ATC141029: Budgetary Review and Recommendation Report of the Portfolio Committee on Economic Development, dated 24 October 2014
Economic Development
Budgetary Review and Recommendation Report of
the Portfolio Committee on Economic Development, dated 24 October 2014
The Portfolio Committee on Economic Development (the
Committee), having assessed the financial and non-financial performance of the
Economic Development Department (the Department), reports as follows:
1.
Introduction
This years Budgetary Review comes at a time when
South Africa celebrates a historic milestone - 20 years of democracy and
freedom fromoppression by the Apartheid state.
Apartheid systematically and
purposefully restricted the majority of South Africans from meaningful
participation in the economy. The assets of millions of people were directly
and indirectly destroyed and access to skills and to self-employment was racially
restricted. The accumulation process under Apartheid confined the creation of
wealth to a racial minority and imposed underdevelopment on black communities.
When the
first democratically elected
government came into power, it inherited an ailing economy from the Apartheid
State.
The economy was experiencing
rising unemployment, a high budget deficit,
double digit inflation rates,negative rates of fixed
investment
,periods
of negative economic growth, and foreigners were disinvesting.The poverty
levels, inequalities, discriminatory practices and inequitable distribution of
income were high.
The dawn of democracy and freedom, however, brought
along change. Employment grew by approximately 5.6 million between 1994 and
2013, or by60 percent. The economy grew at 3.2 percent a yearon average from
1994 to 2012. In 1993, investment had dropped to under 15 percent of GDP but by
2013, investment had recovered to 19.2 percent of GDP due to the multibillion
rand expansion in public infrastructure.
When the 2008/09 global economic crisis hit, the
South African economy suffered a loss of approximately one millionjobs between
the end of 2008 and the end of 2010. Employment only recovered to 2008levels in
2013, when a total of 15.2 million people were employed.
While
there has beena large increase in the number of people employed, this has been
offset by a largerincrease in the number of people looking for work. The
reasons for this include populationgrowth, increasing urbanisation (which in
turnwas partly a result of the dismantlingof thehomeland system and the removal
of the pass laws) and increasing numbers of womenlooking for work, due to
advances in gender equality. Youth unemployment remains a particular concern
[1]
.
KEY ECONOMIC ACHIEVEMENTS FOR THE 2013/14 FINANCIAL YEAR
The
Departments Annual Report has identified the following economy and agency
highlights:
·
Employment growth since adoption
of New Growth Path in October 2010 is at
1.4 million (October 2010 to March
2014);
·
Employment grew by
496 000
(March 2013 to March 2014);
·
Growth in womens employment
300 000
(March 2013 to March 2014);
·
GDP annual growth
1.9% (2012/3
to 2013/4);
·
Size of GDP
R3.5 trillion
(March 2013 to March 2014);
·
Investment grew by
R73 billion
(nominal, year on year, 2012/3 to 2013/4);
·
Manufacturing production grew by
R4.1
billion or 1.4% (2012/3 to 2013/4);
·
Agricultural production grew by
R400
million or 0.9% (2012/3 to 2013/4);
·
PICC monitored infrastructure
projects (value, March 2013)
R 1 trillion;
·
IDC funding disbursements, 2013/4
R11,2 billion;
·
Small Enterprise Finance Agency (
SEFA)
facilitated funding approvals, 2013/4
R1,1 billion
; and
·
Penalties imposed by the
competition authorities, 2013/4
R2,6 billion.
1.1.
Mandate of the Committee
:
The
Portfolio Committee on Economic Development (the Committee) is guided by the
Rules of Parliament and the Constitution to play an oversight role over the
Ministry, the Committee and its entities.
South
Africas parliamentary committees are some of the instruments required by the
Constitution to ensure accountability by, and oversight over, the Executive and
stated owned entities. As a result, Parliaments task, through committees such
as the Committee, is as follows:
·
Exercises
its monitoring role in such a way that it contributes towards the improvement
of the quality of life of all South Africans;
·
Scrutinises
legislation and other policies that impact on the spheres of Economic
Development;
·
Facilitates
interdepartmental and intergovernmental relations at all spheres of government;
and
·
Learns from
international best practices that are relevant to its field of
jurisdiction to improve service delivery to
all South Africans to its best.
The aim of exercising
oversight over the Departments and their entities is to ensure that state
organs are performing their functions and are delivering services that
guarantee a good quality of life for citizens. It is however important to
underscore the fact that the Department does not deliver services directly to
the citizens. The Department is mandated to facilitate and co-ordinate the
creation of decent work through the development of policy interventions
programmes and projects so as to promote economic growth and inclusiveness.
1.2.
Description of core functions of the Department
:
The
Department is responsible for developing economic policy with a broad,
cross-cutting focus so that macro and micro-economic policy reinforce each
other and are both aligned to the electoral mandate. The Department is also
responsible for economic development planning and works with other Departments
to ensure coordination around placing decent work at the centre of governments
economic policies. The Department executes its mandate through the following
functions;
·
Developing strategies and
measures to make economic growth more inclusive, especially for supporting and
encouraging job creation;
-
Encouraging and helping all
state agencies to work together for inclusive growth and job creation;
-
Providing secretariat and technical
support for the Presidential Infrastructure Coordinating Commission acting
as secretariat to meetings; managing monitoring and evaluation; unblocking
projects; and proposing cross-cutting models and guidelines;
-
Facilitating social dialogue;
and
-
Undertaking other activities
as required to assist investments and programmes that lead to new kinds of
economic activity and job creation, for instance by speeding up
bureaucratic authorisations, assisting in obtaining infrastructure or
finding sources of financing (although the Department itself does not
provide funding).
TheDepartment oversees the following
entities:
·
Development Finance Institutions
Industrial Development Corporation
(IDC) and
SEFA
; and
·
Economic Regulatory Bodies
Competition Commission,
Competition Tribunal; and International Trade Administration Commission of
South Africa (ITAC). The Department exercises policy oversight while the DTI is
responsible for administration oversight over ITAC.
In this regard, the Department
administers the following legislation:
·
The Industrial Development Corporation Act (No. 22 of
1940);
·
The Competition Act (No. 89 of 1998);
·
The Competition Amendment Act (section 16 of 2008)
(section 16 was promulgated 1 April 2013); and
·
The International Trade Administration Act (No 71 of
2002).
The Department participates in,
supports or convenes the following Coordinating structures:
·
The Presidential Infrastructure Coordinating Commission;
·
Ministers and Members of the
Executive Council (MinMEC)/Technical MinMEC with provincial Members of the
Executive Council (MECs) and economic development Departments;
·
The Outcome 4 Technical
Implementation Forum and is one of the three Coordinating Departments of this
outcome; and
·
Economic Sectors and Employment
Cluster and the Infrastructure Development Cluster (for the year under review).
Because
of the Departments coordinating function, it
works with a range of other Departments and agencies, among them is the
Department of Trade and Industry
(DTI), particularly in relation to the functioning of the Industrial
Development Corporation (IDC), the International Trade Administration
Commission (ITAC) and the Small Enterprise Finance Agency (SEFA) (formerly
Khula Finance Ltd, the South African Micro-finance Apex Fund and the IDCs
Small Business Unit). These entities were transferred from the DTI to the
Department in 2009 at the beginning of the Fourth Administration. The
Department is responsible for their
oversight,
while the entities still support or are responsible for fulfilling parts of the
DTIs mandate in terms of industrialisation, implementation of trade agreements
and broadening economic participation respectively.
1.3.
Purpose of
the Budget Recommendation Review Report
:
Section 77(3) of the Constitution stipulates
that an Act of Parliament must provide for a procedure to amend money bills
before Parliament. This constitutional provision resulted in Parliament
drafting the Money Bills Amendment Procedure and Related Matters Act (No. 9 of
2009).
The Act makes it obligatory for Parliament to
assess the Departments budgetary needs and shortfalls through its oversight of
the Departments operational efficiency and performance.
1.4.
Method of
Reporting
This report is based on information that was
assessed and analysed from the Department and the entities through briefings,
oversight visits and interaction with relevant stakeholders. Amongst these
oversight activities, the Committee received a briefing from the Departmenton
its 2013/14 Annual Report, Annual Performance Plan, a briefing from the Office
of the Auditor-General (OAG) on the audit outcomes and deliberations on the
analysis that was undertaken by the Parliamentary support staff. These analyses
focused on the performance of the Department in terms of its service delivery
targets and financial performance. However, the Committee did not have sufficient
time to interact with some of the entities on their 2013/14 Annual Reports
before the completion of this report. This BRRR will therefore focus on the Departments
performance only. A consolidated report will follow after engaging all the
entities on their 2013/14Annual Reports.
