Hansard: Appropriation Bill : Debate on Budget Vote No 35 – Trade and Industry

House: National Assembly

Date of Meeting: 03 May 2010

Summary

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Minutes

TUESDAY, 4 MAY 2010

PROCEEDINGS OF EXTENDED PUBLIC COMMITTEE – CHAMBER OF THE OLD ASSEMBLY

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Members of the Extended Public Committee met in the Old Assembly Chamber at 16:45.

The Acting Chairperson Mr A Mlangeni, as Chairperson, took the Chair and requested members to observe a moment of silence for prayers or meditation.

APPROPRIATION BILL

Debate on Budget Vote No 35 – Trade and Industry.

The MINISTER OF TRADE AND INDUSTRY: Chairperson, Deputy Ministers here present, hon members, chairpersons and members of the portfolio committee, ladies and gentlemen, when the Department of Trade and Industry presented its Budget Vote last year, the world economy was in the midst of the worst economic crisis since the Great Depression of the 1930s.

We advised then that what was commonly referred to as a global financial crisis, was fast becoming a deep, real economy and jobs crisis. Our concern at the time was not misplaced, as hon members know, hundreds of thousands of jobs were lost in our economy during the past year.

One of the major lessons that the global recession taught us was that the South African economy, despite the consistent growth it had experienced before the recession, was not as resilient to exogenous shocks as a number of other key developing countries.

Although we saw signs of recovery during the last two quarters of 2009, with a GDP growth rate of 0,9% in the third quarter and 3,2% in the fourth quarter, the recovery is only just beginning and remains fragile and uneven.

Real risks remain for the South African economy in a context where there is still no guarantee against double-dip recession in the world economy.

The main risks to the South African economy can be identified as arising from the structural constraint evident even in the period of growth before the recession, and this is the constraint of unsustainable growth based on credit extension and consumption, without concomitant growth, in production sectors.

In such a context, it is imperative that we redouble efforts to address the structural imbalances that continue to constrain our economy from reaching its undoubted potential. Addressing these structural shortcomings demands from us decisive action to place our economy on a new growth path, a path capable of delivering to our people decent work and sustainable livelihoods on a larger scale than hitherto achieved.

The dti has a clear mandate to create an enabling environment for these structural changes to take place. As a department, we must therefore actively engage in the task of structural reform; a task which is multifaceted in character and requires that we act in concert with the cluster of economic and employment departments in government, and in partnership with both business and organised labour.

Bringing about the structural changes necessary is a complex task. It requires policy cohesion, co-ordination with other economic policies and integration of functions and implementation programmes. The programmes of our department must interface with the range of social and economic development strategies across all spheres of government.

Hon Members, the extent of the impact of the global economic crisis and its aftermath on industrial capacity in South Africa, is a matter for concern. The secondary sector declined by 21,8% and 22,1% in the fourth quarter of 2008 and first quarter of 2009, respectively, with the decline in manufacturing being most severe and ranging from 9,4% to 21,8% in the fourth quarter.

More specifically, export-oriented manufacturing industries such as motor vehicles, parts and accessories and durable goods in general, showed the greatest decline, exposing further the structural weaknesses which limit our ability to absorb exogenous shocks.

This crisis also had a massive impact on employment in the primary and secondary sectors where there was a loss of 870 000 jobs year-on-year. The fact that the wholesale and retail trade and manufacturing industries experienced the greatest declines in employment, registering employment losses of 291 000 and 220 000 jobs respectively, serves only to underscore the importance of these sectors as a source of work for our people.

As indicated earlier, South Africa's recent growth was driven to too great an extent by unsustainable growth in consumption, fuelled by credit extension. Between 1994 and 2008, consumption-driven sectors grew by an average of 7,7% annually, compared with the production-driven sectors which grew by only 2,9%.

Job creation in the retail sector, underpinned by unsustainable credit extension rather than growth in the production side of the economy, is inherently precarious. Moreover, even when our average annual growth peaked at 5,1% between 2005 and 2007, unemployment did not fall below 22,8% of the economically active population. This highlights the need for us to make structural changes capable of making a sizeable dent into what is, in fact, a structural unemployment crisis that is confronting us.

Chairperson, in the light of the global economic crisis and the danger it presented to the real economy, we were called upon to act decisively and I believe, as a country, we achieved reasonable success through the framework response to the international economic crisis.

The R2,4 billion Training Lay-off Scheme was established as an alternative to retrenchment, to allow workers who would otherwise have been laid off to prepare themselves to take up employment opportunities as the recession ebbed. In addition, the IDC set aside R6,2 billion to assist firms distressed as a consequence of the crisis, in key targeted sectors.

Under the framework response, a number of manufacturing incentives were also fast-tracked, whilst the National Credit Act undoubtedly played and will continue to play a role in defending consumers against the worst excesses of risky lending practices.

However, our fundamental task, as I have been arguing, involves much more than responding to the challenges posed by the cyclical downturn. It requires that we as the dti, as part of government as a whole, impact systematically and significantly in placing us on a new growth path, one which creates decent work on a larger scale than before.

As a country, South Africa has no alternative to the course of action we propose. In this regard, we need to recognise that manufacturing and other production driven sectors of the economy are the engines of long-term sustainable growth and job creation in developing countries such as our own.

I wish to contend that there is by now an abundant body of evidence from academic research, and one could cite writers such as Ha Joon Chang or Erik Reinart to establish the point that there has never been a case anywhere, or at any time in economic history, of an economy setting out on a growth path characterised by increasing, as distinct from diminishing, returns to scale without active policies to nurture and defend nascent infant industries in targeted sectors.

Industrial policy and the Industrial Policy Action Plan, Ipap 2, in particular, will therefore be a critical pillar of the government's strategy for economic growth and the creation of decent work.

Hon members, industrial policy is ultimately about government making and implementing policy choices, in the absence of which we will continue on the same path – a path that has failed to sufficiently reduce the systematic unemployment that we face and also to reduce poverty and inequality.

The Ipap 2, as it has become known, builds on the National Industrial Policy Framework and the 2007-08 Ipap 1. It represents a significant step forward in scaling up our efforts to promote long-term industrialisation and industrial diversification. It will contribute to the structural changes needed by expanding production in value-added sectors with high employment and growth multipliers.

The Action Plan accordingly places emphasis on more labour absorbing production and services sectors, on increased participation of historically disadvantaged people and regions in our economy and aims to facilitate, in the medium term, South Africa's contribution to industrial development in the African region. If we succeed, as we must, we will become a more competitive economy in domestic and export markets

The Industrial Policy Action Plan is a product of the work of the economic sectors and employment cluster of Ministers. Industrial policy and the Ipap 2 in particular, while a cornerstone of a new growth path, forms part of a larger set of interrelated policies and strategies, which are being integrated through work led by the Department of Economic Development and Minister Ebrahim Patel.

Other elements of our strategy will include the need for mutually reinforcing alignment between macro and micro policies; the implementation of policies to raise the levels of production and create decent work in agriculture, mining and construction; the implementation of a ten-year innovation plan towards a knowledge- based economy; a concerted focus on rural development and skills development; and the development of energy and water strategies.

Very significantly, the performance agreement I signed with the President on Friday 30 April, also requires us to work with other Ministers in the cluster to produce a clear, detailed, costed and multi-pronged strategy to reduce youth unemployment. This is a very important priority focus and hon members can take I that we will be devoting considerable attention to it as we move forward.

Our Ipap 2 has been subjected to extensive public hearings by the Portfolio Committee on Trade and Industry, and I want to congratulate the chairperson and members of the committee for creating an opportunity for engagement and comment by most of the relevant stakeholders.

I look forward to engaging with your report in detail in due course, but for now I wish to note that the majority by far have expressed broad support for what we have outlined in Ipap 2. Of course, there have been points of criticism. Mostly these have been constructive. As we have said, Ipap 2 is a living document which we intend to amend each year; and certainly, we intend to incorporate all relevant comments and suggestions as far as possible.

Perhaps, the most persistent comment from those who have doubted that we should set out on this journey is the claim that given the potential complexity of implementation, Ipap 2 is a task beyond the capacity of government and this department. This view misses one critical point. The Ipap 2 is a plan generated by the economic cluster of Ministers and not by the dti in isolation.

The Ipap 2 document, in fact, sets out very clearly which department, agency or state-owned enterprise is responsible for carrying forward each action plan and intervention. The new monitoring and evaluation system in government moreover will, I believe, provides us with an additional mechanism to hold each other accountable for delivery on what we have agreed to do.

Certainly, building capacity and strengthening co-ordination are necessary to advance our objectives and Ipap 2 in particular. But we need to see these as tasks that will be undertaken as we implement Ipap 2, not as something that miraculously has to exist in advance of any implementation.

In this regard, the DTIis now firmly in implementation mode. The first quarter in the implementation schedule is now well underway and we have already begun holding regular internal implementation meetings. The performance agreement we have signed with the President also holds relevant economic clusters collectively responsible for implementation of defined output targets.

As hon members know, Ipap 2, has four horizontal or transversal themes around which a number of interventions are built; these are industrial financing, procurement, competition policy and developmental trade policies. It has thirteen vertical sector strategies clustered into sectors whose potential requires new and sustained support.

Ipap is premised on the principle that, like all policies, its true value will be found in the outcomes of practice and therefore is based on the principle of learning by doing. It will be the subject of continuous monitoring and evaluation by government, ongoing oversight and interrogation by the National Assembly and be taken forward and implemented in strengthened consultation, engagement and implementation by government and its social partners.

Chairperson, trade policy is a key instrument that must be used in a manner that supports our industrial policy objectives. Our new trade policy has been circulated for public comment and the

Portfolio Committee on Trade and Industry has held hearings on this important document. The policy document outlines how trade policy and strategy in South Africa can make a contribution to the objectives of upgrading and diversifying our economic base.

This policy framework is set out in the context of the development of the overall growth path for South Africa that seeks to accelerate economic growth and create decent jobs. One of the immediate, but also strategic, challenges facing us is to intensify our efforts to deepen developmental regional integration in Southern Africa as well as extend integration across the African continent.

We have recently returned from the commemoration of the centenary of the Southern African Customs Union, Sacu, in Windhoek, where the Heads of State and Government of the five member countries, committed themselves to meet at another summit before the end of July. We, as South Africa, have long argued that Sacu is at a crossroads; it can move to collectively transform itself from an organisation held together by a common external tariff and revenue- sharing formula into a vehicle for deeper regional integration.

This will require reaching at least some common understanding of the trajectory of regional industrial development and the direction and content of trade negotiations. If we cannot move forward in this direction - we have argued - Sacu will find itself driven by circumstances into a looser arrangement more like a free trade area than a customs union.

The vision and mission statements signed by the heads of state in Windhoek last month indicate that all members agree on pursuing the first option. But much more concrete work needs to be done if we are to successfully translate these broad declaratory positions into concrete programmes. This is an issue which I would suggest hon members may want to monitor closely as we proceed.

