National Industrial Participation Programme & Gender & Women’s Empowerment: Department’s Update

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Trade, Industry and Competition

30 October 2007
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
31 October 2007
NATIONAL INDUSTRIAL PARTICIPATION PROGRAMME & GENDER & WOMEN’S EMPOWERMENT: DEPARTMENT’S UPDATE BRIEFINGS

Chairperson: Mr B Martins (ANC)

Documents handed out:
Department of Trade and Industry: National Industrial Participation Programme Annual Report 2006/07.[available shortly at www.thedti.gov.za]
Department of Trade and Industry: National Industrial Participation Programme Presentation.
Department of Trade and Industry: Gender & Women’s Empowerment Unit Update Report.
SAWEN brochure : South African Women Entrepreneurs 2006
SAWEN brochure : Say When September 2007
SAWEN brochure : Ingwe Idla Ngamabala 2007
DTI’s brochure : Engendering ASGI-SA 2006 National Committee for Business Women’s Organisations(NCBWO)

NOT RECORDED

SUMMARY
The Department of Trade and Industry briefed the Committee on the background and mandate of the National Industrial Participation Programme. This was meant to leverage economic benefits and support the development of South African industry by effectively utilising the instruments of Government procurement. It was based on the principles of additionality and causality. Since the inception of the programme in 1996, 50 000 jobs had been created. Challenges faced by the programme included project failure through lack of competitiveness and ability to sustain projects locally, or due to mismanagement of funds by local suppliers, milestone deadlines being too optimistic, limited support for small enterprises and black economic empowerment, and project failure due to market dynamics.

Questions by Members included whether the Department had imposed a performance management system or mechanisms to prevent mismanagement, what was done about funding in this event, the number of jobs, the reason behind minimal funding in some areas, the benefit to women from the Project, whether the projects were labour intensive, why the economic impact assessment was only carried out now, clarity on the capital investments, the sources of funding and the contractual terms. Further queries were asked around quantification of jobs, why more unskilled jobs were not created, the extent of participation, whether there were similar programmes elsewhere in the world, and the nature of the scheme.

The Department’s Gender and Women’s Empowerment Unit briefed the Committee on the progress of its projects. The Unit had consulted widely on the strategic framework on Gender and Women’s Economic Empowerment in all the provinces and four municipalities around the Gauteng Province. The strategy framework was awaiting Cabinet approval. Some of the initiatives undertaken by the unit were a proposal to have the South African Women’s Entrepreneur Network incorporated into the Department’s agencies, the setting up of three provincial offices, expanding membership, establishment of the Women’s Entrepreneurs Fund, funding pledges of up to R150 million, and training of women through the Technology for Women in Business. Challenges included scarcity of human and financial resources and the reluctance of women to put in their own resources in their businesses. Members asked questions around the values that the Department was attempting to instil in young women, the fact that no sector should be regarded as unworthy of support, the role of the Network in other provinces, what would happen to the Network if it was incorporated into the Department, the types of training, statistics of funding and benefits, liaison with other gender units, assistance to women wanting to run larger businesses, the outreach into the rural areas, criteria for membership of the Network, and the successes.

MINUTES
National Industrial Participation Programme (NIPP): Briefing by Department of Trade and Industry (dti)
Mr Sipho Zikode, Acting Deputy Director, Department of Trade and Industry, briefed the Committee on the background of the NIPP. He stated that the programme was meant to leverage economic benefits and support the development of South African industry by effectively utilising the instruments of government procurement. He stated that NIPP became obligatory in September 1996, and was applicable to all Government and State Owned Enterprises (SOEs). He affirmed that 30% of the imported content in these institutions was part of the value that should equated to the economy.

Mr Zikode noted that the principles that govern the NIPP were additionality and causality. He stated that this meant projects that added value to the economy and ensured increased participation of foreign investors in the South African economy through purchase contracts. South African industries benefited when the NIPP business plan was implemented, by generating new or additional business through investments, export opportunities, job creation, increased local sales, promotion of Small, Medium and Micro Enterprises (SMME) and black economic empowerment (BEE), research and development (R & D) and technology transfer. The obligation value stood at $16 billion, with outstanding obligations at around $ 7 billion. However, it was noted that this accounted for obligations of one company, which were to be offset over four years.

