of Malaysia. He was asked how Malaysia treated the USA, and he replied that the USA is Malaysia’s friend. He was asked how Malaysia treated China, and replied that China is a neighbour and an important friend; Malaysia treated the USA and China equally, and had its own sovereignty. Perhaps that was the route for South Africa to go: Its own sovereignty, and that it did not fall into the trap of being “used by either the New Cold War or the Non-Aligned Movement”, should it re-emerge, particularly in the areas of trade.

Ms Mahdiyah Solomons, Committee Secretary, read out the questions that Ms B Mathevula (EFF, Limpopo) had typed in the chat box. Ms Mathevula asked what progress had been made in the Musina/Makhado, Fetakgomo-Tubatse SEZs in reaching their final operations. The second question was: What relationship did the Department have with the Department of Transport (DOT) to make sure that the roads close to industrial parks were in good condition, and accessible in order to attract investors? For example, the road to Nkowankowa Industrial Park was in very bad condition. Question three asked: In terms of transformation, how many small citrus producers had the Department assisted so far in exporting their products? Question four: What was the Department doing to promote local brands, or encourage community members to buy local brands? Question five asked: What was the Department doing to prevent counterfeit goods from entering the country?

The Chairperson said that this time around, the APP moved away from measuring the number of reports that were submitted to the Minister, even though Members did not know the content of those reports, so they really appreciated the new approach. The presentation mentioned risks. For him, one of the risks was the fact that most people that would be also carrying out the work of the APPs, about five of them, were acting, starting from the DDG for Industrial Policy, the DDG for Competition Policy, and the CFO. That was one of the risks that he identified in carrying out the APP. He felt that the Department diminished the need to show the Committee that there would not be any negative impact on carrying out the APP.

With regard to the 1 million jobs supported through master plans: It would have been good if the Department were to break down those master plans in terms of numbers. For example, in the automotive sector, this will be the number of jobs that will come out of that particular master plan.

Most Members had already raised concerns about energy. South Africa was currently on stage six load-shedding. Members did know how long that would last because Eskom said “until further notice”. Members also did not know how long it would take to solve that issue, and also what impact it would have on the plans of the Department. The Chairperson felt that the approximately 500 megawatts would not do much in terms of alleviating the problem that South Africa was facing.

The Committee was pleased that there would be about R15 billion that would be spent outside the five metros because it was already a concern of the Members whenever they received a briefing from departments. The Committee raised the issue of spending outside the five metros with the DOT in terms of rail transport, focusing on three corridors, which were Gauteng, Western Cape (specifically Cape Town), and KwaZulu-Natal (KZN) (specifically Ethekwini). Nothing was said about other provinces. Members, especially as Members of the National Council of Provinces (NCOP), representing the interests of provinces, were always concerned that they would get disappointed when departments were not doing anything in provinces, especially the rural provinces. Perhaps linked to that was the issue of the SEZ that would be announced. There was an SEZ in Mpumalanga that was “always in the queue” of the SEZs still to be proclaimed. He also added the SEZ on Wild Coast from the Eastern Cape; it was always there on the list of the SEZs that were going to be proclaimed.

He was still not clear about the amounts that the plans were talking to. He wanted to know whether those amounts were an assumption on the part of the Department, or whether there was also participation by the black industrialists with regard to the 23 000 jobs that would be coming from the industrialists. He wanted to know whether the industrialists themselves had a say, or if it was just an assumption on the part of the Department. Also, with regard to other amounts, there was the R700 billion that would be supporting manufacturing, and also the R300 billion that would be supporting manufacturing and exporting to Africa. With those responsible for that manufacturing, was it their commitment that they would do that to the amount of R300 billion, and also to the amount of R700 billion? Or was it just a calculation that had been done within the Department?

