Questions and Replies

Reply:

The question has been put to the CEO of the IDC who has responded as follows:

“The IDC’s total investment in On Digital Media (ODM) was R882 401 000.

On the 26th of October 2012, ODM was placed into business rescue and the undrawn portion of the equity funding into ODM was cancelled.

The business rescue of the company was terminated with effect from 1 July 21016. With the introduction of a new strategic partner and operator that has come on board the IDC is hopeful that the company will turn around in time.

From the resultant business rescue the IDC is a 22% shareholder and in a related company Star Time, IDC has a 5.8% shareholding.

When the company matures, we are anticipating to realize the true value of our investment which will enable us to establish the exact amount that we will be able to recover. In terms of the value of IDC shares, we are presently not placing value since the company has just come out business rescue.”

Geoffrey Qhena, CEO

Recommended/ Not Recommended

Comments:______________________________________________________

_______________________________________________________________

……………………………..

Mr Malcolm Simpson

Acting Director-General

Date: ………………………

Approved/ Not Approved

Comments:_____________________________________________________

______________________________________________________________

______________________________________________________________

………………………………..

Mr Ebrahim Patel

Minister of Economic Development

Date:………………………..

Reply:

As stated on 8 November 2016 in response to question 2291, all of the investigations were conducted by the in-house forensic audit team who report to the Head of Internal Audit at the IDC. Consequently, no additional financial cost was incurred by the Industrial Development Corporation for conducting the 126 investigations except for the normal remuneration the investigators receive as employees of the Industrial Development Corporation.

-END-

Reply:

The Competition Tribunal does not have a post for Deputy Commissioner. A nomination for the position as Deputy Chairperson of the Competition Tribunal was approved by Cabinet on 17 November 2016 and the appointment is expected to be made shortly.

-END-

Reply:

(a) The Settlement Agreement provides for National Treasury to appoint an administrator.

(b) The intended beneficiaries are communities and small construction companies, with provisions for funding of training of engineers and artisans, social infrastructure, small business working capital and technical capacity within the state. Further details will be publicised in due course.

-END-

Reply:

The Department does not currently have an advisor on contract. Advisors are contracted when needed.

-END-

Reply:

South Africa’s main coking coal resources occur in the Greater Soutpansberg Coalfield with a total Coal Resource of approximately 8.7 billion tonnes. Of this resource, only 2.4 billion tonnes are mineable and of this mineable resource 400 million tonnes (20%) is hard coking coal. The challenge is the relatively low yield of the hard coking coal.

Blast Furnace technology uses coke to produce steel, mainly used by AMSA locally and to a limited extent by other smaller steel producers. There is a new coking coal project being developed in Makhado in Limpopo. Other significant reserves of coking coal is in the Moatize Basin (Tete, Mozambique). Southern Africa has limited metallurgical coking coal available. All the local options are characterised by high Sulphur content that, I am advised, affects the “hot strength” of the coke in the blast furnace.

In light of the above, the Department has not, to date, developed a detailed plan on leveraging existing coking coal deposits.

-END-

Reply:

1)   Foskor’s acid plant discards approximately 2.0 Million tons of gypsum annually at the current acid production level of 500 000 tons per annum. In general the acid plant produces approximately four tons of gypsum for each ton of acid production. FOSKOR believes that there are no negative environmental consequences of dumping gypsum into the sea and FOSKOR advanced the following reasons:

a.   The chemical formula of the gypsum is “5CaSO4•2H2O” which is Calcium Sulphate in its di-hydrate form. It dissolves in the sea water and formulate Calcium and Sulphate ions which are natural elements constituent of soil and not harmful to any marine life at the level of concentration it is dumped.

b.  The volume and concentration of the gypsum discarded into the sea, is managed by Mhlathuze Water Board through the Nsezi Water Treatment Plant which removes sludge and add sea water before disposing industrial waste from six industrial uses including Foskor into the sea. This disposal is undertaken under a license issued by the Department of Water Services in November 2002 to Mhlathuze Water Board which is responsible to ensure that disposal is undertaken within the required quality and quantity specified in the license condition.

I have taken note of FOSKOR’s assurance on the matter. I am in addition requesting an independent opinion on the environmental aspects of the current discharge of gypsum.

2)   I am advised that, to date, no feasibility studies have been conducted to determine how much sulphur could economically be extracted from the discarded gypsum because the technology required to extract does not exist at commercial level. 

Based on the state of the sulphur market, the likely capital cost of the investment, and the limitations in terms of technology, the IDC believes that it remains questionable whether the extraction of sulphur will be commercially feasible. However, Foskor will continue to monitor developments in technologies and will conduct a feasibility study when warranted.

-END-

Reply:

1. Yes the Acting HOD signed a performance agreement for his acting period starting 1 April 2016. No performance assessment has been conducted since the appointment is for this financial period.
2. Not applicable
3. Not applicable. Acting DG only appointed from 1 April 2016

-END-

Reply:

 

NAME AND SURNAME OF OFFICIAL	POST NAME	QUALIFICATIONS
Mr Malcom Simpson	Acting Director General	BSc Chemical Engineering Matric
Mr Steven Hlahane	Acting Chief Financial Officer	BTech: Internal Audit ND: Internal Audit Matric

-END-

Reply:

I am advised by the Office of thr Competition Commissioner of the following in respect to the question:

“On the 12th of March 2014, the Competition Commission (“Commission”) received information from the Public Protector contained in the “Docked Vessels” Report No. 21 of 2013/14 dated December 2013. The information suggested that Sekunjalo Investments Limited (“Sekunjalo Investments”), Sekunjalo Marine Services Consortium, Premier Fishing SA (Pty) Ltd (“Premier Fishing”) and Premier Fishing Consortium may have entered into an agreement to collude by discussing and coordinating the preparation of their respective bids to the Department of Agriculture, Forestry and Fisheries (“DAFF”) in respect of a tender to supply marine patrol services to DAFF.

The Commission conducted an investigation and found that Premier Fishing is a wholly owned subsidiary of Sekunjalo Investments and Sekunjalo Marine Services is a division of Sekunjalo Investments. Further, the Commission’s investigation revealed that Sekunjalo Marine Services Consortium and Premier Fishing Consortium are controlled by Sekunjalo Investments. Therefore, the firms suspected of collusive conduct are constituent firms within a single economic entity as contemplated in section 4(5) of the Competition Act 89 of 1999 as amended (“the Act”). Section 4(1) (b) of the Act, which prohibits collusive agreements such as the one alleged in this case, does not apply to constituent firms within a single economic entity.

