ATC181114: Joint Oversight Report by the Select Committee on Economic and Business Development and the Select Committee on Trade and International Relations to Free State, Mangaung Metropolitan Municipality, Dated 14 November 2018
NCOP Economic and Business Development
Joint Oversight Report by the Select Committee on Economic and Business Development and the Select Committee on Trade and International Relations to Free State, Mangaung Metropolitan Municipality, Dated 14 November 2018.
The Select Committee on Economic and Business Development jointly with the Select Committee on Trade and International Relations, having conducted an oversight visit to the Free State, Mangaung Metropolitan Municipality, from 4 - 8 September 2017, report as follows:
1. Background and Introduction
In terms of section 42(4) of the Constitution, the National Council of Provinces (NCOP) is mandated to ensure effective cooperative governance and intergovernmental relations between the three spheres of government. This unique mandate of the NCOP further seeks to ensure that the provincial interests are taken into account in the national sphere of government. It is within this context that the two Select Committees - Economic & Business Development and the Trade & International Relations conducted a joint oversight to Mangaung Metropolitan Municipality in Free State Province.
The focus of the visit was to assess how government programmes are implemented to address the pressing socio-economic challenges. The oversight visit observed and reflected on the efforts of both national and provincial development agencies including local government entities, in addressing the challenges identified in the National Development Plan, including the other government strategic action plans such as the Nine Point Plan.
Investing in enterprise development would also assist government to jump-start the economy, and address socio-economic challenges. Thus the select committees invited various national departments, including state entities with functional focus on economy, employment and infrastructure investment, to identify their contributions in response to local economic challenges, and identify economic opportunities.
It is the view of both committees, that in order for government to achieve its policy outcomes, development partnerships with the private sector, higher education and training institutions including civil society, should be encouraged. The current economic and social challenges compel social partners to work together. This is the era where governments are experiencing declining public sector revenues, thus compelling governments to deliver much needed services with ‘with fewer’ resources.
2. Multiparty delegation
The delegation comprised of the following members:
Hon MI Rayi, Mr (ANC) Chairperson and Co-Leader of the delegation
Hon ER Makue, Mr (ANC) Chairperson and Co-Leader of the delegation
Hon BG Nthebe, Mr (ANC)
Hon SG Mthimunye, Mr (ANC)
Hon LV Magwebu, Mr (DA)
Hon MM Chabangu, Mr (EFF)
Hon YC Vawda, Dr (EFF)
The delegation was accompanied by the following parliamentary officials: Mr H Mtileni and Ms NG Dinizulu (Committee Secretaries), Mr L Sishuba (Content Advisor), Mr Z Ngxishe (Committee Researcher), Mr S Maputi (Media Officer) and Mr M Erasmus (Committee Assistant).
2. In attendance
The meetings were attended by some Municipal Councillors, officials from the Mangaung Metropolitan Municipality, National and Provincial Departments and other public entities listed below:
Mangaung Metropolitan Municipality: Adv T Mea, City Manager; Mr M Ndlovu, HOD: Engineering Services; Mr B Mthembu, Head: Waste & Fleet; Mrs L Titi-Odili, MMC: Finance; Ms V Jonas, MMC: Economic Development; Mr M Nkabu, MMC: SMME Development; Mrs J Petersen, Whip; Dr J Nothnagel, MMC: Rural Development; Mrs G May Thipenyane, Chair: Municipal Public Accounts; Mrs M Tladi, Chair: Section 79.
Provincial Department of Economic, Small Business Development, Tourism and Environmental Affairs (DESTEA): Mrs G Abrahams, Head of Department; Dr T Mokoena, Chief Director; Mr T Oepeng, Parliamentary and Media Officer; Mr M Sani, Chief Director.
National Department of Transport: Mr W Shibambu, Acting Director; Road Infrastructure Planning.
Department of Police, Roads and Transport: Mr N Selai, Chief Director: Corporate Services; Mr Thekiso, Chief Director: Roads; Mr P Masilo, Chief Director: Civilian Secretariat; Mrs J Botes, CFO; Mr TJ Mosiamedi, Chief Engineer.