On the issue of shares for workers, who was going to pay for the shares, the workers themselves or was the Department going to assist workers in buying shares? On the issue of energy, the Department talked about assisting with the mitigation of the impact of load-shedding. In what form is it going to take place? On the issue of the electric vehicle: He understood that the DOT was still busy with regulations. On the other hand, the Department was finalising the strategy. He did not know if there was any collaboration between the DOT and the DTIC.

In terms of addressing the issue of crime, he saw that the focus was on grey-listing and one other area. With regard to illicit trade, what measures were being taken by the Department, and Government generally? There was also the issue of so-called business forums that always asked for a 30% share, and if they were not given that 30%, then projects would not continue.

There was an issue raised by the DG with regard to the APP and getting a clean audit. The Chairperson agreed with Mr Londt that an entity could get a clean audit and also carry out plans, ambitious as they were. Had there been any engagement with the Auditor-General (AG), so that the AG’s office knew that the Department had another approach in terms of carrying out its plans differently from previous plans?

On the issue of cannabis: There was a concern, especially in areas of the Eastern Cape around Lusikisiki where there was a fear that they could be outsiders who would be taking over the cannabis from those areas. To what extent were people in those areas being empowered, so that they could also play a role in the issue of cannabis?

The Chairperson also asked about the issue of solar panels. The Minister of Finance announced the incentives. Firstly, was there any uptake from the companies and the households with regard to the photovoltaic (PV) cells? With the manufacturing of those, what was the role of the local industry in the manufacturing of the PVs?

Mr Ebrahim Patel, Minister of Trade, Industry and Competition, responded to questions. He thanked the Committee for the matters that it had raised, and also for the very warm reception that the Committee had given to the new format of the APP. It was a very significant shift in the plan that the Department had historically done, not only in this administration but since the advent of annual performance plans. It was the first time that the Department had shifted from measuring its activity to measuring the outputs and the impact. It was done in spite of all the risks and all the challenges. Historically, the Department focused on activities because that was what it had control over. What he asked of the Department as it developed the annual performance plan was to be prepared to take some degree of risk in shifting to a better framework. Though there are many things that could go wrong, that were outside the control of the Department, nonetheless, if it worked hard, there were many things that could go right, and that it could influence. It knew that the South African public was looking for a different way of working.

Minister Patel observed that he had counted about 37 questions. He would try to combine questions where possible. A number of the questions turned more towards the operational issues of what the Department did generally, and what it had done over the past year. Members were right to raise those questions because there was a strong connection between the challenges that were out in the economy and what the Department had to do.

 

There was a question on the comments that were made in the presentation on the fact that the Department was now planning for outcomes, and not for audits. It was an important, and in some ways, a ground-shifting way in which the Department was looking at its work. When any department set its annual performance targets, it normally tried to develop targets that were relatively easy to audit. Those would be what the AG called smart targets. Such targets were measurable, simple, and generally within the control of the department. The DTIC was in a different mandate area than some other departments. For example, something that happened in the Federal Reserve in the United States could impact manufacturing in South Africa. A war in Europe and the impact that it had on oil prices could impact manufacturing in South Africa. A virus in China could impact manufacturing in South Africa. Those things meant that typically, any department faced with that complexity would play it safe. The Department would go only for those things that it knew could be audited, and the AG would give it a positive vetting because it was in the control of the Department. If it said that it was going to have ten workshops, it generally could control that it would have ten workshops, even if things went wrong in the world. It would be easy to audit compliance with that. But if the Department said that it was going to seek to get R200 billion in investment pledges, and if suddenly there was a new virus that hit society, or there was a major set of floods or droughts across the country, all of those can affect its outcomes. Such factors would also affect whether an audit process would find that the Department complied with the objectives and the goals that it had set itself.

