Department’s Budget and Strategic Plan 2006/07; Legislative Programme: hearings

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Trade and Industry

14 March 2006
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE AND ECONOMIC AND FOREIGN AFFAIRS COMMITTEE


15 March 2005
DEPARTMENT’S BUDGET AND STRATEGIC PLAN 2006/07; LEGISLATIVE PROGRAMME: HEARINGS

Chairperson:
Mr B Martins (ANC)

Documents handed out

Department Strategy 2006 – 2009 presentation
Guideline for Capturing and Tracking Legislation – 2006
Untitled overview of the Department of Trade and Industry Strategy 2006 – 2009

SUMMARY
The Portfolio and Select Committees were briefed by a delegation lead by the Director-General of the Department of Trade and Industry on the content of the medium-terms strategy framework for the Department. The presentation outlined the Department’s purpose, strategic objectives, its progress on the 2005/06 deliverables and its strategic goals for 2006 to 2009. Amongst the issues over which members voiced concern were the Department’s reporting style, the size and shape of the Department and the ability of the Department to affect broad-based black empowerment. Members also explored the effectiveness of the Accelerated Shared Growth Initiative of South Africa, as well as enquiring after the Department’s progress on the Industrial Policy.

MINUTES
Briefing by the Department of Trade and Industry (DTI)

Mr T Matona (Director-General) stated that the purpose of the Department was to provide leadership to the South African economy, to act as a catalyst for the transformation and development of the economy, to respond to the challenges and opportunities in the economy; and, to provide a predictable, competitive, equitable and socially responsible environment for investment, enterprise and trade.

The Department had five strategic objectives. Firstly, it sought to promote the coordinated implementation of the Accelerated Shared Growth Initiative of South Africa (ASGISA). It wanted to promote direct investment and growth in the industrial and services economy, with particular emphasis on employment creation. Thirdly, it wanted to contribute towards the development of regional integration of the African continent within the NEPAD framework. Then, it also wanted to promote broader participation, equity and redress in the economy. Finally, it strove to raise the level of imports and promote equitable global trade.

These strategic goals would be pursued, firstly, via the publication of new policies, chief amongst which would count a new Industrial Policy framework, an Intellectual Property Law Reform Policy and an Export Promotion and Investment Strategy. Legislation and regulation changes would include amendments to the National Gambling and Lotteries Acts, Counterfeit Goods Act, the Companies Act and IDZ Regulations. In terms of enterprise finance it was notable that one third of the budget in the medium-term strategic framework period would be utilised for enterprise support. Development concerns, trade with the rest of Africa and the ratification of free trade agreements with the South American Common Market (Mercosur) and the European Free Trade Association (EFTA) topped the international trade agenda.

Discussion
Dr E Nkem-Abonta (ANC) felt that the strategy of the Department seemed unclear and uncoordinated from its presentation. He could discern neither the strategic objectives, nor the strategic goals of the Department. He contended that a mere summary of inputs and outcomes did not constitute reporting on measured outcomes and accountability and expressed the opinion that the Department was probably too large and disjointed.

Mr Matona stated that under the National Treasury’s framework, all Government’s departments had to do their reporting in an output-based way. Vote 32, in particular, required specific numbers in terms of output. Should reporting or budget requisitions not be done in this way, National Treasury would either send it back, or change it themselves. He acknowledged that this was frustrating as it did not always indicate the efficiency and effectiveness of the Department well enough. He encouraged the Committee to prescribe a set format for reporting, should it feel that the Department’s reporting style was inadequate.

Citing the claim of 39 122 new jobs created under the Small Medium Enterprise Development Programme, Dr Nkem-Abonta asked how many of these jobs were sustainable, and how many of them relied on incentives. He stated that it was economically impossible to create jobs via incentives in one area without destroying jobs elsewhere.

Mr Matona provided the assurance that all figures in the presentation were audited and this extended to job creation claims as well. He did, however, acknowledge the importance of the issues that Dr Nkem-Abonta’s query raised.

Mr L October (Enterprise and Industry Development Division, DTI) explained that in South Africa, as was done internationally, incentives made up only a very small part of assistance leant by the Department. Cheap credit (Industrial Development Corporation’s role) was the major form of assistance and in South Africa this outweighed incentives by seven times. Incentives were for strategic use only.