As far as SADC is concerned, we need to acknowledge that the Region Indicative Strategic Development Programme, RISDP, target of achieving a customs union by 2010 has been missed. Our view is that we need for the moment to focus on the many complex tasks to consolidate the free trade area, which we launched in 2008, and to complement this work with advances in the real economy and infrastructure development programmes.

Another priority for us is to broaden African integration through advancing the agreed process to negotiate a Trilateral SADC-EAC-COMESA grand free trade area. Once established, this would bring into existence a free trade area literally from Cape to Cairo with 700 million people.

In addition, to pursuing these objectives, we will maintain the momentum of our strong bilateral co-operation with Africa. This means that we will embark on initiatives aimed at supporting infrastructure development, trade and investment projects where requested. A particular focus of our work will be the special development programme, which we are significantly jacking up.

Parliament has been requested to ratify the bilateral investment treaty we have concluded with Zimbabwe. By providing enhanced legal protection for South African investors, this treaty will encourage new South African investment into Zimbabwe to underpin the latter's economic reform and development programme. At the same time, it will ensure that South African investors benefit from economic opportunities, which are now emerging in Zimbabwe.

Hon members, the government's trade strategy has long recognised the importance of the emerging economies of the South. The resilience of these economies, both during the recession and the current tentative return to growth, has brought into stark relief an important structural change taking place in the world economy. What has been confirmed during this crisis is the general continued strengthening and importance of newly emerging economies of what is now called "the Global South". Strengthening our trade and investment relations with these new poles of economic growth is imperative. What we seek, though, from countries with whom we enjoy excellent relations, is the new economic relationships that will differ in major respects from the traditional relationships of the past.

These new relationships, we hope, will be built on principles of partnership, complementarities, mutual benefit and co-operation. Our intention, simply put, is to ensure that the building of such new trading relations enables and allows us to diversify value-added production in our economy and to create decent work. We, therefore, want to identify complementarities in trade and investment relations with key countries Brazil, India, and China, among them, to support national industrial development.

Strategies are meaningless if not accompanied by an implementation plan. In this regard, our implementation efforts are beginning to bear fruit. Sacu signed a trade agreement with MERCOSUR last year; the first with another developing region. We hope that Parliament will soon ratify this agreement.

The Sacu and India Preferential Trade Agreement negotiations are continuing and we are confident that these will advance in the near future. Since the dawn of democracy, China has become our fastest- growing trading partner. This is indicative of the strong and constructive relationship we have enjoyed since democracy.

We are therefore optimistic that our engagement to develop a partnership for growth and development to promote value-added South African exports to China, and also to increase inward investment in projects such as mineral beneficiation, will all bear fruit.

On the multilateral front, the prospects in the near future for an outcome of the World Trade Organisation, WTO, Doha Round negotiations that meets the developmental mandate outlined in the 2001, appears increasingly remote. Given that elections are taking place in many of the key countries this year, we see little chance that the Doha Round will be concluded in 2010.

In the mean time, we will continue to work to strengthen the developing country alliances that have effectively changed the negotiating dynamic in the WTO. This dynamic has placed developing countries, for the first time in the history of the global trade system, at the centre of the negotiations. We will also in the course of this year pay greater attention to the trade aspects of the ongoing negotiations on climate change.

Hon members, exports and foreign direct investment are an important contributor to manufacturing and job creation in South Africa. We noted earlier the overall impact of the global economic crisis on manufacturing in South Africa. Our response to the crisis is not only directed at current challenges, but also seeks out what's best for long-term growth in sustainable manufacturing and exports. Exports must support our industrial policy approach in several ways.

The ACTING CHAIRPERSON (Mr M R Madikane): Hon Minister, you have one minute.

The MINISTER OF TRADE AND INDUSTRY: Well, I've got sections that deal with the rest of our investment promotion arrangements - we are targeting to attract R115 billion of investment. There are also sections that deal with a number of regulatory matters and also our small enterprise development programme, which will be elaborated on by Deputy Minister Ntuli. I also have a few points about BBBEE.

In conclusion, let me thank my colleagues, Deputy Minister MaNtuli, who is with us today and Deputy Minister Tobias-Pokolo, who is unfortunately ill. And I wish her a speedy recovery.

Let me also express my condolences to hon Radebe, who will be speaking after me, on the bereavement that he has suffered and wishing him well in this trying time.

Finally, I thank the staff of the DTI and associated institutions, as well as the chairperson of the portfolio committee and hon members for the ongoing engagements. Thank you very much. [Applause.]

The ACTING CHAIRPERSON (Mr M R Madikane): The next speaker, the hon Mr Radebe, will remain seated while delivering his speech, for personal reasons.

Mr B A RADEBE: Chairperson, hon Ministers and Deputy Ministers and members of this august House, last week, the people of South Africa celebrated 16 years of freedom. We all know that this freedom was not free: It was attained because of the relentless, selfless and heroic straggle of our people supported by the international community.

It is befitting that when we celebrate this freedom, we must not forget the sacrifices of our brothers and sisters on the African continent who didn't spare life or limb in the attainment of our noble goal of a united, nonracial, nonsexist, democratic and prosperous South Africa.

As the Zulu adage says...

IsiZulu:

Isihlahla asinyelwa.

English:

This simply means that once you have eaten a fruit from a tree, you cannot soil on or damage the tree because you will need its fruit or shade in the future. The wisdom behind this adage is more applicable when we reap the fruit of freedom, which is more mobility for the South African citizens, corporate or private, which was difficult during the years of oppression.

We all know that South Africa is one of the respected countriers in the international trade environment because of its competitive products and services. As we ascend, and mesmerise on the global stage, we must not forget our rules and the people who supported us during the dark days of apartheid. That is why we must take heed of the clarion call of the Freedom Charter, that there shall be peace and friendship in the world. That is why we must continuously struggle for a better South Africa, a better Africa and a better world.

The Ministry of Trade and Industry and the department are in a better position to ensure that there is a better Africa and a better world through a better and equitable global trade regime. This will be achieved through the participation in multilateral institutions such as the WTO, AU, Sadc and Sacu. The Ministry and the department must continuously strive for the reform of these institutions so that the development agenda will always be a driving force behind these institutions.

The problems of poverty, unemployment and underdevelopment should always be challenged and undermined. The problem of food insecurity in sub-Saharan Africa should be addressed by removing the predatory farm subsidies in the developed countries, which amounted to US$800 billion in the European economic zone alone in the year 2008.

These agricultural subsidies of the EU are almost equal to the GDP, of South Africa. This shows that the farmers of South Africa will stand little chance of competing equally with the farmers of the developed countries. That is why the Ministry must ensure that the Doha Round of the WTO produces a developmental outcome.

The Ministry must ensure that there is regional integration through harmonisation of policies and trade agreements within the region. That is why the portfolio committee appreciates the bilateral investment treaty between South Africa and Zimbabwe. This treaty promotes investment protection of the citizens of both courtiers, which will lead to certainty in the trade and investment between the two countries without stifling the policy space of each country.

The regional integration should be strengthened through special development projects in the transport and energy infrastructure. The New Partnership for Africa's Development, Nepad, projects should lead to the integration of an economic community of 700 million people of Africa. In the South-South relations, South Africa will benefit from an economic market of about 3 billion people.

Since the emerging markets continue to grow at a rate of more than 7% per annum, it is appreciated that free trade agreements are being negotiated with India and China. This will demand that we adopt a developmental approach in tariff negotiations so that we lower and eliminate the tariffs on those products that will lower the input costs in our industrial value chain. This will also mean that we introduce tariffs where our local industry is threatened by cheap imports. This strategic approach will ensure that our trade policy is determined by our local industrial policy.

To attain this objective of reorganising the world trade order, we should strive to build a developmental state which is democratic, people-driven and people-centred. This can be achieved through a deployment of a new public sector cadre who is alert to the call of high service to the people and has a caring attitude in dealing with the citizens.

It is a great pleasure to note that this new public sector cadre is already deployed in the Department of Trade and Industry. In the past five years, the department was able to get unqualified audit reports from the Auditor-General. This means that the department knows that in the struggle against poverty, the resources commanded by the government might be used effectively and efficiently.

Since the ANC, in its January 8 statement, called 2010 the year of effective service delivery to the people, we will continue to agitate for the department to maintain the good corporate environment it has created over the years.

The director-general and his staff must be commended for attaining a 99% rate of the budget expenditure in the previous two financial years. This means that the resources deployed by Parliament are reaching the people who are deserving of it.

In the struggle against corruption and fraud, the department is leading the way because it has achieved 100% compliance with the financial interest disclosure of its senior management. This will go a long way in limiting "tenderpreneurship" and conflict of interest in the awarding of tenders.

The department has also concluded more than 96% of performance agreements with senior management. That is why it is able to get clean audits year after year.

We have noticed that the Companies and Intellectual Property Registration Office, Cipro, was embroiled in a tender controversy in the previous year. The Auditor-General noticed that there was insider information trading between the successful bidder and the staff of Cipro or the State Information and Technology Agency, Sita, because of similarities in the information of the tenderer and the financial specifications of the tender documents, which were not shared with other bidders.

We, in the ANC, take a strong exception to this incident. That is why we support the Ministry and the department in nipping the problem in the bud. We appreciate that the department didn't play to the public gallery; instead, it played by the book.

We also appreciate that the whistle blowers were reinstated and protected.

We have noticed that the budget of the department nominally increased by 1%. This effectively means that the budget is lower than the previous year, while the demands of the department have increased, for example: In October the Consumer Protection Act will be implemented; the National Consumer Commission, NCC, will be expected to have outreach programmes, which will mean that more inspectors must be appointed.

Since the implementation of the National Credit Act, the debt councillors are expected to help those people who are in serious debt, but it was observed that some of the debt councillors did not do their work diligently. The National Credit Regulator, NCR, must ensure uniformity in the sector.

The magistrate court in Port Elizabeth must be applauded for the landmark ruling against the credit provider who was reckless in awarding a bond of R350 000 to a pensioner, who is 81 and could not afford to repay the bond. Let's hope the credit provider will not pay performance bonuses to the employee who approved this bond.

It is this greed which led to the international financial and economic meltdown in 2008. It is the National Credit Act which cushioned South Africa against the global financial meltdown. That is why Parliament must ensure that entities like the National Credit Tribunal, NCT, and the National Credit Regulator are well resourced to execute their mandates. This is in line with the concept of building a developmental state which is people-centred and people-driven. The portfolio committee will agitate for an increased budget allocation for the department, which must be higher than the inflation rate.

With all its shortcomings, the ANC will support the Budget Vote of the Department of Trade and Industry because it remains a viable tool in stimulating better international trade and a better regulatory environment in our domestic economy. The ANC supports the Budget Vote. I thank you. [Applause.]