1.5.
Outline of
the Budget Review and Recommendations Report
:
The report contains the following:
·
An overview
of the relevant key policy focus areas;
·
A summary of
previous key performance recommendations of the Committee;
·
An overview
and assessment of financial and non-financial performance;
·
The
committee observation from oversight visit reports; and
·
The
committees recommendations.
2.
AN Overview of the
key policy focus areas
At the last State of the Nation Address of
the Fourth Parliament, the President announced that
the country still faces the triple challenge of poverty, inequality and
unemployment, which we continue to grapple with. Dealing with these challenges
has become a central focus of all democratic administrations
.
The President stated that the creation of
decent work
which is the remit of the
Department - was one of the five priority areas on which government has to
focus. The President noted that the countrys socio-economic blue print, the (National
Development Plan) NDP outlines what needs to be done to, among others,
increase employment by 2030. While in his post-election State of the Nation
Address (SONA) speech, the President underscored five priorities, namely,
education, health, the fight against crime and corruption, rural development
and land reform, and creating decent work.
The NDP is the countrys long term vision
which aims at eliminating poverty and reducing inequality by 2030. It envisages
that unemployment should fall from 24.9 per cent to 14 per cent, which will
require an additional 11 million jobs, and the proportion of national income
earned by the lowest earning 40 per cent should increase from 6 per cent to 10
per cent.
The Departments New Growth Path (NGP) strategy is aligned with
the national development plan, and remains the operational plan for
implementation, mandating
the NDP to ensure that the country focuses on
employment creation.
The
NGP identifies key jobs drivers, with high employment creation potential and
the implementation of supporting policies to take advantage of this potential.
The key jobs drivers include infrastructure, agriculture and agro-processing,
mining and beneficiation, manufacturing, the green economy as well as
tourism.
The NGP sets a target of 5 million new jobs by 2020, which
requires employment to increase at an estimated 3.4 per cent per year, on
average, over the next ten years.
The Department also signed Outcome 4 of the Service
Delivery Agreement, as well as the countrys Industrial Policy Action Plan
(IPAP).
In terms of Outcome 4 of the Service Delivery
Agreement, some of the important outcomes indicators for the Departmentare;
·
Number of
jobs created / reducing unemployment;
·
GDP growth;
·
Employment
ratio or absorption rate; and
·
Distribution
of earned income.
The strategic goals of the Department also seek to
respond to other government high level outcomes such as:
·
Outcome 5 (a skilled and capable workforce to
support inclusive growth);
·
Outcome 6 (efficient, competitive and
responsive infrastructure); and
·
Outcome 7 (vibrant, equitable, sustainable
rural communities).
One of theDepartments
highlights is that Parliament passedthe Infrastructure Development Bill over
the 2013/14 financial year.
Infrastructure was
identified in both the NGP and NDP as a critical role player in the economy,
both as a direct provider of services and as a catalyst for higher
employment-creation, inclusive economic growth and trade competitiveness.
Following public hearings by the Committee, which led to considerable
changes in the original draft, the Infrastructure Development Bill was passed
by the NCOP on 26 March 2014.The Infrastructure Development Act No. 23 of 2014
was then signed into law by the President and it came into effect in July 2014.
The Act aims to speed up and
improve the delivery and implementation of social and economic infrastructure
and to maximize the developmental impact.It establishes the Presidential
Infrastructure Coordinating Commission (PICC) structures to ensure that all
three spheres of government are part of the PICCand that all the main executive
authorities across the public sector are mandated to meet on a regular basis to
drive implementation of infrastructure.
The Act provides for 18 Strategic
Integrated Projects (SIPs) that bring together a number of catalytic projects
that together make up the National Infrastructure Plan to support economic
development and address service delivery in the country. The SIP are;
·
SIP 1:
Opening
the Northern Mining Belt;
·
SIP 2:
Logistics
and development corridor from Durban to Gauteng;
·
SIPs 3, 4, 5:
Unlock
economic opportunities on South East coast and the West Coast and in North West;
·
SIP 6, 7 and 11:
Municipal
infrastructure in 23 worst-served municipal districts, agro logistics and
integrated urban planning including BRT systems;
·
SIPs 8, 9, 10:
Energy
security;
·
SIPs 12, 13, 14:
schools,
hospitals and universities;
·
SIP 15, 16:
Information
and Communication technologies and SKA;
·
SIP 17:
African
regional development; and
·
SIP 18:
Water
and sanitation.
On 1 April 2013, the provisions
of the Competition Amendment Act, No. 1 of 2009 which empowers the Competition
Commission to conduct market inquiries came into effect.The newly promulgated
chapter 4A of the Competition Act empowers the Commission to analyse firm
conduct, and
determine whether there are any
anti-competitive features, without having to investigate individual firms. The
Commission can now s
ummonparties to appear before it,
to be interrogated or provide information pertaining to the inquiry.
Furthermore, the Department facilitated the signing and implementation
of the Youth Employment Accord. The Accord was signed in April 2013 by the
National
Economic Development and Labour Council
(NEDLAC)constituencies and leading
youth organisations. It reflects acommon commitment to raising the share of
young peoplein employment, training and education. The six pillars of theaccord
are education and training; work exposure; youthbrigades based on existing
public employment programmes; set-asides for youth employment in growing
industries; youth entrepreneurship and co-ops; and private-sector initiatives.
The Department now monitors the
implementation of the following Accords:
·
Basic Education Accord;
·
National Skills Accord;
·
Local Procurement Accord;
·
Green Economy Accord;
·
October 2011 Social Accord; and
·
Youth Employment Accord.
2.1. Strategic Plans
of the Department
In
order to promote labour absorbing and equitable growth, as required in Outcome
4 of the Service Delivery Agreement, the NGP as well as the NDP, the Departments
strategic goals over the medium term are as follows, to,
·
Provide technical and
administrative support to the Presidential Infrastructure Coordinating
Commission in facilitating the implementation of the national infrastructure
plan;
·
Align the programmes of Departmental
agencies and institutions with the new growth path, while ensuring that their
operations are efficient and effective;
·
Support alignment around core
economic strategies across all spheres and agencies of the state; and
·
Promote social dialogue and the
implementation of the major accords particularly the accords on the basic
education, national skills, the green economy, local procurement, youth
employment, and the framework agreements reached in October 2012 and June 2013,
which aim to enhance the national response to uncertainties in the global
economy.
Regarding the Annual Performance Plan for the year under
review, it is based on the Departments Strategic Plan which was tabled before
Parliament in March 2012.
In its 2013/14 Annual
Performance Plan, the Departmentcommitteditself to
continue
providing support to the PICC through active construction monitoring and
preparing the Quarterly Construction Update, providing oversight of SIP
Intergovernmental Forums and Coordinating Agencies. The Department noted that
there would be additional support required which would include assistance to
develop funding mechanisms and address cost issues, support to bring new
projects on stream and scaling up existing projects, assisting with the
enhancement of state engineering capacity as well as driving industrialisation
and skills development within the project pipeline. In 2013/14 additional
specialist and project management expertise will be brought into the PICC
Technical Team and a PICC Project Office will be established within the
Department
.
2.2
Measurable objectives of the
Department
The Department
performs its functions through four programmes namely, Administration; Economic
Policy Development; Economic Planning and Coordination; and Economic
Development and Social Dialogue
A greater number of Key Performance Indicators were set on
implementation of projects rather than development of policy and planning
tools. The number of products or outcomes expected to be produced in the
course of the year, was increased substantially from 148 in the previous year
to 228 in the year covered by the APP. The outcomes were divided into 38 key
performance indicators. In the previous financial year there were 41 KPIs.
Furthermore, entities that are overseen by the EDD were going to be held accountable
for direct impact on jobs and development. An APP was introduced which required
EDD to do impact assessments on a quarterly basis. Small business entities were
to have a target of road-shows and stakeholder sessions to communicate the
facilities available in government to the widest number of citizens.
Table: Indicators and targets
YEAR
|
NUMBER OF INDICATORS
|
NUMBER OF TARGETS
|
2012/13
|
41
|
148
|
2013/14
|
38
|
228
|
Source:The Department 2013/14 APP
PROGRAMME 1: ADMINISTRATION
PROGRAMME STRATEGIC OBJECTIVE & PURPOSE
: Coordinate and render
effective, efficient and administrative service to the Minister, the deputy
Minister Director General, the Department and its agencies.
