DTIC on COVID-19 measures as it pertains to its mandate; with Deputy Ministers
22 May 2020
The Committee received an update from the Department of Trade, Industry and Competition on measures to mitigate the effect of COVID-19 on the economy.
The Department reported that the overall strategy of government was to save lives first, and thereafter to save livelihoods. The biggest challenge was to find the balance between these two objectives. South Africa had chosen to implement an early lockdown in order to buy time to prepare its health response, and the lockdown had been effective. The Department gave a general overview of the Department’s interventions, which included assistance for the health and food sectors, regulatory support and consumer protection. It was noted that schools would require over 20m cloth masks and that the export of medical supplies would be controlled. Local manufacture of masks and ventilators was being established. The Department was getting ready to move the economy to risk level 3, while staying aware of the danger of a second wave of infections if restrictions were lifted too quickly. The peak of infections was expected to be in June-August. Some of the social and workplace conditions at risk level 3 were discussed. Although some conflicting advice had been received, it was now certain that the move to level 3 would take place and government was finalising consultations. Measures to repair the economic damage caused by COVID-19 were outlined. These would address structural problems hindering job creation. The Department saw no tension between this objective and black economic empowerment.
Committee members asked questions about e-commerce regulations, the consultation processes of the National Coronavirus Command Council, GDP predictions, details of the move from risk level 4 to level 3 and whether the entire country would move at the same time, Section 11 of the National Credit Act, and the updated annual performance plan. They called for the Department to respond to written questions, better implementation of workplace safety measures and applauded the Department’s stance on transformation.
The Minister’s absence (due to illness) was discussed, with the DA pointing out that he had only attended one portfolio committee meeting since the start of the lockdown. The Chairperson said it was obvious that the Committee strongly desired more time to engage with the Minister and made an undertaking to check on the Minister’s availability.
The Chairperson announced that the Minister of Trade, Industry and Competition would not attend the meeting as he was unwell.
Mr D Macpherson (DA) said that it was absolutely critical that the committee knew whether or not the Minister would be attending meetings. He had only come to one portfolio committee meeting since the start of the lockdown. Meetings were shifted to accommodate him, and now he was seemingly unwell, which Mr Macpherson could neither confirm nor deny.
The Chairperson confirmed that the reason for the Minister’s non-attendance was that he was unwell.
Ms J Hermans (ANC) said that it was well known that the Minister was working hard. The Committee should take the opportunity to wish him a speedy recovery.
Mr W Thring (ACDP) said that the ACDP accepted the Minister’s apology and the reason given for his absence and wished him well.
Mr S Mbuyane (ANC) also wished the Minister a speedy recovery.
Briefing by Department of Trade, Industry and Competition (DTIC)
Mr Lionel October, DG, DTIC, began by recapping the Minister’s 1 May presentation to the Committee. He then went through global and local developments since then, and the work of the Department and the government as a whole to respond to COVID-19. The overall strategy was to save lives first, and thereafter to save livelihoods. The biggest challenge was to find the balance between these two objectives. He stressed that it was not a case of finding a trade-off between the health of the people and the health of the economy. South Africa had chosen to implement an early lockdown in order to buy time to prepare its health response, and the lockdown had been effective.
Mr October gave some comparative statistics on COVID-19 in different countries and in different provinces in South Africa. Noting the high number of cases in the Western Cape, he said that this province was at a later stage of the spread of the virus due to its dense population centres like Khayelitsha and high degree of connection with the rest of the world through tourism. The increase in cases in the Eastern Cape was also a particular concern.
Mr October gave a general overview of DTIC’s interventions, which included assistance for the health and food sectors, regulatory support and consumer protection. He noted that a new projection by Deloitte SA estimated a 9% contraction of gross domestic product (GDP) in 2020, significantly higher than the 6% that had been published earlier. He discussed the Department’s work with the sugar industry and other major food companies, and with banks and other creditors. He discussed the health sector, noting that schools would require over 20 million cloth masks and that the export of medical supplies would be controlled. Local manufacture of masks and ventilators was being established, supported by funding from the Independent Development Corporation (IDC). He gave an update on social protection measures such as unemployment disbursements and workplace safety guidance. He also discussed the regulation of the automotive, clothing and e-commerce sectors at risk level 4, noting that Ford had confirmed that it was going ahead with its R17bn plant expansion as planned. He said that South Africa would look to assist neighbouring countries. The DTIC was getting ready to move the economy to risk level 3, while staying aware of the danger of a second wave of infections if restrictions were lifted too quickly. The peak of infections was expected to be in June-August. He discussed some of the social and workplace conditions at risk level 3.