Mr S J F MARAIS: Chairperson, this portfolio and its Budget holds the key, in many respects, to whether our economy will recover and prosper in the future and whether sustainable jobs will be created, not only to satisfy the sincere needs and requirements of the South African electorate, but also to increase the tax revenue base and to decrease the burden of various forms of grants on the fiscus.

Minister Davies and his Director-General must be complimented for being approachable on many issues of concern and interest to the electorate; and in the same vain, our committee chairperson, hon Fubbs.

The task we are facing with this Budget is to evaluate whether this budget represents the best value for money to the taxpayers.

Afrikaans:

Die Departement van Handel en Nywerheid se verantwoordelikheid vir die bestuur van kostesentrums het van 19 tot 13 verminder, met die gepaardgaande vermindering in die Begroting, na die oordrag van funksies na die Departement van Ekonomiese Ontwikkeling. Hopelik sal dit meebring dat die gevalle van twyfelagtige bestuursbesluite en optrede ook sal verminder.

Minister, hoewel u aan die komitee die rasionaal van die funksie-oordragte verduidelik het, maak sommiges nie baie sin nie. Byvoorbeeld, hoewel die Nywerheidsontwikkelingskorporasie, 'n rol het in die ontwikkelingsfinansiering, in terme van laer rentekoerse en hoër risiko lenings, is die eenheid krities belangrik vir volhoubare kommersiële nywerheidsontwikkeling. Dit staan sentraal tot die sukses van die Aksieplan vir die Nywerheidsbeleid, Ipap 2.

Tot op hede het die Nywerheidsontwikkelingskorporasie sy voortbestaan op kommersiële beginsels geregverdig, en moet gevra word of ons later groot herkapitaliseringsversoeke gaan ontvang. Hoe volhoubaar sal dit wees en hoe gaan dit die historiese kernrol van die Nywerheidsontwikkelingskorporasie beinvloed?

Minister, hoewel u meld dat julle nie in silo's werk en dink nie en dat daar baie oorvleueling gaan wees tussen die Departement van Ekonomiese Ontwikkeling en Departement van Handel en Nywerheid, moet daar tog in die laaste geval, iemand verantwoordelik wees vir so 'n essensiële element van handels- en nywerheidsontwikkeling en -groei. Wie sal dit wees, u of Minister Patel?

English:

The Department of Trade and Industry has shown that capacity challenges do exist that can compromise the ability of the DTI to effectively respond to the needs and requirements from the industries to ensure an environment where South African companies can be globally competitive.

The dilemma with Cipro, and the awarding of the Enterprise Content Management, ECM, contract to Valor IT, is but one example where the DTI has dealt with this ineffectively. We are still of the opinion you could have acted earlier, should have protected the whistle blowers much better, and that you are facing a real problem in meeting the deadlines when continuing with Valor IT as the contract party, while the Auditor-General clearly reported and I quote:

The contract with the successful bidder should be reconsidered and those responsible should be held accountable.

My colleague will further expand on that later.

This Budget must address, amongst other things, the following. Ipap 2 was long awaited after Ipap 1 did not meet the expectations and did not deliver the environment for industries to develop, drive employment and flourish to be the catalyst for renewed economic development and growth.

The key objectives of Ipap 2 must be to maximise sustainable job creation, and to optimise profitable production to attract more private and foreign direct investments, while maximising, foreign exchange, forex, earnings via exports. This will also alleviate the pressure on our balance of payments. While industry stakeholders are encouraged by Ipap 2, and while there are elements in support of industrial and employment rejuvenation, concerns still prevail.

One must question the viability of the investment incentives under the Automotive Production and Development Programme for vehicle assemblers. Of vehicles exported, an average 70% is of foreign content, thus there is inadequate downstream beneficiation.

Substantially more sustainable employment opportunities are offered in component manufacturing than with vehicle assembling. Shouldn't we rather invest in and focus more on the development of competitive advantages with mass manufacturing of quality vehicle components, like the catalytic converters?

Afrikaans:

Die onvermoë van die huidige vervoerstelsel wat pad, spoor en hawens insluit, om groot uitvoertoenames te kan hanteer, is 'n bron van kommer. Ondangs die versekering, is dit ook onduidelik hoe die verskillende departementele begrotings Ipap 2 sal ondersteun. Die afwesigheid van spoor as 'n lewensvatbare vragvervoer alternatief, asook die kostes en vertragings by vraghouerhantering in hawens, dra veral by dat Suid-Afrikaanse vervaardigers nie globaal kompeterend genoeg kan wees om sterk groei en werkskepping te fasiliteer nie.

'n Belangrike komponent van die nywerheidsontwikkelingsbeleid en aksieplanne, moet alle vestiging van volhoubare industriële ontwikkelingsones wees, met die fokus op optimale werkskepping en

uitvoergeleenthede. Die huidige industriële ontwikkelingsones lewer nie die gewenste uitkomste nie, en daar sal ernstig na die suksesresepte van uitvoerverwerking en werkskepping sones oor die wêreld gekyk moet word. Die vestiging van velerlei uitvoerverwerkingen werkskepping sones sal ook die werkloosheids- en gepaardgaande maatskaplike probleme in die stedelike en plattelandse gebiede kan help aanspreek.

Te min word gedoen vir aansporing vir volhoubare werkskepping, uitvoer bevordering en vir uitvoertransaksies deur die privaatsektor. Die huidige invoer- en uitvoertariefbeleid is ook nie altyd effektief in hul bystand tot Suid-Afrikaanse organisasies nie. Te min klem word ook geplaas op landbou verwante bedrywe vir voedselsekerheid en om valuta te verdien.

English:

The current BBBEE legislation is not achieving the objective of broad-based beneficiation, and the emphasis is too much on black ownership and shareholding. This results in narrow-based beneficiation rather than broad-based black empowerment. This contributed to the phenomenon called "tenderpreneurs" and corruption in all spheres of society.

The current Act is also not aligned with other relevant legislation, eg the Preferential Procurement Act, which again leads to confusion, misinterpretation and corruption. The Act should be re-evaluated in its totality, in the absence of which the majority of black citizens will just still be kept dependent on state grants and state hand-outs.

The proof of skills development and transfer of knowledge should be a guaranteed part of any BEE deal and transaction. The current failure of the Act's intentions is largely because of the lack of motivation for acquiring relevant skills and knowledge.

While interactive gambling has not been legalised in South Africa, we need finalisation and clarity on the uncertainty surround the legitimacy of interactive gambling within the Sacu region, the advertising of interactive gambling in South Africa and its impact on our economy. Some of these websites are allegedly being operated from within South Africa, only with the official address in a Sacu state. What is the effect of the outflow of funds due to illegal gambling transactions on our balance of payments, especially by means of credit card transactions?

The performance of the Lotteries Board, the Distribution Trust Fund and the distribution agencies have been the problem children of DTI for quite some time. There were expectations that the new Lotteries Board would make a substantial difference to the pay-out performance to worthy applicants. I hope the unwillingness of the Minister to accept worthy nominations from the DA will not haunt him and the DTI later on.

It is just not good enough that the Lotteries Board pride themselves for paying out R1,9 billion over the last year, when there were already unpaid amounts of R7 billion that accumulated last year. That excludes the contributions to the trust fund over the last year from the Lotto operator. One must truly question the ability of the Lotteries Board to effectively channel the benefits to worthy beneficiaries.

Isn't it time that a more effective system be investigated? As an example, a strategic portion of, say, 50% should be transferred to the South African Sport Confederation and Olympic Committee, SASCOC, as the custodians of all sport federations, who must ensure that sport at all levels get the benefit, in line with the South African sport strategy, to boost participation at all levels and to optimise the medal performance of all future national and Proteacolour representatives.

The St Giles Association for the Physically Disabled in Johannesburg is currently facing closure as a result of poor responses, judgement and actions by the Lotteries Board.

Afrikaans:

Die proses en doelwitte met die aangaan van bilaterale beleggings- en handelsooreenkomste moet heroorweeg word. Daar is min sin in om 'n swak bilaterale ooreenkoms soos die onlangse Suid-Afrika-Zimbabwe beleggingsooreenkoms aan die komitee en die Parlement voor te hou, indien dit reeds aangegaan en geteken is.

Hierdie getekende ooreenkoms wat met die Zimbabwe African National Union-Patriotic Front, ZANU-PF-geleide regering onderhandel is, spesifiek artikel 11, is nie in die beste belange van Suid-Afrikaanse beleggers nie en het ook nie die uitsprake van onder andere, die SAOG-tribunaal en die registrering van die uitspraak in Suid-Afrikaanse howe, in ag geneem nie. Dit stuur verkeerde boodskappe uit aan Suid-Afrikaanse beleggers, asook van ander Afrika lande oor Sadu-, SAOG- en Partnership for Africa's Development, Nepad-prosesse, en regsuitsprake wat selektief deur die departement aangehoor en gebruik word.

Hoewel die Departement van Handel en Nywerheid baie gevorder het onder die minister Davies, is daar nog baie wat gedoen moet word, alvorens Suid-Afrika se nywerheids- en industriële kapasiteit genoegsaam ontwikkeld sal wees, wat moet lei tot baie sterkter werkskepping, ekonomiese ontwikkeling en globale kompeterendheid. Ek dank u. [Applous.]

MS C M P KOTSI


Mr S J F MARAIS

Ms C M P KOTSI: Chairperson, hon Minister and Deputy Ministers present, GDP growth in 2007 was 5%. In 2008 it was 5,1% and last year, as a result of the sharp deterioration in consumer and business confidence, it fell to 3,1%. Economists are hopeful that a 3% growth rate is still on track for 2010. However, the question that is uppermost in our minds is what will happen in the construction industry after the World Cup. Will it be able to sustain itself beyond 2010? This is the billion dollar question with regard to what will happen in the construction industry: Will it directly influence the outcome in our economy?

In response to the severe economic downturn, the department has responded with a scaled-up industrial policy and action plan called Ipap 2. Ipap 2 seeks to promote a boost to the manufacturing of vehicles, chemicals, metals, clothing and textiles, and so on.

On the nonmanufacturing side, tourism is being promoted. It is clear that government will have to do something drastic to create economic growth. Therefore the success of Ipap 2 beyond the three years is very important and key.

The figures show that while our exports grew to R448 billion in 2008, they fell back to the 2007 level of R350 billion in 2009. The export market is becoming very complicated because of the profound alterations and shifts. Therefore, to premise our economy growth on the basis of substantially increasing our manufactured exports, a conventional approach to the industry in South Africa may boomerang on us.

If plan A, which is Ipap 2, does not come up to expectations, Minister, does the department have Plan B and Plan C because jobs are very important in our country.

There is another problem with banking on exports of manufactured goods, as we heard during the public hearings on Ipap 2. Short run capital inflows in South Africa keep the rand at relative strength in relation to the dollar and the euro. This is a clear impediment on the exports. Our strong rand and a higher domestic inflation relative to developed economies, add to the difficulty in stimulating exports of manufactured products.