EDD's 2013/14 KEY PERFORMANCE INDICATORS
|
TARGETS
|
KPI 1. Percentage compliance with service standards and administrative
systems
|
Approved service standards and administrative services
|
KPI 2. Number of management meetings
|
12
|
KPI 3. Number of Internal Audit reports
|
6
|
KPI 4. Percentage (%) of posts to be
filled
|
88%
(146 of total staff complement
of 166 funded posts over MTEF)
|
KPI 5. An approved Information and Communication Technology Strategy
|
An approved ICT Strategy and Master System Plan (MSP)
|
PROGRAMME 2: ECONOMIC POLICY
DEVELOPMENT
PROGRAMME STRATEGIC OBJECTIVE & PURPOSE
: Strengthen the economic
development policy capacity of government; review develop and propose the
alignment of economic policies; and develop policies aimed at broadening
participation in the economy and creating decent work opportunities
EDD's 2013/14 KEY PERFORMANCE INDICATORS
|
TARGETS
|
KPI 6. Number of technical instruments on economic development refined
per year
|
3
|
KPI 7. Surveys and reports on the implementation of the New Growth
Path
|
4
|
KPI 8. Number of platforms held to communicate and discuss issues
related to the New Growth Path
|
2
|
KPI 9. Training workshops held on assessing employment impact of state
institutions
|
2
|
KPI 10. Policy interventions identified and/or policy platforms held
to support inclusive growth
|
4
|
KPI 11. Sector interventions aligned, evaluated and improved
|
3
|
KPI 12. Monitoring of Competition Act implementation and proposals as
required
|
1
|
KPI 13. Number of policy platforms held or reports completed on the
impact of BBBEE
|
4
|
KPI 14. Number of reports on the impact of NGP on women, youth and
rural people evaluated and improved per year
|
3
|
KPI 15. Strategy on micro enterprises, livelihoods and the social
economy adopted and reviewed
|
1
|
KPI 16. Skills development proposals in the NGP and skills accord
implemented
|
1
|
PROGRAMME 3: ECONOMIC PLANNING
AND COORDINATION
STRATEGIC OBJECTIVE AND PURPOSE:
Promote economic planning and
coordination through developing economic planning proposals; provide oversight
and policy coordination of identified development finance institutions and economic
regulatory bodies; and contribute to the development of the green economy
EDD's 2013/14 KEY PERFORMANCE INDICATORS
|
TARGETS
|
KPI 17. Number of economic development initiatives facilitated and
unblocked per year
|
18
|
KPI 18. Number of
economic development
plans completed
|
2
|
KPI 19. Number of spatial economic plans produced and or reviewed per
year
|
2
|
KPI 20. Number of Strategic Integrated Projects
construction progress reviews per year
|
60 quarterly reviews
|
KPI 21. Number of infrastructure projects unblocked and/ or fast
tracked
|
8
|
KPI 22. Number of ministerial oversight engagements with the
Development Finance Institutions (DFIs) per year
|
6
|
KPI 23. Road shows marketing the products of
the Small Enterprise Finance Agency
to SMMEs
|
12
|
KPI 24. Value of financing facilitated for small businesses, targeted
growth sectors and companies in distress [Rmillion]
|
R5000
|
KPI 25. Evaluative Reports on jobs targets achieved by EDD agencies
(IDC, SEFA, Competition and Trade Commissions)
|
4
|
KPI 26. Number of ministerial
strategic engagements with the ERBs
reporting to the Ministry of Economic Development
|
6
|
KPI 27. Number of interventions in relation to ERB
|
4
|
KPI 28. Number of interventions to promote regional integration
(research studies produced or company or sector support)
|
4
|
KPI 29. Actions and meetings to implement Local Procurement Accord
|
4
|
KPI 30. Number of interventions to grow the green economy or reports
on the implementation of the green economy strategy and green accord
|
6
|
PROGRAMME 4: ECONOMIC DEVELOPMENT
AND DIALOGUE
STRATEGIC OBJECTIVE AND PURPOSE:
Promote social dialogue;
implement strategic frameworks; build capacity among social partners; and
promote productivity, entrepreneurship and innovation in the workplace.
EDD's 2013/14 KEY PERFORMANCE INDICATORS
|
TARGETS
|
KPI 30. Number of interventions to grow the green economy or reports
on the implementation of the green economy strategy and green accord
|
6
|
KPI 31. Number of social dialogue
engagements held to increase awareness of accords and other economic
issues among social partners
|
10
|
KPI 32. Number of monitoring reports and strategies developed to
improve implementation of accords per year
|
4
|
KPI 33. Number of sectoral and workplace economic development
agreements facilitated with social partners
|
2
|
KPI 34. Number of engagements at company or industrial cluster level
to save or create new jobs
|
4
|
KPI 35. Number of knowledge network sessions and/or publications to
enhance public policy and strategy
|
6
|
KPI 36. Number of capacity building projects for social partners on
the New Growth Path per year
|
8
|
KPI 37. Number of workplace interventions on productivity and/or
innovation facilitated
|
6
|
KPI 38. Number of advocacy initiatives on productivity,
entrepreneurship and innovation at a sectoral and national level implemented
|
2
|
3.
Summary of previous key financial and
performance recommendations of committee
For the
previous financial year (2012/13), the Committee stated that
EDD should continue
its efforts to fulfil its mandates
. To improve its work the following
recommendations were made;
·
Review its organogram to take into
account the need to support the PICC and the need to recruit able junior staff;
·
Ensure that employment opportunities
are created for people living with disabilities;
·
Continue to scale up efforts to support
SMMEs and co-ops, in particular through the work to establish one-stop-shops in
all provinces;
·
Do more to mainstream gender balance
concerns across its programmes, building on early successes that have been
achieved;
·
Strengthen the monitoring and
evaluation of Accords, and carry out an impact assessment of the Accords;
·
Encourage state entities to work with
SEFA, and ensure alignment, integrated work and coordination with SEFA;
·
Consider establishing a SMME
developmental institute; and
·
Strengthen the internal risk audit unit
and ensure that the audit committee term is renewed promptly.
4.
Overview and assessment of the Departments
NOn-financial and financial performance
In its
presentation to the Committee the Department stated that it had 206 targets for
its frontline work, and achieved 253 deliverables which range from holding
platforms to in-depth research projects to reporting on SIPs to unblocking
infrastructure and industrial projects and facilitating social accords. The
Department reported that it met all of its frontline KPIs but it did not meet
one administrative target.
The number of indicators in the 2013/14
APP is 38 and it corresponds with those appearing in the 2013/14 in Annual
Report but there is a discrepancy between the numbers of targets reported in
the two documents. In the 2013/14 APP there are 228 documented targets but in
the Annual Report there are 206. This implies that there are inconsistencies in
the reports on the performance targets.
Overall Performance Level (2013/14)
|
Number of KPIs
|
Total
Number of KPIs
|
38
|
KPIs
with Targets exceeded
|
11
|
KPIs
with Targets met
|
26
|
KPIs
with Targets under-achieved
|
1
|
The Department was allocated R771.5 million in the 2013/14 financial year.
(See Tables below). It spent the 99.9 per cent of its total budget which
equates to R771.4 million. In the previous financial year, the Departments
final appropriation was R696.5 million and it spent R673.5 which represents
96.7 per cent expenditure. Therefore, expenditure rates improved in the year
under review.
Table
: 2013/14 Department Budget and Expenditure by Programme
Budget
(R million)
|
Final
Appropriation
|
Actual
Expenditure (R million)
|
Expenditure %
|
|
Administration
|
63.6
|
91.342
|
91.301
|
99.90%
|
Economic Policy
Development
|
25.5
|
23.891
|
23.886
|
99.90%
|
Economic
Planning and Co-ordination
|
663.8
|
644.515
|
644.511
|
99.90%
|
Economic
Development and Dialogue
|
18.6
|
11.718
|
11.697
|
99.80%
|
Total
|
771.5
|
771.466
|
771.395
|
99.88%
|
Source:
2013/14 ENE and Department Annual Report
In its presentation to the Committee,
the Department noted the following;
·
There is room for
improvement in the demand planning and recruitment of staff.
·
The management systems of
the Department are settling. Improved stability of staffing will enhance this.