Dr Nkem-Abonta asked the Department to substantiate its role and the claims it makes relating to investment facilitation and what the formation of a sector development strategy involved.

Mr S Njikelana (ANC) probed why export and investment promotion were deemed to be strategically linked, and whether enough was done to promote internal investment.

Mr Matona acknowledged the importance of strategies for domestic investment promotion, and explained that this was precisely what the sector development strategies sought to do. The idea was to take sector value chains and analyse them for their job creation potential at their various stages. Unrealised development potential may then be rectified with financial, technological or other assistance. Foreign investment generation was also affected positively by this process.

Mr Matona explained to the Committee that Department’s foreign investment facilitation methodology often included cold-calling prospective international investors to interest them in investment projects in South Africa. Some of these pursuits did take up to five years to bear fruit, but the Department’s claims could all be substantiated.

Mr Matona stated that, overall, Government was weak in the area of monitoring and evaluation. A structured monitoring and evaluation programme for Government was only recently mooted. In the case of the Department it was all the more necessary, since it sank in the region of R3 billion rand into the economy annually. He acknowledged that the Department could make a better effort of linking its policies to its strategic goals in future presentations.

Mr Matona declared himself open to probing the size and shape issues of the Department, but had yet to hear a well-made case for subdividing the Department purely on the basis of its size. Integration of objectives and activities was a Government-wide problem. This was part of the reasoning behind the concept of the Department of Trade And Industry campus: to provide an integrated service outlet to current and prospective business people. He foresaw that, while the problem of integration would currently be exacerbated by subdividing the Department, the case for subdivision may gain strength as the economy matured.

Mr S Rasmeni (ANC) asked when the outcomes of the work of the Department in connection with the ASGISA strategy would become visible. Secondly, he wanted to know what the specific skills challenges were surrounding the coordination of the 19 agencies of the Department. Thirdly, he asked for specifics in terms of the tourism infrastructure development projects in which the Department became involved. And fourthly, Mr Rasmeni wanted to know when the Industrial Policy Framework would be completed.

Mr October stated that the Industrial Policy document had been presented to the Committee, and that many of the Members’ suggestions had been taken on board. The consultation process was completed, and the completed framework should be going to Cabinet for approval within the next few weeks. New industries that would receive support were clearly identified, including aerospace, pharmaceuticals and paper and pulp. Industrial financing support and revised incentive schemes would also be detailed in the new document. The new document would attempt to shift economic activity to poorer Provinces and lagging regions.

Mr Rasmeni was dismayed over the fact that the regulations for the National Consumer Bill were published for public comment prior to it being referred to the Portfolio and Select Committees. He also expressed his concern over the Department’s ability to effectively coordinate broad-based black empowerment (BBEE), since it had come to light that many industries excused delayed action in this regard by citing the lack of a code of good practice. He mentioned this, both in connection with the Department’s direct role in SMME development, as well as in its relationship with other government departments, such as the Department for Environmental Affairs and Tourism. Finally, Mr Rasmeni stated that there was a great need for the support of cooperatives from the Department in general, and the Small Enterprise Development Agency (SEDA) in particular, was lacking in this regard.

Mr October acknowledged that there were problems with apathy in the information technology and the tourism sectors regarding apathy towards BBEE. He stated that no sector could claim that it could not move on BBEE, since there were quite a number of sectors that had done so, whether their charters had been gazetted or not. The financial services sector was one such example. The legislative framework for BBEE would be completed by June in any case.

Mr October acknowledged that SEDA had not yet created a full facility for cooperatives. Two incentive schemes that would be going for cooperatives had only been finalised within the Department. Ten cooperatives in each Province would receive funding, technical- and capacity support. SEDA’s real purpose would be to role out the necessary national infrastructure and non-financial support.

Mr October told the Committee that 95% of the Enterprise and Industry Development Division’s R1 billion budget consisted of transfer payments. This went to the South African Bureau of Standards, the Council for Scientific and Industrial Research, SEDA, Khula, the National Empowerment Fund, The National Accreditation Fund, the Apex Fund, etc.