Car manufacturing is in trouble all over the world and South Africa's manufacturers have suffered more than the other manufacturers. According to a specialist, Lamprecht, almost 10 million fewer vehicles are being manufactured globally. South Africa is one of the countries where sales have declined most.

Wouldn't it make greater economic sense to be an active player in the supply chain than to attempt to be a long-term manufacturer of the total product? With electricity and other costs going up, will manufacturers remain in South Africa for the long haul if cost benefits decline?

If, on top of these considerations, we factor in global warming and climate change, the impact of which will be severe in South Africa, does it not make sense to orchestrate support for South Africa' electric car? As Cope we are not opposed to this, but this project must consider all factors.

While Cope supports the help being given to companies that are in distress, the Minister needs to assure us that these companies indeed have a long-term prospect and, therefore, are deserving of support. In June of last year seven companies were thrown a lifeline worth R500 million by the IDC. Government had also set aside R3 billion to help other companies in distress.

We would like the Minister to inform the House how all these companies in distress were faring, and what their long-term prospects looked like. It would be very problematic to build our economy and hopes on a shaky foundation.

Mr Minister, with regard to the dire issue of the IDC being moved to the Economic Development Department, EDD, where is the accountability when the IDC represents the main entity of the flagship programme, Ipap 2?

It has been a long tripartite alliance ambition to diversify the economy away from its dependence on mineral exports and move it towards job creation. South Africa's position on global economy is fragile, with Cosatu lobbying for protectionism, and the business community lobbying for the deliberate undervaluing of the rand to promote exports and inhibit imports.

The success of this department will lie in finding a solution that will benefit both the business environment and the labour market in South Africa.

Another group that has emerged as a major influence is the Black Management Forum. As we can see, the economic atmosphere is one of various interests, factors and institutions. This department has to create an effective method to meet these needs while emphasising economic growth.

It seems to us that the department is trying to emulate the Asian economies to achieve miraculous growth. Unlike these Asian tigers, we have certain big problems. In the first instance, we have not achieved social cohesion because, as a country, we do not understand its economic significance. Therefore we have not strived very hard to make it an important economic goal. One area in which we can certainly emulate Asian markets is in stimulating domestic sales. We can do this by offering buyers subsidies for the purchase of durable consumer products that are fully manufactured in South Africa.

We want to encourage the government to provide for ecohousing, co-ownership, cohousing and modular housing to keep the construction sector busy even beyond 2010. Housing construction must be used to drive economic growth, as well as improve the welfare of our people in the country. The domestic market must be encouraged to grow so that manufacturers can have a reasonable market to supply. At the same time the economy needs to grow to create job opportunities. With the loss of about 900 jobs in the last year ... [Time expired.] [Applause.]

Ms S P LEBENYA-NTANZI


Ms C M P KOTSI

Ms S P LEBENYA-NTANZI: Chairperson, hon Minister, hon members, the IFP notes with great concern that the transition from the Mbeki administration to the incumbent Zuma administration has shown that the more things change, the more they remain the same.

Despite all the radicalism of Polokwane and the announced policy shift, what we are witnessing two years on is a startling continuity. [Interjections.] I will spell out its benefits as well as its drawbacks.

To prove this point as a background to my contribution to the debate on the current Department of Trade and Industry budget, I will quote the Finance Minister's recent pledge to –

… maintain prudent macroeconomic policies that promote a favourable environment for investment and job creation through low stable inflation and interest rates.

Among other policy announcements, the Minister confirmed an exchange rate policy that will further ease the way for imports while making life more onerous for our exporters. The obvious outcome is a growing current account deficit.

The Minister of Finance showed a great deal of innovation which was mirrored by his colleague at the Department of Trade and Industry, Minister Rob Davies, in the field of youth employment. The government is planning to stimulate it by way of subsidising youth workers' wages by allowing employers to claim back part of such wages through the tax system.

The IFP welcomes this policy as an example of job creation with a direct involvement of a job-creating private sector, rather than a bland government intervention. After all, the EPWP, which has been the flagship government policy in the field of job creation until now, has proved to be more of a welfare-promoting venture than a job-creating venture. It has also been proved to be inculcating further dependency on the state by exaggerating its role in job creation.

As we know, job opportunities created by the EPWP tend to be of a short nature, lasting a month and a half on average. During such a short period, little or no transfer of marketable skills can possibly take place. The fact that the government counts job opportunities separately, even if they are afforded to the same beneficiaries, means that the total number of such jobs is vastly exaggerated.

We believe that the proposal for a wage subsidy to support youth employment could inspire economic growth. The IFP has in the past repeatedly raised concerns about South Africa's lack of leadership and direction, especially on the economic front where there is a lack of economic vision and a lack of a clear, crisp and coherent industrial policy.

It is with this in mind that the IFP is concerned that the Minister has not outlined clearly how the new Industrial Policy Action Plan 2, or Ipap 2 as it is commonly referred to, will be aligned with other departments. It is also worrying that it has not been made clear how this plan will be resourced.

When the Minister made the statement on Ipap 2 in Parliament early this year, the IFP supported the good initiative by the Minister and the department. But in terms of its support for a new growth plan and for stimulating industry as part of the Department's industrial policy action plan, we wonder why priority is not given to small-scale agriculture. This would present an opportunity to speed up land reform through more business-friendly measures than the recently resuscitated threat to expropriate commercially viable farm land.

Furthermore, the vision of Ipap 2 is to create 2,4 million direct and indirect decent jobs is definitely a step in the right direction. However, we sincerely hope that these ambitious plans will not remain a mere wish list, but that will be a significant step forward in scaling up our efforts to promote long-term industrialisation and industrial diversification.

In addition to our concern over Ipap 2, Cipro remains a problem and seems to be somewhat dysfunctional with its registration of both businesses and intellectual property rights. Cipro, with its current modus operandi, will only lead to a slower economic recovery for the country. Measures must be put in place to rectify their shortcomings and the slow turnaround times for business registration.

In conclusion, I would like to make one last comment about a threat to our economy ... The IFP will support this Budget. I thank you. [Time expired.]

MS J L FUBBS


Ms S P LEBENYA-NTANZI

Ms J L FUBBS: Chairperson, hon Minister and Deputy Minster, hon members of this House, colleagues and comrades, the Trade and Industry budget has been structured to support productive investment; regeneration of industry underpinned by a strategic trade direction; and a suite of standards, quality assurances, accreditation and metrology. Many of us began to understand metrology as a kilo of beef in South Africa also being a kilo of beef in Europe. The budget objectives are intended to create an environment that will overcome structural employment impediments.

I wish to thank members of my committee for working many long hours on the Budget Vote and the deliberations. It was just with concern that I have noticed that one of our members certainly didn't clearly perceive that continuity and change mark the capacity of our government, in this fourth term of Parliament, to tackle the serious economic and structural challenges exacerbated by the global economic crisis that were not that evident during former President Mbeki's tenure.

If I may get back, we need to understand the budget as an instrument of policy, through which resources are allocated to achieve imperatives of efficiency, equity and developmental objectives. The question then is: How far does the DTI go in achieving these imperatives within the overall priorities outlined by President Zuma in the state of the nation address?

Certainly, if we look at the large expenditure book, which probably serves as a door step, regrettably, in most homes, the DTI states that –

It aims to lead and facilitate access to sustainable economic activity and employment for all South Africans.

Yes, I would agree that a restructured economy is vital in achieving accelerated economic growth and radically increased employment and greater equity if we accept that people have been burdened by structural unemployment, exacerbated, not caused, by the global economic crisis.

Prior to the global economic crisis of 2008 and 2009, as all of us are aware, South Africa achieved unbelievably high growth rates in the period 2005 to 2007. But this masked, as we know, key structural imbalances in the South African economy. That did not start with former President Mbeki. That is not where these imbalances started; it started long before, and we all know that.

Regrettably though, the academics have befuddled us with their different definitions of poverty. Just about everyone is poor these days they tell us, and by doing this they have literally disenfranchised the unemployed.

What we need to understand, and what we understand as the ANC component of this House, is that the DTI recognises that manufacturing will have to drive decent work. The jobless need a structural solution; we all agree on that, and not a semantic, social investment band aid from either this government or the private sector. No, it doesn't.

Fortunately, the DTI has begun, with determination, to adopt selective, strategic trade actions that will serve to underpin the reconstruction of our industrial base, and not having our poor little industrial base trying to drive a trade strategy, or trade doing it the other way around. We know that we must accelerate industrialisation and trade included, will serve this.

Essentially then, is not only to promote exports - we can't just promote exports. We also need to encourage and promote domestic demand, and to devote more attention to regional markets. We are Africans, we are not Europeans so let's drive an African market. Essentially, we need to find a balance between supply and demand by productive investment.

The DTI has appropriately, I believe, understood that this budget must bring together the macro and economic fundamentals and micro economic principles, so that the consequential energy from macro and micro principles can enable our country, our Cabinet colleagues and the sister departments to work together to achieve the mission of this government. We cannot divorce National Treasury's macro fundamentals from the requirements of a micro economy about which we know the Minister of Finance is developing a deeper and deeper understanding.

Minister Gordhan made it clear only this morning that he will not allow the independence of the SA Reserve Bank to be compromised and the welfare of our people to be jeopardised by cavalier little corporate shareholders. We won't allow that. This year, the launch of Ipap 2 marked a further move to implement measures that encourage a synergy between the macro and micro elements in our economy.

If we unpack the DTI's budget, it rightly identifies the critical challenges of unemployment, deindustrialisation and inequity. In this regard, this nation is made of stronger stuff than water.

If we unpack this budget then, we will see that the DTI has allocated 81% to the following programmes: R3, 2 billion or 5, 5% of its budget to Programme 6, which is the enterprise organisation; another R1,1 billion or 17% of its budget to the industrial development and empowerment programme; and then we also have R777,8 million - roughly just under a billion or 12,7% - to enterprise development.

Incentive measures - yes, we do need incentives at this particular time, and we need support for investment, job creation and regional economic development. Indeed, the empowerment in enterprise development - which I know Deputy Minister Maria Ntuli will flesh out and tell us a lot more about the detail thereof – is an area in which you have the co-ops, the small, the medium, the micro and yes, other larger enterprises.

Essentially as a budget-deploying, labour absorption practice, we can honestly say to Cosatu and any other union that this is a worker's budget, and it is an entrepreneur's budget, but it is also a people's budget. This is because it not only relies on the restructuring of the economy, but it also supports consumer protection.

In particular, the National Consumer Commission has been allocated R24,8 million, about 13%, from the Consumer and Corporate Regulation Programme. That programme gets about R191,5 million, which is all in all just over 3% of the DTI budget.