Governance is improving through risk management, internal
audit, ICT governance, security management and the system of management; and
the audit committee oversight support.
4.1
PERFORMANCE BY PROGRAMME
Programme 1: Administration
The
Administration Programme had five indicators with 21 targets to be achieved in
the 2013/4 financial year. The Department achieved four of its indicators and
delivered a total of 22 targets, exceeding its targets by one. The programme
met its targets for compliance with service standards and administrative
systems, management meetings, audits reports and establishment of an ICT
strategy. It met 95% of its recruitment target for the year. The target for
recruitment for the year was 146; the Department reached 139, falling 4.8%
short of the target.
Table: Programme 1- Administration
KPIs
|
|
Total Number of KPIs
|
5
|
KPIs with targets Exceeded
|
1
|
KPIs with targets met
|
3
|
KPIs with
targets under-achieved
|
1
|
Vacancies
|
|
Funded Post numbers
|
77
|
Staff employed
|
73
|
The Department has put in place measures to
engage on an aggressive recruitment process, and will also be intensifying the
implementation of its retention strategy to make sure that it meets its target
of the number of posts to be filled.
Administration Budget
|
R000
|
Budget
|
91 342
|
Expenditure
|
91 301
|
Under spending
|
41
|
From the Departmental
final appropriation of R91.3 million for Administration in the year under
review, 99.99per cent of the programme budget was spent.
Programme 2: Economic Policy Development
In 2013/4,
through the Economic Policy Development programme, the Department continued to
focus on strengthening monitoring and evaluation of economic policies as well
as alignment around the state. Under this programme, the Department met all its
targets. See Table below.
To improve
monitoring and evaluation, three technical instruments were developed. In
collaboration with the Presidency and the National Treasury, the Socio-Economic
Impact Assessment System (SEIAS) was developed and piloted. Another instrument
that was piloted was the Economic Development Index for South Africa (EDISA).
It permits tracking of inclusive growth rather than the Gross Domestic Product
(GDP) alone through a dashboard of key indicators. Together with the ILO, in
2013/4 a macro-economic model known as DySAM was developed, which assists in
simulating the employment impact of government investments.
Table: Programme 2 -
Economic Policy Development Targets
KPIs
|
|
Total Number of KPIs
|
11
|
KPIs with targets Exceeded
|
3
|
KPIs with targets met
|
8
|
KPIs with
targets under-achieved
|
0
|
Vacancies
|
|
Funded
Post numbers
|
24
|
Staff
employed
|
18
|
The Department
continued to engage with other state agencies to analyse and evaluate their
impact on employment and inclusive growth.
In 2013/4,
the Infrastructure Development Bill and its passage through Parliament was
facilitated.
Substantive
work to support the Youth Employment Accord included quarterly reports to
Cabinet on progress as well as the development of plans and engagements with
relevant state agencies on the implementation of the Youth Brigades and the
achievement of the target set for public-sector internships.
The Department
managed the process of responding to the Competition Commissions finding that
major construction companies had manipulated the tender processes for major
infrastructure projects.
Economic Policy Budget
|
R000
|
Budget
|
23 891
|
Expenditure
|
23 886
|
Under spending
|
5
|
Expenditure for Programme 2 amounted to about
R23.9 million or 99.97 per cent of the final programme budget. About R5000 was
under spent.
Programme 3: Economic Planning and
Coordination
Under this
programme the Department provided support to the Ministers engagements with
keyagencies such as the IDC, SEFA, ITAC, Competition Tribunaland the
Competition Commission.
KPIs
|
|
Total
Number of KPIs
|
14
|
KPIs
with targets Exceeded
|
6
|
KPIs
with targets met
|
8
|
KPIs with targets under-achieved
|
0
|
Vacancies
|
|
Funded
Post numbers
|
49
|
Staff
employed
|
31
|
The Department
was instrumental in a number of unblocking initiatives during the year,
including, facilitating the signing of a lease agreement for Sunrise Energy and
Storage Terminal in Saldanha Bay with Transnet. The Department also worked with
the Provincial Government of Mpumalanga to obtain R20 million towards Lekwa
Municipalitys electricity deposit to Eskom in order to increase the municipal
energy capacity to supply newly established industries
The
Department continued to provide technical support for the implementation of the
National Infrastructure Plan through its work with the Secretariat and
Technical Task team of thePICC.
The PICC
prioritised youth employment through the national infrastructure build
programme. For the year under review the Department recorded 27 000 job
opportunities for youth in just 22 major infrastructure projects included in
the National Infrastructure Plan. Over half of allworkers on the Medupi and
Kusile production sites are youth.
In
supporting localisation of industries,
the Departments PICC technical team together with the IDCs
localisation unit identified opportunities for localisation at both Transnet
and Eskom which includes transmission lines, cables and conductors, grinding
elements, metering pumps and valves for Eskom and locomotives, per ways, port
facilities, wagons, machinery and pipelines for Transnet.
In support of the green economy, the Department provided
support to Mainstream Renewable Power South Africa. This process involved a
joint intervention with the Department of Water Affairs (DWA), after they
discovered an erosion channel whilst constructing in De Aar. Prior to
construction, a full Environmental Impact Assessment (EIA) was conducted and no
water permit was required.
Furthermore,
the Department convened the government task team with
Eskom and the Department of Energy that is charged with providing solar water
heaters, particularly to low-income households. As at March 2014, more than 434
000 solar water heaters had been installed on roof tops throughout the country,
giving most of these households access to hot water for the first time. The
roll out target has been increased to 1.75 million, which created the
opportunity for local manufacturing. Government has designated 70% of the
system for local manufacturing. Eskom, as the Department of Energys agent, will
follow a bulk procurement process to ensure that solar water heaters will be
manufactured locally and installed and maintained using youth cooperatives.
Planning and Coordination Budget
|
644 515
|
Expenditure
|
644 511
|
Under
spending
|
4
|
Actual
expenditure for the Economic Planning and Coordination Programme and its
sub-programmes amounted to R644. 5 million or 100 per cent of the final
programme budget for the 2013/14 financial year. Spending in this programme
consists mainly of transfer payments to the Departmental entities and agencies.
Programme 4: Economic Development and
Dialogue
The programme had eight indicators for the
financial year. It achieved all targets with 44 outputs.
Table:
Programme 4 - Economic Development and Dialogue
KPIs
|
|
Total Number of KPIs
|
8
|
KPIs with targets
Exceeded
|
1
|
KPIs with targets met
|
7
|
KPIs with targets under-achieved
|
0
|
Vacancies
|
|
Funded Post numbers
|
16
|
Staff employed
|
14
|
On 18 April
2013, the Youth Employment Accord was signed with the NEDLAC constituencies,
including the main youth organisations. The Youth Employment Accord was a
commitment to raise the levels of youth in jobs, training and education as well
as support youth owned enterprises and cooperatives.
The Department
implemented the Student Innovation and Entrepreneurship Initiative. The purpose
of this initiative was to cultivate a culture of innovation and
entrepreneurship in students, more so those from FET colleges, by giving them a
platform to discover their own creative, innovative and entrepreneurial
potential.
In the year under review, the Department held 11
platforms that provided capacity building and training to its social partners
on accords and policies such as the NGP.
A central role of the Department in supporting policy
alignment is to develop networks and hold platforms where political leaders,
government officials, business and labour leaders and academics can exchange
ideas, clarify debates and identify how they can do more to support inclusive
growth.
With support from the International Labour Organisation,
the Departmenthas developed a model that enables it to simulate the impact on
employment of some kinds of state policies as well as economic developments.
The model supports evidence-based decision making around how best to support
employment creation.Currently it is being used to evaluate the impact of
various options for generating electricity.
In 2013, together with the United Nations Department of
Economic and Social Affairs (UN-DESA), the Departmentheld a major conference on
financialisation.For the conference, the Department developed an in-depth
research paper on financialisation
in South Africa, which
underscored the rapid growth of the
financial sector in some ways at the cost of industrialisation.It also hosted a
number of platforms and developed research inputs to support the alignment of
policies with the New Growth Path and inclusive growth. Amongst the topics
covered in this way in 2013 were:
·
Broad-based
BEE;
·
Gender and
the New Growth Path; and
·
Township
economy; and smallholder development.
The Department officials also helped draft the economics
chapter of the 20-year review published by the Presidency.