The major NIPP projects fell under the main sectors of transport, metals, mining and capital equipment and chemicals, plastics and rubber products. The manufacturing sector accounted for 90% of the NIPP projects, which was in line with the integrated manufacturing strategy. Mr Zikode stated that the key projects for the year 2007 included rock bolt (wire to wire products), which was a BEE initiative, mechatronics (integrated mechanical and IT development skills undertaken by higher learning institutions students), Novara plastic recycling, ALC (a global supplier of leather seats that created 250 jobs), flextech, offshore Oil and Gas Fabrication centre that was launched on 30th October 2007 at Saldana bay, and the Denel SAAB design and production aero-structure components.

The Department had commissioned an economic impact assessment in March 2007. The findings were that the NIPP projects impacted on the gross domestic product (GDP), balance of payments, and employment and that the NIPP was effectively utilising capital as a scarce resource. In addition the government had received an additional R3.9 billion in taxes due to sales generated by NIPP projects, 15 689 direct sustainable jobs have been created, and in total over 50 000 direct and indirect jobs had been created (66%semi skilled and 34% unskilled jobs).

Mr Zikode noted that an average of R16 billion of capital was required annually to sustain NIPP projects. NIPP imported content of purchases generated substantial funding in US dollars, and he tabled details in the slides (see attached presentation).

He stated that the challenges faced included projects failing due to lack of competitiveness and ability to sustain projects locally, project failure due to mismanagement of funds by local suppliers, milestone deadlines being in most cases too optimistic, limited support being given for SMMEs and broad based BEE, and project failure due to market dynamics.

Recent developments were extension of NIPP tools beyond their current scope by allowing for offsets companies to directly associate with procurement and associated industries. NIPP was contributing towards building local capacity and local content through Government procurement. In addition new projects were required to be aligned to key government initiatives such as BBBEE SMME’s and skills development.

Mr Zikode concluded the presentation by stating that the way forward for the Department was to incorporate direct NIP into existing guidelines, communication of direct NIP to applicable purchasing entities through workshops, increased focus on labour intensive projects, and alignment between NIPP and the Competitive Supplier Development Programme, BBBEE and Customer Sector programme initiatives.

Discussion
Ms B Ntuli (ANC) asked whether the Department had imposed a performance management system in respect of those challenges of failure through lack of competitiveness and mismanagement of funds. She asked to be informed of the position taken when a company mismanages funds.

Mr Zikode stated that the offset companies had performance management contracts with the local companies. Where mismanagement was identified the Department could report the matter to the local authorities to take action against unscrupulous officials. Similarly the offset company that was in partnership with the local company could report the matter to the local authorities.

Ms Ntuli asked whether the Department had mechanisms to prevent mismanagement and ensure meeting of deadlines.

Mr Zikode reaffirmed the position that the projects are based on the principle of additionally and causality. The Department was concerned with only projects that added value to the economy. He stated that the Department had contracts with the offset companies only. The contracts between the offset companies and local companies were commercial in nature therefore intervention by DTI was minimal. The role of DTI was to approve projects, implement them and advance equities and loans to offset companies.

Ms Ntuli asked whether the 50,000 jobs created through the NIPP were from 2006/7, or whether it was the aggregate of jobs created since the inception of the programme in 1996.

Mr Zikode noted that the number of jobs created was an aggregate figure of jobs created since 1996.

Ms F Mohammed (ANC) asked at what stage the Department would discover the mismanagement of funds granted to companies through the NIPP initiative and whether the Department stopped the funding upon discovering mismanagement of funds.

Mr Zikode pointed out that the Department received information on mismanagement mainly from the offset companies. He stated that the Department held bi-annual meetings with these companies where such instances were reported. He informed the Committee that the offset companies could not be punished for the wrongs of the local companies through withholding of funding; instead the Department required that the offset company come up with a replacement project.

Ms Mohammed noted that the funding advanced to industries like tourism was small. She wanted to find out what was the reason behind the minimal funding.

Mr Zikode stated that the Department did not reject any applications for advancement of moneys. He noted that at the NIPP project had initially been meant mainly for the manufacturing sector and that most companies that applied for the NIPP were mainly interested in this sector.

Ms Mohammed asked how many women benefited from the projects and whether the Department did advocacy to ensure involvement of women.

Mr Zikode was of the view that the participation of women was very minimal and the Gender and Women’s Empowerment Unit was trying to remedy this.

Ms Mohammed asked whether the Department measured the per capita of companies against the jobs created. She wanted to know whether the Department would require companies to do projects that were labour intensive.