On slide 24, the Department said that its APP was driven by the need to get results and impact. It had not developed the plan so that it was easy for the Department to tick off in an audit that it had achieved all of its workshops, reports and so on. That did not mean that the Department did not want to still get an audit outcome that showed it was using the money of the state and of the South African people responsibly. It had a legal obligation to look after the money carefully. An audit was really a way of the AG coming back and saying the books of account were a true reflection, and the Department had spent the money in accordance with what was required. But sometimes in the Department’s attempt to make sure that it complied completely with every possible prescript, it slowed things down to the point where very little got done. It was a challenge that many different people had raised in different parts of the administration. It was a challenge where the AG had to look at a higher degree of robustness in how audits were conducted. That had come up from Government at the national level, and it had come up from provincial governments. For example, the Western Cape Government had raised the same thing. It had come up wherever there were public entities, so it was not a matter where one political party had a view. Minister Patel felt that everybody who was in governance recognised that danger. There was definitely a need for a strong and effective audit. Government departments needed to ensure that they complied with the requirements that they had in that respect. But at the same time, the principal focus needed to be on ensuring delivery to South Africa's people. In moving with speed, the Department needed to be able to make sure that it recorded and clearly documented everything that it did, and that it was able to explain it. But the mindset must not start with compliance. The mindset must start with delivery. Then the Department must comply in the process of focusing on delivery as opposed to a mindset that was focused in the first case on a kind of “blind compliance”, or a “tick box” mentality. He still wanted the Department to have an unqualified audit. He would still want every single cent that had been voted for in the budget of the Department to be accounted for and to be used wisely and prudently. That was public money and the Department needed to account for that. The Department also wanted the AG to work with it in ensuring that it accounted properly and that it did in fact meet its audit obligations.

On the timeline for the new approach: The Department was starting that immediately. Though it was only 9 May, the DG would tell the Department that it had probably had about six separate meetings, if not more, on the delivery of the new approach. The Department had already achieved some of the outputs, although not the full ones. With some of those outputs, the Department was already able to see a positive approach, and the reason it had been able to do that was that it started to experiment with that new approach even under the old APP. Members would recall that the Department provided the report to the Committee on a quarterly basis, and in the Committee meetings, he made the point that the Department was shifting into an output and outcome-based reporting system. The Department had now made sure that the plan caught up with its reporting system, and the plan also reflected that. It was a good point that change management was an important element of working differently, and it would take time to get every single person of the 1 200 staff retrained where training is needed. In the more detailed document, the Department set out some steps, including staff training that every chief director was expected to do to ensure that the Department addressed that important part. If Members looked at slide 25, the Department indicated the issues such as reassignment of human resources, provision of specialists, focus on skills in key areas and so on. The Department recognised that the drivers of the new approach would be staff. He thought that some of the staff were already very clearly on board with the new approach. The Department was working hard to bring everybody on board.

On slide 42 on the metal trading regime, the Department was constantly evaluating the effectiveness of all the measures it had put in place, and the Minister would be applying his mind to the information. One of the things that the Department took into account was that there was an overhang of export permits that had been granted prior to the introduction of the temporary prohibition. The Department did not cancel those, so for a period of time, the metal was still being exported. All of that was under careful consideration at the moment.

On the matter of AGOA and the relationship with the United States: Minister Patel stated that the economic relationship with the United States was very important. It was a big market for South Africa, not only for raw materials but also for the export of a significant quantity of manufactured products to the United States. It was also a market from which South Africa drew foreign direct investment. There were American companies in the South African economy that indeed assisted in ensuring that South Africa met its industrialisation goals and helped to employ South Africans. It was a two-way street, in that the United States also benefited from the economic relationship with South Africa. The USA was a much bigger economy. In relative terms, the United States’ impact on South Africa’s economy was large. He could not claim the same thing for South Africa’s impact on the US economy, but he wanted to make the point that South Africa was a significant supplier of critical minerals that went into the United States manufacturing base. It was in the interest of South Africa to maintain that relationship, to ensure that it was able to attract American investment, and to have a strong trading relationship too. As South Africa navigated all the complexities of a more fractured and more polarised world, its national interest was to focus on how it could create jobs and how it could expand the size of the economy, and give more opportunities to small businesses and young people. That meant that the opportunities that existed across the world in South Africa’s economic relationship with countries in Asia, and with countries in Europe; all of those were important opportunities. The Department’s focus now in making sure that it could create more jobs, expand the economy, and create more economic inclusion, was to deepen the trading relationships with the rest of the African continent. The AfCFTA was a significant part of that. The Department was in discussion with the United States. It had had a number of meetings, and of course, those conversations would continue. The Department was not only looking at the short-term issues of AGOA but also the longer-term issues of AGOA.