The Departmentidentified various initiatives to assist
small scale farmers in KwaZulu-Natal to be more productive in their chicken
farming and flock management processes. More than 70% of rural households in
KwaZulu Natal have indigenous chickens, with an average of between three and
ten per household. About 200 small scale chicken farmers received training in
Jozini and Enkwalini areas of KwaZulu-Natal. The attempt was to equip small
scale farmers to become self-sufficient in poultry and egg production so as to
generate income through selling their poultry produce. This has further
spin-offs
for local industries that provide equipment, feed and vaccines.
Spending
for Programme 4 for the year 2013/4 was R 11.7 million or 99.82 per cent from
the final programme budget. The under expenditure amounted to R21000.
Development and Dialogue
|
R000
|
Budget
|
11 718
|
Expenditure
|
11 697
|
Under spending
|
21
|
4.2
EXPENDITURE
BY ECONOMIC CLASSIFICATION
The Compensation of Employees expenditure was R70.9 million which
is equal to 9.2 per cent of the Departments total expenditure of approximately
R771.4 million. Of the total expenditure, approximately R628.1 or 81.4 per cent
was for transfers and subsidies. Operational expenditure which is made up of
Employee Compensation and Goods and Services, was approximately R137.2 million
or 17.7 per cent of total expenditure.
Compensation
of Employees baseline allocation is for 166 posts.
The targeted number as per the approved
APP2013/14 was 146. Savings realised in compensation of employees was utilised
to absorb:
o
Increased office space (Block G):
R7.5 million;
o
Increased legal fees: R6.7
million;
o
The PICC publicity campaign:
R19.1 million;
o
The Video Conference facility: R
456 thousand; and
o
Budget cuts to
SEFAs
economic competitiveness
funding by R50 million: R15 million.
4.2.1Employee Compensation
The largest portion of about R70.9 million or 51.7per cent of the
operations expenditure was spent on the Compensation of Employees. More than
half of the operations budget goes to Employee Compensation because the Department
is not a direct services delivery Department and therefore has no specific
public service projects that it funds from its budget. It is a policy
development and co-ordination Department which utilises mainly personnel to
fulfil its mandate.
Regarding employee compensation, R64.7 million was spent on
salaries and wages. This amount comprises the following;
Table: 2013/14 Department Budget and Expenditure on salaries and wages
Salaries and Wages
R000
|
2014/2013
|
2013/2012
|
Basic salary
|
46.497
|
41.611
|
Performance award
|
0.418
|
0.533
|
Service Based
|
0.147
|
0.182
|
Compensative/circumstantial
|
2.684
|
1.835
|
Periodic payments
|
0
|
0.013
|
Other non-pensionable allowances
|
14.963
|
13.82
|
Total
|
64.709
|
57.994
|
Source: 2013/14 Department Annual Report
The amount spent on basic salaries increased from about R41.6
million in 2012/13 to about R46.5 million in 2013/14. This could be attributed
to the slight increase in the number of staff employed in the year under
review. At the end of March 2013 there were 131 staff members and at the end of
March 2014 there were 136 staff members in the Department. Performance awards
however decreased by R115 000 from R533 000 in 2012/13 to R418 000 in
2013/14.
The non-pensionable allowances of R14.9 million consists of car
and housing allowances for employees on level 11 and higher. The amount
increased by R1.08 million from R13.82 million in 2012/13 to R14.9 million in
the year under review. The rest of the Compensation of Employees expenditure of
R6.2 million is from contributions made by the employer to pensions, medical
and bargaining council (See Table 3). The employer contribution increased from
about R4.5 million in 2012/13 to R6.2 million in 2013/14.
Table: 2012/13 2013/14 Department Budget and Expenditure on salaries
and wages
Employer contribution R'000
|
2013/2014
|
2012/2013
|
Pension
|
4.962
|
3.529
|
Medical
|
1.243
|
0.987
|
Bargaining Council
|
0.008
|
0.006
|
Total
|
6.213
|
4.522
|
Source: 2013/14 the Department Annual Report
4.2.2 Goods and Services
About R66.2 million or 48.2 per
cent of the Departments expenditure for the year under review went to goods
and services, marking an increase from the previous years R56.1 million. Most
of the Goods and Services appropriation was spent on advertising, travel and
subsistence, consultants, and operating leases. Out of all the 21 items listed
under Goods and Services the four mentioned above make up about R51.9 million
or 78.3 per cent of the Goods and Services expenditure or 37.8 of the total
operations expenditure. Goods and services include the following;
Advertising
The largest amount of R20.1 million or about 30 per cent of the
Goods and Services expenditure was spent on Advertising. Advertising also makes
up 14.6 per cent of the total operations expenditure. Advertising costs went up
from about R15.8 million in 2012/13 to about R20.1 million in 2013/14.
The Minister reported that the
Department
is responsible for communicating the work of the Presidential Infrastructure
Coordinating Commission (PICC) to the public. Since December 2013 it has placed
some 70 full-page inserts in the press; commissioned 66 billboards; and
provided 531 minutes of radio coverage and 397 minutes of TV coverage to report
on the PICCs successes in infrastructure and how they have changed the lives
of our citizens.
On the other hand, for Communication under Goods and
Services, the Department spent R615 000.
The Department
reports that
Communications was revised down by about R1.5 million. It is therefore not
clear what the difference is between communication and advertising costs.
Travel and Subsistence
This category is divided into Local and Foreign
travel. For the year under review local travel expenditure was approximately
R10.4 million. In the previous financial year, the Department spent
approximately R12.8 million. That means, there was a reduction in the amount
spent on local travel in 2013/14. Expenditure on Foreign travel, however,
increased from R228 000 in 2012/13 to about R1.5 million in the year under
review.
Consultants, contractors and agency/outsourced
services
In the 2012/13 financial year, the Department spent about R8.7
million on consultants. The figure increased to about R11.7 million in the year
under review and it constitutes about 8.5 per cent of the Departments
operational expenditure. The largest portion of expenditure on consultants of
about R2.7 million or 75 per cent of the consultants expenditure was on work
done by the
Centre for Scientific and Industrial
Research (CSIR).
The Department spent approximately R1 million on legal consultants
in 2012/13. Expenditure, however on legal costs increased in 2013/14 to R6.8
million.
In the 2012/13 financial year the Department spent R1.3 million on
Business and Advisory Services. Expenditure increased by about R2.9 million to
R4.2 million in the year under review.
Operating leases
For the year under review, however, the Department managed to
secure more space on the Campus from 2056 to 3329 square metres which are
spread across four buildings on the Campus. The Department and its entities are
renting office space within the DTI Campus. (See table below for rental paid.)
Table:
The Department and Entities rentals
Name of Department / entity
|
2013/14 (R000)
|
2012/13 (R000)
|
Economic Development
|
7387
|
3011
|
Competition Commission
|
8295
|
8637
|
International Trade Administration Commission
|
2770
|
2836
|
South Africa Microfinance Apex Fund
|
0
|
56
|
Total
|
18 452
|
14 540
|
Source:
DTI 2013/14 Annual Report
Virements
There was a virement amount of R15.5 million which was transferred
to SEFA for, according to the Department, offsetting the entitys 2014/15
budget cut by National Treasury.
Transfers and Subsidies
All
budgeted transfers to entities for the period 1 April 2013 to 31 March 2014
were effected.
Entity
|
2013/14 (000)
|
2012/13 (000)
|
Industrial Development Corporation
|
108 000
|
109 000
|
Industrial Development Corporation:
SEFA
|
245 979
|
171 330
|
Competition Commission
|
176 888
|
157 211
|
Competition Tribunal
|
16 945
|
15 798
|
International Trade Administration
|
79 770
|
74 403
|
Total
|
627 582
|
527 742
|
The Department reported that an
additional R15 million transferred to SEFA for the budget shortfall of the
2014/15 Economic Competitiveness Support Programme (ECSP) allocation is
included in the transfers.
4.2.3 Revenue
Performance
Revenue collection increased from R669 m to R1.1b
and this was largely due to the increase in fines and penalties imposed by the
Competition Commission. See Table below.
Description
|
2013/14
|
2012/13
|
Sales of goods and
services other than capital assets
|
23
|
21
|
Fines, penalties
and forfeits
|
1 037 454
|
617 344
|
Interest, dividends
and rent on land
|
50 229
|
50 106
|
Transactions in
financial assets and liabilities
|
9 836
|
1 191
|
Total
|
1 097 542
|
668
2
|
4.3
REPORT OF THE AUDITOR-GENERAL (AG)
Since the first audit by the AG in the
2010/11 financial year,the Economic Development Department has been receiving
unqualified reports
.