Mr Matona explained that it was the Department’s role to ascertain where the economy was currently; to compare that with what ASGISA wanted it to be; and, to identify the necessary interventions in order to eradicate any discrepancies. The Department then had to determine the level of coordination with the relevant departments necessary in order to execute the identified intervention successfully. Mr Matona ventured that, to this end, it may be advantageous to present the programme of action of the economic development cluster as it had evolved thus far.

Mr Matona stated that, though the Department needed to improve the coordination of its various agencies, this was not a particular area of need in terms of skills, or in terms of particularly advanced skills. Skills in terms of executing the projects identified by Government were a problem, however. Sector expertise was also a problem within the Department. Technical or hard-core skills were in higher demand than organisational skills.

Ms D Ramodibe (ANC) asked that the Department advance some detail on how programmes originating from the ASGISA strategy would advance the cause of women.

Mr Matona explained that, in the evolution of ASGISA, some focus was given to the empowerment of women. Some of the issues relating to the development of female-owned enterprises and other types of assistance did beg action from the Department, as well as from other departments of Government. The Department would be engaging Treasury on resourcing this area.

Mr Njikelana asked whether the Draft Companies Bill was being processed as part of the formerly touted overhaul of South African corporate law. He was interested to see a broad profile of South Africa’s consumer complaints presented. Mr Njikelana then raised the importance of having breakdowns per province, in addition to a breakdown per gender, for the beneficiaries of Technology for Human Resources.

Mr Matona explained that the Draft Companies Bill was the corporate law reform talked about earlier.

Ms M Themba (ANC, Mpumalanga) asked for an indication on the progress achieved with the exploratory talks with India. Given the India Brazil South Africa (IBSA) initiative, Mr Njikelana wanted to know if trade talks with Brazil were ongoing in the face of talks initiated with India.

Mr Matona told the Committee that the Department had just concluded a trade agreement with Brazil. IBSA did have a trade focus, but came only just as the Department initiated trade talks with India. He peddled the possibility of a trilateral FTA with Brazil and India, subject to further negotiations. Both India and Brazil preferred moving incrementally in opening their economies. This was not necessarily negative, since the former would probably pose great challenges to South Africa in the area of textiles and clothing, while the latter would pose certain challenges in agriculture. The political will for reaching agreements was there, though.

Mr Njikelana stated that it would be helpful to receive some detail on the nature of the twenty mega projects scoped by the Department’s cooperative scheme. In addition, he requested the Department to pronounce itself on the recent bad publicity surrounding the Estate Agents’ Board, and asked how this would impact on the review of the Estate Agents’ regulatory framework. Finally, Mr Njikelana asked the Department for some detail on the extent of the financial support it lent to prospective business people.

Ms Themba asked what support initiatives for the youth and the disabled the Department presided over. Finally, she asked for an indication as to which of the Departments’ bills were Section 75, and which were to be introduced as Section 76 Bills.

In terms of the youth, there were a number of areas in which SEDA and the Umsubomvu Fund were active in. Mr Matona conceded that the Department had no initiative in place for encouraging the economic activity of the disabled, other than within the Department itself. The initiative for this function was left mainly to the Office of the Disabled in the Presidency, with whom the Department cooperated. The Minister in the Office of the President had taken the responsibility for driving the agenda for the disabled in Government.

Ms Themba requested that greater attention be given to the distribution of funds and the activities of the Department across the different Provinces. Mr Njikelana asked how accessible the Department’s services were away from its main campus.

Mr Matona responded that the issue relating to Provinces was a reporting style issue, and begged the provision of a reporting template from the Committee, since the information was available at the Department. The Department had various offices all over the country, but these tended to be in the metropolitan areas of the major Provinces. Mr Matona acknowledged that this was inadequate, since these office locations predated the reformation of the Provinces subsequent to 1994. Possible solutions included having Provincial departments take in some of the Department’s offices. This question related to coordination amongst the three tiers of Government and was currently broached by Mr Ravi Naidoo (External Relations and Policy Coordination Unit, DTI) in cooperation with the Presidency.

The meeting was adjourned.


 

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