DTI Customised Sector Programmes Status: briefing

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
21 June 2006
DTI CUSTOMISED SECTOR PROGRAMMES STATUS: BRIEFING

Acting Chairperson: Mr D Olifant (ANC)

Documents handed out:
Status of the Customised Sector Programmes: Department of Trade and Industry presentation: Part one & two

SUMMARY
The Department of Trade and Industry provided a briefing on the status of the Customised Sector Programmes to Members. The Programmes intended to create partnerships between government, business and labour to identify opportunities and facilitate growth. Action agendas would be formulated to drive programmes and an implementation group would be established to ensure completion of projects within five years. Four sector programmes had been approved by the Department. A bilateral restraint of trade agreement between China and South Africa had been completed. 31 product categories were included in the agreement.

Members questions addressed attendance at future stakeholder meetings, dangers of illegal imports and undervalued invoices, the failure to complete a single Sector Programme, the total cost of consultants, the distinction between manufacturers and retailers, the role of the Executive-Board, the urgent need to address human capacity shortfalls, current state procurement practices, the attitude of retailers towards the national interest and plans to assist the local clothing and textile industry.

MINUTES
Department of Trade and Industry presentation
Mr M Matshamba (Acting Deputy Director-General, Department of Trade and Industry (dti)) provided detail on the customised sector programmes and process. The programmes were driven by the desire to create government, business and labour partnerships. A status report on the customised sector programmes was provided. The plans had to be implemented in a co-ordinated manner. The Textiles and Clothing sectors development strategies and programmes had been completed. A chronological account of the negotiation process was presented. Major challenges relating to Chinese imports were explained.

Mr Willem van der Spuy (Chief Director, dti) stated that a bilateral restraint of trade agreement between South Africa and China had been reached. Consultations with stakeholders would identify the most appropriate implementation instrument. 31 product categories were included in the agreement. The terms of the agreement would include technical assistance and customs cooperation.

Discussion
Prof E Chang (IFP) and Prof Turok asked whether Members could be invited to future negotiations and stakeholder meetings to gain valuable knowledge of the process.

Prof Chang believed that an agreement to reduce Chinese imports could be dangerous as control of the trade would remain in Chinese hands, and the price would be determined by the sellers. South Africa had to insist on some level of control such as the right to purchase certain products. Illegal imports were hurting local industries and the customs system had to be improved. Prior knowledge of incoming goods had to be obtained. All documentation should be made available to prevent under-valuation of goods. Chinese investments should be encouraged to establish infrastructure and create jobs.

Mr Van der Spuy stated that the agreement with China would be administered by South Africa. Undervaluing of goods and illegal imports were major concerns and the agreement would focus on improved dialogue between the respective customs authorities.

Mr Matshamba confirmed that Members would be invited to future meetings between stakeholders. He added that dti could not force retailers to purchase a certain percentage of items from local manufacturers. Issues such as sweatshop practices had to be addressed at bargaining councils. The implementation structure had yet to be agreed upon.

Prof B Turok (ANC) noted that World Trade Organisation rules did not apply in practice and South African negotiators had to be innovative in seeking benefits. The success rate of the programme was poor as no sector programmes had been completed up to now. He recommended that regular reporting be made to the Committee to gauge progress.

Mr Thulani Mkhwanazi (Chief Director,Customised Sector Programmes, dti) concurred that progress with sector programmes had been slow although significant work had occurred behind the scenes. An appropriate methodology had to be agreed upon. He confirmed again that Members should be included in the process and invitations would be extended in due course, and that Members would be supplied with copies of all implementation plans. dti was solely responsible for devising strategies and better alignment of sectors would result from enhanced communication methods.

Mr Maake asked for further detail on version three of the programme.

Mr Mkhwanazi stated that version three had been adapted from version two,  but retailers had voiced dissatisfaction with certain aspects of the final version.

Prof Turok was concerned about the lack of co-ordination and he asked whether the clusters were not working.

Mr Mkhwanazi replied that a lack of co-ordination in the public sector tended to occur at the level of officials while better relations dominated interaction between senior management. Institutional arrangements between sector departments would be formalised.

Prof Turok believed that dti had to apply government policy and could not regard itself as neutral in the dispute between business and labour. A distinction had to be drawn between manufacturers and retailers within the business group.

Ms Ntuli asked for detail on the 31 listed categories in the restraint of trade agreement. She asked for the Department’s views on the business position and whether labour had stated its case at the meeting with the Minister on the 24 April 2006.

Ms M Ntuli (ANC) asked why China would construe a South African counter-offer to China as hostile.

Mr L Laubschangne (DA) asked whether Members could receive a copy of the agreement. He noted that Chinese imports could also be perceived by South Africa as hostile. China and South Africa were both members of the WTO and he wondered why hostility should characterise their relationship.