Mr October concluded by outlining measures to repair the economic damage caused by COVID-19. These would address structural problems hindering job creation. The Department saw no tension between this objective and black economic empowerment.
Mr Fikile Majola, Deputy Minister, DTIC, said that the main challenge facing government and the country was how to move the country to risk level 3. Although some conflicting advice had been received, it was now certain that the move to level 3 would take place and government was finalising consultations. Some of the matters being discussed were whether some provinces would remain at level 4 or whether the country would move to level 3 as a whole and what would happen if there was a spike in infections when schools reopened and people returned to work. However he did not expect any major hindrances to moving to level 3.
Mr Thring did not agree with the Minister’s comparison of COVID-19 with the Spanish flu. The latter had killed about 50 million people and COVID-19 was nowhere near that number. In fact, hospitals in the USA were being financially incentivised to declare COVID-19 patients and put patients on ventilators, which may account for the very high number of cases in the USA. Doctors in some European countries appeared to be encouraged to declare that deaths were due to COVID-19. In South Africa, the issue of co-morbidities would need to be closely monitored, as people seemed to be dying with rather than of COVID-19. He added that the country’s beneficiation programme would be key to mitigating the loss of jobs, which was estimated to be 1-3 million. The Minister had spoken about some beneficiation projects, such as fuel cells, but could the committee be provided with a full list of existing and planned projects?
Mr October thanked him for his support for the beneficiation programme. He suggested that the Department do a full presentation on beneficiation and value addition, as it was key element of industrial policy. He would also be able to share some documents.
Mr Thring asked for a detailed plan on lifting restrictions on e-commerce and unscientific restrictions in the clothing and textile sector.
Deputy Minister Majola explained that the list had been drawn up after consultation with the industry. The industry had put forward a proposal and the list that was published by the Minister was by and large the list that was proposed by the industry.
Ms Y Yako (EFF) recalled that the Minister had said that it was not the DTIC’s responsibility to distribute the Solidarity Fund. However, the Director-General had alluded to money from the Solidarity Fund going to the National Empowerment Fund (NEF) and the IDC. Was the Ministry thinking clearly about where these funds were going to?
Mr October explained that the Solidarity Fund was mainly driven by contributions from the private sector, and it had its own board of directors which distributed funds. They had focused on the procurement of PPEs and income support and food parcels for vulnerable households, rather than businesses. Businesses were being supported through the NEF, IDC and the National Treasury guarantee fund.
Ms Yako said that not enough PPE material was being manufactured and it didn’t seem like the Ministry had a clear plan to supply it.
Mr October replied that the DTIC was involved with in developing the supply chain capacity of PPEs, while procurement was being undertaken by the Department of Health and National Treasury.
Ms Yako asked how sure the Department was that emergency loans would be repaid.
Ms Yako asked whether the furniture industry was being allowed to operate again. What was the rationale for not letting it operate? It didn’t seem like the Ministry had a clear plan for the people it was supposed to be serving.
Mr October replied that the National Coronavirus Command Council (NCCC) had debated whether to create a list of items that were allowed to be sold (a positive list) or a list of items that were not allowed to be sold (a negative list). In the end a positive list of essential items was chosen in order to reduce crowding in shops and on the roads and keep people in their homes as far as possible. Restrictions on furniture sales were there in order to limit movement. The criticism of some of the restrictions was legitimate, but because of the density of our informal settlements, South Africa was very vulnerable to COVID-19, and the government had therefore decided to err on the side of caution.
Ms P Mantashe (ANC) welcomed the assurances that the DTIC was continuing to pursue transformation throughout the economy, but was the Department monitoring transformation in the sugar industry? It should be fast-tracked. She also welcomed the news that the automotive sector was being reopened, but she was worried that small businesses in this sector were not being considered by the Department of Small Business. It was in danger of becoming a whites-only sector, she warned.