Mr Zikode noted that most of the projects conducted under the NIPP were high tech areas that created minimal jobs. He stated however that the Department would not force companies to engage in sectors that were labour intensive, as the project accommodated the companies’ wishes as to the projects they would undertake. He noted that in future the Department would focus on labour intensive sectors.

Mr L Labuschagne (DA) noted that the 46% outstanding projects should be finalised.

Mr Labuschagne stated that the carrying out of an economic impact assessment was commendable, but wondered why it was not done earlier.

Ms Teresa de Risi, Director, dti, noted that the Department had carried out a mid-term economic impact assessment, which was on a small-scale level. She stated that a period of around six years had been set aside for implementation of projects, which was the reason why the assessment was held mid-term, to ensure that more accurate findings could be obtained.

Mr Labuschagne wondered whether the R16 billion capital invested in the NIPP was an annual investment. He also asked whether the amount was advanced to companies at the onset of their contracts with the Department, or every time companies started new projects

Mr Zikode noted that 90% to 95% of the obligation value was in form of sales, and was tied to the obligation of the offset companies to make sales worth a specific value. These obligations were undertaken over a period of years, with the requirement that certain milestones be met. The R16 billion was a figure set to ensure that the projects were sustained and it did not mean that the same amount was advanced every year.

Ms de Risi added that the money did not come from the government but that it was from the Industrial Development Corporation in the form of loans.

Mr Labuschagne noted that the introduction of government initiatives such as BBBEE and SMMEs was new to the South African economy. He asked whether the Department changed the rules of engagement with these companies by requiring them to adopt these policies.

Mr Zikode stated that these requirements were imposed on new contracts. The Department was not in a position to change the rules of existing contracts that were entered into before inception of these policies, and any attempts to change would have been detrimental to encouraging investors into the country. The Department would negotiate for the inclusion of these policies where it could.

Mr Labuschagne wanted to know whether the Department quantified the jobs created by existing companies, together with those created through the NIPP projects with offset companies, or if it looked at additional jobs created as a result of the coming in of the offset company.

Mr Zikode noted that, in line with the additionally principle of the NIPP, the Department only looked at the additional jobs created.

Mr M Bhengu (IFP) noted that the overwhelming majority of South Africans fell into the category of unskilled labour. He wanted to know why the majority of jobs created were semi-skilled and skilled.

Mr Zikode noted that the Department had accepted that the prevailing situation was not good and that it was important to improve it. Some of the sectors required skilled labour and the Department was focusing on skills development programmes. Initially the Department did not allow stand-alone skills development programmes initiated by companies, but had recognised the need to allow these programmes to benefit the disadvantaged groups in South Africa.

Mr Bhengu noted that the quest for the inception of programmes such as the SMMEs and BEE was to benefit disadvantaged groups but there was a public outcry that these programmes benefited only the elite.

Mr Zikode noted that the Department required broadened participation, which meant that these projects should not benefit the elite only. He stated that participation was required from BEE companies under the NIPP projects, but that the Department did not have leverage to stop investors from selecting companies with whom they wished to partner. The role of the Department was to emphasis the need for broadened participation.

Mr Bhengu asked the Department to give a brief history of the NIPP, its mandate and its life span.

Mr Zikode stated that there were about 80 countries in the world that had rules on NIPP, but some countries in the World Trade Organisation (WTO) opposed it, primarily the USA. USA had some NIPP rules hidden in its system but the reason behind its objection was the fear of exposing its intellectual property. The United Kingdom had no NIPP rules but had an NIPP office that took up negotiations with countries seeking to sign NIPP project contracts. He stated further that South Africa was not party to the WTO clauses that restricted NIPP project contracts.

Ms D Ramodibe (ANC) asked why the Northern Cape did not benefit from projects initiated by the NIPP.

Mr Zikode stated that the Department gave the offset companies the discretion to identify areas where they wished to invest. The Northern Cape was not a favourable site, given limitations such as infrastructure.

Ms Ramodibe asked whether the Department had policies to assist women to involve themselves in these projects.

Mr Zikode stated that women were included in the programmes initiated to assist the disadvantaged marginalized groups such as the SMMEs.

Ms Ramodibe required an outline of what commodities contributed to exports and imports under the NIPP project.

Ms de Risi stated that the Department did not involve itself with specific commodities, but instead looked at exported beneficiated products and the value of the investment brought into the country.

Mr S Njikelana (ANC) asked why the construction industry generated the lowest jobs.

