ATC151027: Budgetary Review and Recommendation Report of the Portfolio Committee on Economic Development, dated 27 October 2015

Economic Development

Budgetary Review and Recommendation Report of the Portfolio Committee on Economic Development, dated 27 October 2015

The Portfolio Committee on Economic Development (the Committee), having assessed the financial and non-financial performance of the Economic Development Department (the EDD) for the 2014/15 financial year, reports as follows:


  1. Introduction


The year 2014/15 was the last financial year of the Fourth Administration. The year was marked by economic headwinds which saw the country grappling with a low economic growth outlook because of a slowdown in the global-economy, electricity supply constraints, labour market conflict and skills shortages.


The EDD was established in July 2009. Its vision is to create decent work through meaningful economic transformation and inclusive growth. The EDD’s mandate is rooted in ensuring that the country focuses on employment creation[1]. The EDD states that unlike other national Departments that deliver services directly to the citizens and so can monitor the number of citizens/clients served, it coordinates and facilitates the integration and alignment of the economic efforts of other National Departments and SOEs, provincial economic departments and municipalities.[2]


In 2010, Cabinet adopted the country’s economic framework called the New Growth Path (NGP) and also signed Outcome 4 of the Service Delivery Agreement. 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’ are  infrastructure, agriculture and agro-processing, mining and beneficiation, manufacturing, the ‘green economy’,  tourism and productive services, knowledge-based sectors, the social economy, the public sector and African regional integration.”


The country’s long term vision on economic development is contained in the National Development Plan (NDP) which aims at eliminating poverty and reducing inequality by 2030. The plan addresses the need to grow an inclusive economy, build capabilities, enhance the capacity of the state, and promote leadership and partnerships throughout society.


According to the NDP by 2030, 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. To achieve this, the plan proposes accelerating progress by focusing on job creation across government and society, improving education, addressing regional inequality, reducing dependence on resources, and improving service delivery and governance. The NGP strategy is in alignment with these goals and aims to provide concrete programmes for growth, employment creation and equity in line with government’s commitment to prioritise employment creation in its economic policies. The EDD’s mission is to:

·         Coordinate the contributions of government departments, state owned entities and civil society on economic development;

·         Contribute to efforts that ensure alignment between the economic policies and plans of the state and its agencies and government’s political and economic objectives and mandate; and

·         Promote government’s goals of advancing economic development with decent work opportunities.


The 2014 Medium Term Strategic Framework (MTSF) 2014-19 highlights government’s support for creating decent work opportunities, encouraging investment and a competitive economy. It sets out actions government will take and targets to be achieved. The Outcomes relevant to the work of EDD are:

  • Outcome 4: Decent employment through inclusive growth;
  • Outcome 5: A skilled and capable workforce to support an inclusive growth path;
  • Outcome 6: An efficient, competitive and responsive economic infrastructure network; and
  • Outcome 7: Vibrant, equitable, sustainable rural communities contributing towards food security for all.


Social Accords that the Department facilitated and monitors and which  were agreed to in order to build partnerships between business, organised labour, community representatives and government, are the following;

·         Basic Education Accord;

·         National Skills Accord;

·         Local Procurement Accord;

·         Green Economy Accord;

·         October 2012 Social Accord; and

·         Youth Employment Accord.


  1. Mandate of the Committee:


Chapter 4 of the Constitution, 1996 sets out in detail the powers, functions and procedures of Parliament. Parliament through Committees, such as the Portfolio Committee on Economic Development, is tasked with the following functions; 

  1. Making laws;
  2. Maintaining oversight over national executive authority and any organ of state;
  3. Facilitating public involvement in the legislative and other processes of the Assembly and  its committees
  4. Participating in, promoting and overseeing co-operative government; and
  5. Engaging and participate in international participation (participate in regional, continental and international bodies).

In line with the parliamentary oversight function, Section 5 of the Money Bills Amendment Procedure and Related Matters Act No. 9 of 2009 empowers Portfolio Committees, to annually assess the performance of each national Department through an annual Budgetary Review and Recommendations Report (BRRR). The overarching purpose of the BRR Report is for a Committee to make recommendations on the forward use of resources to address the implementation of policy priorities and services, as the relevant Department may require additional, reduced or re-configured resources to achieve these priorities and services.

The Act also gives effect to Parliament’s constitutional powers to amend the budget in line with the fiscal framework. However, the Budget Office which is responsible for fiscal oversight is still in the process of becoming fully functional. The BRRR process, nonetheless, enables a Committee to exercise its legislative responsibility to ensure that the Department and its entities are adequately funded to fulfil their respective mandates. The BRR Reports must be tabled in the National Assembly.


  1. 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 government’s 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  state agencies to work together for inclusive growth and job creation;

·         Providing secretariat and technical support for the Presidential Infrastructure Coordinating Commission (by 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 prioritising and identifying sources of financing infrastructure development.

The Department oversaw the following entities during the year under review:

  • Development Finance Institutions –the Industrial Development Corporation (IDC) and its subsidiary, the Small Enterprise Finance Agency (SEFA). However, from 2014/15, the Minister of Economic Development issued a directive that strategic responsibility and oversight for SEFA be moved to the newly established Department of Small Business Development. By agreement between the two Ministers, SEFA remains a wholly-owned subsidiary of the IDC.
  • Economic Regulatory Bodies – the Competition Commission, Competition Tribunal; and International Trade Administration Commission of South Africa (ITAC). The Department exercises policy oversight while the DTI is responsible for considering individual tariff applications.


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);
  • The International Trade Administration Act (No. 71 of 2002); and
  • The Infrastructure Development Act (No. 23 of 2014).


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 Department’s coordinating function, it works with a range of other Departments and agencies, among which  are the Departments of Trade and Industry (DTI); Tourism; Agriculture, Forestry and Fisheries (DAFF); Small Business Development (DSBD); and Science and Technology (DST).