National Empowerment Fund (NEF) & Kgahlisa General Supplies: Mr S Molepo, Divisional Executive; Ms M Motsepe, Head of Marketing & Communications; Ms M Mhlahlo, Free State Regional Manager and Mr S Phalatse, Owner: Caltex Tshela Garage.
Department of Labour: Mr N Jack-Douw, Provincial Head; Mr MW Nape, Director: Labour Activation Programme; Mrs M Mataboge, Parliamentary Officer; Mrs E Maneli, Director; Mrs B Nkwakwa, Deputy Director; Mr V Mnisi, Deputy Director; Mr S Motau, TETA Acting Executive: Rail Chamber.
Transnet Engineering: Mr S Silo, General Manager; Mr K Sedikelo, Manager Capacity Building.
Provincial Department of Public Works & Infrastructure: Mr M Seoke, HOD; Mrs MB Tshabalala, Chief Director: EPWP; Mr M Dlamanzi, Director: EPWP; Mr B Ntshumayelo, Director: EPWP; Mrs M Mdahleni, Director.
Mangaung Chamber of Commerce & Industry (MCCI) Mrs N De Sousa, President; Mrs A van der Merwe, Board Member; Mrs D Bester, Deputy President, Mrs E Papangelis, Manager, Mr A Petersen, Executive Member.
Department of Energy: Mr L Mahlangu, IPP Programme: Economic Development Compliance
Letsatsi Power Plant: Mr N Makhothe, Community Liaison Officer.
National Department of Tourism: Mr C Nakhooda, Director; Mr P Mcina, Director.
Mangaung Botanical Gardens: Mr E Lithudzha, Curator.
The report is structured on the following themes:
3. Free State Province at Glance
3.1 Overview of the Free State economy, key economic industries and spatial outlay
Agriculture and mining (gold dominates) are the major pillars of the provincial economy, followed by manufacturing and construction. There are great economic opportunities in new industries such as solar energy, chemicals including plastics and gas.
The provincial population accounted for 5 per cent of the South African population, recorded at 2.8 million. The Province’s contribution to the national Growth Domestic Product (GDP) is also slightly proportional.
The largest contributor to the real economy-sector in 2016 was mining, at 11 per cent of the provincial economy, followed by manufacturing at 9 per cent, agriculture at 4 per cent and construction at 3 per cent. The economic growth in the Free State has generally trailed behind the national growth. The main reason has been maturing of the gold mines, and the recent drought that has affected the agricultural industry. Overall, the Province’s share in the national economy decreased from 2003 to the end of commodity boom in 2011.
In terms of employment, agriculture, manufacturing and mining led the real economy in the Free State. Agricultural and mining industries have shown major declines in creating jobs, and thus have left small towns and rural economies severely disadvantaged and caused major socio-economic challenges. Recent figures by StatsSA have demonstrated that Free State has recorded the highest unemployment rate in the country.
Despite tough economic challenges, coupled with high unemployment rate, there are major economic and investment opportunities:
- Free State government in collaboration with the Department of Trade and Industry has established a special economic zone (SEZ) in Maluti A Phofung. The main industries that the SEZ is expected to serve are agriculture, agro processing, automotive and logistics, and will include a container terminal and car terminal facilities. The SEZ is linked to the overall Durban/Free State/ Gauteng logistics and industrial corridor that is intended to strengthen the logistics and transport corridor in one of South Africa’s industrial hubs. A number of incentives will be available for the companies that wishes to locate within the SEZ.
- Sasol is expected to invest R13.6 billion to expand the Sasol Fischer Tropsch Wax Project.
- R384 million would be allocated for the Province to develop the Lace Diamond Mine.
- A new water pipeline from the Gariep Dam is currently under construction. The investment in the water infrastructure would boost economic development.
- Transport infrastructure investment is another interesting development. The Bram Fischer International Airport in Mangaung presents industrial and commercial opportunities.
The above opportunities allow the provincial government to strengthen partnerships with other critical role players in the economy: public, private, non-profit, philanthropic, labour, civil society and knowledge institutions (the Province has two well established higher education institutions: University of Free State and the Central University of Technology). The cross-sector partnering would enhance efforts that would contribute to the growth of the economy, and thus attract investment and create jobs.