On the matter of Petro SA and the challenges there: Minister Patel was going to request that one of the officials reach out and see what specifically the challenges are that Mr Londt was drawing attention to.

On the output of jobs: It was a reality that in a market economy, one had both job growth and job losses for the current financial year. The Department had introduced for the first time a measure where it would focus on jobs as an explicit target. It would look at new job growth and it would look at stabilisation of existing jobs. He hoped in future years that as the Department built on that APP, it would eventually be able to look at the net effect. In other words, it would calculate job growth less job decline to see the net effect of that target. But this year as the first step in bringing jobs, as an explicit area, the Department was looking at output. It was looking at the jobs, specifically the gross numbers.

On the 1 million jobs: It would be 1 million jobs that were either supported by DTIC programmes or that were covered by master plans. The Department had kept it very short in the main descriptor in the document for ease of reading. But to give an example, it would have a master plan in the clothing industry. That master plan would cover a number of workers in that industry. The Department would also have an agreement, for example, with a company called PepsiCo that it would not retrench workers or reduce the headcount (the number of employees it has) for a certain number of years. That was not a master plan-connected metric or measurement. That was a competition linked to one. The Department was taking all the different programmes of the DTIC, not just masterplans, and the aggregate effect of all of that must be that its various measures needed to cover at least a million jobs.

On the R1.3 billion for small and medium enterprises: The Department wanted to complement the important work done by the DSBD, and it was finalising criteria; some of the detail will be made available publicly.  In the APP, the Department provided a sense of some of the key elements of that energy resilience plan. It was only a stepping stone. It was not the final solution to the energy issues. Specifically, it was a stepping stone to help companies in this particular period that were vulnerable. The Department was not going to be able to cover every small and medium enterprise. The criteria that would be announced would help to focus those to a greater extent. The energy measures that the Department put in place were in support of what the Minister of Electricity was doing. Minister Ramokgopa had a big responsibility, and the Department’s contribution was a relatively small part of helping him and the rest of the Cabinet to meet the energy plan. The Department could take the view that because energy falls and other departments, the DTIC should only focus on its core mandate, but the truth is that its core mandate was affected by energy. It was thus putting in place a target of new investment; it wanted to get into energy. It was putting in place an “energy one-stop shop” to help private sector companies who were battling to navigate the regulatory requirements of the South African environment when they wanted to supply South Africa with energy. For example, a company that wants to put up wind energy in the Eastern Cape or solar energy in the Northern Cape often did not know about the regulatory challenges, and the Department was building a team in the DTIC in that one-stop energy shop to assist. All of that could help the Minister of Electricity in meeting his important set of targets.

The Department would ask an official to reach out on the matter of the containers. A number of charities had in the past imported products, and what the Department had not generally encouraged was the importation of second-hand clothing. But there had been many other instances where charities had done good work in society, and they had imported other kinds of products. The Department would ask the DG to get an official to talk to the Member who asked that question.

In response to Mr Mmoiemang, Minister Patel observed that there were 12 months left of the sixth administration. Some of the work that the Department had done in the last few years that had been very positive was not captured in the APPs. Such work was maybe more put into the reports that came to the ministry, and as Members had said, they were not privy to those reports. The Department was therefore putting it all out in the open, transparently, so that it could measure its work. It was not that the work in the sixth administration would only start now. The Minister had just come back that morning from a launch that was planned two months ago at the Localisation Support Fund, where for example, Coca-Cola put R240 million up to help localise products in the South African economy, and not just Coca-Cola products, but any product, so small businesses and others could work on it. For example, that fund was now looking at medical devices, furniture, and renewable energy components. Coca-Cola had been joined by a company that made R100 million available for a similar project, and by Heineken, which made R200 million available. The Department was seeing very positive examples on the localisation side.