Mr October thanked Ms Mantashe for her support and said that the Department saw no conflict between transformation, empowerment and economic recovery. Black economic empowerment could not be put aside during the pandemic. It would remain firmly in place. The Automotive Industry Transformation Fund existed to support black suppliers throughout the value chain, from dealers to component suppliers and garages.
Mr Mbuyane also welcomed the ongoing support from the Department for black economic empowerment.
Ms Mantashe suggested that the merger of the NEF and IDC was more urgent than ever.
Mr October agreed that these two organisations needed to be merged. It was actively being worked on.
Ms Mantashe asked what plans were in place to deal with the rise in the price of bread, given that 50% of wheat was imported.
Mr October said that the DTIC was working actively on this problem with the Department of Agriculture, companies at ports and food conglomerates and would keep the Committee updated.
Ms Mantashe welcomed the wide consultation with different stakeholders that had taken place but observed that nothing had been said about churches. She also welcomed the Department’s push for African unity.
Mr October confirmed that the African Free Trade Agreement had been fast-tracked. The continent remained vulnerable because of its low level of industrialisation.
Ms Mantashe was concerned about the small footprint of the National Consumer Commission (NCC) in rural provinces. Consumers in rural areas were particularly vulnerable to unfair business practices.
Ms Mantashe asked whether it would be wise to move all the provinces to level 3, given the high number of cases in some provinces.
Mr October replied that the risk-adjusted approach allowed for different provinces to be at different risk levels. However, the South African economy was highly integrated and people moved between provinces, which posed some difficulties.
DeputyMinister Majola added that at this point, the only announcement that the President had made was that the country would move to level 3. Whether different provinces would move at different times would be announced once the NCCC had made a determination. The possibility of unintentionally increasing the movement of people would have to be taken account.
Ms Mantashe suggested opening up fast food drive-throughs, as social distancing was in place by default.
Mr J Mulder (FF+) wished the Minister well but was concerned that he hadn’t appeared before the committee more often. The FF+ recognised the need find a balance between preserving lives and protecting the economy, but it’s position was that the lockdown had destroyed an already impoverished economy. There was too much micro-management. He wanted to put on record that the government would not be able to re-open the economy or handle the future challenges of poverty and hunger. The economy should be reopened. The presentation did not give any new information.
Mr October agreed that it was time to open the economy. The President wanted to see a large part of the country move to level 3.
Mr Mbuyane was unsure that the conflicting advice the government was receiving could be made to talk to the risk-adjusted strategy.
Mr October replied that the debate on balancing lives and livelihoods was going on in every country and there was always conflicting advice. The World Health Organisation (WHO) was concerned about countries lifting restrictions too quickly and was advising countries to wait until the rate of infection started to fall. South Africa did not meet this WHO guideline but this fact had to be balanced against the fact that we had implemented a lockdown so early. The NCCC took into account the views of all the experts.
Mr Mbuyane applauded the directives to open up the e-commerce, automotive and clothing sectors. He asked who was dealing with the verification of the localisation of COVID-19-related manufacturing.
Mr Mbuyane asked what strategies the Department had in place for dealing with the expected June-August peak in the infection rate.
Mr Mbuyane observed that the country would be co-existing with COVID-19 from now on, so the Department needed to ensure that PPE’s were available and regulation continued.
Mr Macpherson did not accept the fact that the Minister had only appeared before the portfolio committee once since the beginning of the lockdown. He called for a date to be set when the Minister would appear and answer urgent questions.
Mr M Cuthbert (DA) added that the Minister had not responded to written questions from 4 months earlier. It seemed to be part of a trend of refusing to be held accountable by the Committee. It was despicable that he didn’t feel he had to account to parliament and the public at large.
The Chairperson said it was obvious that the Committee strongly desired more time to engage with the Minister. He would follow through and check the Minister’s availability.
Deputy Minister Majola replied that he would work with the Minister and the Chairperson to ensure that the Minister would come to the Committee as soon as possible.
Mr Macpherson said that the presentation was a rehash of earlier presentations and it contained nothing new. He would have preferred a presentation on revisions to the Department’s annual performance plan and the new budget that would have to be tabled next month. What were the Department’s priorities going forward?