I just want to refer again to the growth; the growth that was driven by unsustainable increases in credit extension and consumption that was not sufficiently underpinned by productive sectors of the economy. Now I happen to know that the hon Turok and the hon Njikeleni know a lot more about this and I'm sure they will be giving us greater detail in this regard. I'm also conscious of my time constraints.

Earlier we heard our Whip, hon Radebe, address us, and I must personally on behalf of the Portfolio Committee on Trade and Industry, convey our heartfelt condolences to hon Radebe and his family. I must say that I think that every member of our portfolio committee, from whichever bench or party, appreciates the presence of our Whip here with us today, if only for a short while.

I know that he has referred to "tenderpreneurs" and the negative impact that that has on employment creation and domestic and international competitiveness. I think that the other area that he, and others, of course, has also referred to has been Cipro, and I must say we appreciate the action that has already been taken and we look forward to being kept abreast of other measures that will be taken in this regard.

This committee, every member of this committee, is opposed to the kind of corrupt practices of some members in Cipro that brought the DTI into disrepute about. We will jealously guard our regulatory mechanisms to ensure that this cannot and does not happen again.

What is important for us to appreciate is that the Minister of Finance allocated an additional - over and above the budget that we have already - R3, 8 billion in terms of the allocation to clothing and textiles and the automotive or vehicle industry on a kind of 50/50 basis.

If some of the members are form the Eastern Cape and studied the budget report that came out of there from the MEC, they would have seen the references being made to the high retrenchments that came about some months or a year or so back, and how this injection will revitalise an essential component of the Eastern Cape economy.

Again, I know that the natural resources are going to be tackled in depth by hon Turok, as will the motor industry development programme, etc, and all the chemicals and so on. What I do want to say is that other middle-income countries are not standing still. They are taking serious steps to develop their competitive edge. We all know that there was a time when Brazil was standing behind us, and now I believe they have edged ahead with the support and help of the Brazilian Development Bank known as the BNDES.

Don't worry, they also have a lot of corruption; I believe they are running around with the equivalent of AKs and in armoured vehicles, just to transport themselves. However, what I do want to say is that the committee, in its report and its engagement, noted the absence of a trade policy, but we are aware that this is being developed and has already been launched with a discussion document - the South African Trade Policy and Strategy Framework - which reflects a strategic developmental approach.

Lest I run out of time, it would certainly not be helpful if I overlooked the recommendations made by this committee. Just to note some of the key recommendations ...

The Deputy Speaker: Hon member, your time has expired.

Ms J L FUBBS: Well, let me just say that the ANC supports this Budget. Thank you.

Mr A D ALBERTS

MS J L FUBBS

Afrikaans:

Adv A de W ALBERTS: Die departement het ambisieuse planne en vir seker, groot uitdagings. Die VF Plus wens die Minister en sy departement geluk met die hernieude fokus op die groei van die ekonomie, tesame met volhoubare werkskepping.

Ons stem saam met Minister Davies dat daar ernstige strukturele gebreke in ons land se ekonomie bestaan en dat 'n gevolglike gebrek aan groei in die produksie sektore, daartoe lei dat Suid-Afrika nie behoorlike werkskepping sien nie.

English:

We believe that one of the other key drivers of those structural deficiencies that the Minister referred to and neglected to address, is the current system of labour market intervention, called affirmative action.

Many of our country's experts, who could have acted as mentors, have left the country due to this system. As an economy is a human system, we truly need to re-evaluate what we do with our intellectual capital in this country. Do we cherish it by ploughing experience back into the market, or do we just keep up with market interventions that lead to inevitable imbalances?

Afrikaans:

Minister Davies, ons moet ook daarop let dat daar nuwe industrieë is wat ons 'n ontwikkelingshupstoot kan gee in die toekoms. Ek gee twee voorbeelde daarvan aan u:

English:

I will give you the following two examples of future industries that we could focus on. Firstly, it is our submission that the global space industry is one such sector that deserves more research on its future potential. We have now reached the second generation space initiative at a global level that is increasingly going to be dictated by the private industry. Apart from perhaps the biomaterials sciences, this seems to be the one industry that will lead us to new, global economic frontiers.

South Africa needs to perform future studies in this field to assess how it can fit into the future space economy and start research and development in the space-related fields of materials, energy and information science. The Square Kilometre Array, SKA, and low cost satellite projects represent a step in the right direction.

Secondly, the film and television production industry is a fast job creator with training that happens to take place on the job, so to speak. The Department of Trade and Industry's rebate system is a good start in the right direction. However, we believe that adding tax incentives into the mix, more long-term international productions will come to South Africa, leading to the quick creation of jobs whilst creating the possibility of also expanding our tourism industry. We ask that the Minister also take this industry into consideration.

We can compete with the best in the world and create jobs in the process, but let me emphasise again that we will then need all South Africans, black and white, to participate in the economy.

Afrikaans:

Indien ons almal op 'n gelyke vlak kan deelneem, sal die ekonomiese groeigety wat daaruit voortspruit al die skepe in die hawe se vlakke lig. Almal sal uiteindelik daarby baat vind. Ek dank u.

The DEPUTY MINISTER OF TRADE AND INDUSTRY

Adv A D ALBERTS

The DEPUTY MINISTER OF TRADE AND INDUSTRY (Ms B M Ntuli): Chairperson, hon Minister Rob Davies, hon Deputy Ministers, hon members of the National Assembly, ladies and gentlemen, at the seventh Nelson Mandela Annual Lecture in 2009, Prof Muhammad Yunus, founder of the Grameen Bank said and I quote:

The responsibility of the state is to create opportunities for people, to support them, so that they can stand up for themselves.

I have every reason to agree with Prof Yunus and this is why we must create entrepreneurs and create opportunities for them. We must support them so that they can stand up for themselves.

Poverty is created by a system. Last Friday, together with the Minister of Home Affairs, Minister Dlamini-Zuma, I was in Kokstad in KwaZulu-Natal. I had the privilege of visiting a bakery, run from a container by five enthusiastic young men. Led by Thembelani, this group is called the Sakhakulunge Co-operative Bakery.

An opportunity was created for them by the Greater Kokstad Municipality. The container was equipped, but the energy and the passion to run the operation had to come from the group. The leader of the group explained that if it were not for this opportunity, all of them may have been repeat offenders, with lengthy jail terms.

Initiatives such as these need further support from government. The challenge facing this co-operative is what many other similar micro enterprises face. It is the challenge of increasing market share, the challenge of increasing capacity and the challenge of making this a sustainable enterprise. We are prepared to establish more of these businesses in all the provinces. Let us work together with all members in this House. I invite all of you.

None of the co-operative members expressed the wish that this business should make them millionaires. They wanted to use the business as a vehicle to provide their families with an education, improve their own skills, provide a healthy product, prevent other young people from doing crime by being gainfully employed, contribute to the development of this rural area and be economically active.

These five young people have expressed more eloquently than any policy could, the five priorities identified as national priorities by our government and in our ruling party's elections manifesto. The priorities are health, education, job creation, rural development and crime prevention.

In our pursuit, not only to meet but exceed the expectations of the five priorities of government, our department has looked at methods that, together with our colleagues at provincial and, to an extent, the local level, we can initiate this during this financial year.

I also had discussions with various people from academic institutions to those from the private sector, who are offering to assist us in meeting our developmental goals. Wits University, for example, have started already on entrepreneurial development.

Last year I reported a process initiated by my office to meet all the Provincial MECs of Economic Development in order to see if we could co-ordinate our work better. This, I am pleased to report, has been done and I wish to thank all the MECs for the extremely warm and collegial manner in which these meetings took place.

While the nine provinces differ in many areas, there were common points raised across the board. A report will be tabled in the portfolio committee soon. A full briefing on my findings and what we will do will also be reported. Here are some comments related to these visits.

The main issue raised was the lack of a cohesive and efficient communication system amongst the three spheres of government, which has resulted in national government not always knowing what the provinces are doing, and vice versa.

Through great effort of the Empowerment and Enterprise Development Division and the various provincial heads of departments, a forum has been established to map the way forward. This forum had its meetings and pilot projects have been identified that the Department of Trade and Industry, DTI, together with provincial departments will initiate and launch during this financial year. From the side of the DTI, we have assigned a provincial champion to spearhead projects in each province. The list of those champions is available so that we can hold them accountable if they don't deliver.

We are particularly, but not exclusively, focusing on projects that will revive industries in the former homeland areas. Together with our provincial counterparts, we have identified a number of buildings that belong to the former development agencies that have fallen into disuse. This must be revised. There is potential in these areas.

We acknowledge that resources are limited and we need to seek partnerships, if we truly want to transform the economic landscape of our country. We have therefore looked at partnerships, as mentioned earlier. We have also looked at other institutions that also operate in the fields of enterprise development, co-operatives and finance for small enterprises.

I started with the story of the bakery co-operative. I said that they still have some challenges. They have received a hand-up from the local municipality. What stops us, as the DTI, from pooling our resources with the province and other agencies, and even the private sector, to assist co-operatives such as these and others, who often need minimal assistance to flourish, for example, bridging funds to expand.

When driving through the town, I saw at least two supermarkets and a few schools as well as a prison that could support this bakery. We have to get out there and assist, not from the comfort of our offices. We have to go to the actual areas where our communities are. Maybe then we will appreciate the fact that we have to work with a greater sense of urgency. Let's do well. Let's work harder and smarter.

On co-operatives for this year, we are speeding up our efforts to initiate the formation of an advisory body for co-operatives. I must be honest and mention that this has not been an easy task because not everyone shared a common perspective on the way forward. We will convene an inclusive meeting to continue with our efforts and harness the collective wisdom of all parties to see this body come to fruition. I know I have the absolute support of Minister Davies for this effort.

As a believer, it is my conviction that the development of our people, no matter how daunting the task may be, can be realised. I believe that our country has the potential we need to eradicate poverty. All we need is a leadership that is ready and capable and equal to the task of responding to the aspirations of the people.

We can create a world class economy, if we work together with everyone who is willing to do this. Let's work together. Poverty knows no colour, no political boundary and no race. If God be with us, no one can stand against us.

In addressing the noted challenges, our government has formulated the national co-operative strategy that outlines various interventions aimed at enhancing the support programmes and institutional capacity, geared towards the development of co-operatives.

Moreover, government has taken the decision to review and amend the current co-operative legislation. In this regard, our government intends to remove constraints and close the legislative gaps affecting co-operative development by amending the Co-operative Act, Act 14 of 2005.

To name just a few of those areas being amended, these include auditing requirements for co-operatives and voting rights of co-operatives … [Time expired.] I thank you. The ANC supports the Budget. [Applause.]

PROF B TUROK

THE DEPUTY MINISTER OF TRADE AND INDUSTRY

Prof B TUROK: Chair, Mr Minister, Madam Deputy Minister, I would like to address my remarks to the hon Trollip. I see he is very busy, but I think there are some important things that we need to talk about, and I would appreciate your attention if it is possible, all right? [Interjections.] Good, that is very good.