It was true that the master plans were not in the ten core output areas. There was a very good reason for that: The master plans were in the annual performance plan. But the Department had separated out things that were activities from things that were outputs. In a master plan, a typical output of a master plan would be to increase investment. In the core output, the Department had investment as a core output, and that R200 billion was going to be made up, among others, of the Department’s successful work in master plans in getting companies to make commitments. A master plan like the clothing master plan was focused on increasing local content and local production. Ms Mathevula made a good point about supporting local fashion. When the clothing master plan achieved its outputs, that would go into that R14 billion additional local output that was in the core area. When South Africa made cars, which was covered by the auto master plan, it was exporting a lot of those cars, which would help to go into the R700 billion in manufacturing exports. That was how in that dashboard of ten core targets, it would cover a lot of the impact and outputs of the master plans. On the question of the SEZs, there were a number of different SEZs that were vying for designation. Provinces had put up their hand and put forward their SEZs. The Department was in the process of finalising it. Minister Patel hoped that in about two weeks’ time or not later than three weeks, to make an announcement in respect of one of the two SEzs. In the past, the Department used to just announce at the start of the year about all the SEZs it was going to do in a year. Now it made sure that it re-checked the business plans of SEZs, that it brought in proper governance arrangements, and that it got provinces and municipalities to co-fund within their means. A number of questions had been about how the old model of SEZs had not always been a good model. The old model was one where it was largely a provincial competence. The DTIC historically was just the funder, and it had no say over anything else. At the start of this administration, the Department said that it must change that. It experimented with a new approach in Tshwane, where it said that the DTIC wanted to have people on the board, and it wanted to have a “co-say” on the project management for the SEZ so that it did not have poorly qualified people appointed. It wanted to see an investment base with commitments by investors to additional production, and that was what it did now. For all of the questions that have been asked about the Nkomazi SEZ and the other SEZs, the answer was that some of those SEZs had really battled because they did not have proper business plans in place. In Musina/Makhado the Department had had many problems with the environmental impact assessment area. Minister Patel was happy that the Department could be invited to take the Committee through some of those challenges and difficulties in future. If it so pleased the Committee to have that on its programme, then he wanted the DG and the Special Economic Zone unit to do a presentation on those ones, including Fetakgomo-Tubatse.

On jobs in energy: There was an important relationship, and the Department needed to resolve the energy challenge to be able to unlock more job creation. But even as South Africa rebuilt its energy infrastructure, that could also be a source of additional job creation including localising the component supplies that were used in energy. Mr Mmoiemang raised an important point about capital investment. Minister Patel did not see a trade-off between transmission lines to the Western Cape and transmission lines to the Northern Cape. South Africa needed transmission lines to both areas because energy needed to be available across the country. A lot of the work that the Department did was helping to unlock opportunities in different parts of the country. It brought in the District Development Model (DDM) as a very important discipline for all in order to ensure that the Department did not neglect some parts of the country. On battery production: It was an area the Department was looking at carefully. While it did look at issues of minerals, it was also a case of having researchers and other qualified technical personnel available in South Africa and in the areas where that was developed. The Department had piloted the new outreach programme, and it wanted to do at least 52 outreach visits. It had done the first one in the Northern Cape, and it had learned some very good lessons on how it could do that even better as it went to other districts.

On the Social Employment Fund: This was a budget-related matter, and the Department was waiting to see that it got some progress. There was funding that the National Treasury (NT) could make available. The Department was covered for the current financial year, but from the next financial year, it would need more funding. It may be very good for the Committee in its oversight work to also look at some of the examples in the Social Employment Fund. Minister Patel would be appreciative of the additional support that the Committee expressed for strengthening the resource allocation in that area.