Based on the above findings, the Commission decided not to refer the matter to the Competition Tribunal for prosecution. The Public Protector was informed about the outcome of the Commission’s investigation on the 1st September 2016.”

-END-

Reply:

The Economic Development Department, the Competition Tribunal and ITAC did not spend any amount on advertising on the ANN7 channel, SABC and or community television and radio stations.

Spending details for the Competition Commission were mostly for the 2015 4th BRICS Competition Conference, the Private Healthcare Inquiry and the Grocery Retail Inquiry. The IDC spent advertising amounts for the 75 years of development funding. Details are provided below.

Competition Commission

		(aaa) 2015 / 2016 Financial Year	(bbb) April 2016 to date
(i)	Africa News Network 7 Channel	R 250 000. 00	0
(ii)(aa)	SA Broadcasting Corporation Television	0	0
(ii)(bb)	SABC Radio stations	R 492 369.50	R 490 749.80
(iii)	National Commercial radio stations	R 684 563.04	R 94 100.00
(iv)(aa)	Community television	0	0
(iv) (bb)	Community radio stations	2 800 00	391 089.50
SUB TOTAL	R 1 429 732 .54	R 975 939.30
GRAND TOTAL	R 2 405 671. 84

INDUSTRIAL DEVELOPMENT CORPORATION (IDC)

		(aaa) 2015 / 2016 Financial Year	(bbb) April 2016 to date
(i)	Africa News Network 7 Channel	R 980 400	0
(ii)(aa)	SA Broadcasting Corporation Television	R 2 402 606	R 8 587 620
(ii)(bb)	SABC Radio stations	R 3 576 089	R 9 939 637
(iii)	National commercial radio stations	R 166 531	R 1 477 582
(iv)(aa)	Community television	0	0
(iv)(bb)	Community radio stations	R 134 509	R 469 214
SUB TOTAL	R 7 260 135	R 20 474 053
GRAND TOTAL	R 27 734 188

-END-

Reply:

The IDC will be subscribing for 35% shareholding in the project and has committed a funding package totalling R1,5 billion for this purpose. This funding package is made up of subscription of ordinary shares, shareholder’s loan and shareholder guarantees proportional to its envisaged 35% shareholding in the project company. The rest of the funding for the project costs will be invested by the BAIC Group, local and international banks.

-END-

Reply:

I have drawn to the IDC’s attention the need to fast-track a turnaround strategy for Scaw Metals and Foskor and requested the IDC Board to regularly review progress with such turnaround strategy. Both companies are in significant sectors of the economy, namely in the metal and fertiliser value-chains and their products are used in downstream industries.

The Chief Executive Officer of the IDC advises the following in respect of the two investments:

(a) Scaw Metals is in the process of finalizing the restructuring of the group, which will result in the introduction of Strategic Equity Partners (SEPs) in some or all of the four steel operations. The SEP’s are expected to add the necessary operational expertise to turn around the businesses. This process is underway and the decision will be made towards the end of the current financial year after evaluating all the proposals. The interested SEP’s have similar businesses and their core competencies are aligned to that of Scaw businesses.

(b) Foskor’s financial performance is dependent on market prices for its products, which are largely commodities. Global prices have softened since their peak in 2008-2010 as a result of supply and demand dynamics. Although this is substantially outside Foskor’s control, there are opportunities to upgrade equipment and improve production efficiencies to place it on a firmer footing. Foskor has therefore developed an investment and performance improvement plan, which also entails IDC finance. Although this will result in improved competitiveness, the timing to achieve sustainable levels of profitability will remain dependent on the speed of recovery of market prices.

-END-

Reply:

The IDC posted a profit of R 223 million for the year ended 31 March 2016 compared to a profit of R1, 65 billion for the year ended 31 March 2015. The main contributor to the reduced profits for the year was increased levels of impairments (an increase of R 1, 6 billion) caused by difficult operating conditions including the impact of the drought.

The CEO of the IDC provided details of the impact at the public release of the IDC’s financial results on 30 August 2016 and he noted that these operating conditions mainly impacted the IDC’s clients in the manufacturing, mining and agricultural sectors. A number of IDC clients were affected by market conditions and requested restructuring of their facilities and / or assistance with drought relief funding. The impairment levels reflect the IDC commitment to play a counter-cyclical role in the economy as well as supporting high risk sectors and business unattractive to commercial financiers.

A considerable effort has gone towards implementing various impairment interventions which are expected to reduce the impairment levels over the medium to long-term.

-END-

Reply:

I have been furnished with a reply by the CEO of the Industrial Development Corporation (IDC), Mr Geoffrey Qhena, a copy of which is attached hereto.

-END-

Reply:

I have been furnished with a reply by the CEO of the Industrial Development Corporation (IDC), Mr Geoffrey Qhena, on the matters covered by the question. The reply follows:

“SUBJECT: IDC RESPONSE TO PARLIAMENTARY QUESTION NW1794E

The IDC has been requested to respond to a question asked in parliament by Mr P G Atkinson (DA). Set out below is IDC’s response to the question.

QUESTION 1

(a) What was the initial loan amount given to Oakbay Resources and Energy by the Industrial Development Corporation (IDC) to fund the purchase of the Shiva uranium mine?

IDC REPLY

The initial loan amount given to Oakbay Resources and Energy was R250 million.

(b) What amount of the specified loan plus accrued interest was paid back to the IDC before the remainder of the loan was converted into equity and;

IDC REPLY

None of the capital amount (R250 million) was converted to equity.

To date a total of R137.5 million of capital repayments have been received in line with the settlement agreement concluded during 2014 and the remaining balance is R112.5 million with the next capital instalment of R37,5 million due in June 2016.

The return (based on 10% RATIRR) of circa R257 million at the time of signing the restructuring agreement was converted into shares on listing date at share price of R9. This represented a 10% discount on the IPO listed share price.

After the restructuring in addition to the shares (referred to above) an interest of prime +2% is levied and will be repaid on 31 March 2018 as a lump sum.

(c) What were the reasons for the IDC registering a (i) mortgage bond to the value of R250 million and (ii) general bond to the value of R 250 million over the specified mine’s assets;

IDC REPLY

The bonds were registered to secure the IDC loan to the company.