I make the point because I think the country is at a decision-making moment. There are a number of reasons for my saying that, and I would like the Opposition to be conscious and aware of why I say this.

In the last few days, the press has been reporting on a report by City Group Bank in New York that South Africa is the world's richest country in mineral reserves. These reserves have a life-span of 100 years, which include US$2,3 trillion in platinum. Now, we still have to verify that report. I am personally chasing it up, but it makes an important point for us at this particular time in our history, because the implications are really quite considerable.

The reason they are considerable is because our economy – the modern economy – was founded on mining with all kinds of consequences for the country as a whole. These consequences included huge riches for a small minority, good jobs for white workers, but a forced cheap migrant labour system for many, and the destitution of what we then called the reserves.

So, if we are to maximise our efforts with respect to mining and these huge resources, which is very tempting – and indeed, it is a very powerful asset which we can use very valuably and very importantly – and if our focus is on mining and a quick buck, as it were, and we neglect the rest of the economy and alternatives, then I think we will be making a mistake.

This is because what we have inherited through a mining economy is a highly skewed economy with a consequent highly unequal society. This is a problem and we live with it now, despite efforts by some governments in the thirties and forties to overcome that imbalance through various industrialisation measures, including using the state to create state enterprises which we have today, like Eskom, and others before such as Iscor and Foskor. These were an attempt by that government to overcome the imbalance of a mining economy and a dependence on mining.

I want to argue that it seems to me that the DTI, with their new Industrial Policy Action Plan poicy is doing exactly that. They are saying to this country and to you that we have to look at the legacy, the mining legacy, the consequences for the country as a whole, the polarisation it brought into South Africa. Even though it brought a great deal of riches to a small number of people, but also let us admit, high taxes, the consequences are with us today.

We have to do something serious and this is why I approach you to say that we are at decision-making time. We must not go along and accept this legacy as if we cannot change it, and I think that the policies of the DTI are very relevant to that proposition.

We have to change the structure of our economy. We cannot continue to be mining-dependent, even though mining contributes something like 40% of our export revenues. It covers to a degree the current account, but it has created all kinds of problems. It has led to the lagging of industrialisation. It has created a dependence on world prices. It has brought very little beneficiation, and we discuss this all the time.

We want your co-operation to ensure that that changes – that we are no longer a primary commodity export country depending on mineral resources primarily. We must actually change the structure of the economy so that we have a more balanced growth, so that we grow and expand the whole economy. [Interjections.]

Mr B TUROK: Well, that is a detail. Let us look at the structure of things. I do not want to be distracted by detail, but thanks for listening! [Laughter.]

The problem with the mining economy, hon Trollip, is that it has a low multiplier effect on the rest of the economy. That is the case I am making.

So, with the job losses, with the import dependence, with the small internal market which goes with a mining economy, we have the problems of inequality, unemployment and poverty that my colleagues and some of your people have been talking about.

The essence of the DTI plan … and by the way, I was interested in the Cope propositions that were put forward as proposals. It is curious that what you were emphasising is the consumer. You want to subsidise the consumer. We want to subsidise industry. There is a difference. We, by subsidising industry and creating employment, are, of course, subsidising the consumer, but through jobs and not through consumer support. [Interjections.] So, yes, I am very glad that you are listening and you are barracking. I prefer that to your taking notes and falling asleep. [Laughter.]

Chair, with what we want to do in restructuring the economy, there are some rather difficult decisions that we have to take, because a mining economy is, by and large, a rent-seeking economy. People are making profits far beyond what the market would give them normally. They are engaging in rent-seeking. That leads to all kinds of cartels that the Competition Commission of the DTI has uncovered. They create an environment of strong corporates who engage in collusion, and we are going to have to deal with that.

Let me say very clearly, the ANC is not against private enterprise; by no means. Indeed, the proposals of the DTI in the Ipap are precisely to create a capital base which will go on concessional terms to the private sector, to business and manufacturing so that the cake will grow, so that more people can participate, so that there will be more jobs.

That is the intention of the whole programme. However, we must, at the same time, act against the kind of parasitic, cartel behaviour that we see in the mining sector and certain other areas.

In addition, and this is a lesson I think this House must take seriously, we also need to look more seriously at how we regulate the financial sector, because that is the lesson coming from the international community, where now, suddenly, everybody is waking up to the fact that the big failure of the IMF and the regulation institutions in the United States was the failure to regulate the financial sector. We have got to "pasop", we have got to be careful about that.

So, what do we propose to do? Firstly, we must harness substantial financial capital, give it at concessional terms to the private sector, and ensure that the private sector uses that capital for proper productive activity. My colleagues have referred to the importance of production. Clearly, that is at the heart of restructuring a mining economy.

Secondly, we must analyse the value chain in its full scope. Value is created in many different ways in an economy. There is skill, enterprise, and so on, and various components in the way a value chain operates. We need to value it, look at it in its fullness, so that we can take action in the right way.

We must also identify the roles of the banking sector and the services sector. Our banks are guilty of a degree of gambling in hedge funds and derivatives. They have done that. It has created a situation where, despite the certainty that we have in our banking system, they were not above doing a bit of gambling on the side with derivatives and hedge funds. We need to watch that.

We need to build the regional and domestic markets. The Ipap's focus is very strongly on creating downstream activity which will develop the domestic market as opposed to simple, pure export promotion as if export-led growth is the path for South Africa - it is not. We must rebuild our industrial and manufacturing capacity and build the domestic market partly through procurement.

A lot has been said about procurement. It is clear that government is the biggest procurer in South Africa. [Interjections.] It is. Well, all right, it does build bridges. It also builds various things that you use in your daily life, including roads, not just bridges, roads too! So, you are quite right. Government builds roads, bridges, and many other things that you use.

So, we need to do more local procurement. Government is a big procurer. We need to ensure that it does not import the bridges you are talking about, but builds them locally.

My final point is this: The ANC built its struggle by mobilising what we call social capital. A great deal of community organisation took place. We built power centres in the rural areas and in the towns. That is what led the ANC to victory. We are not using that social capital to rebuild the country. And so, my last message is this – help us. Let us build that social capital so we rebuild the economy. It is a simple proposition. Thank you.

MR R B BHOOLA

Prof B TUROK

Mr R B BHOOLA: Hon Chairperson, we know that our mines cannot be relied upon for a long-term. There are two areas, in addition to infrastructural development, that can ensure that we sustain our development and our growth.

At least, let's make South Africa a country where an agriculture revolution succeeds; we had a political revelation and we cannot say we are waiting for the agricultural revolution.

Secondly, we must be the number one manufacturing country in Africa.

Now these two areas are the job creators, and my suggestion to the hon Minister is that we make sure that we don't worry too much about the giants in our country. We should worry about the informal sector and the SMMEs.

If you look at certain countries in Europe, it is the informal sector and the SMMEs that grow the economy that creates most of the jobs. There was a time where we were a proud agricultural country and unfortunately the input in the GDP, from the agriculture is pathetic.

We can't say we are waiting for a turnaround strategy; we need to act now and get the best brains to plan our industrial revolution and agrarian revolution. It is absolutely important for Parliament to keep abreast of trade negotiations at the WTO and close ties with the country's trading partners need to be undoubtedly maintained.

The MF is extremely concerned with regard to illegal imports and calls on Parliament to ensure that effective mechanisms are implemented at the borders by custom services.

It is of paramount importance that Parliament ensures that the community also benefits from the economic activities of the country.

Co-operatives can play a significant role in economic development, especially in the rural areas where the absence of large spending power does not attract private investment, so as to harness local skills and resources that in turn can uplift the living standards of those operating in the local economy.

I agree undoubtedly with the hon Deputy Minister that poverty sees no race and no face, it attacks almost anyone who comes in front of it. It is therefore imperative to remove our people from the shackles of poverty to the light of dignity and development.

The time is now right for us to deliver sustainable opportunities. The MF supports the budget vote. Thank you. [Applause.]

MR R B BHOOLA

Mr N E GCWABAZA: Chairperson, hon Minister, hon Deputy Minister and hon Members of Parliament, I am rising to announce that the ANC supports Budget Vote No 35 - Trade and Industry.

The ANC says in its statement of 8 January 2010:

We have placed the creation of decent work at the centre of our efforts to address poverty . . . and inequality, and government policies and programmes are meant to speak to this goal . . .

The level of unemployment, poverty and inequality remains very high, with South Africa's official jobless rate being among the highest in the world at 24,3%. However, using the expanded definition, the unemployment rate is at 34,4%.

Unless the structure of our economy, which is characterised by massive unemployment, is transformed fundamentally, the government will not be able to address the challenge of creating decent work and sustainable livelihoods.

In the state of the nation address, His Excellency, President Jacob Zuma, alerted the nation to the fact that South Africa has a youthful population with nearly 70% of the people under the age of 35. Collaborating this fact, the analysis of unemployment shows that the unemployed youth between 15 and 35 years account for 73% of those who lost their jobs during the recent recession. This means that well over 3 million employable young people, mainly African and women, are unemployed.

Even more disturbing is the latest statistics, which shows that decent work has contracted by 12,7% whilst temporary, part-time, contract and other forms of casual employment have increased by 23,7%. This caused the number of casual workers in South Africa to increase from 1,5 million in 2000 to about 3,9 million of the total employment in March 2010.

Our democratic, developmental state must play a central and strategic role in creating decent work for our youth, and in this regard, pay special attention to women and persons with disability.

Through Ipap 2 and the trade policy, the developmental state will focus on improving growth in key manufacturing sectors with the main thrust being to create decent work and provide sustainable livelihoods to millions of our people.

The Ipap 2 identifies three cluster sectors with the potential to create decent work. The first cluster of sectors includes metal fabrication, capital and transport equipment, green industries, energy saving industries and agriprocessing.

The second cluster consists of automotives and components, medium and heavy vehicles, plastics, pharmaceuticals and chemicals, clothing, textiles, footwear and leather, biofuels, forestry, paper, pulp and furniture, tourism and cultural industries, and business process services.

Cluster 3 is made up of advanced capabilities such as nuclear energy, aerospace and advanced materials.

This calls for intensified investment in the productive and labour-intensive sectors of the economy. Furthermore, we must redouble our efforts to establish co-operatives and SMMEs in order to bring the majority of our people into the mainstream of economic activity and to maximise government's capacity to create decent work.

Also, Ipap 2 makes it possible for the government to invest in knowledge-based industries. Therefore, the key to economic growth, decent work and sustainable livelihoods lie in enhancing the skills capacity of all citizens so that they can make a productive contribution to the economy, instead of being excluded by unemployment, poverty and inequality. Lack of technical skills will jeopardise the implementation of Ipap 2.

Rural development and agrarian reform must address the question of redistribution and ownership of productive land to rural communities to create decent work and ensure food security.

