Tshumisano Trust 2006 Annual Report

SCIENCE AND TECHNOLOGY PORTFOLIO COMMITTEE
31 October 2006
TSHUMISANO TRUST 2006 ANNUAL REPORT

Chairperson: Mr N Ngcobo (ANC)

Documents handed out:
Presentation and annual report for financial year 2005/06 by Tshumisano Trust

SUMMARY:
The Tshumisano Trust presented its annual report for 2006. Its strategy included plans to expand to poor provinces and send more students to be trained in scarce skills in other countries e.g. India. Their objectives were to develop tooling for automotive components, plastics, packaging and others. Proposed technology stations in Agrifood will be established in Mpumalanga and Limpopo. The Department of Science and Technology funds Tshumisano and the latter in turn funds Small, Medium and Micro-Enterprises in the provinces.

Some of the challenges they are facing included the low number of women in business and the lack of participation of women in the automotive component industry. Tshumisano announced that next year they would become a public entity due to the increase in the grants they received and also the increase in the number of students they trained.

MINUTES
The Chair opened the meeting by announcing that the Academy of Sciences of South Africa (ASSAF) was unable to appear due to technical reasons; a future date will be allocated for them to give their report.  

Presentation by Tshumisano Trust
Mr David Phaho, Chief Executive Officer, gave an overview of the past three years on the development of their technology stations countrywide and their past and future challenges. The aim was to highlight the challenges over the past three years to their stakeholders and to make recommendations for improvement.

He outlined his organisation’s mission and vision that guided its strategic goals for 2005/06.The trust was trying to increase their national footprint in poor provinces such as Mpumalanga, Limpopo and the Eastern Cape. The projects in the poor provinces were linked to the Inter-dependence Development Cooperation (IDC). The envisaged outcomes were national economic growth objectives, promotion, and financial and socio-political development.

Mr Phaho said that the initiatives in advanced tooling were involved in research. Collaboration between centers was encouraged through the use of an innovation hub.

Discussion
The Chair wondered whether the absence of the trust’s financial manager would hamper them in answering questions about their financial position.

Mr S Dithebe (ANC) congratulated Dr A Ramsuran on her promotion to Manager: Governance, within the Department. He wanted to know, in respect of the taxi recapitalisation program whether Tshumisano has a business opportunity strategy to take advantage of the roll-out of new taxis.

Mr Phaho responded that their focus was on automotive manufacturing and tooling was restricted to addressing the need for component development in order to help Small, Medium and Micro Enterprises (SMMEs) who were involved in component manufacturing and or design. Also in terms of skills development, the technology stations in the automotive sector would provide training in arc welding, panel beating etc.

Mr Dithebe wondered what the link was between Tshumisano and Sasol concerning the recasting of molded plastics.

Mr Phaho responded that the tooling initiative involved Sasol’s Chemcity together with the Vaal University of Technology (VUT) to set up the institute for technology station.

Mr Dithebe wanted to know what role Tshumisano played in the innovation hub next to the Council for Industrial and Scientific Research (CSIR) and the one launched in the Free State.

Mr Phaho said the innovation hub had relocated from Tshwane to Bloemfontein in the Free State. Through the use of Fablabs, the employees can link up to their station. They had a partnership with IDC in terms of finances where they would refer people to Tshumisano who needed technological assistance.

Mr A Ainslie (ANC) congratulated Tshumisano on the increased number of SMMEs they have reached. His concern was that, in their report, emphasis was put on the numbers reached and not necessarily on the quality of the work produced. He felt that in order to achieve the required excellence, Tshumisano needed to formulate a follow-up plan on the small businesses for quality-checking purposes.

Mr Phaho noted the suggestion. He said that although the number of SMMEs had increased so did the quality of their produce. This had to do with institutional memory where some of the SMMEs were repeat businesses. What they usually did was to employ the assistance of an outside contractor to do an impact assessment on SMMEs. In the last year they obtained 76%, the remaining 14% was due to staff capacity issues.

Mr Ainslie asked how current assets increased from R11million in 2005 to R23million in 2006.

Mr Phaho replied that the roll-out of the Institute for Tooling played a role because they were given a grant last year but Tshumisano had only started distributing the money this year. This was due to legal agreements as some institutions had not completed their business plans or had not completed the requirements for obtaining the grant. Some of the money was for purchasing equipment as the Trust now purchases it for the institutions.

Mr Ainslie also wanted clarification on the funding received by Tshumisano, since on tooling funding there was an error that was not noticed by the auditors.

Mr Phaho responded that the error was a result of not having an internal auditor. He assured the Committee that the error would not occur again as they would be forced by law to have an internal auditor since they are going to be a public entity.