South Africa’s (recent) historic economic policies have significantly impacted on economic structures, and especially on access to economic opportunities for ordinary South Africans. The Province has one metropolitan municipality (Mangaung), four district municipalities and nineteen local municipalities.
Mangaung metropolitan area is the largest contributor to the provincial gross domestic product, followed by Fezile Dabi District municipality, with Lejweleputswa and Thabo Mofutsanyana district municipalities chasing the 3rd spot. Xhariep district municipality remains (relatively) the lowest contributor to the provincial economy. Mangaung Metropolitan Municipality was the key focus area of the select committees’ joint oversight visit in Free State Province.
3.2 Cities have potential to foster inclusive growth
The focus of government is beginning to shift to where economic activities are significantly concentrated. Many government’s strategy policy documents emphasised the need to grow the economy, and ensure that the growth is more inclusive. Cities are viewed as critical engines that matter in the growth of economies, and platforms that can draw investment and create jobs. Mindful of the role of the cities in propelling growth of the economy, and as platforms that can contribute to an inclusive growth agenda, the select committees received a briefing from Mangaung Metropolitan Municipality (MMM) focusing on the following strategic policy areas:
- Economic challenges faced by the municipality,
- MMM economic development strategies, including the implementation plans to attract investments.
- MMM key economic development projects; and
- MMM alignment of development plans to the National Development Plan (NDP).
3.2.1 Economic challenges faced by the MMM
Based on the presentation shared by the municipality, with the select committees, the following economic development challenges (that hinder economic development) were identified:
- Decline in the overall investment in the Province including the metropolitan municipality;
- Lack of private sector appetite to invest in the metropolitan region;
- Insufficient linkage of private and public sector investment plans;
- Economic policy and programme initiatives not adequately coordinated between the three spheres of government;
- There is a need to boost investment in public infrastructure to attract private sector investments;
- Mining and agricultural industries have experienced declines, resulting in forced migration from mining and agricultural regions to the city, thus creating demand for services;
- Economic activity not sufficient to absorb the increasing levels of labour force;
- Despite the city having two higher education institutions, the region experience inadequate skills, and is thus unable to meet the demands of the new industries in the economy, which are largely service driven and also technical in nature;
- Rising poverty and unemployment levels;
- High income levels and ‘skills gap’ between white and black South Africans constrain the transformation agenda.
3.2.2 Realising the full potential of the City
The select committees emphasised the importance for the metropolitan to have an integrated industrial and economic development plan. The plan should focus on attracting investments in transportation, human settlements, strong infrastructure networks, and land management and development in order to attract businesses. Another important development pillar that was mentioned by the select committees’ delegation, and the metropolitan representatives agreed to, was investments in local communities and partnerships with the private sector, and civil society (including higher education institutions).
The metropolitan municipality reported that it is in the process of reviewing the economic development strategy, and the emphasis was expected to focus on inclusive growth that would reposition the city as a dynamic, vibrant, and sustainable regional economy. It has identified four strategic policy thrusts, namely: employment creation; economic diversification; creating an environment conducive to boost economic growth and attract investments; and developing regional economic industrial hubs.
The select committees emphasised the importance of building cross-sector investment initiatives. The metropolitan municipality, in an effort to drive economic growth, attract investments and create employment opportunities, has identified development programmes focusing on agricultural sector development; industrial cluster development; SMME development; rural development; tourism development and transport development.
With regard to the industrial cluster development, the N8 development corridor, together with its associated industrial development such as Estoire Development, Airport Node and Botshabelo-Thaba Nchu Node, has been identified as main development nodes to kick-start growth and development. The metropolitan municiaplaity reported that it has released 2000 hectares of strategically located land for significant economic development purposes and as earmarked flagship development project which is estimated to create 11 000 jobs. Currently on Phase 1, over 700 hectares of land for development has been released by private investors. In the development of Phase 2, the metropolitan has allocated 1 300 hectares of prime land for mix development. Over the next three years R197.7 million will be used for the installation of bulk and reticulation infrastructure services.