Mr Zikode noted that this was not the true picture; he stated that there were many jobs created during construction of infrastructure.

Mr Njikelana asked whether the NIPP was a sensitive scheme, which liased with companies to undertake projects that were beneficial to the country and to its people, or an obligatory scheme that obliged offset companies to abide by certain rules.

Mr Njikelana asked whether the lowering of tariffs would assist the project from the challenge of lack of competitiveness.

Mr Njikelana asked whether there was any support for people living with disabilities.

Mr Njikelana asked what steps the Department had taken to ensure skills development and whether this applied to new contracts.

Mr Zikode responded to these questions generally. He re-emphasised the point that the government’s role under the NIPP was to leverage economic benefits and support the development of South African industry by effectively utilising the instruments of Government procurement. He stated that the contracts between the offset companies and the dti were commercial in nature and the obligation under the contracts was based on the principles of additionality and causality. He stated the implementation of government policies such as skills development, SMMEs and BBBEE were a priority of the Department.

Dr P Rabie (DA) was alarmed that there were only two projects in the tourism sector. He stated that the tourist sector was one of the fastest growing industries in the country and that there was need to invest more money in the industry.

Mr Zikode acknowledged the sentiments raised by Dr Rabie and said that the NIPP was initially meant for the manufacturing industry. He stated that the Department was reconsidering its strategies to ensure the incorporation of these new industries.

Dr Rabie stated that it would be very rewarding if the Committee would pay an onsite visit to one of the companies under the NIPP project to measure the productivity of the project.

Gender & Women’s Empowerment Unit Update Report: DTI Briefing
Ms Mmabatho Matiwane, Chief Director, Women’s Empowerment Unit, dti, briefed the Committee. She stated that her Department had consulted widely on the strategic framework on Gender and Women’s Economic Empowerment in all the provinces and in four municipalities around the Gauteng Province. More than 7 000 women participated in the consultation process. She affirmed that the framework had been finalised and that it was awaiting Cabinet’s approval. She noted that it was through the work of the Deputy Minister for Trade and Industry, Hon Elizabeth Thabethe, that the project materialised.

Ms Matiwane noted that for years women were faced with the problem of lack of funds to start businesses. She stated that the Women Entrepreneurs Fund had been created. She noted that a baseline had been created and funds were allocated by the National Treasury and an international donor. The dti had pledged R50 million and this was matched by the IDC. In addition Old Mutual had also pledged R50 million.

She stated that the South African Women Entrepreneurs’ Network (SAWEN) had been empowered to give support to women on a daily basis, as opposed to its previous mandate of offering a forum for women to interact. Three provincial offices had been established under very scarce resources and SAWEN had recruited six contractual staff members for administrative and coordinating purposes. SAWEN had a total of 1 200 fully paid up members at an annual fee of R300.

Ms Matiwane stated that more than 700 members had participated in capacity building, mentoring and coaching programmes had been conducted with strategic partners and MTN had undertaken training workshops for women on ICT. She confirmed that SAWEN was to be listed as one of the DTI’s implementing agencies.

One of the initiatives undertaken by the Gender Unit was the Technology for Women in Business (TWIB) initiative. TWIB had initiated several programmes since its inception, including Techno Girls, geared at encouraging girl children to choose science and technology, giving of awards to women who came up with sophisticated technological projects, and exposing them to international markets. Ms Matiwane stated that women were encouraged to come up with publications about their businesses and the products they had to offer. She stated that this initiative gave exposure and promotion of products.

In conclusion Ms Matiwane stated that one of the problems faced by the Department was that women expected handouts and were not ready to invest in their businesses and attend initiatives such as workshops. The Department endeavoured to create awareness on these initiatives and encouraged own investment.

Discussion
Professor E Chang (IFP) stated that the Department should ensure that it educated women on the value of hard work. She stated that most young girls only aspired to manage businesses so as to delegate the work to their subordinates. She reiterated that an entrepreneur was a person who owned a business and worked for 24 hours, even thinking about the business while she was sleeping.

Ms Matiwane noted the comments, and said that the Department would re-emphasis the value of hard work to the young entrepreneurs.

Prof Chang noted that the four most important qualities that a woman entrepreneur should acquire were skills, ability to market her products, financial resources and management skills.

Prof Chang noted that ventures such as running a bakery had been undermined by people who thought that they were irrelevant to the economy. In Eastern Europe these sectors had benefited women and helped elevate people from poverty.