Furthermore, Mr Ainslie asked whether they were involved in small-scale mining projects or rural community development and if so, how they were planning to expand it.

Mr Phaho replied that they were not yet involved in small-scale mining. They only had specific requests; their rudimentary request was in metal recasting. Currently there was no program in mining, which would become an issue when they spread to North West and Limpopo.

Professor I Mohamed (ANC) asked Mr Phaho what he meant when he said “traditional Universities” and “that blue sky innovation must come to an end”. He also commented that there were discrepancies in the way Mr Phaho classified race groups in the report.
           
Mr Phaho replied that traditional Universities referred to the comprehensive universities since technikons were now referred to as Universities of Technology. Concerning “Blue Sky” research, he meant that there should be a balance between them (for example nanotechnology and abstract algebra) and research that has direct practical impact on society. He apologised for not being consistent in his classification of the racial groups and said that the mistake will be addressed.

Prof Mohamed asked for clarification of the decreasing number of training sessions since there was an apparent need for them. He also found it difficult to understand how one operated with a deficit since on their financial statement a deficit of R3million in 2003 and R2million in 2006 are shown.

Mr Phaho replied that the number of sessions had decreased, but not the number of trainees; they had in fact increased. The training reflected in the report was about the Universities and technology stations; on-floor training was not taken into account.
 
Ms F Mahomed (ANC) wanted to know how Tshumisano Trust addressed the challenge of bio-fuel.

Mr Phaho passed the question to Mr Imraan Patel, Department General Manager: Economic
Impact, of the Department of Science and Technology (DST) since they were not directly involved in the research but on the policy making level.

Mr Patel said the research was in its infancy and that the research they had done so far had to be sent to Austria to be tested as they did not have the necessary equipment.

Their research was on coal products and they worked with the Department of Agriculture on alternative bio-fuel processing, like feed stocks to enhance the yields in the oil contents. Oils in maize, sugar cane and fruit trees will also be investigated.

Ms Mahomed asked how the Department planned to encourage the creation of more women-owned business. She felt that 155 were a very low number in relation to the country’s population.

Mr Phaho felt that the problem lay with accessibility and knowledge in that the Trust needed to be more involved in rural areas and that the women needed a networking environment where they could make contacts and exchange ideas.

Ms Mohamed suggested the use of incubators in terms of networking and said she will be delighted to be of assistance. She commented on the automotive components sector that there were absolutely no women in the technology stations. She expressed concern about the decrease in funding at the Mangosuthu University of Technology’s station and at the North West technology station reflected in the financial statement.

Mr Phaho replied that the disparity in terms of funding was due to the fact that technology stations were obliged through the grant agreement every year to submit their business plans and their annual report in order for the Trust to see whether they reached their objectives or not. As such the funds were allocated accordingly.

Ms Mahomed wondered how Tshumisano was supporting the clothing and textile industry.

Mr Phaho replied that they were looking past training. They wanted to introduce competition country-wide to improve the SMMEs’ quality of products. For example in the Western Cape, the SMMEs came together to look at best factory layouts and employees exchanged or imparted their best practices to one another. They rotated their staff as well.

Ms Mahomed stated that human resource capital was the most valuable asset in South Africa and asked whether Tshumisano made any effort in attracting the youth.

Mr Phaho replied that in tooling they had trainees who did not have tertiary education. They trained them for three to four months. For example in Soshanguve they had 15 trainees and they were looking at expanding.

Ms Mahomed wanted to know whether all SMMEs linked themselves to the SA Bureau of Standards (SABS) since testing was expensive.

Mr Phaho said the SMMEs needed intervention as the costs of testing were very high and could only be afforded by the more established businesses.

Ms Mahomed asked how Tshumisano linked themselves to poor municipalities in terms of exposing them to their institution.

Mr Phaho responded that due to their lack of capacity, they were unable to be directly involved with poor municipalities.

Mr J Blanche (DA) queried whether Tshumisano was looking into the training of motor mechanics and automotive specialists especially component manufacturers as there were a lot of foreign automobiles in the country which when they broke down necessitated the components to be imported, which turned out to be an expensive endeavor.

Mr Phaho replied that Tshumisano in partnership with the Department of Trade and Industry (DTI) and IDC were looking into expanding the footprint of the chemical, textile and automotive sectors. In the automotive sector the training of panel beaters would be advocated through SMMEs.

The Chair asked, since Tshumisano aimed to improve the innovation and competitiveness of SMMEs, where did it differ from the innovation fund.