QUESTION 2

Was any further consideration given to the specified mine for the specified bonds; if not, why not; if so, what are the relevant details;

IDC REPLY

The following security packaged was taken:

• Mortgage bond
• General Notarial Bond including debtors
• Cession and pledges of shares

QUESTION 3

Whether any steps have been taken by the IDC to protect its interest in its investment(s) in the specified mine, such as acquiring a director for the board; if not, why not; if so, what are the relevant details;

IDC REPLY

The above mentioned (2) security package protects the IDC’s interest in Oakbay Resources and Energy. No board seats were taken as the security package was considered adequate to secure IDC’s interest.

QUESTION 4

(a) what was the final amount converted to equity of the loan given by the IDC to Oakbay Resources and Energy to purchase the Shiva mine,

IDC REPLY

None of the capital amount (R250 million) was converted to equity. The return of R257 million was converted into equity as explained in the answer to question 1(b).

(b) How did the IDC determine the value for the shareholding percentage of the converted equity and

IDC REPLY

Oakbay was listed at R10 a share with market capitalisation of R8 billion. The value was supported by the Mineral Asset Valuation of uranium and gold resources and property, plant and equipment in the balance sheet. The Mineral Asset Valuation was done by an independent firm, in terms of SAMVAL Code.

The Competent Persons Report (CPR) valuation, compiled by Mineral Corporation valued the mineral resource in excess of R6 billion, and PPE valued the other assets such as plant and equipment at R2 billion bringing the total to R8 billion. The Corporate Advisor and Sponsor (SASFIN Capital) supported the R10 per share listing price.

(c) What residual amount remains owing to the IDC after the specified loan was converted to equity;

IDC RELY

Since the equity was not converted the whole capital of R250 million remained as the residual amount.

QUESTION 5

Whether the IDC granted any other loans to (a) Oakbay Resources and Energy,

IDC REPLY

No other loans were granted to Oakbay Resources and Energy.

(b) any other Oakbay Investments entity and/or (c) any other company linked to the Gupta family; if so, what are the relevant details in each case?

IDC REPLY

No other loans were granted to any other Oakbay Investments entity and/or (c) any other company linked to the Gupta family.”

-END-

Reply:

Implementation of Section 13 of the Competition Amendment Act, 2009 (Act No1 of 2009) came into effect on the publication of the Proclamation in the Government Gazette on 9 June 2016.

-END-

Reply:

1.I am advised that a total number of 73 entities responded with written comments to the proposed amendments to the Price Preference System (PPS) on the Exportation of Ferrous and Non-ferrous Waste and Scrap Metals published in Government Gazette notice R.1211 on 11 December 2015.

(2) (a) Oral submissions have been heard by the Commission (ITAC) and were
made by the following entities:

• Metal Recyclers Association (MRA).
• Recycling Association of South Africa (RASA).
• Non Ferrous Metal Industries Association of SA (NFMIA) and the Aluminium Federation of SA (AFSA) in a combined presentation.
• SA Institute of Foundrymen (SAIF).

(2)(b) In the light of the fact that the process of evaluating the amendments is still underway it would not be appropriate to divulge the specific content of the oral submissions, save to say that in general, NFMIA, AFSA and SAIF were in support whereas the MRA and RASA objected to the amendments.

-END-

Reply:

One official, Dr Molefe Pule, Chief of Staff in the Ministry of Economic Development, accompanied me to Kigali, Rwanda for the World Economic Forum Africa.

-END-

Reply:

(a) Details of spending for the department and its entities for the 2015/16 financial year will be available once audited, and included in the 2015/16 annual reports to be tabled in parliament during 2016.

(b) Below is the department’s and entities budgeted advertising spending for the 2016/17 financial year:

Department /Entity	2016/17 Advertising budget
Economic Development Department	R 5 124 000.00
IDC	R 23 000 000.00
Competition Commission	R 1 363 091.00
ITAC	R 283 541.00
Competition Tribunal	R 32 087.00

-END-

Reply:

(a) Economic Development Department

The Economic Development Department (EDD) has from time to time supported different initiatives initiated through the IDC, sefa, and other departments such as Department of Small Business Development and Trade and Industry.

1. EDD, jointly with the IDC manages the Agro Processing Competitive Fund (APCF) which support small agro-processing businesses and corporates

Funding to R250 million was made available by National Treasury in April 2011 following the fine imposed by the Competition Commission on the Bread Cartel. For the period between 1 April 2011 to 31 March 2016, the APCF achieved the following:

• Loans approved (interest free) : R201 425 701
• Funds disbursed : R186 277 970
• Write-offs : Nil
• Number of jobs created (inception) : 2 401
• Jobs created in 2016-17 financial year : this will be known after the expiry of the period
• IDC co-investment : R223 885 641

2. The department conducted research on township based enterprises in Gauteng that have received funding from state owned funding institutions such as IDC, NEF and sefa. The purpose of the research was to determine the levels of impact of DFI funding to township enterprises. For 2016/17 financial year, the department may expand this research survey to cover one or two additional provinces.

3. As part of the Township Economy work, EDD is piloting a project of spaza shop development project which aims at re-establishing a network of more than 25 spaza shops in Mamelodi. Sefa is considering the application to recapitalize such spaza shops.

(b) IDC

The IDC advises that, over the last 20 years, more than 70% of the number and 18% of the value of IDC funding approvals pertained to small and medium enterprises. The IDC realised that empowerment could not be exclusively driven by its focus on funding large projects, and that SMEs, inclusive of black entrepreneurs, had to increasingly participate in all sectors of the economy, which have been dominated in most instances by very large players. The IDC has also directly promoted black empowerment through the development of a credible and strong SME sector.

In addition the IDC has spearheaded the establishment and support of development agencies at a local level to facilitate economic development within municipalities as an approach for identifying and supporting opportunities generating jobs and wealth in communities through the employment of local mechanisms and strategies; and, the leveraging of local resources, assets and capabilities. IDC provides funds for institutional and opportunity development.

Through the Social Enterprise Fund the IDC continues to support social enterprises throughout the country. Social enterprises are businesses with social missions and trade to tackle social and environmental problems, and improve the lives of people and communities, often the most vulnerable. The legal form that many of these social enterprises take often include cooperatives. Under this programme, IDC finds, funds and supports social enterprises, as well as to those organisations providing support to this sector.