The agencies reporting to EDD now provide broad support across government and to different departments’ mandates. For example, the IDC supports investment along the agriculture value-chain, working with DAFF; in the tourism sector, working with the Department of Tourism, in manufacturing enterprises, working with the DTI. The Competition Commission, working with the Department of Health, is now doing a market enquiry into the private health-care industry. The Commission is also working with the Department of Telecommunications and Postal Services, and investigates mergers in the mobile phone industry.


  1. 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 Money Bills Act).

The Money Bills Act sets out the process that allows Parliament to make recommendations to the Minister of Finance to amend the budget of a national Department. In October of each year, Portfolio Committees must compile the Budgetary Review and Recommendation Reports (BRRR) that assess service delivery performance given the available resources; evaluate the effective and efficient use and forward allocation of resources; and may make recommendations on forward use of resources.


The BRRR also sources documents for the Standing/Select Committees on Appropriations and Finance when they make recommendations to the Houses of Parliament on the Medium-Term Budget Policy Statement (MTPBS). The comprehensive review and analysis of the previous financial year’s performance, as well as performance to date, form part of this process.


The Act makes it obligatory for Parliament to assess the Department’s budgetary needs and shortfalls through its oversight of the Department’s operational efficiency and performance.

  1. Method of Reporting

The BRRR of the Committee is based on the information that it accessed and analysed through various engagements with the Department on its annual planning processes and with relevant stakeholders on legislation as indicated below:


  • The 2015 State of the Nation Address;

·         The EDD Strategic Plan and Annual Performance Plan for 2014/15;

·         The EDD Annual Report and Financial Statements for  2014/15;

·         Quarterly Reports of the Department for  2014/15;

·         Report of the Auditor General to Parliament on the Financial Statements of Vote Number 28;

·         Report of the Fiscal Finance Commission to Parliament on the Vote Number 25;

·         Presentation by the Department of Performance, Monitoring and Evaluation on the performance and evaluation of the EDD for 2014/15;

·         National Development Plan (NDP);

·         New Growth Path (NGP); and

·         National Treasury Section 32 Reports.


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 the entities on their 2014/15 Annual Reports before the completion of this report. This BRRR will therefore focus on the Department’s performance only. A consolidated report will follow after the Committee has had an opportunity to engage all the entities on their 2014/15 Annual Reports.

  1. Outline of the Budget Review and Recommendations Report:

The report contains the following:

  • Recommendations from the previous financial year;
  • Summary of highlights reported on by the Department;
  • An overview and assessment of financial and non-financial performance; and
  • The committee’s observations and recommendations.




During the deliberations on the Department’s performance in 2013/14, the Committee:


a)     Recognised that the economy was facing challenges of unemployment, particularly among youth but also acknowledged  positive development such as the  growth in jobs for youth aged 18 to 34 that grew by 150 000 during the year under review. The Committee welcomed 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, youth brigades based on existing public employment, programmes set-asides for youth employment in growing industries, youth entrepreneurship and co-operatives; and private-sector initiatives;


b)    Acknowledged that the Department has played a crucial role in promoting and supporting local procurement and giving greater effect to Public Procurement Policy Framework (PPPFA) act of 2011. However, the Committee identified the need to develop a mechanism to verify and ensure that 100 per cent of South African goods are indeed produced and manufactured in the country;


c)     Urged the Department to intensify its efforts to 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;


d)    Urged the Department to do more to mainstream gender balance across its programmes so as to build on early successes that have been achieved;


e)     Noted with concern that the Department had revised down its vacancy target from filling 166 funded posts to 146 for the year under review. The Department had missed its revised target as only 139 posts were filled. The Committee was concerned 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 and ensure that the Department can function optimally;


f)     Expressed its appreciation to the Department for obtaining an unqualified report for the fourth consecutive time. However, the Auditor General’s findings on financial misstatement, non-adherence with Supply Chain Management processes 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 in these areas. The Committee urged the Department to ensure that findings from the previous financial years do not reappear in the current financial year;


g)    Contended that the internal auditing Committee within the Department needed to be strengthened so that it could be more effective, dependable and reliable. In addition, the Committee urged the Department to expedite the filling of audit vacancies, after two contracts expired in 2013/14;  


h)     Approved of the improvements in the performance of the Department as indicated in the Key Performance Assessment Tool which shows that departmental governance structures, policies and systems that had been put in place to make sure that the Department achieves its strategic objective goals. However, the Committee was concerned that the tool indicated a regression in the performance of the financial management systems. This raised concerns about the Department’s internal audit office capacity to strengthen and improve on its performance; 


i)      Raised 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; 


j)      Expressed its satisfaction with the improvement in SEFA’s disbursement rate during the year under review. The 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 SMMEs would play a major role in attracting new clients and spreading SEFA’s footprint across the country;


k)     Requested  the Department to encourage other state entities to work with SEFA, in providing Small Micro and Medium Enterprises (SMMEs) access to economic markets; and


l)      Urged the Department to consider establishing an SMME development institute that will assist in developing necessary skills for running an SMME.


2.1        Previous financial year’s recommendations


The Committee recommended that the House request the Minister of Economic Development to:


a)     Speed up the finalisation of the organogram which will take the PICC needs into account;

b)    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;


c)     Consider establishing one-stop shops for SMMEs to attract new clients and spreading SEFA’s footprint across the country;


d)    Do more to ensure that gender balance is mainstreamed across its programmes so as to build on early successes;


e)     Encourage other state entities to work with SEFA, in providing SMMEs with access to economic markets;


f)     An SMME Development Institute be established by government to help develop the necessary skills for the SMME sector;

g)    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;


h)     Submit a response plan on the AGSA audit outcomes before the Parliament rises for the end of the year recess; and


i)      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.




