Department 2005/6 Annual Report: briefing

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
15 November 2006
DEPARTMENT 2005/6 ANNUAL REPORT: BRIEFING
 
Chairperson: Mr B Martins (ANC)

Documents handed out:
Department powerpoint Presentation on 2005/6 Annual Report
Department of Trade and Industry 2005/6 Annual Report [available at www.dti.gov.za]
National Industrial Participation Programmme Report [available later at  www.dti.gov.za]

SUMMARY
The Committee was briefed on the 2006 Annual Report of the Department of Trade and Industry.

The Committee raised concerns about the aborted free trade agreement with the USA; high vacancy rates; inter-department co-operation; the role of agencies and the Women’s Development Fund.

MINUTES
Briefing by Department of Trade and Industry (DTI) on 2005/6 Annual Report
Mr Tshediso Matona (Director-General) made a presentation about the performance of the Department in the 2005/6 year. The Department listed growth in the manufacturing sector of 4.1% due to increased domestic and foreign investment.  Employment growth was reported as being 540 000 new jobs in the past year. However the Department still faces the challenge of a trade deficit caused by a strong currency resulting in a widening trade deficit. One of the ways in which the Department can combat this is to increase value added exports.  The Department has various strategic objectives in place; one of which is to promote economic development in the country. The objectives are supported by the seven programmes of the Department. Some of the objectives include increasing exports, promoting direct investment, focussing on employment, promoting broader participation, equity and redress in the economy. 

Mr Matona said that DTI functioned very effectively and they were proud of that. One of the major outputs in 2005/6 was the number of policies that the Department had in place. DTI is part of a team that sets out Accelerated Shared Growth Initiative of South Africa (ASGISA) policies. The Department accounts for the bulk of the framework outlined in ASGISA. The Department developed an Integrated Small Business Strategy and Co-operatives Strategy and rolled out the Small Enterprise Development Agency (SEDA). In the period under review, the National Empowerment Fund (NEF) has significantly expanded its capacity. It financed 66 deals with a total value of R467million. Co-operatives support developed initiatives and obtained donor funding to finalise an incentive programme to support co-operatives. The Department also implemented agreements which it had concluded in recent years. Other trade initiatives included trade agreements with China with the focus on the textile industry. The vacancy level as at 1 April 2006 was 332 posts, but by the end of the period under review, the Department had decreased the vacancy rate to 269 at 30 September 2006.

The Department has received unqualified audits. The budget of the Department has experienced a steady increase. The level of under spending has been fairly constant with the exception of a small increase in the period under review due to the delay in bringing the micro-spending programme on-line. There has been a fair utilisation of Department resources. The Department requested an additional R8 billion over the three-year Medium-term Expenditure Framework (MTEF) period but got R1.3 billion. The Department has achieved all targets and Mr Matona said that he believed that they could do better if they had additional financial resources. Mr Matona concluded his presentation by saying that DTI would improve as they continue to engage with Departments and all tiers of government.

Discussion
Dr P Rabie (DA) mentioned that the vacancies in April were 332 and in September 269. It was very important that these vacancies be filled. He went on to ask if the Department was using any people form the private sector or consultants to fill the vacancies because the lower level staff needed guidance. On the issue of free trade with America, Dr Rabie wanted to know the reasons for the negotiations breaking down and whether the Department had any intentions or plans to rekindle them.

Mr S Rasmeni (ANC) asked if there were any progress with respect to Black Economic Empowerment (BEE). He mentioned that the report indicated that government departments are involved in codes of good practice for BEE and asked what progress the Department is making on good practice. Mr Rasmeni said that the Export Credit Insurance Corporation (ECIC) appeared before the Committee and the Committee queried whether they were taking on board codes of good practice. He said that government should lead by example when it comes to this. Mr Rasmeni noticed that the Department had challenges with respect to skills development and requested that the Committee be told what the challenges were and what was being done to rectify them. He further requested comment about the performance of SEDA. He noted that they continued to roll-out structures at various national levels, but that there was no indication that the Department was doing what they are supposed to be doing with respect to the mandate of SEDA. Mr Rasmeni asked for feedback about the performance of SEDA. Khula Enterprises said that it functioned within a box because of the regulatory framework. Mr Rasmeni wanted to know what the Department was going to do to unlock this cell so Khula can do its work.  Lastly he asked for elaboration on the issue of donor funding. 