The Spatial/Special Intervention Fund, which aims to address the socio-economic and developmental needs of targeted, largely marginalised, areas through public, private and community partnerships, has resulted in many innovative and impactful initiatives. These initiatives include the establishment of business development support organisations for small businesses and pursuing inclusive business approaches with supplier linkages into retailers and corporates.

The IDC is one of three founding partners of Startup Nations South Africa (SuNSA), focused on advancing the national agenda for entrepreneurship and the creation of sustainable startups and small businesses which can contribute to the economic and social development of South Africa meaningfully. SuNSA works very closely with an international network of entrepreneurship capacity development experts to advance the local entrepreneurship movement. This programme supports entrepreneurs through providing training, peer networking events and linking them to potential investors and clients; and further endeavors, through research, make inputs into policy impacting on enterprise development

IDC also has a well-defined Business Support Programme that seeks to offer both pre- and post-investment support to entrepreneurs in respect of its general business mandate. Not only is this programme aimed at making applications investment-ready, but also ensures their sustainability post approval. There is a deliberate focus in support of youth, women and Black Industrialists. The funding in relation to this programme operates on a shared basis.

An amount of R50m is specifically earmarked for the above-mentioned programmes of Agency Development and Support, Social enterprises and Spatial/Special Interventions. The IDC uses these funds as a catalyst to “pump-prime” the participation and crowding in of other funders and partners. The IDC endeavors to support and include small businesses in all aspects of its normal operations and activities too, which is difficult to quantify and business support is provided on a case-by-case basis.

Jobs created are highly dependent on the nature (sector, location, etc) of each particular application. Having said that, the IDC endeavors through the above-mentioned funds/programmes, to create a 1000 jobs with the budgeted R50m.

SuNSA operates on co-funding basis and IDC’s contribution is R1m per annum, as well as accomodating the Project Management function.

-END-

Reply:

I have been furnished with a statement by the CEO of the Industrial Development Corporation, Mr Geoffrey Qhena, on the matters covered by the question.

The statement by the IDC follows:

“(A) There were no political considerations associated with the restructure;

(B) The restructuring was done purely on commercial terms as set out below;

(C) Point of correction – the amount is R250 million and not R250 billion.

The original R250 million loan is expected to be fully repaid, as R137,5 million has already being received to date and R112,5 million is outstanding as at 30 April 2016. The next instalment of R37,5 million is payable by end of June 2016, with intention of the full capital being repaid by 31 March 2018.

The interest of R257 million being from 14 April 2010 to 31 May 2014 (the date on which the amount converted was determined) was converted into shares when the entity was listed (at a 10% discount to the listing price).

The additional interest (after conversion) of prime plus 2% will be repaid as a lump sum on 31 March 2018.

The risk profile of the company at the time of our initial investment compared to the risk profile of the company at the time of restructuring differed materially. At the time of the acquisition, the mine was under care and maintenance and the company was not generating any revenue which needed to be brought back into production.  The turnaround strategy of the company was based on an improvement in operational efficiencies and productivity. The IDC initially viewed the asset as a pure uranium play (the gold potential was not considered at the time due to level of accuracy of the information) compared to the time of restructuring, there was a demonstrable open cast gold reserve with a proven operational record. At the time of the acquisition, the “perceived” risks were higher, hence the equity type return of 10% Real After Tax Internal Rate of Return (RATIRR).

Our pricing mechanism always takes into account both the level of risk and developmental impact and the repayment profile mirrors the anticipated cash flow generation of the asset/project.

At the time of the restructuring, IDC demanded that the company part settle R100 million of the original facility before the restructuring of the facility. In addition the main shareholder had injected an additional R293 million and the company was generating positive cash flows from the gold production concomitant with now a demonstrable operational track record from the gold production. Moreover, the IDC facility was reduced by R100 million and the balance of the original capital continued to be secured by the assets of the company, giving the IDC a security cover of more than one times – hence the prime plus two percent post the restructuring. It is not the first time that the IDC has done a restructuring of this nature where a debt facility is converted into equity. Ordinarily both the interest and capital is converted into equity. The difference in this instance is that only the interest portion was converted retaining the capital for it to still be repaid thus putting us in a better position.”

MG Qhena, 23 May 2016

-END-

Reply:

I am advised that the government expert witness signed the requisite confidentiality agreement supplied to him by government lawyers prior to gaining access to confidential information.

-END-

Reply:

I have been furnished with a statement by the CEO of the Industrial Development Corporation, Mr Geoffrey Qhena, on the matters covered by the question.

The statement follows:

“It is common knowledge that the IDC has provided financial assistance to Oakbay Resources & Energy Limited. In the period leading up to the finalisation of negotiations regarding the transaction and in the normal course of business, Mr Ufikile Khumalo (who was at the time the Divisional Executive responsible for Mining and Beneficiation) and Mr Abel Malinga (the current Divisional Executive responsible for Mining & Metals Industries) held several meetings with officials, executives and shareholders of Oakbay Resources & Energy including Mr Atul Gupta and Mr Jagdish Parekh. All meetings with officials, executives and shareholders of Oakbay Resources took place at the offices of the IDC. None of these meetings took place at the Gupta’s Saxonwold Estate.

In addition to the meetings referred to above and during the course of the last year, the current Divisional Executive for Mining and Metals Industries, Mr Abel Malinga met twice with the Chief Operating Officer (COO) of Oakbay Resources, Ms Ronica Ragavan, to finalise the terms for restructuring Oakbay Resources’ existing facilities with the IDC. The second meeting discussed a possible early redemption of IDC facilities by Oakbay Resources. The meeting to discuss the restructuring of Oakbay Resources facilities took place at the IDC whilst the discussion on possible early redemption of IDC facilities by Oakbay Resources took place at the client’s offices at 144 Katherine Street, Sandton.”

MG Qhena, 11 May 2016

-end-

Reply:

The Competition authorities are mandated, in terms of the Competition Act, to investigate and prosecute allegations of cartel conduct, including price fixing. The authorities currently do not have in their possession information or evidence giving rise to a reasonable suspicion that the retail prices of motor vehicles in South Africa are as a result of price fixing or collusive conduct of car manufacturers or any other participants in the market for finished motor vehicles. Should the Competition Commission receive any such material, information or evidence, it may commence an investigation in terms of section 49B(2) of the Competition Act. The Competition Commission is currently investigating collusive conduct in relation to car parts. The prices of car parts contribute to the ultimate price of the finished product.