With regard to rural development initiatives, agro-processing industries and marketing of local agricultural products have been identified as an immediate development priority expected to stimulate economic growth and attract investments. In order to revitalise agriculture and agro-processing value chains, the metropolitan municipality has planned to construct a hydrophonic unit in Tweefontein village, construct egg laying units and erection of fence in Moroto village, and construct piggery units at Feloane village.
The metropolitan municipality recognised that SMMEs are the engines that could drive inclusive growth. To this effect, the metropolitan municipality intends to establish small business networks. Public sector procurement will be used an instrument to support SMME’s growth and development. In partnership with development institutions the metropolitan municipality intends to establish business parks to support SMMEs. Furthermore, it will support and promote entrepreneurship in local schools- in partnership with local higher education institutions.
In supporting the informal sector of the economy, the metropolitan municipality reported that it has completed building 44 hawking stalls in Botshabelo and 103 stalls are still under construction. The select committees were also informed that the metropolitan municipality has supported over 13 000 small traders. The support included provision of business advices, training and mentorship, development of plans, facilitation of access to finance, business registration support, project identification, planning and providing an enabling and conducive environment for businesses to flourish and be sustainable. Through the economic development section of the metropolitan municipality 449 cooperatives were provided with support to successfully complete the registration processes.
Tourism development remains high on the MMM development agenda. The metropolitan municipality planned to support and establish tourism networks to promote tourism and foster inclusiveness in the local tourism industry. Promote maximum utilisation of supporting services within the tourism sector. Design a tourism infrastructure investment framework and identify opportunities for public private partnership (PPP) on construction and maintenance of infrastructure related to tourism. The select committees stressed the need for the tourism industry to meet transformation expectations, and that the private sector should promote broader participation in the tourism industry.
The focus of the metropolitan municipality is to position Mangaung as a tourist destination. In this regard, the City informed the select committees that it has given priority to the redevelopment of Naval Hill by transforming this famous landmark from just being a game reserve at the heart of the city to becoming the most frequently visited tourist destination. To date the tourism development project has created 183 job opportunities. The number of tourists visiting Naval Hill has since increased sharply and is estimated to attract over 500 000 visitors annually. With a total investment of more than R16 million, the metropolitan municipality reported that it has built an entrance gate, upgraded ablution facilities, installed hard landscaping and public lightning, erected a perimeter fence, upgraded walkways to the top viewing platforms and also upgraded kiosks.
The select committees further emphasised that the City should prioritise connectivity both in terms of road infrastructure and ICT in order to promote economic and social networks. The metropolitan municipality informed the select committees that is in the process of developing a comprehensive transport development strategy. The transport development strategy is expected to present a new transport system that will support economic growth and development. The metropolitan municipality further informed the select committees that it is planning to establish a logistics and long distance freight transport centre on the N1 Route.
The metropolitan municipality further informed the select committees that it has invested in the development of the bulk infrastructure, which will anchor the development of N8 Corridor. To this effect, a raceway has been developed, and ACSA and SANRAL would further make significant contributions in upgrading transport infrastructure. The development projects would position the N8 Corridor as both the industrial and commercial hub.
Key among these developments includes investment in the Naval Hill development, Longbridge and Botshabelo reservoirs, including the constrction of the North-Eastern Waste Water Treatment Works, and the expansion of capacity of Bloemspruit and Sterkwater Waste Water Treatment Work. Furthermore, the development initiative includes the refurbishment of Masselspoort Water Treatment Works to support N8 and Airport Development Nodes.
- Policy and programme coordination remains a priority including partnerships that are key to inclusive growth
4.1 Policy and programme coordination
The select committees emphasised a need for resources allocated for economic development to be well coordinated in order to meet the intended outcomes. In the Free State Province economic policy and programmes are administered by the Department of Economic, Small Business Development, Tourism and Environmental Affairs (Destea), and to a certain extent includes the Department of Agriculture and Rural Development. The work of the Destea is supported by the two development agencies namely, the Free State Development Agency, and the Free State Tourism Authority.