On the agenda of broad-based economic empowerment: It went to issues of skills development. Many of the provisions in the past relating to matters like affirmative goals that had been set were within the domain of the Department of Employment and Labour (DEL). The Department focused very strongly on the area of ownership. The area of ownership in the past was about trying to get black South Africans to 5% or 15% of an existing company. The Department was now saying that it needed to focus on bringing more black South Africans into opening their own businesses to become industrialists. The market was a hard place, and not everybody who opened a firm would succeed. The government could not guarantee that someone would not fail. It would require those entrepreneurs to be able to do it. But the Department hoped that many of the firms would survive, and even those who failed would be an entrepreneur who had learned some valuable lessons when they picked themselves up and started all over again. There was a need to increase the number of successful firms in the economy. On the Companies Amendment Act: It would come to Parliament as soon as it had been considered by the Cabinet.

The electricity challenge was important, which was why there were eight actions that the DTIC was focusing on even though it was not an electricity department, per se, but it needed to make its contribution.

It had and would continue to have quite significant engagements on citrus with the EU. Certainly, more than ten meetings at the level of officials, heads of state, minister level and others. Most recently the Department met with the President of Finland and it raised citrus matter, which took place about two weeks ago. That was a significant area. The Department was looking at all the areas that Ms Boshoff had raised. The DTIC worked very closely with the DALRRD, who would have a greater responsibility for the supply chain, including all the key elements of it. That also related to the question about support for small citrus producers, which was done by the DALRRD. The DTIC’s job was to support that department in its work, and it brought knowledge of trade law on the issue.

On the R8 billion in financial support for SMMEs, women and youth: Regarding people with disabilities, the Department did take that group into account in its criteria. Additionally, the monies were not a budget allocation, as in it was going to give that sum to a separate fund for women. The Department used the balance sheet of the Industrial Development Corporation (IDC), and the IDC borrowed money from the financial sector in South Africa. The IDC put up as a guarantee of payment, its balance sheet. The Department did not really get money from the NT. It had not had funding from the NT since the start of democracy. In fact, even decades before that, the DTIC expected the IDC to run a profitable business as a Development Finance Institution (DFI), and the profit it made on shares that it had in large companies, those dividends were then used to fund development. Companies were then able to apply for funding. The Department then made sure that it had a number of applications from women, young people, people with disabilities, those outside the metro areas, etc. At the end of the day, those applications must still meet the fund criteria. The Department would be reporting regularly on how well it did in achieving the R8 billion target. The money did not get channelled directly to a township, but it depended on the soundness of the business case that came in from township entrepreneurs when they applied for funds. The Department is trying to strengthen the capacity of the agencies of the DTIC, to help applicants to strengthen their business cases.

On the R200 billion in pledges and how past pledges have assisted: Minister Patel gave a few examples. If one watched Netflix, then films that came through Netflix came via fibre optic cables, and those fibre optic cables linked South Africa to other key parts of the world. One of the big investment announcements that was made by Google was to lay an undersea cable that connected West Africa, South Africa, and Portugal. That undersea cable was one of the ways in which Netflix movies or Zoom meetings with people in other parts of the world took place. Every time someone got into a Toyota Corolla Cross or a C-class Mercedes or Ford Ranger bakkie or an Isuzu bakkie, then those have been done through the investment pledges that had been made; those investment pledges had resulted in those important projects being done. Every time Government had had any Member of Parliament vaccinated for Covid-19 then if the Johnson & Johnson (J&J) vaccine was used, that would have come from a factory in South Africa that was the result of an investment pledge. Every time someone went to hospital for an operation and was placed under anaesthetic, that anaesthetic was now produced in South Africa as a result of the announcements that were made, in the pledges. Every time Minister Patel used a phone to make a phone call, that phone call was routed through either MTN or Vodacom, and that would have come about because they would have upgraded those cell towers. The cell towers and all of that infrastructure would have been upgraded as a result of announcements made at the investment conference. He could go into the food that had been produced as a result of that. or mining products, or in fact, steel products, and a range of other products. Those were not plans; that was what had already happened.