3.1        HIGHLIGHTS


The Department reported on the following highlights;

  • Jobs grew by 405 000;
  • Total employment of 15.5 million by March 2015;
  • Women’s employment grew by 111 000 (total women in employment 6.8 million);
  • The number of jobs for youth increased by  233 000 (total youth jobs: 6.2 million);
  • Since adoption of the New Growth Path in October 2010, employment grew by 1.8 million;
  • GDP is now R3.8 trillion for the year and growth rate was 1.6 per cent;
  • Investment grew by R47 billion;  
  • Government infrastructure spending was R254 billion;
  • Agricultural value add grew by R5 billion or 7.5 per cent;
  • Manufacturing value add declined by R1.1 billion or 0.3 per cent;
  • Maintaining large-scale infrastructure spending boosts growth and jobs;
  • Support for an innovative system: the PICC;
  • 200 000 jobs in PICC-monitored projects; and
  • Substantial gains made for both large projects and at a community level, though much remains to be done. Examples include, among others:

o    160 000 new houses connected with electricity;

o    Cities building new bus lanes for Bus Rapid Transport (BRT);

o    BRT operational in three cities with thousands of users; and

o    In Tshwane, every bus has free Wi-Fi, which is useful to students.

Examples of work done by EDD on infrastructure includes:

  • Monitoring 18 Strategic Integrated Projects (SIPs) for Cabinet to provide high-quality, credible information for policy-making;
  • Tracking projects worth R1 trillion to monitor spending patterns;
  • Submitting 72 progress reports to  Cabinet;
  • Completing project on skills for infrastructure with the Department of Higher Education and Training; and
  • Identifying actions to combat cable theft.

The Department’s interventions supported the development of opportunities for industrialisation, higher levels of private investment and industrial funding and localisation in the economy. These included;

  • Addressing investor meetings and addressing challenges;
  • Supporting efforts to maintain high levels of IDC funding;
  • Supporting localisation and local procurement;
  • Promoting the development of new sectors; and
  • Unblocking, fast tracking investment.

The principal investment institution in the state is the Industrial Development Corporation (IDC), whose policy-framework is set by the Ministry. The IDC approved investment projects with private investor partners worth R36,8 billion, with the IDC committing R11,5 billion of its resources.

Through the PICC, the Department supported efforts to localise the manufacture of components and rolling stock for the National Infrastructure Plan. New and expanded factories directly supplying components for rolling stock infrastructure include, among others:

  • Thin-film solar experimental plant in Stellenbosch;
  • Wind-towers plant in Coega;
  • Large truck factory in Coega, with 450 new jobs;
  • Factory to assemble and laminate solar panels in Epping;
  • Truck and bus plant in Pretoria , with 350 new jobs initially;
  • Factory  making solar inverters in Cape Town;
  • Majority black-owned factory in Blackheath that supplies buses to municipalities;
  • Expansion in locomotive-furbishing capacity; and
  • 200 new jobs in Atlantis in a further wind tower plant. 


The Minister provided a directive to IDC to develop a renewable energy industry. IDC invested R14 billion in solar, wind and renewable projects during the year: including the opening of the ka’Xu Solar Plant in Pofadder in Northern Cape. The plant brings 100 megawatts (MW) of solar energy onto the grid. By March 2015, South Africa generated 1 730 MW of energy from the sun, wind and water.

The Department also facilitated, fast-tracked and/or unblocked 13 investment initiatives. Sectors included forestry, agro-processing, biofuels, pulp and paper, chemicals, textiles, construction, green energy and steel. Unblocking included, among others:

  • Securing Land And Finalising Lease Agreements;
  • Facilitating Access To Financing;
  • Mobilising Trade Measures;
  • Addressing Energy Challenges;
  • Helping Secure Pricing That Promotes Local Manufacturing;
  • Supporting With Social Dialogue;
  • Measures To Deal With Illegal Imports; and
  • Fast Tracking Administrative Processes to save jobs.



4.     Overview and assessment of the Department’s NOn-financial and financial performance


The Department’s six strategic objectives were aligned to and supportive of its key programmes, namely Administration, Economic Policy Development, Economic Planning and Coordination and Socio Economic and Social Dialogue.


The Department performed well against its predetermined goals. All the Department’s targets were met and some were exceeded. The Department over-achieved the most in the Economic Planning and Coordination Programme. This is an improvement compared to the previous financial year where the Department performed well and managed to achieve 95 per cent of its targets. See the details below.


Table 1: Departmental KPIs and targets



Planned Targets

Actual Targets

Performance against targets






Economic Policy Development




exceeded by 4

Economic Planning and Coordination




exceeded by 50

Economic Development and Social Dialogue




exceeded by 1





exceeded by 55

Source: Adapted from the EDD 2014/15 Annual Report




4.1.1     Strategic Objective 1 (PROGRAMME 1 ADMINISTRATION)


Strategic Objective 1 related to administrative support for the Ministry and the Department by ensuring that there was a well-managed Department which would support the economic development through continuous refinement of organisational strategy and structure in line with appropriate legislation and best practice.


In order to take account of the strategic objectives set by the Ministry and the work on a new MTSF for the Fifth Administration, the Department planned to review its organisational structure, the budget programme structure, and the Strategic and Annual Performance Plans. The review was to ensure that the Department is appropriately resourced and structured. Moreover, this was to strengthen the Department to be able to play its coordination and facilitation role on making the environment conducive for the creation of jobs and improving the growth prospect of the economy. 





Strategic Objective 2 related to the coordination of jobs drivers, sector/spatial projects and implementation of the NGP for job creation, inclusive growth, industrialisation and social inclusion. This was in line with the Department’s core function of supporting alignment across all state agencies to encourage sustainable, inclusive growth and job creation.


