Department of Trade and Industry Annual Report: briefing

Meeting report

TRADE AND INDUSTRY COMMITTEE
25 October 2005
DEPARTMENT OF TRADE AND INDUSTRY ANNUAL REPORT

Chairperson:

Department Presentation on Annual report 2004/5
DTI Annual Report 2004/5 [available soon at www.thedti.gov.za]

SUMMARY
The Department of Trade and Industry presented its annual report to the Committee. The report conceptualised the Department’s medium-term strategy that addressed the need for accelerated and shared economic growth and job creation; the need for increased levels of investment and exports and the promotion of a conducive environment for industry and enterprise development amongst others. The report reflected progress made on the 2004/05 objectives. Some of these were to increase the contribution of small enterprises, significantly advance broad-based black economic empowerment (BBBEE), and increase the level of direct investment in manufacturing.

Some of the key proposed policy initiatives were the National Small Business Advisory Council; the Services Sector Framework; the BEE Advisory Council; the SME Women Private Equity Fund; the National Credit Register and the Women Owned Business Incentive.

Members of the Committee asked what the consequences were of unfilled posts in the Department and what the obstacles were faced in implementing programs. Committee members felt it would be helpful for the DTI to indicate some of their failures in a self-critical analysis that both the Committee and the Department could learn from.

MINUTES

Department of Trade and Industry (DTI) Presentation
Mr T Matona, the DTI Acting Director-General, said that the annual report of the DTI was conceptualised by the Department’s medium-term strategy that addressed the need for accelerated and shared economic growth and job creation; the need for increased levels of investment and exports and the promotion of a conducive environment for industry and enterprise development amongst others.

The report reflected progress made on the 2004/05 objectives. Some of these were to increase the contribution of small enterprises, significantly advance broad-based black economic empowerment (BBBEE), and increase the level of direct investment in manufacturing.

To achieve the goal of increasing the contribution of small enterprises, the Small Enterprise Development Agency (SEDA) had been established and was being rolled out. The Alternative Exchange (Altex) was established to list small and medium enterprises and the DTI was participating in a study on the regulatory impact on SMMEs. To advance BBBEE, the DTI supported the development of sector charters and implemented the BEE strategy which included the release of the scorecard and codes. To raise the level of investment and exports, investments of R2.3 billion were made in metals, agro-processing and automobiles. The DTI facilitated export sales of R3.6 billion and initiated a film and television rebate scheme.

Mr Matona said that the expenditure pattern over the past seven years had been consistent. An unqualified audit report indicated significant progress in maintaining good financial management. About 95.6% of the R3.6 billion budget allocation had been spent. Around 79% of the allocation went to public entities and incentive support and the 5% unspent amount represented delays in executing infrastructure programs and the merger of NTSIKA and NAMAC into SEDA. Some of the key proposed policy initiatives were the National Small Business Advisory Council; the Services Sector Framework; the BEE Advisory Council; the SME Women Private Equity Fund; the National Credit Register and the Women Owned Business Incentive.

Discussion
Ms D Ramodibe (ANC) asked what the consequences were of the unfilled posts in the DTI and what the obstacles were to the DTI implementing their programs.

Mr Matona said that the issue of vacancies was a challenging one. The DTI needed people with specialised skills and it took some time to find such individuals. Skilled professionals were scarce in the economy, especially as the DTI had to compete with the private sector to fill the vacancies. It was not necessarily a bad thing as these people remained in the economy and the vacancies did not necessarily affect the DTI’s ability to operate.

Mr N Stephen (DA) said that it would be helpful for the DTI to indicate some of their failures in a self critical analysis that the Committee and the DTI could both learn from. He questioned why the human development index for South Africa dropped even though there had been economic growth. The DTI had to recognise that entrepreneurs had a skill and this had to be supported and trained. The DTI also had to develop a register of skills that were required in the market to ensure that unemployed people knew which skills to acquire.

Mr Matona said that the DTI had reviewed its strategies about small businesses as they had not achieved all of their goals in this area. Other areas of concern were ensuring small business’ access to finance and the need for increased industrial development to create jobs and improve the industries.

Dr E Nkem-Abonta (ANC) said that it was useless for the DTI to come to the Committee and say that they had attended conferences and provided grants. What they needed was strategic reports to show where the DTI had made an impact and in what way. The Committee wanted to see figures such as how much unemployment had gone done and how much investment had come into the country for example.

Mr Matona said that the way the report had been framed was to show how money was spent. A more detailed analysis could lead to useful discussions so the report for next year would include a more strategic analysis report. The weaknesses and failures of the DTI would become clearer if this method of reporting was used.

Mr R Davies, the Deputy Minister of Trade and Industry, said that the Committee wanted a more output-based reporting mechanism, but it was also important to have periodic reviews of the incentives to ensure that they were being used properly. The shortage of key strategic skills in the DTI was a problem and this problem had been around since apartheid. There was a skills retention programme that was under development. The DTI could not compete with the private sector on the matter of salaries so they had to compete in other areas such as making the DTI a fun place to work for example.

Mr L Labuschagne (DA) asked for a progress report on the Small Development Agency. He enquired if whites had been excluded from receiving assistance for their small businesses and if it were for blacks only, and if the DTI had assessed the unintended consequences of BEE, such as the shortcomings of the points system. He was also concerned about the high number of vacancies in the DTI. He asked if the DTI had any mechanisms to retain their skilled employees.

The Chairperson said that white people with small businesses did receive assistance. The DTI had a mandate to carry out Government’s policies, which included promoting the rights and needs of historically disadvantaged groups.

Mr L October, a Deputy Director-General of the DTI, said that the occurrence of these ‘unintended consequences’ of BEE were the reason why a score card had been introduced, as well as the development of a code of good practice.

Ms B Ntuli (ANC) asked if the DTI was really able to deal with the issue of the ‘second economy’ as there had been very little done to improve the lives of poor people since 1994. She asked the DTI to expand on some of the progress it had made in this regard.

Mr Matona said that more work had to go into supporting small businesses. Ensuring their survival and their prosperity would bridge the gap between the first and second economies.

Mr Davies said that it was important to structure specific programmes for these people and make sure that the small businesses understood the programmes.

Mr S Rasmeni (ANC) asked how well known the DTI was to small businesses, and what the Department had done to ensure that initiatives which were meant to help these businesses were known. He asked what their relationship with municipalities was like.

Mr Matona said that some customer awareness surveys had shown that the DTI was fairly well known in the market. Problems lay with differentiating the products and services of the DTI from others. The relationship with the municipalities was still developing. The DTI’s participation in local government would go a long way to achieve its goals.

The meeting was adjourned.