Mr Phaho replied that they did not have “hard” resources in terms of equipment to carry out projects; the innovation fund provided funding for the innovative research and their key objective was to see that innovation increased.

The Chair asked for Tshumisano’s strategy in terms of making sure that recruitment programs for science graduates succeeded to eliminate unemployment in the science industry.

Mr Phaho responded that they received internship grants from DST and then asked the technology stations to appoint them. DST then did an independent audit and reviewed them.

The Chair asked the Human Resource Manager, Ms Collette Molefe, to outline her strategy, vision and mission in terms of driving human resource skills and skills development.

Ms Molefe replied that she had just joined the organization. She explained that her role was not administrative but to make sure of HR best practices in Tshumisano. This was to show that human capital was being developed appropriately within the project management.

Her vision was to be proud of what they had and challenge the young people they had employed. In terms of strategy development, they were now going to have a meeting to plan for the next three years.

The Chair agreed that tooling technology was very much needed in the country. He asked whether Tshumisano interacted with India at the institute of technology in Mumbai that dealt with machine tooling and cryogenic engineering.

Mr Phaho said that they had funding for the next three years in order to produce high quality products and interns. They have sent some students to three cities in India to learn more about tooling, especially precision cutting.

The Chair asked for clarification of the differences between chairs in research institutions and Tshumisano and also about Tshumisano becoming a public entity.

Mr Phaho replied that they had to link up all of them. At the moment they were being driven by their board, stakeholders and Sector Education and Training Authority (SETA).

The Chair wondered whether the Trust, in terms of developing SMME technology, had looked into addressing the power failure problem or collaborated with the University of Johannesburg on their project to address energy issues.

On the matter of Tshumisamo becoming a public entity next year, Mr Phaho requested the question to be answered by Dr A Lucen (General Manager: Governance, DST)

Dr Lucen said that the National Treasury was discouraging the establishment of trusts.  Basically Tshumisano has grown to a point where they do not want to be a trust. Also the number ofg Grants/ funding had increased. She acknowledged that there were going to be substantial changes in the organisation to comply with Public Finance Management Act (PFMA) standards.

The Chair asked whether the Trust had any savings through vacancies.

Mr Phaho said that until now their staff and HR costs were less than 0.7% of the total budget. The saving was due to one of their partners being hired by their German partner so the salary paid for two other staff members.

The Chair also questioned whether they had looked into using ash waste to manufacture bricks as this would create employment in the second economy.

Mr Phaho responded that they had not been involved with the built environment or Sasol Ash but they will look into that in the future.

The Chair stated that entities like Tshumisano were used to developing economic structures through the kind of technologies they supported. He asked whether the trust had a vision for developing such integral systems with a business focus around the institutions.

Mr Phaho answered that they had.

The Chair questioned the Trust representatives whether they had a strategy for developing local technologies.

Mr Phaho replied that it has not yet been involved with ICT but that it would link up with their capacity to produce high quality products.

In terms of Indigenous Knowledge based Systems (IKS), the Chair asked whether the Trust has developed a marketing strategy to promote them.

Mr Phaho reminded the Committee that Tshumisano handled niche projects; as such DST had strong indigenous knowledge systems and programs. They mostly worked with the Department of Agriculture.

The Chair wanted to know how much funding the Trust received from DST.

Mr Phaho responded that they received R18 million for technology stations. In addition, they received special grants, for example for running the All Africa conference and the Indo –German Tool. They do not recover any cost but they wanted the technology stations to be able to, in order for them to reinvest it in their HR. The grants were increasing due to the increase in the number of students.

Mr P Maloyi (ANC) asked where the North West technology station was situated and what it specialized in.

In response to the above question, Ms Lucen said that she had referred to the “old” North West which was in Ga-Rankuwa.

Mr Dithebe wondered whether the Trust’s specific intervention was a company skills or industry skills package.

Dr Lucen replied that they tried to expose the trainees to all aspects of the industry including report writing.

Mr Dithebe said he was bothered about the costs for the SMMEs to comply with SABS requirements. One of the financial constraints that the Accelerated Growth Initiative for South Africa (ASGISA) faced was its impact on SMMEs. If they need to address Treasury to subsidize SMMEs in order to satisfy international standards, then that was what must be done. All agreed with this sentiment.

Dr Lucen replied that DST has been considering the matter for a long time. They had already started negotiations with the key role players.

A Member expressed his concern on the Northern Cape not being considered for a technology station.

In response, Dr Lucen said that Mr N Mahomed was the liaison officer for the Northern Cape. Mr Patel added that the problem with the province was that it did not have a base to set up the technology center, since they generally set them up with Universities of Technology.

The meeting was adjourned.