The Department has gained experience with the systems developed for the PICC in infrastructure development. The experience has been extraordinarily helpful and will be used to develop mechanisms for coordinating and supporting implementation for other jobs drivers in areas such as manufacturing, mining, agriculture and services such as tourism.


The Department aimed to develop effective implementation systems that would drive the actions of the state to unlock the potential of the productive sectors of the economy. The MTSF requires that the Department develops similar systems for other Job Drivers in the NGP and the economy as a whole.


The KPIs for Objective 2 were:

·         KPI 1: to coordinate and support implementation of two (2) job drivers, through development of information and monitoring dashboards; collation of data on performance; aligning activities with overall government plans and unblocking obstacles to implementation;

·         KPI 2: participation in the Cluster and Outcome 4 processes within government to facilitate achievement of economic outcomes of the MTSF. The Department aimed to have four (4) quarterly progress reports on Outcome 4; and two (2) in-depth reviews of progress, opportunities and risks for Cabinet Makgotla;

·         KPI 3: strengthening the implementation of the NGP as part of achieving the National Development Plan (NDP) goals by 2030. There are 4 target initiatives;

·         KPI 4: completing six (6) spatial, local and/or provincial initiatives to support inclusive growth and job creation, national economic priorities and promote greater accountability. This also includes measures to improve provincial economic development oversight and performance.




Strategic Objective 3 aimed at coordinating infrastructure development for inclusive growth, service delivery, job creation, industrialisation and social inclusion. This arose out of the Department’s role in supporting the PICC under the Infrastructure Development Act, in particular the provision of the technical unit and strategic frameworks and targets. The MTSF sees the public investment programme as central to economic transformation because it can provide extensive support for existing and emerging productive enterprises. Furthermore, the build programme encourages investment to supply inputs, and secures improved inputs for producers, notably electricity and water as well as logistics. Infrastructure is fundamental to service delivery for communities.


The KPIs for Objective 3 were:

·         KPI 5: The Department planned to produce 60 Cabinet-level quarterly progress reports on each SIP;

·         KPI 6: The Department planned to unblock fast-track or facilitate a total of 8 Infrastructure projects;

·         KPI 7: The Department planned to implement four (4) Cabinet and PICC strategic decisions on infrastructure (including policy, funding, users, development impact or capacity-development areas); and

·         KPI 8: Secretariat and coordination function provided for PICC: The Department intended to provide support for and convene 20 Council, Secretariat, Management Committee (MANCO) and SIP Coordinators meetings.




Strategic Objective 4 aimed at promoting investments, expanding industrial funding and entrepreneurship and improving performance of DFIs for job creation, inclusive growth, industrialisation and social inclusion. The Department supports new investments that will diversify the economy and create employment both directly, by addressing blockages, and through its oversight of the IDC and sefa. The Department needs to ensure that investments do more to support inclusive growth by driving industrialisation, creating jobs and providing more opportunities for women, youth, Small Medium and Micro Enterprises (SMMEs) and rural people.


The Department was to dedicate capacity to facilitate and unblock productive investments as required through identifying innovative opportunities for diversification and growth, helping to establish supportive frameworks, and overcoming delays in decision making by relevant agencies. This is also reflected the Department’s role of overseeing the IDC and sefa. These two agencies have a central role in increasing financing for new investments to support growth in the core productive sectors, diversification, employment creation, expansion in smaller enterprises, and greater economic equality overall. 


The Department wanted to work to improve the efficiencies of the DFIs and expand the level of industrial funding available across government and DFIs and their impact on jobs, women, youth, small business, black industrialists, township enterprises, rural development and entrepreneurship.


The KPIs for Objective 4 were to:


·         KPI 9: Facilitate, fast track and/or unblock 10 investment initiatives;

·         KPI 10: Make four (4) interventions to improve the efficiencies of DFIs and ensure world-class institutions through strategic guidance and Departmental work;

·         KPI 11: Measure and expand the level of industrial funding available across government and DFIs. The target here was two (2) initiatives;

·         KPI 12: Undertaking two (2) initiatives to measure and facilitate the improvement of the jobs impact of industrial funding, administered through DFIs and/or government departments; and

·         KPI 13: Take two (2) initiatives to measure and facilitate developmental goals through industrial funding (including women, youth, small business, black industrialists, township enterprises, rural development, and entrepreneurship).




Strategic Objective 5 aimed at promoting competition, trade and other economic regulation in support of job creation, inclusive growth, industrialisation and social inclusion. The Department’s oversight of key regulatory agencies, namely, the Competition Commission, Competition Tribunal and ITAC involves setting policy frameworks and goals and ensuring good governance and efficiency.


The Department wanted to continue to strengthen the administrative efficiency of trade and competition authorities and ensure world-class institutions through strategic guidance and Departmental work and evaluate and strengthen the impact of economic regulators on job creation, inclusive growth and developmental goals.


Under the MTSF, the Department was to also build the regulatory capacity and effectiveness across the state, including through improved training of regulators and, where necessary, the consolidation of regulatory institutions or amendments to legislation.


The KPIs for Objective 5 were:


·         KPI 14: Strengthening administrative efficiency of trade and competition authorities and ensuring world-class institutions through strategic guidance and Departmental work. The Department planned to carry out three (3) initiatives;

·         KPI 15: Evaluating and strengthening the jobs, inclusive growth and developmental impact of economic regulators. The Department planned to undertake four (4) initiatives;

·         KPI 16: Seek to reduce red-tape and unnecessary restrictions on enterprises and/or improve impact assessment of government/regulatory measures. The target for the 2014/15 financial year was two (2) initiatives; and

·         KPI 17: Undertake one (1) initiative to build regulatory capacity and effectiveness across the state, including through improved training of regulators and where necessary, consolidating regulatory institutions and administration/amendment of legislation. The MTSF requires the Department to conduct a review of all economic regulators and propose improvements.