-END-

Reply:

Information on income is disclosed in annual parliamentary disclosures. No income was derived from businesses since my appointment as Minister. No family members earned income from businesses through my appointment as Minister.

-END-

Reply:

According to our records, no requests were received from the said family for bilateral meetings at their home for either business or social purposes in either the current or the previous administration. 

In the previous administration, members of the said family were present at public functions that I attended and addressed and were thus engaged at the events.

-END-

Reply:

The rationale for the proposed amendments is to strengthen the administration of exports of scrap metal to achieve public policy objectives.

ITAC has published a notice requesting members of the public and interested parties to comment on a range of proposals in this regard.

One of the proposals related to the possible designation of one port to enable the concentration of resources to enable effective compliance. ITAC will need to take into account all relevant factors, including the additional costs on parties and weigh these against the likely benefits. A public call for comments assists ITAC to take all views into account.

-END-

Reply:

On 29 February 2014 and 27 January 2016 the Commission received complaints related to a visa service provider.

The first complaint was that the visa service provider had allegedly concluded contracts with various foreign governments in terms of which it had been given exclusive rights to provide visa support services, and was charging excessive prices for its visa support services.

After investigating the complaint, the CC decided not to refer the matter to the Competition Tribunal, due to jurisdictional issues relating to the conduct of foreign governments. The Commission also found that the prices that were being charged were in fact aligned with the embassies’ own tendering frameworks.

The Commission did however engage in advocacy efforts with the embassies concerned, to make them aware that such practices could have anti-competitive effects.

On 27 January 2016, the Commission received a complaint that the same company was abusing its dominance in the provision of visa support services to international travellers to South Africa who have to use South African embassies abroad. This complaint is still under investigation by the Commission.

-END-

Reply:

Maize:

Grain SA submitted an application for an increase in the dollar based reference price for maize in December 2015. ITAC engaged with stakeholders and solicited comments from 25 interested parties. ITAC staff is now evaluating the application. The preliminary submission will be submitted to the Commissioners of ITAC during the Commission meeting of May 2016 for consideration.

Wheat:

Wheat tariffs are determined by a variable tariff formula based on US dollars. At the request of producers, when the conditions were met for an upward tariff trigger, ITAC applied the formula and tariff increases were accordingly applied. This resulted in an increase of customs duties on wheat from 91.12c/kg to 122.43c/kg and wheaten flour from 136.68c/kg to 183.65c/kg.

However, in light of the drought, the current exchange rate and the impact on food prices, government has requested a review of the variable import duty formula to ensure that consumer needs are properly taken into account.

-END-

Reply:

The Economic Development Department is not involved in this project. The Gauteng Department of Economic Development is overseeing the project.

-END-

Reply:

The Chief Executive Officer of the IDC was quoted in a local newspaper in February 2016, as noting that the IDC needs to restructure some of the debt that it holds.

This restructuring would be on the asset, not liability side of the IDC’s balance sheet, ie money owed to the Corporation by local companies.

The purpose of the debt restructuring is to assist IDC clients and business partners that are affected by the downturn in the macro-economic environment, particularly those that are negatively impacted by the slump in commodity prices. In this regard further details will be provided in my budget vote speech, or as soon as the IDC has completed the technical work on the matter.

-END-

Reply:

a) For the period 1 April 2015 to date, 26.8% of the department’s total procurement spent was allocated to SMME’s including Co-operatives. This amounts to R5 926 304.97.

b) The entities total procurement spent allocated to SMME’s is as follows:

IDC

The IDC has awarded procurement contracts to the value of R78 951 498.00 during 1 April 2015 to 29 February 2016 of which 57% of the total contract value was awarded to SMME’s.

ITAC

ITAC total spent on SMMEs is 31%, at a total value of R5 227 410.49

Competition Commission

Due to the nature of the Commission’s business being an investigative and prosecutorial agency, the majority of its procurement is on legal counsel, economists and experts. The total spent from 1 April 2015 until 30 September 2015 is at 4% at a total value of R63,7 million.

Competition Tribunal

The Competition tribunal does not currently keep statistics with regard to procurement from SMME’s or co-operatives. EDD has now requested that such data be collected in future.

-END-

Reply:

During 2012-13, adverts were placed in New Age by recruitment companies totalling R102 146 for staff posts advertised by the department. This constituted 0,65% of the total advertising costs of the department for the year. Other media outlets used in this period included the Star, Mail & Guardian, City Press, Business Day and Sunday Times.

During 2013-14, infrastructure marketing was placed by Brand SA on behalf of EDD in various media outlets, which included newspapers, radio and television. Adverts and marketing were placed in Sowetan, the Star, Cape Times, Pretoria News, Mercury, Mail & Guardian, Business Day, City Press and the Sunday Times. No advertisements or marketing was placed with the New Age in this period and the amount was accordingly nil.

During 2014-15, infrastructure marketing was placed by Brand SA on behalf of EDD in various media outlets. Adverts for this as well as normal departmental advertising were placed in City Press, The Star, Pretoria News, Cape Times, Mercury, the New Age and Sunday Times. A separate partnership between KPMG and EDD was done, involving the M&G, at no cost to EDD. A sum of R100 000 was paid by EDD to Brand SA for advertisements in the New Age, which was equivalent to 1,6% of EDD’s total advertising spend for the financial year.

-END-

Reply:

None. See reply to Parliamentary Question 263 in respect of media adverts.

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Reply:

Yes, I have entered into a performance agreement with the President.

The Performance Management Framework for Ministers is the Medium Term Strategic Framework (MTSF) for 2014-2019, which is the first 5 year implementation plan of the National development Plan (NDP) 20130. The performance targets and indicators are derived from the 14 Outcomes which government seeks to achieve.

These outcomes and targets constitute government’s Programme of Action (POA), against which performance is tracked and reported at least on a quarterly basis. POA reports are publicly available on the government’s website and sets out progress made in meeting the key indicators and targets.

Cabinet closely monitors the implementation of the NDP 2013/MTSF 2014-2019 through POA Reports. These reports are tabled before an Implementation Forum of a Cluster of Ministers collectively responsible for MTSF outcomes, and then submitted to Cabinet, where progress is noted, bottlenecks and obstacles to implementation are discussed and recommendations to address bottlenecks are considered and approved.

The annual report of the department provides more details on key progress made in addition to the information above.