During deliberations with the Committee, the
office of the AG indicated that overall the Department performance was
satisfactory however there were gaps in the internal control environment. It
was pointed out that it is imperative to continually monitor the Department and
entities to determine progress on remedial actions taken to address audit
findings.
Regarding the Department, the AG reported the
following matters;
For the third consecutive time, the AG
reports that financial statements submitted for auditing were not prepared in
accordance with PFMA requirements. The AG identified material misstatements of
receivables, Departmental revenue and disclosure items. The AG reported that
there were misstatements of receivables, accruals, and capital assets. Like it
did in the previous two years, the Department received an unqualified report
after making corrections.
In the previous financial year when the issue
of misstatements was raised, the Department reported that in response to the
AGs report, it made the following
commitments
for addressing audit issues:
A consolidated heat map reflecting all audit issues
identified was compiled with responsible persons and timeframes set for
addressing the problem areas;
Biweekly meetings were to be held to track progress made
on implementation of mitigation plans;
Internal Audit was to review evidence for adequacy as per
the audit coverage plan; and
Progress reports were to be presented to the Audit Committee,
Executive Authority, DG and EXCO.
The AG identified misstatements again in the Departments
2013/14 financial statements. Misstatements are a risk factor because they make
the Department vulnerable to fraud. Had the misstatements not been corrected
the Department would have obtained qualified audit reports. According to the
AG, the management is not implementing effective controls that ensure that
financial statements are accurate and complete.
The AG also identified that employees were
appointed without following relevant Public Service Regulation processes. The
AG reports that the contravention of Public Service Regulations could have been
avoided if there was proper monitoring of controls.
Regarding Human Resource matters, the AG
noted that the Department contravened the Public Service Regulations in two
areas;
·
Employees were appointed without verifying
claims made in the applications, and
·
Employees received overtime in excess of the
30% of their monthly salary.
The
AG also noted inconsistencies in between the Human Resource Management report
in the Annual Report and the one which was supported for audit.
For the year under review, irregular
expenditure increased by more than 9 times from R61 000 in the previous
year to R593 000 in 2013/14. The AG reports that there were 23 incidents
of irregular expenditure.
Among others,
the irregular expenditure includes R190 000 for an acting allowance that
was paid beyond the permitted timeframes; R191 000 for engaging a consultant
who was in possession of a certified copy of a tax clearance certificate.
Another example is R83 000 for a consultant who was contracted without a
tax certificate for particular periods and an amount of R12 000 which
relates to overtime worked without prior approval.
An amount of R27 000 in irregular
expenditure relating to travelling without approval (R10 000) and engaging a
service provider without following Supply Chain Management processes (R17 000)
was condoned.
Table: Irregular, fruitless, wasteful and unauthorised
expenditure for 2010/11 -2013/14
Year Incurred
|
Irregular Expenditure
|
Fruitless and wasteful expenditure
|
Unauthorised Expenditure
|
2010/11
|
|
R27 000
|
|
2011/12
|
|
|
|
2012/13
|
R61 000
|
|
|
2013/14
|
R593 000
|
|
|
The Department reported the r
oot causes of the increase in irregular as
the following;
·
Consultant
appointed without a tax clearance certificate;
·
Consultant
engaged with a certified copy of the tax clearance certificate;
·
Consultant
engaged in periods where tax clearance was not provided;
·
Verification
of officials details using a service provider whose term had lapsed;
·
Engaging a
service provider without following SCM processes;
·
Overtime
worked without prior approval;
·
Overtime
paid in exceeds 30% monthly basic salary; and
·
Acting
allowance paid beyond the permitted timeframe.
The AG on the other hand reported that there was a
lack of monitoring controls in place to ensure adherence
relevant legislation.
The management report issued by the Auditor-General for the 2013/14
financial reflected 41 findings:-
·
46% (i.e. 19)of the findings relate to Human Resources Management; and
·
27% (i.e. 11) of these findings relate to Financial Accounting (7) and
Supply Chain Management (4)
The remainder 27% (i.e 11) relate to Planning (3), Information Technology
(2), Management Accounting (1), and Internal Audit (1), Financial Accounting
and Management (1), Financial Accounting and Human Resources (2), OCFO and
Financial Accounting (1).
Corrective measures implemented include:
·
Only
original tax clearance certificates are accepted from potential service
providers;
·
Tax
clearance certificates are verified before payments are effected;
·
All
procurement is initiated at SCM;
·
SMS members
acting longer than 6 months will not be paid; and
·
Transactions
will not be processed for overtime not pre-approved.
4.3.1 Auditor Generals Recommendations
The Auditor General made the following
recommendations
·
Management
should ensure that annual financial statements are prepared regularly.
It is critical that a full and proper set of
financial statements (including all disclosure notes) are prepared on a monthly
basis;
·
These annual
financial statements should be reviewed by the governance structures i.e.
management, internal audit and audit committee;
·
The annual financial
statements prepared should be adequately supported by substantiating evidence
to corroborate validity, accuracy and completeness thereof;
·
Annual
financial statements which are submitted must be the final set approved by the
leadership and supported as referred to above; and
·
Management
should ensure that procedures and processes in place are adequate to ensure
that all Human Resource expenditure are in compliance with relevant
legislation.
5.
HUMAN RESOURCES
The Departments mandate requires relatively little
routine administration and requires high-level professionals and managers to
analyse economic developments, propose sustainable and practical responses, to
work constructively with stakeholders inside and outside the state, and to
oversee and support major regulatory and development finance institutions. The Departments
organisational structure is illustrated here below:
Source:
AGs Presentation on EDD Report 2013/14
The
Departments approved post establishment is funded over the MTEF to 166 posts.
Parliament endorsed the APP for 2013/4 with a target for staffing of 146
set
to allow the Department time to
source high-quality staff each year and to progressively achieve its full approved
post establishment over a three-year period.
Programme
|
Number of posts on approved establishment
|
Number of posts filled
|
Vacancy rate against approved establishment
|
Number of employees additional to the establishment
|
Vacancy rate against APP target
|
Administration
|
77
|
73
|
5.48%
|
3
|
|
Economic
Policy Development
|
24
|
18
|
33.33%
|
0
|
|
Economic
Planning Coordination
|
49
|
31
|
58.06%
|
0
|
|
Economic
Development and Social Dialogue
|
16
|
14
|
14.29%
|
0
|
|
Total
|
166
|
136
|
22.06%
|
3
|
5.04%
|
Source:
Department 2013/14 Presentation on Annual Report Financials
A
As at the end of March 2014, the staff complement of the Department
was at 139 officials, which was 4.8% short of the Departmental annual target of
146 at the end of the 2013/14 financial year. In the Adjusted ENE, Finance did
a straight-line projection based on historical spending for the first 5 months
of the year and projected for the remainder of the 7 months not on a number of
posts given that a restructuring process was being considered.
The Department encountered some challenges in its
attempts to achieving the 146 target faced challenges. These include:
·
The shortage
of skills in the market impacted on the filling of posts. The line functions of
the Department are dominated by very high-level professionals and managers with
relatively scarce skills such as economics and spatial planning that cannot be
filled overnight. Department has been engaged in a process of identifying the
right people for the job;
·
Caution was
exercised in filling senior posts, given the Departments need for some
restructuring; and
·
Decision to
only fill high priority posts in the last quarter in order to achieve savings
so as to improve funding for SEFA.
To help deal with these challenges, the Department utilised
staff provided by other agencies for the PICC work.
·
Currently,
about 70 people across the government assist the Departmentin overseeing and
supporting the build programme. This approach has mobilised expertise from all
spheres of the state. It is a very helpful arrangement, but it is not
sustainable. In future, the Departmentwill have to bear some of the staff
requirements on its own budget structure;
·
The Department
was also able to secure short-term secondments of staff from the Independent
Development Trust (IDT) and SEFA for special projects, and from other Departments
for activities requiring specific skills.
Although the Department only filled 139 of the targeted posts, it was
able to realise its mandate effectively in each of its core areas of work;
·
Since the
staffing model relies on both short-term contract employees and secondments as
well as permanent positions, the turnover rate is unusual compared to Departments
that are able to rely more on permanent staff;
·
Going forward,
the Departmentwill focus on filling the remaining managerial and professional
positions. Senior expert positions that are advertised will be subject to a
simultaneous headhunting process. There will be care taken to create a balance
between recruiting and appointing quality staff.