Strategic Objective 6 related to the facilitation of social dialogue and implementation of social accords; support productivity and innovation for job creation, inclusive growth, industrialisation and social inclusion; and promote broader consensus on other key strategic objectives. The social accords concluded to date include the Youth Employment Accord, the Green Economy Accord, the Local Procurement Accord and the National skills Accord/Basic Education Accord. The Department’s task was to work with stakeholders to improve implementation. Social dialogue at national, sectoral and workplace level was also crucial for sustainable long-run growth.


The KPIs for objective 6 were:


·         KPI 18: Supporting local procurement of goods and services and/or implementation of the Local Procurement Accord. The target for this KPI was two (2) interventions;

·         KPI 19: Supporting the development of the green economy and green jobs and/or implementation of the Green Economy Accord and the target was two (2) interventions;

·         KPI 20: Enhancing skills development and/or implementation of the National Skills Accord and the target was two (2) interventions;

·         KPI 21: Enhancing youth empowerment (employment, skills or entrepreneurship) and/or implementation of the Youth Employment Accord and the target was four (4) interventions; and

·         KPI 22: Assessing national, sector or workplace economic development partnerships facilitated with social partners and the target was four (4) initiatives, covering commitments to work together on economic goals; improve social equity and productivity and reduce workplace conflict, and/or promote greater innovation and entrepreneurship.




Overall, the Department’s final appropriation was R696 million for the year under review which was a decrease compared to the previous year’s R771.5 million. For the financial year under consideration, the Department spent 99.7 per cent of its final appropriation of R696 million. The under expenditure amounts to R2 million or 0.3 per cent of the allocated funds. See Table 2 below. 


In the previous financial year the Department was allocated R771.5 million and it spent 99.9 per cent of its total budget. The Department generally spends close to 100 per cent of its appropriated funds and the year under review was no exception in spite of the reduced budget. Furthermore, the Department achieved all its performance targets regardless of the smaller budget in 2014/15.


4.2.1 Departmental expenditure by programme


Of the total budget, about R585.5 million or 84.2 per cent was spent on Programme 3: Economic Planning and Coordination. This programme provides oversight on economic regulatory bodies, development finance institutions and contributes to the development of the green economy.


The second largest amount of about R87.4 million was spent on Programme 1: Administration. The amount spent on the Programme decreased compared to the previous year’s R91.3 million.  


The Department spent about R12.8 million on Programme 3: Economic Policy Development, which is a significant reduction in expenditure compared to the previous year’s spending of about R23.9 million.


The programme that saw the least expenditure of about R9.2 million, was the Economic Development and Dialogue. This programme’s expenditure also decreased compared to the previous year’s R11.7 million expenditure


Table 2: 2014/15 Department Budget and Expenditure by Programme




Annual Budget



Annual Budget












88 076

87 419



91 342

91 301



Economic Policy Development

12 834

12 775



23 891

23 886



Economic Planning and Coordination

586 500

585 452

1 048


644 515

644 511



Economic Development and Dialogue

9 450

9 267



11 718

11 697




696 860

 694 912

1 948


771 466

 771 395



Source: 2014/15 ENE and Department Annual Report 


4.2.2 Expenditure by Economic Classification


According to the Statement of Financial Performance, there was a decrease in Current Expenditure from R136. 8 million to R116.3 million between the previous financial year and the one under review. The 2014 Estimates of National Expenditure (ENE), reports that about R160.8 million had initially been budgeted for the Current Payments in the year under review.  The amount was adjusted to R131.9 million and from that amount about R9.3 million in funds were shifted and R4.5 million was for virements. The final appropriation was R118.2 million.  Of this amount, R116.3 million or 98.4% of the final appropriation was spent on Current Payments which was a decrease in expenditure compared to the previous year’s R136.7 million. See Table 2A below.




The Department reports that about R6.775 million in virements were funds from the Administration Programme to other programmes. About R5.1 million of the virements was transferred to the ITAC and the Tribunal for accommodation costs and a quarter of a million (R250 000) was reprioritised internally. About R941 000 and R461 000 went to the Economic Policy Development and the Social Dialogue programmes respectively for reprioritisation of the budget.


Current Expenditure


Current Expenditure comprises, Compensation of Employees and Goods and Services.

Compensation of Employees: In the 2014 Estimates of National Expenditure it is reported that, R107.8 million had been budgeted for the Compensation of Employees. The adjusted appropriation for the Compensation of Employees was reduced to R76.9 million. From that amount, there was a virement of R350 000 which led to the actual expenditure of about R75.8 million. Total expenditure on the Compensation of Employees, however increased from R70.9 million to R75.8 million when compared to the previous financial year. Expenditure on key management personnel amounted to about R20. 4 million which is a decrease compared to the previous year’s R23.3 million. Key management personnel include the Minister, the Deputy Ministers and about 20 individuals on level 14 salary band.  

Goods and Services: The initial budget for Goods and Services was, R53 million, according to the ENE. The adjusted appropriation went up to R55 million from which the R9.3 million was shifted and R4.2 million was used as virements. The final appropriation was approximately R41.6 million of which R40.6 million or R97.5 per cent was the actual expenditure for the year under review. Compared to the previous financial year, actual expenditure on goods and services decreased from about R65.9 million to about R40.6 million in 2014/15. 

From the budget of Goods and Services the Department spent the largest amount of about R9.6 million for travel and subsistence followed by about R9.2 million on Operating Leases. The two items combined make up about 46 per cent of departmental expenditure on goods and services.   

During the year under review, about R6.1 million was spent on advertising. This is a significant decrease compared to the previous year’s expenditure of about R20 million.  The Department reports that it had commissioned BrandSA to assist in the PICC publicity campaign but there was a disagreement on the amount payable to the value of R2.8 million.