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Reply:

A pre-feasibility study (“PFS”) was conducted by the IDC in August 2012.

The key findings of the PFS include:

• A new low cost iron and steel plant with annual capacity of 2.5 million tons based on low cost iron ore and coal resources in South Africa, is viable.
• The preferred process route would be the Rotary Hearth Furnace (“RHF”) technology. The primary advantage of this technology is that it does not require coking coal and subsequently has the lowest operating cost. The downside is the high capital cost of an RHF project and relative high electricity consumption.
• The second best option is Blast Furnace (“BF”) technology. Although it is the most proven route worldwide for iron making, it requires coking coal which is not currently available in South Africa and was therefore considered second best to RHF.
• Beneficiation of the magnetite could be done at a facility at Phalaborwa.
• Middelburg would be a suitable location (and significantly better than Phalaborwa) based on availability of coal, raw material transport logistics, infrastructure including water, rail and electricity as well as proximity to inland domestic market.

After the PFS was concluded, IDC embarked on a process to find a strategic equity partner which led to the Memorandum of Understanding executed with China’s Hebei Iron & Steel Group (HBIS) in September 2014.

HBIS’s participation is conditional upon using their core competence which is based on BF technology as well as to increase the target size of the project to 5mtpa of which a substantial portion will be exported, to other Sub-Saharan African markets. The BF process necessitates the use of coking coal that would need to be imported (possibly from Mozambique). The capacity change, new markets identified and raw material import requirements may put an inland site such as Middelburg at a competitive disadvantage. Therefore, they are considering a coastal site as an alternative.

HBIS and IDC are currently conducting additional prefeasibility studies to assess the economic viability of BF technology, increased size and the project location. Depending on the outcome of these additional prefeasibility studies, a detailed feasibility study will be conducted before a final investment decision is made.

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Reply:

1. The Memorandum of Understanding was executed in September 2014.

a) The terms of reference include undertaking and completing a pre-feasibility study (“PFS”) for a new low cost steel production facility in South Africa (the “Project”) that will meet international environmental compliant standards using raw materials that are locally and regionally available. The envisage Project had to be a profitable low cost producer of a broad spectrum of steel products required by the South African and Sub-Saharan markets

Furthermore, it envisages the establishment of a down-stream industrial park to process some of the steel products to finished goods for domestic and export markets.

b) The estimated total capital outlay of the envisage plant is USD 5 billion which is R70 billion at R14/$. The Project will be funded partly with debt (up to 60%) and partly with equity (40%). The objective of the IDC is to play a catalytical role in the establishment of the facility and not to have a controlling interest in the project.

c) The plant will be designed to have a capacity of 5 million tons of steel per annum. During the detailed feasibility study, consideration will be given to the option to build the Project in two phases of approximately 2.5 million tons each.

d) The labour force to construct the Project is estimated to peak at around 11000 and construction will span over a period of at least 42 months. The operational labour requirement for the Project is estimated at 3 500.

An earlier pre-feasibility study was completed, based on the use of a Rotary Hearth Furnace (“RHF”) technology. Since Hebei seeks to use a different technology, further pre-feasibility studies will be conducted. For details of the earlier pre-feasibility study outcomes, the attention of the Honourable Member is drawn to the reply submitted to Parliamentary Question 4138.

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Reply:

I wish to share three points with the Honourable Member.

First, on job performance in the third quarter of 2015, the StatsSA Quarterly Labour Force Survey shows the following:

• Total employed persons in the SA economy numbered 15, 8 million at the end of September 2015, which is the highest level it has ever reached.
• There were 625 000 new entrants to the age cohort 15-64 in the past 12 months, and the number of jobs created (712 000) for the 12 month period was significantly larger than this.
• However, the labour force increased by 979 000, as a result mainly of a significant rise in the number of previously discouraged work seekers who re-entered the labour market (278 000).
• As a result, robust jobs growth over the period nevertheless translated into an increase in the unemployment rate from 25.4% to 25.5% over the year.
• The number of new jobs created for the quarter was 171 000.

Second, global growth prospects have weakened further over the past six months, with the October IMF projections revising growth prospects downward for the global economy as well as for the African continent.

In April of this year, the IMF projected 2015 growth of 3.5% for the global economy and of 4.5% for Africa. It has now revised those projections down to 3.1% for the global economy and 3.8% for Africa. The April projections were already a downward revision of October 2014 projections.

Third, to address the backlogs in jobs and address the needs of new entrants to the labour market, we need higher growth and more labour-intensive growth, driven by broader economic participation and by re-industrialization centered on a dynamic, internationally competitive manufacturing sector.

Recent actions such as the agreements signed with the People’s Republic of China to invest in industrial and infrastructure activities in South Africa and the rest of the continent, are measures to respond to this economic framework. Of particular relevance for the Economic Development Department were two agreements signed by the Industrial Development Corporation: namely to work towards establishing a new BAIC auto-assembly plant in South Africa with an investment value of R11 billion and to set up a Fund with a R10 billion commitment by the China Construction Bank to invest in the domestic and regional economy.

During the debate in Parliament on the state of the economy in August this year, I addressed the question of government’s overall response to the global economic slowdown and the headwinds facing the local economy, which I summarise below:

The two global storms, in the mineral and steel sectors, are what we have to navigate with as little damage as possible, recognising that production and job losses in these sectors can have a multiplier effect on the economy.

To respond to these conditions and to address the still-continuing high levels of unemployment, we are doing the following:

Public investment

We are maintaining a high level of public investment in infrastructure, which is a true game-changer for the economy. We are spending close to a quarter trillion a year, or R1 billion rand per working day, on economic, industrial and social infrastructure. The BRICS New Development Bank is a major potential source of new funding for South African and regional infrastructure.

Trade and regional integration

We are expanding trade with the rest of Africa, particularly exports of South African made cars, machinery, iron and steel and food products.

Exports to the rest of the continent now account for 244 000 direct jobs and it has been estimated as much as 885 000 total jobs; that last year, Zambia was our number one global export market for televisions, Zimbabwe for plastic products, Mozambique for clothing and the DRC for electrical equipment.

Domestic economic actions

We are implementing actions in the domestic economy, summed up in the 9-point plan announced by the President in the State of the Nation Address in February.

