Department of Trade and Industry: Strategic Plan 2007 – 2010

ECONOMIC AFFAIRS SELECT COMMITTEE
23 May 2007
DEPARTMENT OF TRADE AND INDUSTRY: STRATEGIC PLAN 2007 – 2010

Chairperson: Ms N Ntwanambi (ANC)

Documents handed out:
Department of Trade and Industry (DTI) on their Medium Term Strategic Framework: 2007 – 2010

SUMMARY
The Department of Trade and Industry said that the change in the economy towards a higher growth path had now been well established with GDP growth of 5% in 2006. Key drivers had been robust consumer spending and increased fixed investment by both public and private sector. Key challenges were that increased imports exerted pressure on the trade balance while unemployment remained high despite improving job creation. Export and foreign direct investment (FDI) performance was modest. However, millions were still on the economic margins and many were poverty-stricken. The Accelerated and Shared Growth Initiative for South Africa (ASGI-SA) had been the policy response to this, which identified key binding constraints and interventions to address them. The DTI was key in the ASGI-SA conception, and DTI's focus was on increasing economic efficiencies, promoting dynamic sectors and having an integrated small enterprise service delivery.

MINUTES
Department of Trade and Industry Medium Term Strategic Framework
DTI Director-General, Mr Tshediso Matona, made a presentation on DTI's strategic objectives, key outputs for 2006/7 as well as strategic deliverables for 2007-2010. Mr Matona also briefed the Committee on challenges faced by his Department, resourcing its strategy and also the Economic Cluster. The DTI chaired the Economic Cluster of government departments. The Cluster focused on increasing economic efficiencies, promoting dynamic sectors and integrating small and micro enterprises.

The Director-General pointed out that the step change in the economy towards a higher growth path had now been well established, with a GDP growth of 5% in 2006. Key drivers had been robust consumer spending and increased fixed investment by both public and private sectors. Leading growth sectors were in construction (13.2%), finance and business services (7.9%), trade (6.9%) then transport and communications (5.6%). Despite the rising inflation, interest rates and import competition, Mr Matona re-iterated that business confidence remained at high levels.

Some of the challenges the Department faced were that increased imports exerted pressure on the trade balance. Unemployment remained high despite an improvement in job creation. Export and foreign direct investment (FDI) performance was modest but millions were still on the economic margins and many were poverty-stricken. The economy’s fortunes were still tied to global economic developments such as oil price although prospects remained positive.

One of the policy responses had been to introduce ASGI-SA which identified key binding constraints and interventions to address them. The DTI had played a key role in the ASGI-SA conception as well as the Economic Cluster’s implementation of ASGI-SA. The focus for the cluster in 2007-2009 was on increasing economic efficiencies, promoting dynamic sectors and having an intergrated small enterprise service delivery. Some of the strategic objectives included:
- promoting co-ordinated implementation of the accelerated and shared growth initiative.
- promoting direct investment and growth in the industrial and service economy, with particular focus on unemployment.

ASGI-SA identified the need to develop a robust industrial policy to promote diversification, competitiveness and labour-absorption. The National Industrial Policy Framework had been finalised and approved by Cabinet with a directive for it to be implemented immediately.

To support Enterprise Development, the DTI had established the National Small Business Advisory Council. Khula loans and advances had increased from R34 million in 2002 to R137 million in 2006 with three new funds having been launched and capitalised at R300 million.

Products for targeted procurement by government departments had been identified and would be implemented. The Industrial Development Co-operation had approved investments in excess of R6 billion. Mr Matona added that 15 co-operatives from six provinces (Eastern Cape; Kwa-Zulu Natal; Gauteng; North West; Northern Cape, Limpopo) had been supported financially and were benefiting 205 youth and 188 women.

In support of the Broad Based Black Empowerment (BBBEE), the codes of good practice were gazetted. A BEE Advisory Council was to be established to oversee and monitor its implementation. The National Empowerment Fund had disbursed R424 million from an approved investment of R590 million. In the Black Business Supplier Development Programme, 854 projects were approved to the value of R46.9 million and a further R25 million would be disbursed during the year.

With regard to the consumer and corporate regulation, the new Companies Bill had been approved by Cabinet and published for comment. It was expected to increase investment in firms by reducing regulatory and administrative burdens on small and medium size firms. The Competition Policy Review had been completed and amendments were to be drafted. This Bill would improve the competitiveness of concentrated sectors and address anti-competitive behaviour.

The DTI contributed to the January 2007 resumption of WTO Doha Round of negotiations and led the development of the country’s position on industrial tariffs in Doha and led the development of the Southern African Development Community (SADC) negotiating position on the Economic Partnership Agreement with the European Union.

In human resources, the DTI had targeted filling 150 vacancies by 31 January 2007. It managed to fill 135 of them (that is, 90%). The Department had launched a special recruitment agency. The DTI establishment reflected a 25.8% vacancy rate as at 28 February 2007. Extensive training was provided via bursaries, in-house training, internships, the Adult Basic Education and Training programs, and the Regional Trade and Investment Capacity building programs. The Department was certified for Employment Equity Act compliance.

In terms of its financial performance, the DTI received an unqualified audit report for 2005/6 and the yearly spending trend reflected an average spend of their allocated budget over the past four years of 95%. The under-expenditure was largely due to limited spending on critical infrastructure.

Some of their strategic deliverables in Enterprise and Industry Support and Development were the implementation of the National Industrial Policy Framework (NIPF). Here they would continue sector strategy to support initiatives such as tourism. Over 40% of the Department’s budget went to the support of enterprises through incentives. They had developed a human capital strategy to support critical skills areas, including centres of excellence.

They wanted to continue and step up non-financial enterprise development support through an effective service delivery network with the Small Enterprise Development Agency (SEDA), which sought to provide export readiness for small businesses, training and mentorship, manufacturing support and information and advice to businesses.

Also mentioned in the presentation were the institutional challenges facing the DTI where recruiting and requisite capacity as well as the requisite skills posed a problem. Another was ensuring continued good corporate governance and continued sound financial management of the Department. Their aims were to reduce the level of vacancies to less than 15% by having a dedicated Humans Resources Development strategy, aiming for competency enhancement and development.

Discussion
Ms M Temba (ANC,Mpumalanga) asked the Director-General for the date on which the Advisory Council would be established

Mr Z Kolweni (ANC, North West) asked Mr Matona on who had been targeted on the road shows he had mentioned in his presentation.

The Chairperson, Ms N Ntwanambi (ANC), noted that five of the nine member DTI delegation filled their position in an acting capacity. She asked about the time frame of their respective acting positions.

The Chairperson wondered why Edgars and Woolworths still supplied products sourced from China. She asked about the development between the DTI and Nelson Mandela Metropolitan, that is, on issues of housing. She also asked which non-member countries of the Southern African Customs Union (SACU) was Mr Matona referring to in his presentation.

Due to time constraints, the meeting had to be adjourned and Mr Matona said he would send his responses via e-mail to the members of the Committee on 25 May 2007.