Mr L Laubschagne (DA) said that the DTI was a very important Department that does not always get enough credit. The vacancy level was worrying and he asked what percentage of vacancies affected delivery. On the matter of inter-departmental co-ordination, he asked which departments were holding up service delivery. To what extent was the lottery distribution fiasco the Department’s fault? He also wanted feedback on the BEE codes.

Ms D Ramodibe (ANC) said that the Department reported that a total of 10 corporate incentive schemes had been approved. She asked if these schemes were functioning. She asked that the Department give clarity on the Khula issue because newspaper reports was not in line with the picture the Department created. She also asked for an update on the Woman’s Development Fund.

Ms M Ntuli (ANC) asked why the vacancies were not filled. She asked when the Department was going to give the Committee feedback about the challenges they faced last year, the steps taken to rectify them and how far they were in solving them. Ms Ntuli said that the skills training problem had been a problem for a long time and asked what the Department was not doing right. She said that if the Department kept on reporting that they had the same challenge, they were not making progress.

Mr J Maake (ANC) asked at what level the vacancies were. He asked at what level the negotiations with the USA were – Departmental or another level. He also asked what had stalled these negotiations. With respect to job creation, Mr Maake said that jobs had been created but when the projections are calculated a large monetary figure is given. He asked if it was fair to have so much money floating around.

Mr G Oliphant (ANC) said that there were substantial roll-overs in this Department. South Africa had numerous trade agreements which are supposed to bring investment and eventually job creation. He asked what the role of DTI and its agencies was in job creation as the level of job creation is very slow in this country.

Mr S Njikelana (ANC) said that when SEDA made a presentation to the Committee, the Members of the Committee raised concern about National Treasury giving funds to SEDA. He asked if the Department had engaged National Treasury about the underspending at SEDA. To what extent did the Department engage with the Department of Foreign Affairs because Foreign Affairs policies influenced trade with other countries?  He said that foreign policies stated that Africa should be prioritised but he saw a bias towards countries like China.  On the issue of the Council on Trade and Industry Institutions (COTII) agencies, Mr Njikelana said that the Committee should have received reports from all the agencies. He commended some agencies saying that they were doing a great job. He asked to what extent there is co-ordination between the COTII and the Department.

On vacancies, Mr Matona said that it was not true that the Department was not doing anything to address the problem. It was a systemic problem in the public service with a total of some 44000 vacancies. When people leave the Department they go to the private sector.  This was not necessarily a bad thing if the human development approach to the economy is taken.  The Department had to review whether they offered the best incentives to retain personnel. The numbers sometimes stay constant because the in-take of new people and resignations often matched each other.  Mr Matona said that there is a correlation between the level of human resources and the budget. He said that he believed that the Department could do more if it had more money. He said the DTI can fill vacancies, but the real danger was that there would be nothing for the personnel to do. In the area of Co-operatives the Department has shown that they can do more. National Treasury has not put money into co-operatives. The Women’s Development Fund is receiving a modest level of funding from National Treasury.

The Department was still committed to concluding mutually beneficial trade agreements with the USA. The USA was a large economy with which South Africa was increasing trade. However the terms and conditions set by the Americans were not friendly to SA policies. The USA’s approach to free trade is not developmental. Countries are supposed to open up their economies to the extent that they can support increased competition. But the USA wants free trade now and wants to keep it. They want to retain the right to subsidise agriculture but want SA to open up its agriculture boundaries. The Department is going to create a framework called the Trade & Investment Agreement which will allow it to engage in trade negotiations and deal with problems as they arise. The USA may still make it possible and feasible for SA to conclude the agreement.

Mr Matona said that the work of putting the codes of good practice together had been finished. He stated that the media reports that there are problems with the codes are incorrect. He said that the matter would be finalised by the end of the year. With respect to agencies and how they relate to BEE, he said that no arm of government was exempted from applying BEE, but for the Department, because of the different character and functions of the agencies, it is not possible to come up with a single framework.  Agencies have to consider BEE when taking on certain projects. He said that they encouraged enterprises to follow the codes of practice but the Department does not compel any enterprise to apply the policy.