·
The
Departmentmade considerable progress in terms of organisational development
over the past year. This lays the basis for the Departmentto fulfil its
increased responsibilities under the new MTSF adopted by the in-coming fifth
Administration.
The Department has been doing well on the Management
Performance Assessment Tool, with scores showing an upward trend from the
2011/12 assessment period to the 2013/14 assessment period. See Key Performance
Assessment Tool Table below. This is a demonstration of Departmental governance
structures, policies and systems that have been put into place to make sure
that the Department achieves its strategic objective goals.
Table: Key Performance Assessment Tool
KPA
|
2011/12
|
2012/13
|
2013/14
|
1. Strategic Management
|
2.7
|
3.0
|
3.0
|
2. Governance and
Accountability
|
2.2
|
1.6
|
2.5
|
3. Employees, Systems and
Processes
|
1.7
|
1.8
|
2.2
|
4. Financial Management
|
2.3
|
3.0
|
2.1
|
Average scores
|
2.2
|
2.4
|
2.6
|
Source:
Department 2013/14 Presentation on Annual Report Financials
Going
Forward
The Medium Term Strategic Framework for the coming five
years lays out the key steps and measures to achieve this objective.It includes
major tasks for the EDD.Infrastructure remains a key tool for the state to
support growth, job creation and improved equality. Key challenges are to
ensure that:
·
The build
programme encourages productive investment both by suppliers and through
off-take agreements, and
·
It provides
affordable as well as higher quality services, especially for energy.
The Department reports that a further core challenge is
to improve the environment for new investment, especially in ways that will
generate employment in line with the New Growth Path.
The Departmenthas committed itself to working on
establishing more action-oriented monitoring and evaluation for the Jobs
Drivers, to ensure that government agencies act timeously on new risks,
opportunities and blockages as they arise.It will continue to work with the agencies
it oversees as well as with other state agencies to increase industrial
financing, support local procurement and investment, encourage job creation and
expanded training, and reduce unnecessary regulatory obstacles and delays.
Finally, as the recent mining strike demonstrated,
workplace conflict has become a significant challenge to inclusive growth.
·
The roots of
workplace conflict lie in persistent inequality and poor communication in many
workplaces;
·
The social
wage can also do more to reduces pressures on the workplace; and
·
This is an
area where the Department, in collaboration with other key Departments and
stakeholders, will focus its attention in the coming administration.
6.
CONSIDERATION OF OTHER SOURCES OF INFORMATION: OVERSIGHT
REPORTS
In the year under review the Committee undertook the
following visits:
6.1 Oversight visit
to
Gauteng, North West, KwaZulu-Natal and Limpopo Provinces
On 22 July02 August 2013, the Committee undertook an oversight visit to
the following areas and the aim of the oversight visit was to:
·
Evaluate the progress made in the development of transport
infrastructure in Gauteng, more specifically Rail transport and the Gautrain
and the development of the modal transport system
·
Follow up on the visit made by the Committee in 2009 so as to assess the
progress made by SARS, specifically the Customs division in terms of
controlling fraud, illegal imports in the major Ports of entry since and
evaluate the interventions implemented by Customs since the Committees
previous visit. The Committee also wanted to assess how customs was managing
the congestion at the DurbanHarbour.
·
Conduct round tables for Small Medium Micro Enterprises (SMMEs) and Co
operatives.
·
Assess progress on key infrastructure projects such as Medupi Power
Station
·
Assess the impact of projects visited on key national objectives such as
job creation, SMME and development of Co-operatives, localisation and rural
development
The theme of the oversight was
Development of SMMEs, Co-operatives, Youth,
Infrastructure and Rural Development, and the named sectors formed the key
focus of the oversight.
6.1.1 Oversight visit to Gauteng
Province(23-24/07/2013).
In Gauteng, the Committee met
with the Gauteng Legislature, specifically the Portfolio Committee on Economic
Development. The meeting with the Legislator involved presentations by
transport agencies, namely PRASA, Rea Vaya and Gautrain who gave an overview on
their transport integration plans and developments.
The Committee observed that the
modal transport system had been highly effective in improving transport needs
of the people of Gauteng, thus making it easy for them to get to work. The
Committee had an experience of travelling on the Gautrain and appreciated the
standard of security provided by the Gautrain.
The Committee also visited the
Transnet at Koedespoort in Pretoria. The mandate of Transnet is to assist in
lowering the cost of doing business in South Africa thus enabling economic
growth. The Committee observed that Transnet had established a new division
known as Transnet Engineering (TE). TE is the backbone of South Africas
railway industry and has been responsible for the development of the most
innovative locomotives and is dedicated to the maintenance, repair, upgrade,
conversion and manufacture of freight wagons. The Committee was impressed with
the contribution of Transnet with TE on promoting localisation, skills
development and introduction of new technology.
The Committee also visited the
Nissan Plant in Roslyn. The Automotive sector is one of the key sectors in
terms of job creation. Nissan like many of the automotive companies is
benefiting from the Automotive Production Development Programme (APDP) an
industry incentive that is administered by one of the Regulatory entities,
ITAC. The Committee noted the contributions made by Nissan in job creation and
it was indicated that Nissan was planning to double employment as it was planning
to introduce a new assembly line which would require that it works double
shift. The Committee recommended that there be a follow up visit to Nissan to
assess progress on its plan to expand and to assess the impact of the expansion
on job creation.
6.1.1 (a) Round table
for SMMEs and Cooperatives and
Road show
The Committee had round tables in
Johannesburg, Rustenburg, Durban and a Road show in Limpopo. The focus of the
round tables was to engage with SMMEs and Cooperatives with the aim of
ascertaining successes and challenges in the advancement of their businesses or
entrepreneurship development initiatives. The Committee further wanted to
establish whether SEFA was being effective in the advancement of enterprise
development, whether SEFA was reaching out to the SMMEs, Cooperatives, Youth,
People Living with Disabilities and Women Enterprises especially following the
merger of Khula and SAMAF.
In Limpopo, the Committee had a
road show where the economic development entities made presentations about
their products, offerings and services. The purpose of the road show was to
ascertain the extent in which the entities are reaching out to the rural
communities and also raise awareness about the entities.
During the round tables, the
Committee ascertained that there were still challenges with the merger of Khula
and SAMAF as a result SMMEs were still confused about who SEFA was, the lack of
accessibility of SEFA and the slow turnaround time for applications.
During the road show, the
Committee ascertained that there was still a need for the entities to ensure
that they reach out to the rural communities and also simplify the language
used in the promotion of their products, services and offerings.
During the round table in Rustenburg,
a small mining, the Amava Mining Investments (AMI) had made an appeal to the
Committee to visit its mining project. The Company had raised concerns about
how their funding application had been handled by SEFA and also made recommendations
that SEFA should be flexible to the needs of different SMMEs and also improve
its turnaround time.
6.1.2 Oversight visit to the IDC funded projects for Nguni Cattle in
Rustenburg, North West
Province (25/07/2013).
The Committee visited two Nguni Cattle projects, namely,
the Bafokeng Nguni Cattle Project and the Khuduthate and Kgolagano Agricultural
Cooperative. The aim was to assess how the Nguni project had improved the
livelihoods of the beneficiaries and the communities where the projects are.
The Committee noted the good intentions of the Nguni
Cattle project. However, there were concerns regarding the long term
sustainability of these projects, noting that the profits were quite minimal
and the input costs were high. The Committee recommended that the IDC should
consider looking at what additional support the project needed, so as to ensure
long term sustainability.
6.1.2 (a) Visit to
theCustoms Office in Durban and the Durban Harbour
(30-31/07/2013)
The Committee received a detailed
presentation on the interventions and mechanisms that had been put in place by
Customs to deal with customs fraud and illegal imports. The Committee noted
that as much as a number of good control mechanism had been put in place to
mitigate customs fraud and illegal imports and SARS was doing a good job but
the challenges were still there. The Committee recommended that Customs should
consider doing a benchmark study on how other countries faced with a similar
challenge were dealing with the problem and the mechanisms used thereof.