Key functional policy responsibility of Destea is to develop and coordinate economic policy, and ensure implementation of the development programmes. The select committees were informed that the Province has developed the Free State Vision 2030 (Economic and development strategy), which is aligned to the National Development Plan.
The key focus areas of the development strategy were framed in the following strategic policy thrusts:
- Build a thriving and competitive economy that is inclusive,
- Invest in skills to foster human development,
- Seek new opportunities in new industries, and support growth of traditional industries such as agriculture and mining;
- As articulated in the NDP, to seek opportunities that will eliminate inequality and reduce poverty;
- At the heart of the development strategy is to combine economic growth and job creation efforts to create an inclusive Province,
- To invest in infrastructure to connect the people, including linking urban development to the rural economies,
- To support and promote green economy and tourism,
The select committees further emphasised the need for the province to work closely with other spheres of government in the implementation of industrial policy and development initiatives. Partnering with other development agencies such as the Industrial Development Corporation (IDC) including Small Enterprise Development Agency (Seda) and Small Enterprise Finance Agency (Sefa) will help the Province to realise its development outcomes. This is the area that the Province need to pay attention to.
The Province, including the metropolitan municipality, need to step-up their efforts in influencing how state-owned enterprises (SOEs) plan their investments. The select committees stressed that the role of SOEs in development spending need to support provincial and local economic development efforts. Critical decisions that have an effect on investments, such as whether, where, when and how to expand or construct development projects need an input from provincial and local government/s. Thus development plans need to take into account the interests of both provincial and local government growth trajectories.
4.2. Partnership with the Mangaung Chamber of Commerce and Industry (MCCI)
The select committees appreciated the presentation made the Mangaung Chamber of Commerce and Industry (MCCI). MCCI was constituted in March 2004 after a negotiated merger of the CBI/SBI (Central Business Incorporated), the AHI and NAFCOC.
The primary task of the MCCI is to be the voice of businesses in Mangaung and throughout the Free State Province. The membership of the MCCI consists of over 500 companies - a membership that places the Chamber as one of the top 10 chambers of commerce in South Africa.
Membership in the MCCI enables members to play an active role in influencing government in formulating economic policy. The MCCI is the oldest business chamber in the Free State, and has created networking platforms for its members to be exposed to new business models in order to grow their businesses.
Through its solid networking platforms, that extend to higher education institutions, it has enabled members to gain access to new information, and linking its members to enterprise development opportunities that include finance and non-financial support.
MCCI highlighted that skills development remains a priority and that it would add valuable development outcomes, particular for new enterprises. Currently, MCCI is supporting training and development initiatives focusing on rural development (supporting cooperatives and instilling a culture of entrepreneurship in previously disadvantaged communities).
One of the strategic objectives of the MCCI is to promote better business practices by incorporating social investment initiatives and fostering local economic development. However, the select committees noted a lack of working relationship between the MCCI and the Provincial Government. The select committees urged both the provincial government and the MCCI (including the Mangaung metropolitan municipality) to design working mechanisms in the interest of provincial and local economic development. Collaborative approaches in development were recognised as the best solution that could ensure that economic development players can share expertise, and maximise use of financial resources. Hence it is critical for public sector, private sector and civic organisations to collaborate in efforts to design and implement economic strategies.
It was acknowledged by both the provincial government delegates and the select committees that tourism is one of the industries that need both public and private sector support. This is the area that need to be exploited to address unemployment in the province. In order to realise the full economic benefits of the tourism industry, including other industries in the provincial economy, cross sector partnership would be needed.
- Economic and Social Development to foster inclusive growth
5.1 Kgahlisa General Supplies
The select committees visited the Kgahlisa General Supplies which owns a Caltex garage in Botshabelo. The garage was funded via the National Empowerment Fund (NEF). The business consists of 24-hour fuel services, lubrication and a convenience shop. The NEF approved a total investment of R3,1 million.
Kgahlisa General Supplies is 100 per cent owned and managed by Mr S Phalatse. The owner holds a Bachelor of Commerce and honours degree in Business Management from the University of Free State and has worked for Standard for a period of 13 years before he decided to venture into business.