Mr October replied that a new annual performance plan was being prepared. National Treasury had indicated where budget cuts were expected and the budget was expected to be finalised by the end of June. Firstly, the preservation of industry would be a priority, so more money would have to be allocated to keeping companies afloat and the Department was looking at creating a general manufacturing incentive. Next, supporting companies that were expected to grow because of the pandemic, such as companies producing PPEs and other essential items, would also be a priority, both because of their potential to supply local needs and their potential to export to the rest of the continent. Finally, the Department would look to ensure that the country had infrastructure-led economic growth. Electricity, water, municipal infrastructure and industrial parks would also be supported. A more detailed account would be provided in the future.
Mr Macpherson asked if the Minister agreed with the predictions of GDP contractions or whether he still considered them “thumb sucks.”
Deputy Minister Majola said that there was no doubt that the economy was going to contract quite seriously. There were different projections as to how much, but they all agreed that there would be a contraction.
Mr Macpherson welcomed the change in the Department’s position on e-commerce. Why had it taken the Minister 48 days to change from considering it unfair to extolling its virtues?
Mr October replied that the matter had been extensively debated. There had been a strong opinion from the security perspective that movement on the roads should be limited. Government had decided to implement an early and severe lockdown and err on the side of caution.
Mr Macpherson asked why it was taking so long for the Department to enact Section 11 of the National Credit Act. He had submitted a proposal more than a month ago. Didn’t the government want low-income South African’s to access credit?
Mr October replied that the Minister would give a more detailed response as he had been engaged with the industry and the National Credit Regulator on this matter.
Mr Macpherson asked why micro-lenders were not allowed to operate under risk level 4. Were they not a key source of credit for low income South Africans? Would they be allowed to operate at level 3?
Mr October replied that micro-lenders were under discussion and hopefully the Department would be able to make an announcement about it soon.
Mr Macpherson said it was astonishing that the Deputy Minister had firmly committed to moving to risk level 3. Where did he get this information? When was this decision taken? Did his certainty not undermine the consultation process?
Deputy Minister Majola replied that the President had already announced the move to level 3. There would be consultation with stakeholders to determine when and how it happened. The Department would await further announcements.
Mr Cuthbert asked the Department to submit a full written list of all the non-profit organisations and non-governmental organisations that had received funds from the National Lotteries Commission.
Mr October replied that this would be supplied.
Mr Cuthbert asked why South Africa had not signed a joint statement with other members of the World Trade Organisation (WTO) on global supply chains.
Mr October replied that the Department had made a detailed submission to Cabinet on this matter. The international trade division would be able to give a full update on this matter when it presented to Parliament.
Mr Cuthbert asked who the DTIC was supporting to replace Roberto Azavedo as Director-General of the WTO.
Mr October replied that there had been discussions within the Africa group on this and the Committee would be updated.
Ms Hermans commended the stakeholder consultation conducted by the NCCC, and asked that the process be unpacked. The suggestion that the Minister was just thumb-sucking lists of products to be allowed for sale and other regulations was disingenuous.
Mr October replied that they would try to communicate more clearly on the consultation, but explained that it was a very active process. The National Economic Development and Labour Council (NEDLAC) met constantly and there was ongoing engagement with business, labour and the security cluster as well as the Department of Co-operative Governance and Traditional Affairs (COGTA).
Ms Hermans said that most of the benefits e-commerce accrued to urban and wealthier citizens. She called for a broader range of products to be made available so that poor South Africans could also benefit.
Ms Hermans said that the transformation of the sugar industry had been a long and hard road and reminded the Department that the regulations would expire in June.
Mr October took note of this.
Mr F Jacobs (ANC, Member of the Portfolio Committee on Small Business Development) said that the presentation showed that the Department was finding a measured balance between lives and livelihoods. However in the Western Cape, the necessary protective measures were not in place at workplaces, and workers were going to bear the brunt of the risk. The regulations were welcomed but the implementation and monitoring were still very weak.
Mr October thanked him for his support. This issue was a worry for everyone, including the companies themselves. In one case there had been 50 infections in a single store. People working in healthcare and retail were the most vulnerable. Worker safety was absolutely imperative. No mercy would be shown to companies that did not implement safety regulations. This was the condition on opening up the economy.
Deputy Minister Majola said that there seemed to be a general positive appreciation for the actions that government had taken in response to the crisis. The President had made it clear that although sometimes government would make mistakes, they would be rectified. It had to be made clear that all decisions were made in good faith and in the interests of all South Africans.
The meeting was adjourned.