Research shows that 2,5 million households are involved in own production of food, and three-quarters of this number are found in KwaZulu-Natal, the Eastern Cape and Limpopo. We must increase this number, Chairperson. Therefore, the budgetary processes of government must speak to the funding of the implementation programmes of the Industrial Policy Action Plan 2.

IsiZulu:

Sihlalo, amabhange okuxhasa osomabhizinisi kanye nazo zonke izikhungu zikahulumeni zokuxhasa osomabhizinisi nabalimi abasafufusa, kufanele zabelwe imali eyanele ukuze zixhase, ziqeqeshe futhizinakekele osomabhizinisi abasafufusa, ukuze baphumelele futhi babe negalelo elibonakalayo ekwakhiweni kwemisebenzi eminngi encomekayo.

Kodwa kufanele ukuthi siqaphela ukuthi, laba osomabhizinisi nabalimi bangafufusi nomabakhase kuze kuyoshona ilanga. Kufanele sibasize bathuthuke baze babe yizinkampani ezinkulu ezizokwazi ukuthingelinye ilanga zifike ezingeni lokuthi zikwazi ukuhweba namazwe angaphandle.

English:

Further, Ipap 2 enables the developmental state to invest in green and renewable energy industries with a potential to create hundreds of decent job opportunities. For instance, it has been suggested that the bioenergy sector has the potential to create between 600 000 and 1 million jobs. But as we seek to create these jobs in this particular sector, we must balance decent work creation and food security.

Failure of government and the private sector to fund its implementation will relegate Ipap 2 and the trade policy to being useless papers in state cupboards, and we shall have failed to bring about socioeconomic equity in our country.

During the extended public hearings, all those who made presentations to the Portfolio Committee on Trade and Industry, including the private sector, expressed full support for Ipap 2.

If the project of creating a massive number of decent jobs and sustainable livelihoods is to succeed, big business must commit itself to diverting profits from investing in the international financial markets to reinvesting in the productive sectors of the South African economy.

Dr Miriam Altman, the Director of the Centre for Poverty, Employment and Growth at the Human Sciences Research Council, HSRC, says that looking into the future, the private sector will have to pick up speed and devote meaningful attention to building industries, which are globally competitive, with strong employment linkages in the domestic economy.

The government must, therefore, call business, labour and civil society to rolling mass action for the creation of decent work and sustainable livelihoods. Thank you, Chairperson. [Applause.]

MR A P VAN DER WESTHUIZEN

Mr N E GCWABAZA

Mr A P VAN DER WESTHUIZEN: Chairperson, hon Minister of Trade and Industry Dr Davis, Deputy Minister of Trade and Industry, Chairperson of the portfolio committee, hon Joan Fubbs and hon members, we are all in agreement that the eradication of poverty is one of the biggest challenges facing the South African economy.

It is only a vibrant and growing private sector that can grow the economy and that can create wealth. Further, the support of the economic growth is, in turn, closely related to the core issues of this department.

The withdrawal of money from the economic cycle in the form of taxes and levies to fund government, and particularly to fund this department, is something that inherently limits economic growth. It is, therefore, of the utmost importance that we should be asking ourselves critical questions as to this department's spending and its functioning such as whether the performance of this Department is really in support of what the economy needs.

Hon Minister, you have presented to us a highly ambitious agenda for the next few years. The proposed budget that we are debating today is much smaller than that of the past year.

It is smaller, even if we take into account that some of the functions and entities of the Department of Trade and Industry are about to be transferred to the Department of Economic Development. This budget cut is a good start and opens the door for a serious review of the productivity and success rate of the Department of Trade and Industry. However, the department was not doing too well when measured against the five strategic objectives that it set itself in 2006, and let me remind you of these objectives.

Nowadays, one seldom hears of Asgisa, the Accelerated and Shared Growth Initiative for South Africa, which was the first objective. The focus is still on employment creation, but with 850 000 real jobs being lost during the last year, the department cannot claim success regarding its second objective.

Its third objective was to raise the level of exports and the promotion of global trade. In this regard, the department and the South African economy have also slipped. In the 1980s, when sanctions were at their highest, South Africa's exports were growing faster than over the past few years; and our share of the world export trade has been slipping from 2% 60 years ago to 0,5% in recent years.

The Department's fourth strategic objective was to promote broader participation, equity and redress in the economy. Although this is difficult to prove statistically, it is generally accepted that we have not done too well on that count either, and I refer to the rising gini coefficient.

The fifth and last objective was to contribute to Africa's development and regional integration within New Partnership for Africa's Development, Nepad. It seems as if the government has also abandoned this ideal, as one nowadays seldom hears Ministers referring to Nepad initiatives. So, we are looking at a state department that is seriously in need of new objectives, having failed dismally at reaching its previous ones.

The buzz word or term in government is presently "monitoring and evaluation". Monitoring and evaluation, I'm sorry to say, cannot replace good governance and good management principles, principles that unfortunately are often lacking in government today.

I, therefore, want to highlight a number of management issues that should be put under the spotlight in the coming year, hon Minister. The management of staff, including the filling of posts, remains a serious problem. There can be no defence for a department that is running with almost one of every five approved posts being vacant.

Secondly, hon Minister, I believe that the lack of speed with which some processes are dealt with is in serious need of your attention.

To mention just two recent examples, and one of those has just been referred to by my colleague, hon Marais: During November last year, the hon Minister signed an agreement with his Zimbabwean counterpart. As is customary, this agreement will only come into effect once both Parliaments have ratified the agreement.

Our Zimbabwean counterparts, despite their enormous problems and internal strife, have already done so. Why has the department not yet sent this agreement through to the Speaker of the National Assembly to put this on our Parliament's agenda?

A second example, Grain SA submitted an application for a revised import tariff on wheat in October last year. It took the International Trade Administration Commission of the Department of Trade and Industry, Itac, more than six months to consider this application and to announce the revised tariff. As is so often the case, it will probably prove to be a case of too little, too late for this agricultural season. Again, departmental delays have failed the economy.

Afrikaans:

Wagtye vir die registrasie van besighede en besigheidsname by Cipro, die ou Registrateur van Maatskappye, het oor die laaste jaar drasties verswak. Die grootste skade aan die ekonomie is na my mening egter nie hierdie vertragings nie. Die grootste skade wat aangerig is, was deur die onwilligheid van senior personeel in die departement om daadwerklik op te tree toe die korrupsie die eerste keer, meer as 'n jaar gelede, aangemeld is. Persone wat dit durf waag het om korrupsie uit te wys, het geen beskerming geniet nie. Hulle kontrakte is gekanselleer. Hulle is geskors. Hulle is selfs daarvan aangekla dat hulle inligting met die Polisie deel, en dis 'n klagte wat ek swart op wit gesien het wat vandag nog oor 'n Cipro-amptenaar se kop hang.

Die departement kan in hierdie opsig groot siviele eise verwag, en ek is bevrees dat daardie geld waarskynlik nie verhaal sal word van die amptenare wat daartoe aanleiding gegee het nie. Daardie amptenare, terloops, sit na meer as 'n jaar nog steeds en verdien hulle enorme salarisse, ten spyte van hulle betrokkenheid by hierdie korrupsie.

Vertraging in die registrasie van besighede is sleg vir die ekonomie, maar die skade is klein as dit gemeet word aan die skade wat korrupsie reeds aan die ekonomieë van baie ontwikkelende lande aangerig het. Die klimaat wat geskep word waarin korrupsie so gedy, staan in sterk teenstelling met die DA se visie van 'n oopgeleentheidsamelewing. Dit bring my terug by my oorspronklike vraag: Is die Departement van Handel en Nywerheid werklik besig om die breë Suid-Afrikaanse ekonomie tot diens te wees, en beskik die departement oor die vermoë om uitvoering te gee aan die nuwe, ambisieuse planne van die Minister? Ongelukkig glo ek die antwoord is tans steeds "nee." Minister, ons wens u egter alle sukses in die program toe en ook in die bou van kapasiteit by die Departement van Handel en Nywerheid. Baie dankie. [Applous.]

Mr S J NJIKELANA

Mr A P VAN DER WESTHUIZEN:

IsiXhosa

Mr S J NJIKELANA: Sihlalo obekekileyo, abaPhathiswa abahloniphekileyo, malungu ePalamente ahloniphekileyo, kunye nani nonke bantu baseMzantsi ndihlanganisa noosomashishini,abasebenzi kunye nabahlali ...

English:

... I greet you in support of Budget Vote No 32 of the Department of Trade and Industry. My humble input is essentially a manual of proposals and suggestions of what needs to be done by our emerging developmental state, working together with the civil society, to transform our economy for a better life for all, as was nicely articulated by Comrade Turok.

Just as a reminder, in Polokwane the ANC resolved to build strategic organisational and technical capacities of government with a view to a democratic, developmental state through, amongst other things, building and strengthening development finance institutions which are able to effectively channel financial and institutional resources towards a variety of transformation objectives.

As is expected in any aspiring developmental state, the implementation of the widely supported Ipap 2, is anchored by a host of dynamic tools around industrial finance. Given that our government has not been forthright and assertive enough in bolstering developmental finance, it is high time, Comrade Rob, that our state earnestly refines relevant policies, legislation and programmes to enhance the capacity of development finance institutions such as the IDC, the Khula Enterprise Finance Ltd, the SA Micro-Finance Apex Fund, Samaf, as well as the provincial agencies to play a stronger and a meaningful role in the industrialisation programme. Let us bite the bullet and not be apologetic about taking bold steps to strongly invest in industrial finance because of the vitality thereof; particularly when compared to investing in nonproductive sectors of our economy which take us nowhere but enrich a few.

Whilst being critical of the low and uneven lack of investment in development finance at times by the private sector, government must intensify its efforts to invite this sector to gear up a public sector financial investment, particularly in IPAP 2.

The focus should be on further transformation of the National Empowerment Fund so that it becomes an outright development finance institutions whose investment in rural co-operatives and communities is increased dramatically. An emphatic reminder to those state agencies, which have not yet given the National Empowerment Fund their share allocation, is issued!

Of course, the implementation of Ipap 2 is expected to integrate enhancement of broad-based black economic empowerment as well. I'm just reminded that it has been some time since this Parliament has received any update from the DTI on progress on the implementation of the codes of good practise on broad based black economic empowerment as well as sector-based transformation charters. It's been some time and we need to know what is happening. This means that in view of the implementation of Ipap 2, an audit of these two areas is essential.

With regard to another Polokwane resolution which commits to transforming the structure of production and ownership, including BBBEE aimed at broadening and deracialising the ownership and control of productive assets by black people, women and youth, as a reminder, we need to assess whether BBBEE programmes are yielding the expected results. Personally I have serious doubts about any good results as yet.

Generally, there's a need for emphasis on broad economic participation in order to transform our economy and reverse the frontiers of poverty. Broadening BEE was then one of the intentions to achieve this noble goal. The question which we then ought to ask ourselves is: Why is the realisation of such noble goal so frustratingly slow? Where is the inertia and how is it being addressed?