6.1.3 Oversight visit to the Norjax Tomato Farm in
Tzaneen, Limpopo
(01-02/08/2013)
During the road show in Limpopo, Norjax had raised concerns about how
their funding application was being handled by the IDC and requested that the Committee
visit their project. The Committee consented to the request and visited the
project on the 17
th
of September 2013. The aim of the visit was to
show support for SMME and Cooperative development in the agriculture sector,
assess what challenges the business was facing especially with regards to the
application for funding and also to ascertain the impact of tariff instruments
administered by ITAC on the development of small enterprises and job creation.
The Committee noted that Norjax had made an application for tariff
support to ITAC, one of the regulatory entities. The application had been
partially approved by ITAC, thus the company was protected against cheap
imports from China. The Committee however was concerned that despite all the
tariff support, Norjax was still not competitive and was struggling thus the
need for financial support. It was also not clear how Norjax was structured as
a company and whether the funding being solicited from IDC was going to be
helpful in light of the company not being competitive.
6.1.4 Oversight visit to the Department,
IDC and SEFA offices in Gauteng
On the 29 January 2014, the Committee visited the above offices with the
aim of familiarizing the new Members of the Committee, on the operations of the
Economic Development Department
and its Entities.
7.
ISSUES RAISED DURING DELIBERATIONS
During the
deliberations the Committee:
·
Notes with
concern that the Department had revised down its vacancy target from filling
166 funded posts to 146 for the year under review. Although the vacancy rate
against the APP target was 5 per cent, the Department, filled 139 posts and
therefore missed its revised target. The Committee is also worried about the
high turnover rate, particularly at senior management level and called on the Department
to finalise its new structure so as to address the staffing issues. The
Committeeexpressed its sympathy with the Departmentregarding the vacancy
challenges. The Committee understands that the Department is relatively new and
that the Departmentpositions require specialist skills that are scarce due to
structural unemployment in the country. The Committee, however urged the Department
to speed up the finalisation of its new organogram and the recruitment process
to ensure that the Departmentcan function optimally;
·
Appreciates
the fact that the Department obtained an unqualified report for the fourth
consecutive time. However, the Auditor generals findings on financial misstatement,
non-adherence with Supply Chain Management on tax clearance needed to be
addressed. The Committee noted that the root cause was a lack of monitoring and
adequate internal controls to ensure compliance with relevant legislation. In
addition some of the audit findings pertaining to Supply Chain Management and
Human Resource Management weaknesses had been raised in the previous years and
no remedial action was taken to address them. Members were of the view that there
should be punitive measures for poor performance. The Committee urged the Department
to ensure that findings from the previous financial years do not should not
reappear in the current financial year;
·
Contends
thatinternal auditing within the Departmentneeded to be strengthenedso that it
can be effective,dependable and reliable and function.In addition, the
Committee urges the Committee to expedite the filling of audit vacancies, after
two contracts expired in the year under review;
·
Approves of the
improvements in the performance of the Department as indicated in the Key
Performance Assessment Tool which shows thatDepartmental governance structures,
policies and systems that have been put into place to make sure that the Department
achieves its strategic objective goals. However, the Committee was concerned
that the tool indicates a regression in the performance of the financial
management systems. The Committee is of the view that the Departments internal
audit should be fully capacitated to strengthen and improve its performance;
·
Recognises
that the economy is facing challenges of unemployment, particularly among youth
but also acknowledges that positive development such as the
g
rowth in jobs for youth aged 18 to 34 grew by
150 000 during the year under review.
The Committee welcomes the Departments efforts to unlock
potential in this area through the Youth Employment Accord. The Committee
emphasised the need to monitor and evaluate progress in the implementation of
the six pillars of the Youth Employment Accord, namely,
education and training,work exposure,
youthbrigades based on existing public employment, programmesset-asides for
youth employment in growing industries, youth entrepreneurship and co-ops; and
private-sector initiatives;
·
Has concerns
about signatories who lack the commitment to be active participants in the
implementation of the Accords. For the Accords to succeed the Department should
ensure that engagements with signatories are done on an on-going basis. Furthermore
the Department should monitor and evaluate the implementation of the Accords
and also conduct an assessment study to measure its impact;
·
Acknowledges
that the Department has played a crucial role in promoting and supporting local
procurement and local content. However the Committee identified the need to
verify and ensure that 100% South African goods are indeed produced and
manufactured in the country;
·
Suggests that the
Department should Review its organogram to take into account the need to
support the PICC and the need to recruit able junior staff;
·
Urges the Department
to intensify its efforts and achieve the 2 per cent employment target for
people living with disabilities. In addition the Committee emphasises the need
to ensure that employment opportunities are created for people living with
disabilities; In this regard, the Department in collaboration with the Department
of Labour should encourage people living with disabilities to make use of the
Sheltered Employment Factories. The factories employ and empower people living
with disabilities, with skills that enable them to be mainstreamed into the
economy;
·
Expresses its satisfactionwith
the improvement in SEFAs disbursementrate during the year under review.
Committee believes that this is due to the fact that SEFA is addressing
backlogs from its predecessors. In this regard the Committee feels that the
establishment of one-stop shops for SMMEswould play a major role in attracting
new clients and spreading SEFAs footprint across the country;
·
Urges the Department
to do more to mainstream gender balance across its programmes so as to build on
early successes that have been achieved;
·
Requeststhe Department
to encourage other state entities to work with SEFA, in providing SMMEs access
to economic markets; and
·
Urges the Department
to consider establishing an SMME developmental institute assist develop
necessary skills for running an SMME.
8.
RECOMMENDATIONS
The Committee recommends
that the House requests the Minister of Economic Development to:
·
Speed up the finalization of the organogram
which will take the PICC needs into account;
·
Work in collaboration with the Minister of
Labour, to encourage people living with disabilities to make use of the
Sheltered Employment Factories so as to acquire skills that could make them
economically active;
·
Consider establishing one-stop shops for
SMMEs to attract new clients and spreading SEFAs footprint across the country;
·
Do more to ensure that gender balance is
mainstreamed across its programmes so as to build on early successes;
·
Encourage other state entities to work with SEFA,
in providing SMMEs with access to economic markets;
·
Based on observations made, the Committee
recommends that an SMME Development Institute be established by government to
help develop the necessary skills for the SMME sector;
·
Help fast track the process of aligning and
integrating the work related to economic development at all spheres of
government and report on the outcomes on a quarterly basis to the Committee;
·
Submit a response plan on the AGSA audit
outcomes before the Parliament rises for the end of the year recess; and
·
Work on a strategy to collate information
related to the country's performance on the jobs led growth; income
distribution and poverty alleviation (this should be outside normal country
reports received from relevant authorities), and report to the committee on a
quarterly basis.
9.
Conclusions
This report marks
South Africas twenty years of democracy as well asthe end of the Fourth
Administration during which the Department was established. The Department
began with a handful of staff members and a great deal of work was done to
recruit staff and put systems in place to ensure that the Department fulfils
its mandate. Three major milestones that the Department achieved during the
Fourth Administration, included the adoption of the NGP, facilitating the
conclusion and signing of the five Social Accords; and drafting the
Infrastructure Development Bill which was later passed by the national
legislature. The Department, has also managed to place job creation at the
centre of government activity.
The Department,
however, faces a number of challenges. These include the need for an updated organogram,
the recruitment and retention of staff with appropriate skills and experience;
and the resolution of issues identified by the Auditor General. To improve on
its performance, the Department is urged to take into serious consideration the
observations and recommendations made by the Committee.
Now that the Fifth
Administration has been ushered in, the Committee is looking forward to the
Department achieving more milestones.
10.
Appreciation
The Committee would like
to express its sincere gratitude to the Minister, Hon. Ebrahim Patel; the
Deputy Minister, Hon. Madala Backson Masuku and former Deputy Minister Hon.
Prof. Hlengiwe B. Mkhize; the Director General, Ms Jennifer (Jenny) Schreiner and
the entire team at the Department for their commitment and contribution during
the period covered by this report.
Appreciation is also extended to the dedicated
entities of the Committee, namely, ITAC led by Mr Siyabulela Tshengiwe,
Competition Commission led by Messrs Shan Ramburuth and Mr Bonakele;
Competition Tribunal led by Mr Norman Manoimn, IDC led by Mr Geoffrey Mvuleni
Qhena and SEFA led by Mr Thakhani Makhuva, together with the Board Members and
staff of all the entities, for their hard work during these trying economic
times.
The Chairperson thanks
all Members of the Committee (both 4th and 5th Parliament) for their active
participation during the process of engagement and deliberations; and
contribution to the observations and recommendations of this report.
Report to be considered.
Documents
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