In terms of the business performance, Mr Phalatse explained that the business revenue has shown a positive growth from the sale of fuel (petrol & diesel). Other contributors included income from the shop, airtime, electricity, lotto and carwash. Those activities have enabled the business to boost its income. To date it has managed to generate 63 per cent more income than it was originally projected and business has generally performed above the projections. Currently, the business has created 33 jobs. The garage is managed by the younger Phalatse brother (a youth).
5.2 Mangaung Society for the Care of the Aged
The Centre Manager (Ms Mosala) and Board members, accompanied by the NLC Board Chairperson (Prof Nevhutanda) and Commissioner (Ms Mampane) briefed the joint committees:
The Mangaung Society for the Care of the Aged, also known as the Boikhuco Old Age Home, is a registered Non-Profit Organisation, based in Bochabelo, Mangaung. The organisation provides a residential facility and other care and support services for older persons. In 1950 the Managing Municipality established and managed the Boikhuco Old Age Home. In 1982, due to financial constraints the municipality indicated the closing down of the home. In 1986 the community of Mangaung facilitated the re-opening of the facility as a NPO, and took over its management, under a new name " Mangaung Society for the Care of the Aged".
The services rendered includes management of own and other old age homes and a day care programme for older persons (95 older persons are accommodated at the centre). Other services include: care of frail elders, a luncheon club, provision of support to people affected by HIV&Aids, and multi-purpose dropping –off centre for orphans and vulnerable children.
The centre has received funding from the National Lotteries Commission (NLC-an entity of the dti) totalling R17 million to date (over several years). The impact of NLC funding contributed in building new housing units and a hall with capacity to accommodate 800 people. It also enabled the purchase of four vehicles to assist in day to day running of the centre.
Other funders, which have contributed to the growth of the old age home include National Department of Social Development, Nelson Mandela Children's Fund, Witherow Trust, based in Mangaung, Thabo Community Trust, Nedbank Foundation and SABC Foundation. The funders have helped the organisation to meet its social development commitments.
5.3 Kopanang Women’s Enterprise
Kopanang Women’s Enterprise is a cooperative registered with the main purpose to facilitate the development of previously disadvantaged communities. The cooperative is owned by a group of black women who were previously employed in the clothing sector.
The cooperative has initiated a job creation project which comprises the establishment of the clothing manufacturing hub and business incubator for unemployed youth and retrenched skilled workers. The mission of the cooperative is to produce and supply affordable high quality garments to the public and government. The cooperative strived from its inception to establish itself as leaders in clothing and sanitary pad manufacturing industries.
The cooperative is situated in Botshabelo and occupies two buidings. Presently, only one of the buildings is utilised. The other building will only be utilised should production increases.
This project aptly demosntrates the assertion (made above) regarding the beneifits of iter-government cooperation and support. While the facilties and skills are available the levels of production and access to markets is a major challenge.
The national Department of Social Development promised to purchase the school uniforms and sanitary pads manufactured by the cooperative. This is disconcertingly not happening on scale.
5.4 Unemployment Insurance Fund (UIF) and Transport Education and Training Authority (TETA) training and development project
The Unemployment Insurance Fund (UIF) and Transport Education and Training Authority (TETA) entered into a 50/50 co-funding partnership at national level, targeting all provinces to provide training and development for technical skills. Initially 80 learners were recruited to undergo artisan development training at Transnet in Bloemfontein over 3 years at a cost of R150 000 per learner, and this amount is inclusive of stipends.
The Bloemfontein Transnet office also manages the Northern Cape training centre. Transnet participates as a training provider and a host employer. Currently the training centre provides the following trades: Electricians, Electro-Mechanics, Platers, and Welders. The learners were recruited from the Department of Labour work seeker database. The number of learners participating in the programme has reduced due to resignation of trainees for various reasons, such as finding permanent jobs- prior to completion of the course.
Currently the programme accommodates 70 learners, 9 learners are trained at Transnet in Kimberly and 61 learners are trained at Transnet in Bloemfontein. Learners have been accepted according to their interest in trades, race, gender and age group and were recruited throughout the Province.
Some of the key features of the programme are:
- To train the learners not only to find employment, but to become future entrepreneurs.