The nine priorities are:

1. Resolving the energy challenges through practical actions, including cogeneration, new IPPs and completing the public energy-build programme
2. Revitalising the agriculture and agro-processing value chain
3. Advancing beneficiation through adding value to our mineral wealth
4. More effective implementation of a higher impact Industrial Policy Action Plan
5. Unlocking the potential of small business, cooperatives and township and rural enterprises
6. Stabilising the labour market
7. Scaling up private sector investment
8. Growing the Oceans Economy and
9. Diversifying and boosting the economy through science, technology and innovation, expanding transport, water and ICT infrastructure and reforming state-owned companies.

To respond to the steel industry's problems:

• We fast-tracked a tariff investigation by the trade authorities on three steel products
• We completed a competition commission probe into steel pricing by the dominant company
• We extended short-term industrial funding of R150 million to one steel-mill to give it the space to restructure rather than close its doors
• We appointed a panel of steel industry experts to identify options for steel that would not damage downstream factory users, and
• We are meeting with business and labour to identify further steps to be taken,

To respond to the mining industry's problems:

• We convened a dialogue with stakeholders to consider options to reduce or avoid job losses
• We are investing in technologies and innovation to boost demand and localisation, such as platinum fuel-cell pilot projects
• We have initiated a Mining Phakisa to address the future of the industry

To respond to the clothing and industry's challenges:

• We implemented a tariff increase on finished products at the start of the previous administration
• We set a reference price on imported clothing to identify smuggling and import-fraud
• We created a competitiveness fund that has already invested over R3 billion in new technologies and work organisation to boost output and jobs.

IDC funding

The IDC expanded its industrial funding envelope over the past five years, particularly in green energy, putting some R14 billion into the Independent Power Producer programme that has already seen almost 2000 megawatts of energy coming onto the grid.

The IDC is now focussing on expanding investment in manufacturing, agro-processing and new industries.

Autos

During a time of declining mineral exports in dollar value, our auto exports have actually accelerated after 2011 and now constitute one of our top five exports, speaking to the success of the partnership built with investors.

Competition and anti-monopoly actions

To boost competitiveness, the competition authorities have acted against monopolies and cartels in sectors such as fertilisers, bread and poultry, steel, construction and telecomms.

Industrial relations

To promote partnership, the Deputy President has led discussions with the business community and trade unions on reducing workplace conflict, including the role of strike ballots, action against violence in strikes and picketing rules. To reduce income inequality in the workplace, proposals for a national minimum wage are under discussion.

Skills

To boost youth employment, government is revamping its skills and entrepreneurship support programmes to make them more effective. The President convened a meeting with the business community in August this year at which stronger partnerships on skills development and work placement were considered.

Partnership

As we navigate our way through the minerals and steel turbulence and storms generated by falling global demand, we need to pull South Africans together, address domestic challenges such as energy and labour-business partnerships and speak with one voice.”

-END-

Reply:

Government is currently building the capacity of economic regulators, who play a vital part in allocation of scarce resources, price-setting in monopoly markets and regulating conduct.

The BRICS Conference on Inclusive Growth and Competition held in November 2015, brought together economic regulators from the five BRICS countries as well as from elsewhere on the continent and from developed countries, to share experiences and insights.

As part of the work with regulators, we will be exploring the possibility of further consolidation of regulators and balance the specialist expertise that may be located within sector regulators with the broader economic and legal capacity that the competition authorities have built up over the years.

-END-

Reply:

I intend to introduce legislation to further strengthen our efforts to tackle anti-competitive practices which impose unnecessary costs on consumers, undermine industrial policy objectives and reduce the competitiveness of the economy. The Department has undertaken work on the scope of the amendments required, using the jurisprudence and the experience of the competition authorities to identify weaknesses or gaps in the legal framework. We are holding discussions and consultations with relevant parties to enable the drafting process to be completed as soon as possible. A Bill will be published on completion of the process.

-END-

Reply:

Technical work is continuing in order to give effect to the phased introduction of the Competition Amendment Act and ensure capacity to implement effectively. This has been done successfully with the market enquiry provisions. Further announcements can be expected within the next six months, based on progress made with additional areas of the Amendment Act.

-END-

Reply:

1. The infrastructure spending referred to in the previous reply was principally in the following infrastructure programmes and projects:

• Energy covering energy generation, transmission and distribution
• Transport (road, rail and port)
• Water, including dams and pipelines
• Sanitation
• Broadband rollout by the state
• Education (universities, colleges and schools)
• Health (clinics and hospitals)
• Provincial housing (for FY 2014/15)

2. The data is for all four financial years since 1 April 2011 (except as otherwise indicated) and for the three spheres of government and state-owned companies, using audited data for the first three years and estimates for the fourth year.

3. The nature of the investment in infrastructure includes spending on new and refurbishment or revitalization of existing infrastructure assets.

4. Additional spending on areas covered by the National Infrastructure Plan, not covered in the above figure, are:

• Renewable energy programmes worth R145 billion, from funding committed by development finance institutions (IDC and DBSA), and private investors (foreign and local, equity and loans).
• Infrastructure provided by the private sector either through a private-public partnership or through a public concession
• Housing build-programmes, financed by the public subsidy, except for FY 2014/15
• Development finance institutions’ direct investment in infrastructure

5. The infrastructure programme is the most ambitious yet for South Africa, with spending exceeding in real terms the levels spent in past decades

-END-

Reply:

Audited data that have been properly verified are contained in the Department’s Annual Report tabled in Parliament. From unaudited data made available by the Department, the following applies in respect of travel by Departmental staff, excluding the Ministry:

Flights: R718 694

Accommodation: R153 077

Car rental: R59 201

-END-

Reply:

ITAC published a notice in the Government Gazette on 19 December 2014, requesting public comments on proposed duty increases on specified steel products, following receipt of an application by steel-makers, who cited global and domestic steel-market conditions.

It received written submissions from companies in the sector.

In all, 30 companies provided written submissions. ITAC consulted with representatives of 19 downstream companies as well as with a business association representing the views of automotive customer companies. The downstream producers were also provided with an opportunity to make oral representations on 20 May 2015.

The companies in the downstream industries generally did not favour tariff increases to protect upstream producers, citing the impact it will have on their businesses and noting challenges with the price, quality and availability of product from local steel-makers.

In addition to the two applicant companies who requested a tariff increase, ten other companies supported the increase in duties.

ITAC took account of the views of all the parties as well as of the global circumstances and pressures in the domestic market, in its consideration of the request for tariff-increases made by the steel-makers.