Mr Van der Spuy stated that the United States and the European Union had secured a provision within the trade protocol with China to limit certain exports such as clothing and textiles. China had regarded this initiative as discriminatory. South Africa had considered its position in the developing world, and its strong relations with China, in formulating an appropriate response to the challenge of bilateral trade. Stakeholder interests had been included in the dialogue process. dti was of the opinion that the bilateral dialogue process had achieved greater benefits. Agreement had been reached on customs arrangements, technical and capacity-building exchanges and fixed investment plans. Limits on the 32 product categories were based on current volume flows and would be imposed for the next three years.

Mr Maake sought clarity on the role of the Executive-Board.

Mr Matshamba replied that the Executive-Board was comprised of the Minister and senior management and had to approve all programmes prior to implementation.

Mr D Dlali (ANC) asserted that human resources had to be enhanced, and the repeated excuse of lack of adequate skills was no longer acceptable. Members should be aware of timeframes to monitor progress in addressing capacity shortfalls. A lack of co-ordination within government should not continue.

Mr Matshamba stated that lack of capacity would not be referred to at future Committee meetings and the Department was engaged in addressing weaknesses. The alignment of sectors would be facilitated and regular feedback reports would be provided to Members.

Prof Turok sought detail on the total cost for consultants.

Mr Matshamba stated that Consultants had been employed in the absence of specific skills and the total cost had been approximately R100 000.

The Chairperson asked whether consensus prevailed between business and labour as the presentation claimed that a deadlock existed.

Mr Matshamba concurred that a distinction prevailed between manufacturers and retailers. An agreement had been secured initially but the addition of retailers into the equation had caused complications. Retailers were concerned that lucrative contracts with importers would be placed in jeopardy. An alliance between retailers and manufacturers had recently been forged. Bargaining council issues should not be included in a strategy document. dti had a policy to implement and could not be regarded as neutral. The Interim Support Scheme for business expired at the end of March 2007 and an agreement had to be secured prior to the deadline. Business and labour had recently written letters to the Deputy-President complaining of poor implementation by the Department. However, a major stumbling block remained the inability of business and labour to reach agreement.

Mr J Maake (ANC) felt that the admission of misalignment of priority sectors between the Presidency and the Department was problematic and he asked whether the Presidency had a strategic plan to complement the Department’s plan.

The Chairperson believed that the admission of misalignment with the Presidency was a serious statement that was open to misinterpretation. South Africa produced high quality clothing and textile products and the local industry should be defended. A balance was needed between local production and imports.

Mr Matshamba stated that misalignment with the Presidency would be addressed. He agreed that South Africa produced sound quality products and certain niche products would be targeted for increased export opportunities. A communication campaign had been undertaken to encourage consumers to buy local products and thereby contribute to job creation. The government would reconsider its procurement policy to promote local purchases. Details on the interim support programme would be forwarded to Members. Two strategies would be presented at Exco meetings to speed up approval and address blockages. Business appeared to be stalling the process. He confirmed that Members should attend meetings to gain insight into the process.

Prof Turok asserted that the Department could impose the 75% local content demand on the state. The Committee should be informed of those retailers that refused to co-operate in programme initiatives. Retailers had to also bear the national interest in mind when conducting business. Detail was requested on the interim support scheme. A blockage seemed to exist at the apex of the Department that hindered implementation.

Ms D Ramodibe (ANC)  asked what other roles government could play to assist the local clothing and textiles industry.

Mr Maake sought clarity on the current position of the government regarding local procurement. He asked whether amendments would be necessary to alter current practice.

Mr Matshamba declared that the role of government was to assist the textile industry and reduce job losses. The National Treasury and the Department would consider any amendments to current legislation.

Mr Dlali asked whether a plan would be implemented at the end of the month despite a lack of agreement between business and labour.

Mr Martin Viljoen (Executive Director, SA Textile Industry) asserted that South Africa complied with WTO rules but other parties did not provide compliance scorecards.

Prof Chang noted that China tended to use bilateral agreements to their advantage by adding value to exports, and believed that South Africa should try to obtain raw materials from China to assist local production.

Mr Matshamba stated that retailers had ignored the invitation to attend a stakeholders meeting and then sought to influence proceedings at the last minute. Joint ventures with China were an option to address concentrations of products.

Ms S Osman (Director-Textiles and Clothing) stated that a national government procurement policy was in place to use local materials initially.. Importation could occur if the required products were not available in the local market. More research was needed on the extent of local state procurement.

Prof Turok notified members that China was an expert in joint ventures and would structure arrangements in their favour. He proposed that the retail sector should appear before the Committee if cooperation failed to materialise.

The Chairperson confirmed that the Committee agreed with the proposal. He further confirmed that Members would attend future meetings with stakeholders.

The meeting was adjourned.