- The Department of Labour set the requirements for learners to be accepted from the ages of 18-25, with matric or N2 qualifications. CVs are also required, to be able to match the learners with suitable trades.
- Although still limited, the Department of Labour conducts advocacy awareness in relation to the programme.
- Currently the learners receive a stipend amounting from R1500 –R2500 pm according to their levels of learning.
- Learners from all nine provinces may apply, depending on their qualification.
5.5 Sqobile Bulk Bag Manufactures project
The business was registered in 2013 to manufacture different designs of bulk bags, for products such as cabbages, onions, salt, mealie meal etc. This is a family business owned by Mary Molahleni and Rose Lehana. They have vast experience in the production component of the business. The business became fully operational in this current year (2017) and like many SMMEs they have experienced challenges such as access to finance, business infrastructure (premises including office equipment) and business development support (non-financial to start up the business).
Despite the challenges they have experienced. The project received financial and non-financial support from some government development finance institutions- although it was not adequate. The National Youth Development Agency (NYDA) gave the company financial support in the form of grant amounting to R44 125.40. With this amount the NYDA purchased 3 sewing machines. Out of the 3 machines 2 were not suitable for the production of the goods produced by the project. The machines were not exchanged, and remain in the premises and not in use.
The owners of the business indicated to the select committees that if they can be assisted to purchase proper equipment to run the production line lines, the business can be able to create 230 permanent jobs. The employment opportunity would benefit the residence of Botshabelo.
Currently, the company has orders to supply two big companies in Upington, Northern Cape and there is potential for orders from other companies. But due to lack of adequate manufacturing resources and inadequate operational space they are unable to fulfil the market demand. The company indicated that it could lose current clients unless the challenges mentioned to the select committees are urgently addressed.
In order for them to render their business services effectively to their clients they need bigger space, to accommodate the correct sewing machines and their employers. On face value, the company shows great potential to grow. With adequate business development services, the company could grow.
Members of the select committee felt that there is a need for a coordinated support by national and provincial development agencies to step-up their services for SMMEs, particularly small enterprises in townships such as Sqobile Bulk Bag Manufactures. To this end, the Chairperson requested the support staff to have an information sharing session with the officials from the Free State Development Corporation, Sefa, Seda, NYDA, National Empowerment including Destea.
In the main the support staff mandate was to get a deeper appreciation of the work of various development finance agencies in the Province. See attached Annexure as part of the feedback.
6. Department of Labour Free State
The delegation was supposed to receive the presentation from the Provincial Department of Labour and CCMA, on the progress and challenges with regard to the claims with UIF, Compensation Fund and referrals from the CCMA in the Mangaung metropolitan municipality. But, due to the incidence that happened in Wesselsbron in relation to various serious contraventions of labour legislation and regulations, the select committees requested the Department of Labour to report on the Wesselsbron matter.
The Provincial Head, Ms Douw–Jack briefed the Committees on the status of the Wesselsbron report as follows:
The Provincial Department of Human Settlements reported to the Inspectors of Welkom Labour Centre that on the 24 August 2017, 19 seasonal farm-workers were dumped at Wesselsbron Police Station. All the farm workers were originally from North West Province.
On 28 August 2017, the Department of Labour conducted inspection on the farms in the Wesselsbron area. The inspections were conducted in 4 farms, namely; Driehoek, Weenen 2, Graspan and Kwaggavlakte. During these inspections seasonal farm-workers were interviewed and indicated that they came from North West province, and were residing at Delareyville and Taung villages.
Free State farm owners, in this case Mr Hendrik Heyneke, subjected the farm workers to appalling working conditions- in contravention of labour laws and regulations. What was also shocking was the abuse of under-aged children as farm workers.
6.1.1 Modus Operandi
There was a protocol in the villages of North West where the Chief would be consulted with regards to the recruitment of seasonal farm-workers. The “labour-broker” would make a commitment to the Chief that all recruited workers would be paid in accordance with the law that regulate workplaces. Based on this dubious undertaking, the workers would be allowed to leave the village and work on certain Free State farms.