About R3.4 million was spent on legal services. The amount has decreased compared to R6.8 million on legal services in the previous year. Expenditure on external audit amounted to approximately R3 million, representing a slight decrease from the previous year’s expenditure of about R3.2 million. Thus in the year under review, the audit report showed improvements despite the decrease in expenditure on external audit costs.  

Accruals and payments not recognised amounted to about R1.9 million. About R1.88 million of that amount was services rendered or goods delivered within 30 days of year end. Approximately, R59 000 was for services rendered or goods delivered but not yet invoiced that were older than 30 days




Table 2A :Economic Classification

Economic Classification               (R' 000)

Adjusted Approp

Shift of Funds


Final Approp

Actual Expenditure


Expenditure as % of final appropriation

Final Appropriation

Actual Expenditure

Current Payments

131 955

-9 268


118 151






Compensation of employees

76 911



76 561






Goods and Services of which

55 045

-9 268

-4 186

41 590






Travel and subsistence

10 249



10 228






Operating leases

9 901

3 500

4 216

9 185







16 484

-9 874








legal services

4 025









External Audit Costs

2 617



3 037







11 769

-3 283

-8 487

9 372






Transfers and subsidies

560 456

10 333

5 156

575 945






Depart Agencies and Accounts

291 611

10 085

5 124







Public Corp and private Ent

268 845



















Payments for capital assets

4 448

-1 065








Machinery and Equipment

3 970









Software and other Int Assets











Transfers and Subsidies

Transfers and subsidies are dived into Departmental Agencies and accounts; public corporations and private enterprises; Non-profit institutions and Households. In the ENE, about R533.9 million was allocated for transfers and subsidies. The amount was adjusted to R560.5 million. About R15.4 million in shifted funds and virements went into transfers and Subsidies. The final appropriation was about R575.9 million and 100 per cent of that amount was the actual expenditure.

Of the R575.9 million, R306.8 million was transferred to the Departmental Agencies which consist of the Competition Commission which received the bulk of the budget at R198.2 million; followed by the International Trade and Administration Commission to which approximately R88.4 million was transferred, the  Competition Tribunal which was given R19.9 million, and the Public Sector Seta received about R323 000.

The remainder of the adjusted figure for transfers and subsidies i.e. approximately R268.8   million went to Public Corporations and Private Enterprises. This economic classification comprises the IDC and SEFA. For the year under review there were no transfers made to the IDC. SEFA received the entire amount of about R268.8 million.  

The Department reports that a R60 000 transfer was for Mitchell’s Plain Skills’ non-profit institutions and R219 000 for employee social benefit.


In its presentation to the Committee on the total budget expenditure, the Department noted that the year on year decrease in expenditure was mainly due to the:

·         Decrease in the annual appropriation of the vote by R75m which was made up of reductions:

–         Goods and Services of R25m;

–         Transfers to agencies of R52m.

·         Reduction in the advertisement, legal costs and travel and mainly implementing the cost containment measures; and

·         Fewer assets purchased and there were no software purchases.




According to the Auditor General’s (AG’s) report, the Department obtained an unqualified audit opinion for the fourth consecutive time. Furthermore, for the first time after three financial years there were no material misstatements in the financial statements that were submitted for auditing in 2014/15 and the Department also reports that there was no fruitless and wasteful expenditure. This indicates an improvement in the Department’s financial reporting and performance. The AG, however, did make the following findings;

  • Employees were appointed without following a proper process to verify the claims made in their applications. The AG reports that in this instance, the Department did not comply with the Public Service Regulation 1/VII/D.8 which states that;


“Before making a decision on an appointment or the filling of a post, an executing authority shall - (a) satisfy herself or himself that the candidate qualifies in all respects for the post and that her or his claims in her or his application for the post have been verified; and (b) record in writing that verification”[4].

This is a reoccurring finding as it was also identified by the AG in the previous financial year’s report when the Department verified details using a service providers whose term had lapsed. An action plan was formulated to address external audit findings, however, management did not take sufficient monitoring measures to avoid non-compliance with legislation.

The Department explained that the verifications were not finalised prior to employees taking office but were completed prior to the audit.

  • The management report issued by the Auditor-General for the 2014/15 financial year reflected 25 findings. See Table below. This is an improved when compared to the previous year’s 41 findings. 


The Auditor General expressed concern over the slow pace of management response to address negative audit outcomes. The AG reported that the slow pace was one of the top three root causes of audit findings in the previous year. The situation improved in the year under review but the slow management response was the main root cause of audit findings. In the AG’s observations this was due to inadequate action plans, controls and processes developed to address findings and previously identified deficiencies. The AG added that implementation thereof was not sufficiently monitored. The AG also reported that leadership relied heavily on the external audit process to identify and correct material misstatements in the financial statements.

Table 3: AG’s Findings

 Section within Department

No. of Findings

As percentage of total findings

Matters affecting the Audit

Human Resource Management




Supply Chain Management




Financial Accounting




Information Technology








Source: Adopted from EDD Annual Report Presentation 2015


The AG reported that the Minister had fulfilled the commitment to ensuring:

·         The effective functioning of the internal audit unit,

·         Engaging with the chairperson of the audit committees,

·         Submitting financial statements that are free from material misstatements and

·         Compliance with supply chain management prescripts and laws and regulations at the department were implemented. 

The Minister committed to addressing the issues raised about human resource management and directed the acting accounting officer to take action against transgressors. In this regard, the following were still in progress, at the time of going to print:

·         Improving controls in human resource management.

·         Improving the effective monitoring of the action plan to address external audit findings.

The AG recommended that:

  • Adequate action plans be implemented within strict timelines.
  • The implementation of action plans should be reviewed at least quarterly by the audit committee.
  • Internal audit should assess if implementation has achieved the required outcome. 