 

Mr Dangor had raised the issue around the EU and citrus. Minister Patel made the point that the most favoured nation principle applied to the treatment of countries on tariffs, for example. With sanitary and phytosanitary standards in international trade law, one could apply those selectively where one had evidence of a sanitary or phytosanitary problem, a plant health problem or an animal health problem. The Department had made the point to the EU that the EU was “misusing” the sanitary and phytosanitary standards, and that it was “targeting South Africa” in part because South Africa’s exports had become so successful. South Africa was now the second largest exporter of citrus fruit in the world, just behind Spain. In the Department’s view, this was narrow protectionism of Spanish farmers and had nothing to do with the problems that the EU said it had. It was about protecting jobs in Europe. The Department was trying to work through that matter through a combination of having to deal with it via the World Trade Organisation (WTO). But because South Africa had a relationship with the EU, it was going to first exhaust every means to see if it could persuade the EU to shift course before it had to go the final route.

 

On the matter of AGOA and chicken dumping: The United States some years ago was able to get an agreement with South Africa that a certain quantity of poultry products were allowed into South Africa free of an anti-dumping duty. That facility was only in place as long as AGOA was in place. That was done to take into account the preferential access that South African products also had to the US market. The Department could look at encouraging the DSBD to support NGOs and co-ops in accessing the American market. There were some very interesting examples of small and medium-sized companies that were benefiting from that trade. It was true that it was not in South Africa's interest or Africa's interest for a new Cold War. South Africa needed to work with all parts of the world. It needed to focus on jobs and economic development in South Africa. Thus, South Africa sells products to China, and to the United States. Both of those economic relationships were vital and important for South Africa.

On Musina/Makhado and Fetakgomo-Tubatse: He suggested that because it was a more detailed reply, the Department could offer, at the convenience of the Committee, a deeper briefing. Minister Patel would ask the Department and the SEZ unit to be available for that. On the DOT: This was a matter that provinces were responsible for dealing with, specifically, the infrastructure around industrial parks. It would be very good if provincial authorities were also encouraged through the work of the Committee to address the problem that had been raised by Ms Mathevula. The DTIC also tried to see where it could pressurise players to move quickly. But the budget allocation for many of those roads, from the Minister’s understanding, went to provinces. There was a need to unlock that more.

On the promotion of local brands or encouraging community members to buy local brands: The DTIC was the government department that sponsored and supported the Proudly South African Campaign. But in addition to that, when it had the Black Industrialists Conference in July last year, it had a whole section displaying South African fashion and South African brands. On fake goods coming into the country or counterfeit goods coming into the country: The Department worked with the South African Revenue Service (SARS); it was a legal responsibility that SARS had, but the Department had created a hotline for tip-offs and so on, so the industry could provide the Department with information. Periodically, SARS seized those goods and worked with the Department on that issue.

Circling back to the outcome of investment conferences: Minister Patel observed that even if Members did not have time for watching TV, then for Zoom meetings, there were global Zoom meetings, perhaps with counterparts in the European Parliament, where that same fibre optic cable infrastructure would be used. He was sure that Members would celebrate the outcome of those investment conferences with the Department.

On the acting positions in the Department: The Department had scoped out those posts, so it wanted to work on filling some of the vacant posts. It was also creating a fit-for-purpose DTIC that had a leaner, smaller structure, that it used all the available staff in the areas that were outward-looking, and that it progressively shifted the work to the new priorities that it had identified.

On spending outside of metros: That depends on the applications, but the Department was giving an important signal to the market by saying that it was going to spend outside of those five metros. With the number of jobs, its target was to do with jobs created by black industrialists as well. With amounts such as R1 billion, R10 billion or R20 billion over a five-year period, that was an input and not an output. It may be the output of a Department branch, but it was an overall input because the Department only supported black industrialists because those companies produced, and employed people. The Department was shifting the focus there. Those numbers had come about from the modelling exercise it had done regarding the black industrialists that it worked with. Such numbers included how many jobs are in those businesses, and how it could make sure that those job numbers did not drop and indeed, that it could increase them.