Mr Matona said that skills development has been embraced as a challenge. The DTI has a critical role to play in skills development and they have made various plans for it.  He said that it is important for everyone to make the link between critical skills in the economy and the capacity challenge in government.  This is work that the Department of Public Service and Administration is dealing with.  The Department has an in-house program for skills development and training called Learning Centre. It identifies gaps in skills and puts together programs of varying lengths to deal with skills development.

The DTI was a fundamentally different entity to what existed before. The DTI now has a highly expansive mandate dealing with equity, small business, regulating the lottery, industrial development etc. Institutional Development is a structure adequate to execute the DTI mandate. The Department has taken over a very large mandate in a small amount of time and operated fairly coherently.

SEDA has to continually look at appropriating and dispensing services. Mr Matona said that he appreciated the concerns of the Committee in this regard and assured them that there would be additional and more complex services which the Department would be watching closely.

Mr Matona said Khula highlighted some of the challenges which they faced as a Department and government i.e. supporting small business.  The Department had good ideas, but funding was lacking. The issue was bigger than the DTI – it was a national challenge.

The COTII met quarterly with the Department and agencies. The forum deals with issues of alignment, but the Department has gone beyond the forum and Developmental Financial Institutions meet more often and exchange information. Mr Matona suggested that the Committee engage the agencies. He also added that there was room for improvement in the co-ordination of the forum.

The relationship between DTI and the Department of Foreign Affairs was a good one, with Foreign Affairs realising that it has a much larger international footprint that can be used to SA’s advantage. In the previous week, the two Departments had together engaged the European Union.

Mr B Martins (ANC) said that although the Committee understood the background to vacancies, they wanted to know if it impacted on efficiency at DTI.

Mr Matona responded that the employment objectives and policies of DTI reflected the policies of government. He said that the Committee needed to evaluate demographics with respect to that. The Department placed advertisements in the newspapers which listed competency-based criteria.  He said that DTI was satisfied with the level of transformation in the Department. He however highlighted that they were finding that there were fewer and fewer white applicants and that it was not because of employment equity.

Mr Rasmeni said that the problem with small businesses and co-operatives was the stringent regulatory requirements when they applied for funding. He suggested that DTI look into that problem.  On 8 November the Committee had interacted with the National Lottery Board. They claimed that the National Lottery Act was restrictive for people with no expertise. Only people who have resources to appoint or hire consultants received assistance. He asked if DTI was able to initiate amendments to this Act. Mr Rasmeni said that during the Apartheid years many black people worked as artisans. Due to restrictions they were not given skills training. He said that if the Department could do research, they could find these people and a few weeks of training could result in them being placed in some of the vacant posts.

Ms D Ramodibe (ANC) asked where the co-operatives were located in the various provinces. She requested that the Department provide more information on the Women’s Development Fund so that the Committee can assist with this project where possible.

Mr J Maake (ANC) asked what the incentive payments were to which 40% of the budget was allocated. Some sections of the Council for Scientific and Industrial Research (CSIR) got more money than Khula.

Mr S Njikelana (ANC) commented that the vacancy issue was quite a sensitive one and that what struck him the most was the high rate in certain divisions.

Mr Matona said that the National Lottery has been operating for seven years and that the Department had a good idea of its functionality i.e. whether it is working well or not, and the competence of the Department. Some Members on the Committee engaged with the Department on the difficulties within their constituencies and the Department appreciated that for their feedback purposes.  He said that DTI is part of the President and Deputy President’s Imbizos in various provinces.

The Women’s Development Fund is still being set up and when everything is finalised, he would inform the Committee. The Department believes that this is an important initiative because the National Treasury have made an allocation in this regard. The incentive payments referred to the transfers and disbursements that the Department makes to enterprise organisations. The list of incentive payments forms part of the Annual Report.

The Chairperson stated that the Department would have to report on the National Industrial Participation Programme at the beginning of next year.

The meeting was adjourned.