Another area that needs focal attention is the structuring and financing of BEE deals. Bravura, in its presentation to this Parliament in 2008, asserted that the impact of BEE participation has little or no value transferred, is often riddled with legacy of debt, and, in essence, there is no real long-term sustainable empowerment. Bravura argued that there is limited broad-based black economic empowerment and it's the usual suspects who have access to money benefits.

As if this were not enough, our government adopted a rather awkward position of "Once BEE-empowered, always BEE-empowered" with regards to white companies. I hereby make a passionate appeal to all members to ensure that this unpalatable position is reversed and the original status be reinstated. White-owned companies must diligently earn their BEE status as well as maintain such. To allow a white company to have a black partner for a limited period is questionable to say the least.

Once again, Bravura claims that the vast majority of BEE transactions, typically the special purpose vehicle, SPV, structures, leave the BEE participants with no more than 20% of their original shareholding. Without any doubt, these factors have to be urgently addressed as they compromise genuine broad-based black economic empowerment. An additional risk is that the benefits of the current industrialisation programme will be that the established business community will mainly be the ones that benefit, thus exacerbating the Irish coffee syndrome in our economy.

I want to assert very strongly that any broad-based black economic empowerment that does not fundamentally integrate development and support for co-operatives is going astray. The ANC has already asserted that in transforming the structures of production and ownership such will include financial and institutional support for co-operatives and micro enterprises. Let me commend the DTI in this instance, especially Mantuli, on adopting the drive to set up an advisory council that is strongly developmental and current, and for intensifying and promoting co-operatives.

May I just remind this august House that co-operative movements have created more jobs than the conventional business sector worldwide. Statistics that I have seen recently indicate that 100 million people have been employed by co-operatives as compared to 80 million in the private sector

Broad-based black economic empowerment must be practised by South African businesses investing in Africa. There is no need for those investing throughout Africa to wait for appropriate legislation in host countries. What's good for the goose is good for the gander. The implementation of BEE also needs to be strong as part of the revitalisation of township economies where spaza shops, in particular, are constantly threatened by the shopping malls which are mushrooming in townships.

IsiXhosa:

Mhlalingaphambili, zafa iizipaza ezilokishini!

English:

Another area of concern is the lack of drive to provide incentives in the economic sector in an integrated and collaborative approach. May I just remind people that any modern economy is, amongst other things, advanced through incentives. The DTI is highly commended for revising its incentive regime, especially in the textile and clothing industry, and for preparing for the industrialization drive. Unfortunately, concerns about the poor promotion of such incentives on the ground must be strongly expressed.

In conclusion, our committee should ensure that it becomes vibrant in assessing and monitoring the work that the DTI is doing and, thus, also conduct a self-assessment to ensure that we are able to enter into a paradigm shift from outcomes-based to a stronger emphasis to impact-based assessment.

Let me take the last few seconds just to respond to a few disconcerting inputs. One, it is claimed that some of the good candidates were left out in the appointment of the National Lotteries Board; that is not true. Anyone can go to records and look at how the lottery board was established.

The TEMPORARY HOUSE CHAIRPERSON (Mr M R MDAKANE): Hon Njikelana, just take a second to wrap up.

Mr S J NJIKELANA: My last point is just to appeal to hon Lebenya to give herself some time and go onto the ANC website – she is not even around – and she will realise how refutable her inputs are, particularly because the more she says things, the more they remain refutable.

Chair, I support the Bill and I thank you for your attention. [Applause.]

THE MINISTER OF TRADE AND INDUSTRY

MR S J NJIKELANA

The MINISTER OF TRADE AND INDUSTRY: Chairperson, thank you to the hon members who contributed to the debate; mostly they were thoughtful and engaging contributions. I must say that some of the suggestions that were made about what we should and should not include in the Ipap 2, do show that probably there is a little bit of homework to do; go back and read what it says.

The issue is clear that nobody has stood up and said that we were wrong when we said we have to make structural changes in the economy; no one has said we were wrong when we said that we now have to have purposeful action from the department through the Ipap 2; and so on.

I'm taking this debate along with our engagements in Nedlac, and with what I'm hearing from the public hearings to indicate that there is a broad consensus reaching across the aisle for us to pursue this work that we set ourselves to perform.

Of course, we are doing this - as I was trying to say in my speech – with the imperfect machinery of the state; that's what we are trying to do. We are not trying to say that everything must be perfect and then we will start it, but we are saying we will perfect it as we go along. Of course, what we want to do is to try to improve the performance of all the divisions of the Department of Trade and Industry, reduce the time it takes and so forth. That is actually a piece of work that we are getting our chief operating officer to do, that is, to try on a systematic basis to go through everything and give us a proposal on all these things.

Having said that, I must say I'm a little surprised at some of the examples that the hon van der Westhuizen gave. I don't know where he was - the Zim bid is before the portfolio committee. In fact, we had a meeting in Nedlac the other day, which I facilitated on the request of the portfolio committee. It has been referred and the decision is now in the hands of Parliament, so I don't know what the hon van der Westhuizen is talking about.

As far as the grain tariff is concerned, I don't know whether the member would prefer a system where somebody walks in, lobbies the Minister, and the Minister changes the tariff, because I wouldn't. I think the procedures and processes that Itac represents when it receives the request, takes it up for hearings, etc, and then makes a recommendation, is a very important process which we going to defend against all sorts of other proposals for changing the tariff set in this country; and that needs to be maintained.

Hon Marais made a number of points which I would want to comment on. The first one, which various other people raised, is that if we need to do things differently in government to achieve the structural changes which we need – and we do - it means that government itself must work differently. The Industrial Policy Action Plan, Ipap 2, cannot succeed if it is just left to the DTI to administer those parts which work for it and there's no requirement for anybody else.

In that regard, the whole question of the IDC is that it is absolutely critical to the success of the Ipap 2, and the IDC needs to be restructured and changed. The hon Kotsi has said that we are trying to imitate the Asian Tigers; we actually learnt more from Brazil in that particular case.

In fact, we are taking lessons from any successful country that pursued industrialisation and which has got its industrial finance right. I think that that being the case it doesn't mean that because the DTI is responsible for that, and if the responsibility for the IDC is not directly in line with the responsibilities of the Minister of Trade and Industry, that the whole thing is going to flop; not at all.

In fact, if the Minister of Economic Development can give quality time and focused attention to the task of restructuring the development finances of the institutions so that they can play their role, then that is part of the sharing of the responsibilities in collective governance.

As I said in the portfolio committee, we have walk-in rights and we do not have to write to the Minister when we want to directly deal with the IDC. This is an exercise, not of silos and empires, but of trying to work differently in government and I don't see any problems whatsoever.

Hon Marais asked about the value of the incentives that were given to the automotive industry. Well, I think the immediate value is that we got R9 billion of investments just recently and several thousand jobs have been created as a result. We are also concerned about the percentage of foreign components that is used, but let me tell him that in one of the last ones that was announced by Ford, in fact, the percentage was almost reversed. The majority of what will be produced in the new Ford investment will be produced here in South Africa from South African components.

That is what we are trying to achieve and we are engaging the companies with that; and that's what makes a difference between the 20% and 30% that people can get for the automotive investments scheme.

Yes, we want to create a components industry in this country – and we see that the jobs are there, which is exactly what we said in the Ipap. But the components industry will rest on the original equipment manufacturers being in the country because when you have original equipment manufacturers in place, that's also when you stimulate a components industry.

In fact, we are discussing all sorts of things with them; how we can go about deepening the components industry by them perhaps procuring collectively from some of the components manufacturers. Those are very important things.

The hon Marais also talked about export processing zones – and here, I think we need to be careful about initials. Yet sometimes he talked about industrial development zones. We have to review and seriously jackk up our approach on how we promote industrial decentralisation. I'm sure that industrial development zones are not the only model that we are going to use. We have been talking about other models such as special economic zones and things of that sort.

What we offer through the IDC is essentially duty free entry of goods that are used in the production of things that are exported. It is a tool for export industries and then one gets the benefits of the concentrated infrastructure and things like that. That is a model which we still need to assess and improve upon.

But the hon member was talking about export processing zones, where one suspends labour law and you have a race to the bottom and you allow the exploitation of people and sweat shop activities. The experience around the world is that even if we were to go that route – and I don't think we can a snowball'st chance of being able to do so – we are not going to create the required employment. Too many countries have tried to do that and the experience of export processing zones is not at stake.

The DA should be very clear that when you go to places like Atlantis and you say that you want to create an EPZ there, tell the workers there that that is what you mean: that they must not have any rights under labour legislation. Tell them that and be honest with them and then see if they vote for you next time there is a by-election.

I believe that the real task now, since we are in the implementation mode and trying to work differently in Ipap, is that Parliament should try to rejig itself so that it provides us with serious oversight on this. I would like to see Parliament holding us to account when some of the targets may or may not be missed in terms of the time frames. Ask some serious questions as to why that is the case and then start to think about this as being work that is beyond one department but is being done through the totality of government. This is a very important task.

Let me now come to CIPRO; it is a lovely whipping boy for Mr van der Westhuizen. in fact, I don't think that his political career would have taken off if we hadn't had a problem in CIPRO. But let me say that I am absolutely committed to making sure that we have decent, functioning, clean and uncorrupt agencies in government. This is our commitment.

But the thing is that the Auditor-General's report, as I explained to the portfolio committee, made a number of observations about the Electronic Communication Network, ECN, tender, but it then required of the accounting officer, first of all, to ascertain if one of the companies had had an unfair advantage over the others. Then in the quotation made by Mr Marais - he left out the first half – he says, depending on the answer to that, we then have to come up and say what we are going to do about the tender and holding individuals accountable. I said it in the portfolio committee, and let me return to that: We will go to Scopa on the 18th of this month, which I think is two weeks from now, and we will go there and explain to Scopa what we intend to do and how we intend to respond to this. But I'm not going to get drawn into that today.

In response to hon Njikelana, let me say I think that there is a need to come to the portfolio committee and to discuss BEE in some depth, including some of the work done by the Advisory Council because when we are at the Advisory Council there was a study that was presented to us. You know, with the extent to which we have BEE in this country, one would think it's something that everyone is dominated by, but less than a quarter of the companies in this country are doing anything about BEE altogether; that's what research found.

The weakest parts of that are what is called "indirect empowerment". Many of the companies are much more used to doing share transactions and stuff like that, and the points that they can earn through things like procuring from SMMEs they find much more difficult. That is where we want to put the emphasis; that is where we want to go.

The HOUSE CHAIRPERSON (Mr Mdakane): Hon Minister, thank you.

The MINISTER OF TRADE AND INDUSTRY: Thank you very much, let's go and have our cocktail!

Debate concluded.

The Committee rose at 18:59.


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