Ms Ramodibe wanted to know whether there was a plan for SAWEN to stretch to other provinces.

Ms Matiwane stated that SAWEN had chapters within those provinces where it did not have offices and that these chapters had the mandate to forward their activity plans. These plans would be coordinated through the various offices. She stated that other offices would be created when funding allowed it.

Ms Ramodibe asked what would happen to the member’s subscription moneys once SAWEN was made part of the dti agencies.

Ms Matiwane noted that the Gender Unit’s plan was to maintain the both the independent SAWEN and that part that fell under the agency. The Independent SAWEN would be a networking tool for women.

Ms Ramodibe asked what type of training was given to women to enhance their capabilities to become better entrepreneurs.

Ms Matiwane noted that her unit engaged women, who had themselves been trained through SAWEN and become successful in business, to train other women in all provinces on business skills.

Ms Mohammed stated that she was aware that the Gender Department had done a lot of advocacy, which was commendable. She asked whether the Unit had statistics of how much funding other agency institutions gave to women.

Ms Matiwane stated that the Unit did not have statistics on funding, but the Department had carried out a survey of what benefits women received from these agencies, their access to trade initiatives, and access to funding. A report prepared from the findings of the survey had concluded that women received very minimal support.

Ms Mohammed asked whether the dti Gender Unit liased with other gender units in the various government institutions and agencies.

Ms Matiwane affirmed that her Unit had good relations with other agencies’ gender units and that they coordinated the economic cluster of all gender units.

Ms Ntuli stated that the minimal amount of R30 000 advanced as a loan for women to start businesses was too low. She asked whether the Department evaluated the viability and sustainability of business proposals before granting these loans.

Ms Matiwane noted that the gender unit had limited financial resources. She stated that the Gender Unit assessed the viability of projects before advancing loans to entrepreneurs, by sending an official to look at whether the business existed and its probability of success. She stated that in future the Gender Unit would train women on financial management as a package with the loan advancement.

Ms Ntuli stated that from the Department’s report it seemed that women were involved only in small-scale businesses such as pottery, beadwork and cloth making. She wanted to know whether the Department assisted women who wanted to do other businesses.

Ms Matiwane stated that the Gender Unit linked up women who wanted to start large businesses with agencies who could provide enough finance and advice them on how to conduct their businesses.

Ms Ntuli wanted to know whether the Department trained women in the rural areas on basic principles such as calculating their profits, loses, expenditure and income, in a language that they could relate to.

Ms Matiwane noted that SAWEN members were used to train women in the rural areas. These women would interact with on a one-to-one basis and communicate with them in a language that they could easily understand.

Ms Ntuli wanted to know how SAWEN linked up with the areas where it did not have offices.

Ms Matiwane noted that the Gender Unit had strong links with various institutions, and SAWEN would appoint some of its members to work in these institutions to reach out to women.

Ms Njikelana thanked the Department for the work they were doing in his constituency. He asked whether the Women Entrepreneurs Fund was an IDC only initiative.

Ms Matiwane stated that there were several private actors involved in the Fund, such as Old Mutual.

Mr Njikelana asked whether there was a rural bias with respect to SAWEN projects.

Ms Matiwane confirmed that SAWEN was very dedicated to taking its services to women in the rural areas. She stated that the Deputy Minister had emphasised the need to involve women in rural areas. The Unit was constrained in terms of funding and personnel but it was doing everything humanly possible to reach these women.

Mr Njikelana asked whether the Gender Unit made follow-ups on the workshops it held. He stated that the number of women who attended SAWEN workshops was overwhelming and he would have expected that the membership of SAWEN would be more than 1200

Ms Matiwane reiterated her statement that the Department had limited human and financial resources to do follow-ups.

Mr Bhengu asked the criteria for becoming a SAWEN member.

Ms Matiwane noted that some women wanted advice on how to set up their own businesses, and not membership. She stated that there was no restriction as to who became a member of SAWEN. However, the Department was cautious as to the number of women joining SAWEN as the Department would not be able to service a big number of members given its limited resources.

Mr Bhengu noted that the trend of expecting handouts was held not only by women but by many less advantaged citizens of South Africa. He stated that there was a need to come up with a strategy to root out this mentality.

Mr Bhengu asked whether women were being empowered enough to own their own businesses.

Ms Matiwane noted that there were many women who had opened up their own businesses and had been able to sustain these businesses.

The meeting was adjourned.

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