-END-

Reply:

Audited data on travel that have been properly verified are contained in the Department’s Annual Report tabled in Parliament. From unaudited data made available by the Department, the following applies in respect of combined travel by the Minister and Deputy Minister:

Trips (return): 77

Airfare and accommodation costs: R873 764.

Accommodation was incurred by the Deputy Minister only for the period until he was allocated an official residence.

-END-

Reply:

I draw the attention of the Honourable Member to my remarks during the debate on the state of the economy, held in the National Assembly on 18 August 2015, available in Hansard. For ease of reference, an extract form the speech follows:

“These two global storms, in the mineral and steel sectors, are what we have to navigate with as little damage as possible, recognising that production and job losses in these sectors can have a multiplier effect on the economy.

So what are we doing to respond to these conditions and to address the still-continuing high levels of unemployment?

First, we are maintaining a high level of public investment in infrastructure, which is a true game-changer for the economy. We are spending close to a quarter trillion a year, or R1 billion rand per working day, on economic, industrial and social infrastructure. The BRICS New Development Bank is a major potential source of new funding for South African and regional infrastructure.

Second, we are expanding trade with the rest of Africa, particularly exports of South African made cars, machinery, iron and steel and food products.

Honourable Members will be pleased to note that exports to the rest of the continent now account for 244 000 direct jobs and it has been estimated as much as 885 000 total jobs; that last year, Zambia was our number one global export market for televisions, Zimbabwe for plastic products, Mozambique for clothing and the DRC for electrical equipment.

Third, we are implementing actions in the domestic economy, summed up in the 9-point plan announced by the President in the State of the Nation Address in February.

The nine priorities are:

1. Resolving the energy challenges through practical actions, including cogeneration, new IPPs and completing the public energy-build programme
2. Revitalising the agriculture and agro-processing value chain
3. Advancing beneficiation through adding value to our mineral wealth
4. More effective implementation of a higher impact Industrial Policy Action Plan
5. Unlocking the potential of small business, cooperatives and township and rural enterprises
6. Stabilising the labour market
7. Scaling up private sector investment
8. Growing the Oceans Economy and
9. Diversifying and boosting the economy through science, technology and innovation, expanding transport, water and ICT infrastructure and reforming state-owned companies.

To respond to the steel industry's problems:

• We fast-tracked a tariff investigation by the trade authorities on three steel products
• We completed a competition commission probe into steel pricing by the dominant company
• We extended short-term industrial funding of R150 million to one steel-mill to give it the space to restructure rather than close its doors
• We appointed a panel of steel industry experts to identify options for steel that would not damage downstream factory users, and
• We are meeting with business and labour to identify further steps to be taken,

To respond to the mining industry's problems:

• We convened a dialogue with stakeholders to consider options to reduce or avoid job losses
• We are investing in technologies and innovation to boost demand and localisation, such as platinum fuel-cell pilot projects
• We have initiated a Mining Phakisa to address the future of the industry

To respond to the clothing and industry's challenges:

• We implemented a tariff increase on finished products at the start of the previous administration
• We set a reference price on imported clothing to identify smuggling and import-fraud
• We created a competitiveness fund that has already invested over R3 billion in new technologies and work organisation to boost output and jobs.

More generally, the IDC expanded its industrial funding envelope over the past five years, particularly in green energy, putting some R14 billion into the Independent Power Producer programme that has already seen almost 2000 megawatts of energy coming onto the grid.

The IDC is now focusing on expanding investment in manufacturing, agro-processing and new industries.

During a time of declining mineral exports in dollar value, our auto exports have actually accelerated after 2011 and now constitute one of our top five exports, speaking to the success of the partnership built with investors.

To boost competitiveness, the competition authorities have acted against monopolies and cartels in sectors such as fertilisers, bread and poultry, steel, construction and telecomms.

To promote partnership, the Deputy President has led discussions with the business community and trade unions on reducing workplace conflict, including the role of strike ballots, action against violence in strikes and picketing rules. To reduce income inequality in the workplace, proposals for a national minimum wage are under discussion.

To boost youth employment, government is revamping its skills and entrepreneurship support programmes to make them more effective. The President convened a meeting with the business community 10 days ago at which stronger partnerships on skills development and work placement were considered.

…as we navigate our way through the minerals and steel turbulence and storms generated by falling global demand, we need to pull South Africans together, address domestic challenges such as energy and labour-business partnerships and speak with one voice.”

-END-

Reply:

I have discussed the broad policy imperatives of government relating to empowerment of women in the economy, with the Minister of Women in the Presidency and we collaborate on giving effect thereto.

I have tasked development finance institutions reporting to me to specifically measure and report on efforts to increase industrial funding to women-owned enterprises. Details of these may be obtained from the IDC Annual Report tabled in Parliament. EDD also monitors the share of women in employment.

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Reply:

Developmental pricing refers to arrangements to supply locally-produced inputs at lower than market prices to locally-based downstream producers, in order to stimulate value-add production in a country. It is one of the means that is used to promote beneficiation of minerals so as to expand the national value-chain, grow the number of jobs in manufacturing, deepen the economic development benefits in a country and help to reduce vulnerability of economies that are reliant principally on exports of minerals or agricultural products.

In South Africa, government has supported efforts to beneficiate a greater quantity of locally-mined iron ore through a developmental pricing regime that had been in place for many years.

It is government’s view that pricing of inputs is one element of a number of factors that need to be addressed to expand beneficiation significantly. Other key factors include availability of energy at competitive prices, local know-how or partnerships with international technology partners and availability of key skills. Pricing of raw material inputs remain a critical component in efforts to substantially expand beneficiation of minerals.

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Reply:

During the period from 1 January 2014 until 15 September 2015, a total of 18 days were spent outside the country (excluding travel time) on official trips to the United Kingdom, Indonesia, the United States and Switzerland, to meet investors or to showcase examples from South Africa to other policy-makers.

In the course of such engagement, both parties normally share national experiences. The observations of the experience of other countries help to shape the refinement and implementation of our policies. In none of these cases did we take an existing policy or practice from another country and simply implement it, which limits the assessment of their impact on our domestic economy.

Investor feedback has been helpful however in confirming the value of actions taken in respect of the export of scrap metal, the renewable energy programme and the shift of focus of skills training to technical and artisanal skills. In addition, valuable insights have been gained on the importance of infrastructure investment for economic development.

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