Public Enterprises Africa Programmme to increase Intra-Africa trade and investment

Meeting report

Joint Project Facility (JPF) Africa programme: Department of Public Enterprises (DPE) briefing
Mr Mehleli Mpofu, Deputy Director General: Joint Project Facility, Department of Public Enterprises, said that South Africa was committed to playing a lead role in promoting economic and social development across Africa. Engaging with Africa would not only assist South Africa in achieving its own growth aspirations but would also provide a basis for sustainable growth and competitiveness beyond 2014. It was noted that achieving sustained and shared growth in the long run would be critical for reducing and maintaining low poverty rates on the continent. The Rest of Africa project therefore had a vision to contribute to the shared and sustained economic growth through increased trade, investment and industrial upgrading
 
The project was envisaged to manage a number of initiatives falling within three broad categories. It aimed to contribute to increased intra-Africa trade, investment and industry cooperation within State Owned Enterprise (SOE) dominated industries, and to firms within the economy at large. South Africa, as the strongest regional economy, needed to consciously put the region on a mutually beneficial growth path. It was envisaged that this project would be executed in collaboration with key government and non-governmental stakeholders.

Mr Mpofu said that to effectively address its high poverty levels, Africa needed to build its industrial base. This could be achieved by leveraging the investment and procurement expenditure of SOEs and multinational corporations in Africa’s infrastructure and resource sectors to build local supplier industries. This would benefit firms and national economies. However supplier development on the continent requires collaboration between countries and the public and private sector. The Department of Public Enterprises (DPE) suggested that it could share the tools and methodologies developed for South Africa’s competitive supplier development programme with countries/firms looking to build their local supplier base. It was in the process of identifying potential areas.  The leading SOEs had a relatively large operational and capital project procurement spend, and could build industries that would answer stable, repetitive, high value and high volume demand. The South African government had also high levels of respect and credibility amongst fellow African states and there was also a high private sector interest and involvement on the continent. In order for South Africa to expand on its capacity build programmes, it would have to import from Africa due to lack of capacity to meet the demand. Therefore the JPF created opportunities for South African firms to collaborate with African Countries with under utilised capacity.  There would be a particular emphasis on the energy, transport and ICT sectors.  The main agenda of the project was to effectively address its high poverty levels, and build Africa’s industrial base.

Discussion
The Chairperson noted that she did not quite understand what the Department was trying to achieve as nothing was really being implemented. The Department did not provide a sense to what extent it had started work on the project, and the Department was not really expanding the economic or industrial potential of the country. The Committee needed to know the extent in which the Department gave assurance to major suppliers that they would not be tied down.  

Mr Mpofu replied that the Department had a detailed project document and needed to find the funding for the project. Part of the roll out of the benchmarking programme was that the Department identified a need for a survey of African countries, which looked at the supply base and the big buyers. There also needed to be a survey of whether the big buyers would be willing to invest in South Africa’s local economy.  The Committee should note that it was very difficult to pre select suppliers and the Department was very honest to suppliers and assured them that delivery could take place.

Mr C Wang (ANC) concurred with the Chairperson, and said that the matter was a global initiative of importing global skills and placing them in the local market. It was however too limiting to focus only on the African market, and the Department needed to think globally. The project was also similar to the projects preformed by the Department of Trade and Industry (dti) and the Department of Foreign Affairs (DFA). It should also be noted that many SOEs had failed to focus on a joint direction and the Committee had not seen anything from the Department since the JPF project was launched.

The Chairperson agreed that the Department’s programme tended to overlap with those of the dti and DFA, and it was a huge problem.  These other two departments would, in her opinion, be better suited to such a programme. There were other similar initiatives happening across South Africa, and the major challenge would be in the practical effect of what the Department was trying to achieve. There were also so many different role players with different interests, and many of the role players would not participate in the programmes unless the investment was cost effective. Much of the Departmental proposals would benefit South African suppliers far better than local suppliers in the foreign countries. If the Department wanted to benefit African suppliers, then they would need to have a free trade zone for African suppliers. That would be far more effective than the very ambitious initiatives that the Department was currently trying to achieve. The issue of licensing should also be taken into consideration.  Far more could be gained politically. However many other countries were suspicious of South Africa’s intentions. The Department needed to ensure that the rest of Africa had a foothold in the South African economy.

Mr Mpofu replied that South African SOEs were coming to grips with the Competitive Supplier Development Programme (CSDP) and the Department was very conscious of trying to get a fairly good output from the South African side.  The Department needed to translate the theoretical constructs in order to show what had been achieved. The Department was not trying to duplicate functions with the Department of Trade and Industry and the Department of Foreign Affairs. There were many companies in the African continent that did not have the capacity to provide the principal mass to build the local industry. Therefore there was a definite need for African companies to partner with other similar companies on the continent in order to build the principal mass. The Department’s intent was to find sufficient suppliers for the SOEs; however the process was not for the SOEs but for the broader industry. In order to succeed the Department needed to work closely with the DTI and DFA. 

Mr Mpofu added that one of the main challenges was making sure that the State’s objectives were achieved at the same time that benefits to the commercial entities were achieved. The Department would mitigate the obligation if it was able to bring on board a number of viable organisations with the potential to supply. It was true that many African countries saw South Africa with a suspicious eye. However most African countries were very receptive to South Africa, and South Africa should be aware that they were not the only countries who were planning to invest. The Department was presenting the project as an Africa-wide project, and this would eliminate the legitimacy barrier.  Mr Mpofu then addressed the comments about the free trade zone, stating that free trade agreements were meaningless when a country did not have the capacity. The Department’s focus was to showcase the many different suppliers, who could perform a number of different projects, and benchmark this against the other African suppliers, then build the local suppliers.  If the Department engaged on free trade, it would be encroaching on the dti’s function.

The licencing matter was one that required further engagement in order to determine what could be done from the South African side, in terms of acquiring material from African suppliers.  In many cases many of the suppliers could be local traders, and the Department was emphasising the building of the capacity of the local supplier, and lobbying for any changes in policy. The challenge was that the matter was in the hands of dti, but DPE could state how one could leverage the SOEs to build the economy. 

Adoption of Reports
Members adopted the draft budget report and discussed the PBMR oversight visit report.