In its presentation the Department reported that it has begun to implement the AG’s recommendation through the following measures:

·         A consolidated ‘heatmap’ to rectify the audit findings has been compiled, which reflects responsible persons and timeframes to rectify each finding. In the heatmap process, specific attention is given to the priority areas of the AG findings such as performance information but most importantly to repeat findings around human resource management matters.

·         ‘Heatmap’ mitigation plans are being monitored every second Friday at the progress meetings, attended by the Internal Audit process, the relevant personnel and is chaired by the Chief Executive Officer (CEO).   Internal Audit is expected to audit the corrective measures that have been implemented as part of the audit coverage plan.

·         Progress reports on the implementation of corrective measures are presented to the Audit Committee, Director-General and Management Committee.




The Department started the 2014/15 year with a staff complement of 136. The target was to fill 164 posts. As a result of the adjustments made to expenditure across the state following the 2014 MTBPS which gave effect to Cabinet’s decision to reduce allocations of compensation for employees, EDD’s funded posts were reduced to 149. By the end of the financial year 121 positions were filled. The Department’s vacancy rate went up from 22.06 per cent in the previous year to 26.2 per cent in the year under review.  However, measured against funded posts, the vacancy rate was 18.2%.


EDD’s employee turnover rate was 22.1 per cent which is an improvement from the previous financial year’s 32.08 per cent.  The Department reports that there were 11 resignations, 9 transfers to other departments, 1 death, 1 retirement, 1 abscondment, and 7 contracts that expired during the year under review.

Table 4: No. of Posts by Programme - 2014/15


Posts on approved establishment

Posts filled

Vacancy rate (%)

Employees additional to  the establishment






Economic Policy Development





Economic Planning and Coordination





Economic Development and Social Dialogue










Source: Adopted from EDD 2014/15 Annual Report


By critical occupation, the legal services had the highest turnover rate at 50 per cent (there were two employees and one left), followed by senior management and information technology at 34.6 per cent and 33.3 per cent respectively. Financial and related services had the lowest turnover rate at 7.1 per cent.  By salary band, the highest turnover rate was in the highly skilled supervision (level 9-12) followed by the senior management service (level 13-16).


The Department has been attributing the vacancy rate to a shortage of relevant skills in the market, and offers that are being rejected by candidates. The Department acknowledges that the shortage of critical skills, especially economic and statistical analysts, has been a risk to the Department as it has been dependent on external supply for these skills.


The Portfolio Committee has engaged the Department on several occasions about staffing challenges, EDD’s retention strategy and feedback from the exit interviews. Nonetheless, the Department is able to achieve all its performance targets despite the high vacancy rate, in part due to the Department’s success in securing staff secondments by other public agencies for its work on the PICC.




6.1 Quarterly Performance Reports for 2014/15


During the 2014/15 financial year, the Committee was constantly overseeing the performance of the Department by calling EDD to account on its quarterly performance. During the engagements on quarterly performance reports, the following issues arose;


Operational Matters


a)     The work done by the Department as part of its responsibility to the Secretariat of the Presidential Infrastructure Coordinating Commission (PICC).

b)    The need to address the vacancy rate in the Department.

c)     The need for the Department to provide the Committee with more information on job creation, job preservation and economic growth - the update should include any issues that may amount to challenges and structural problems in this area.


Progress on the National Development Plan


a)     Progress made on the implementation of the National Development Plan – with a focus on jobs, economic growth and the stimulation of the small business sector.

b)    The Committee’s concerns over the role and impact of remittances in the country in relation to poor jobs creation in the rural areas versus the interventions done in the urban areas. The Statistician General had reported that the rural areas were still lagging behind and the Department was requested to give the Committee a report on the areas where it had done assessments in this regard.


Social Accords


a)     Youth Accord: The Minister is expected to report to the Committee on the Youth Accord and other Accords towards the end of 2015. Pertaining to youth development, with particular reference to the South African Bureau of Standards (SABS) Design Institute, the Committee asked whether there was anything the Department could do to support that initiative. The Minister emphasised the important role the Department seeks to play, of unlocking and stimulating youth entrepreneurship through policy development. He reported on projects that the Department was currently engaged with together with the Department of Higher Education and Training. He committed to sending departmental officials to the SABS Design Institute to find out how the Department can assist. The Committee would be updated on this once a report is received.


b)    The Green Economy Accord: The role of the Department and the IDC in the upcoming rounds of financing for the Green Economy Accord and the 39 hydro-plants currently producing for the grid. A combination of solar and wind infrastructure contributes 1900 megawatts to the grid. The Department’s role has been to unblock investment blockages, whilst the IDC has played a financier role, contributing some R14 billion in equity and loan funding towards renewable energies.


c)     The green economy (hubs) ideas and programmes were appreciated and supported. The Committee requested that the hubs be rolled out to the rural areas and more support be made available to provinces in implementing their programmes. Through the incubation hub initiative Provinces need to be brought together under one roof and consulted at the same time to achieve synergy in implementing the programme.


d)    At the macro level, the Ministry reported that it had had several interactions with the stakeholders on Social Accords and that the private sector had not done well in reporting on the work done. It was also noted that state-owned enterprises had played a very significant role on this front.






Feedback on issues emanating from oversight visits


a)     Follow-up on progress made by Noble Resources (Mpumalanga) since the Committee’s last visit.  The company had gone through the first phase of its operations, and production was still insufficient. The Department continued to work with the provincial departments of cooperative governance, economic development as well as the district municipality to ensure that small producers come into the production chain and are supported. A further report on progress would be brought before the Committee in the 4th quarter of the year.


The Presidential Infrastructure Coordination Commission


a)     The role of the Department in KPIs 5 and 6 on Strategic Infrastructure Projects (SIPs). The Department looked at various cluster projects, collated the information on them and created a ‘dashboard’ for Cabinet. Progress on KPI 7 in relation to cable and metal theft had amongst others led to the tabling of the Criminal Matters Amendment Bill, 2015.