On the exports: Those were enormous sums of money; R300 billion to the rest of the continent, R700 billion to the rest of the world as total manufacturing exports. Those were not commitments by companies. That was a case of how the DTIC needed to create an enabling environment that could help to drive South Africa’s successful export efforts.

On the shares for workers, and if the workers paid: The workers did not pay. The Department did not pay either. It created funding mechanisms using different kinds of models. For example, PepsiCo donated the entire amount of money directly to a worker’s trust, and that worker’s trust was then able to buy the shares. Companies like Heineken or Coca-Cola would structure a deal called vendor funding, where the dividend flows came to the funds, and with profit on the shares, a portion of that profit went directly to the workers. A portion went to pay off the loan that had been made.

 

On the question of energy, and how the Department would implement the energy measures of the DTIC: Some of the measures are localisation. For example, the Department had supported that more companies produced the components here in South Africa. That was a good example of how the Department addressed the energy issue where the DTIC unblocked a big company that had an energy challenge; its generators packed up, and the Department was able to step in and help to ensure that the company was able to significantly mitigate the risk of those workers being laid off. A Member asked the question about an example of how those investments created jobs. Last year, Minister Patel invited President Cyril Ramaphosa to visit a local factory in Kwadukuza. In that massive facility that had come out of a commitment that that company had made previously, there were 4 000 workers just in that one facility, producing the wire harnesses that went into cars in the production sites of different big automakers in the Eastern Cape, KZN and Gauteng.

On the matter of electric vehicles: The Department was coordinating with the DOT on illicit trade. The Minister had said earlier that the Department worked closely with SARS on that. The AG would continue to audit the work of the Department, and it would work very closely with the AG.

On cannabis: That was driven by the DALRRD. Ms Nomalungelo Gina, Deputy Minister of the DTIC, had been asked to be responsible in the ministry to support the efforts of the DALRRD colleagues. The DTIC was also bringing some support there.

On the solar panels and the tax incentives: An important part of what the Department did was to ensure that it could produce locally. Obviously, South Africa did not produce on a sufficient scale, such as the kind of size that China had. That resulted in local products in some areas being more expensive. The way to bring the prices down was to scale up production, which meant that South Africa needed a very predictable renewable energy programme so that companies could carefully plan their production. One could not have stop-start production. That was not a helpful way to bring down costs. There were of course also foreign direct investors, for example in wind. There was also one foreign investor in the solar PV panels, and the other investor was a South African company.

The Chairperson mentioned Mr Londt’s question, which had been referred to a DG. Minister Patel reiterated that he had suggested that the relevant DG would reach out to Mr Londt outside of the meeting platform.

The Chairperson said that Members needed to get to Parliament for a hybrid session. He requested the Minister to make closing remarks, after which the Committee would close the meeting.

Minister’s Closing Remarks

Minister Patel remarked that the approach that the Department had adopted was a new approach. The Department would look for Members’ understanding as it learned some new ways as it implemented the new approach. It hoped that it would achieve a lot of the good things that were in the APP. Where it made mistakes, it wanted to be able to own up to those mistakes and learn from them. Where it succeeded, it wanted all of the Members of Parliament from all political parties to help celebrate that, because South Africa succeeded when any department succeeded. If the DTIC was able to achieve some things, it was one that all South Africans could celebrate. He thanked the staff, and the DG and her team for the hard work that was put into the implementation of the APP.

Chairperson’s Closing Remarks

The Chairperson thanked the Minister and Deputy Minister. He then thanked the Members for their participation. He thanked the DG, the DDGs, the staff of the Committee, the staff of Parliament and the Minister. If there were some outstanding questions, then the Committee Secretary could send those outstanding questions to the Department, after which they would be responded to in writing.

The meeting was adjourned.