Progress on some State Owned Entities’ projects


a)     The role of Eskom, and the amount of attention given to address electricity supply constraints. More information was needed on the Department’s facilitation of the Rustenburg Bus Rapid Transport and SANRAL N4 projects.


Coordination of Social Corporate Investments


a)     The contributions made through the Corporate Social Investments (CSIs) were acknowledged. The discussion turned to whether these were coordinated at the national level, and if the Department could account on what had been invested in and for how much. Eskom, through Kusile and Medupi had, for example, rolled projects to a number of schools. The Minister undertook to brief the Committee on these and others at a later stage.




During deliberations on the Department’s 2014/15 performance, the Committee:


  1. Appreciated the fact that the Department obtained an unqualified report for the fifth consecutive time;


  1. Emphasised the need for internal auditing within the Department to be strengthened so that it can be effective, dependable, and reliable;


  1. Applauded the improvements in the performance of the Department which shows that Departmental governance structures, policies and systems that have been put into place are working;


  1. Recognised and appreciated the co-ordination role played by the Department in integrating and aligning the work of the national departments and entities with that of provinces and municipalities. The need to measure the impact of the coordination efforts of the Department was identified. The Department reported that it has received cooperation in all the provinces;


  1. Raised concerns over the creation of temporary jobs in the year under review. The Department explained that out of 405 000 jobs created about 22 000 were from Community and Social Services which include temporary jobs from the Expanded Public Works Programme (EPWP). The Department added that government aims at creating long term decent work opportunities but of major concern are 18-25 year-olds who are not employable because they are unskilled. The EPWP plays a significant role in empowering them with skills so that they can be employed;


  1. Commends the inroads that the Department is making in renewable energy to alleviate pressure on the national electricity grid. Thus illustrating that the government is serious about addressing the country’s electricity challenges. The Department acknowledged that the cost of renewable energy is high and currently cost subsidised by coal. The Department is hopeful, however, that with technology such as exploring fuel cells costs could come down. In addition, the Department noted the need to improve on the localisation of renewable energy products;


  1. Expressed appreciation for Corporate Social Investment (CSI) contributions made by the public and private sector but raised concerns over the implementation thereof that is fragmented;


  1. Voiced concern over progress in the ailing local steel industry and whether the Competition Commission’s investigations are aligned with government interventions. It was stated that the Department and government at large recognise the challenges faced by the steel industry and are aware that interventions through pricing should not transfer problems to other parts of the value chain. On the whole, the Department noted that there is a need to improve performance as a lack of investment has affected the ability to maintain the competitiveness of the steel industry;


  1. Supported the co-ordinated effort to improve infrastructure in particular interventions to curb cable and metal theft. The Department reported that cable and metal theft has caused widespread harm to infrastructure development in the country and that it is working together with the Department of Justice and Correctional Services on the Criminal Matters Amendment Bill, 2015. The Bill aims at criminalising the vandalism of critical infrastructure which may lead into interfering with the provision of basic services to the public; and


  1. Expressed congratulatory remarks on President Jacob Zuma’s appointment as the President of the African Union’s new Programme for Infrastructure Development in Africa (PIDA). In this respect, the Department reported that ambassadors from the different countries on the continent were given action points booklets on infrastructure projects that can promote industrialisation and investment in infrastructure development.








Informed by its deliberations, the Committee recommends that the House request that the Minister of Economic Development should:

a)     Devise a strategy for measuring the impact of its coordination and facilitation role in all spheres of government and government entities. The Department should report twice per annum on progress made in this regard;


b)    Accelerate its coordination and policy alignment efforts in relation to the provincial and municipal economic development. The Department should report more comprehensively, every quarter, on the work done with provinces and municipalities;


c)     Develop better ways of empowering youth with necessary entrepreneurial skills that will help them start their own business and also empower them to be employable. The Department should also update the Committee on possible collaboration with other departments e.g. Trade and Industry and Science and Technology and other government institutions, on innovation and advancement;


d)    Work with other Departments to co-ordinate CSI contributions by the different entities and report on progress made in this regard; and


e)     Assist the steel industry to develop ways and means of improving performance to ensure that it is more competitive as many jobs depend on steel manufacturing in the country.


The Department performed well against its predetermined goals. All the targets were met and some were exceeded. The Department spent nearly 100% of its adjusted budget and obtained an unqualified audit report with fewer findings compared to the previous year. There were no material misstatements in the financial statements and there was no fruitless and wasteful expenditure. The AG, however, identified that some employees were employed without following a proper process to verify the claims made in their applications. The Department reported that it was in the process of implementing corrective measures in this regard. Meanwhile, there were several funded posts that needed to be filled in order to enhance its human resource capacity. It is hoped that the vacant posts will be filled in the 2015/16 financial year.


The Committee would like to express its sincere gratitude to the Minister, Hon. Ebrahim Patel; the Deputy Minister, Hon. Madala Backson Masuku; former Director General, Ms. Jennifer Schreiner for all her hard work and cooperation during her tenure - the Committee wishes her well in her new endeavors; the Acting Director General, Mr Kumaran Naidoo 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 Tsengiwe, Competition Commission led by Mr Thembinkosi 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 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.




Auditor General of South Africa (2015) PFMA audit outcomes of the 2014-15 financial year for Trade and Industry 2014/15.


Economic Development Department (2014) Annual Report 2013/14.


Economic Development Department (2015) Annual Report 2014/15.


Economic Development Department (2014a) Annual Performance Plan 2014/15.


Economic Development Department (2010) The New Growth Path.


National Treasury (2014) Estimates of National Expenditure, Pretoria


National Planning Commission. (2011). National Development Plan – vision for 2030.




[1] Portfolio Committee on Economic Development (2014)

[2] Economic Development Department (2014a)

[3] Economic Development Department (2014/15)

[4]Department of Public Service and Administration (2004) 


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