In this case it was alleged that Mr Hendrik Reyneke circumvented all the established community protocols, and even recruited children as farm workers. After their arrival on the farms, the seasonal workers would be subjected to appalling and inhumane working and living conditions, followed by salaries well below the initially agreed (minimum) wage.
Investigations into the complaints were initiated from the 24 August 2017 until the 3rd of September 2017. A multi departmental task team (comprising Labour, SAPS, Provincial Department of Human Settlements, Environmental Health Officers including the provincial Department of Social Development), which was headed by the South African Police Services was formed. The integrated approach is a long standing model used by various provincial governments in dealing with cross cutting sectoral cases. The matter was treated as one of the priority cases, and was further discussed at the Free State Human Trafficking Forum in Welkom.
6.1.3 Actions taken by the Department of Labour
The Rapid Response Team from the Department of Labour was formed, consisting of Labour Inspectors and Client Service Officers. It was tasked to take individual complaints from the seasonal workers in the different farms, and furthermore to determine how much the farmers owe the farm workers. The operations covered Kwaagavlakte, Driehoek, Weenen and Graspan.
The Department reported 3 cases of child labour at SAPS station in Wesselsbron. Furthermore, the Department compiled Compliance Orders for 3 farms, which were expected to be served on 5 September 2017. Prohibition and Contravention notices were served for contraventions of the Occupational Health and Safety Act. As a standard procedure, the Department conducted verification of IDs, and recommended prosecution of the farm owners for contravening labour laws.
6.1.4 Blitz inspections 4-8 September 2017
During this week the DoL inspectors embarked on Blitz inspections in the Wesselsbron, Allenridge and Hoopstad areas. The objective of the Blitz was to sweep the Lejweleputswa district area in order to proactively identify any cases of child labour and non-compliances with labour laws. A total number of 70 farms was anticipated to be visited during this period. There were seven teams constituted to conduct the operation, comprising of BCEA, OHSA and EAS competencies. Each team was expected to visit at least two farms per day.
6.1.5 Select Committees Interventions
The select committees convened an urgent and confidential meeting with various government stakeholders involved with this matter. The select committees were updated by the MEC responsible for Roads, Transport and Police (at that time the MEC also served as Acting Premier). The MEC including the heads of Hawks and SAPS gave the select committees an informative and confidentiall update report. In turn the select committees proposed charges that should be insituted againts the prepertrators (farm oweners involved). Empahisis was placed on ensuring that charges would result in jusitce for the farmworkers and their children.
The suspected farm owner leading the criminal activites (as identified by SAPS & Hawks) was then arrested on the following day for contravention of various laws of the Republic of South Africa.
The select committees welcomed the cross sectoral coordinated approach which was used in dealing with this particular case. Furthermore, the select committees commended the manner in which the Department of Labour dealt with the case.
7. Provincial Department of Public Works
The Provincial Department briefed the select committees on the challenges and achievements of the Expanded Public Works Programme (EPWP) in Mangaung metropolitan municipality. The EPWP in the Free State Province was designed to focus on the following projects:
Cash for Waste: The programme involves participants collecting waste in areas where there is no sufficient capacity from local municipalities. The programme would expand the scope to cleaning of government facilities in the current financial year. Its objective is to improve environmental cleanliness among local communities and ensuring a safe and healthy environment.
The budget allocation for the project during 2017/18 financial year was over R3 million. The total number of job opportunities created in this programme during the August month is 50.
Community Work Programme: The Community Work Programme is a government initiative aimed at tackling poverty and unemployment. The programme provides an employment safety net by giving participants a minimum number of regular days of work, typically three days a week or twelve days a month. The work performed under the programme includes cleaning of storm water channels, cleaning of streets, cleaning of public buildings e.g. SAPS buildings, schools, clinics, libraries, taxi ranks, stadia and cleaning of illegal dumping sites. The project was allocated R11.908 million and the total number of job opportunities is 560.
Cleaning and Greening: Cleaning and Greening Programme has been identified as one area of expansion in the Environment and Culture Sector and it is aimed at assisting Municipalities to beautify and green parks specifically where Municipalities are unable to provide services.
The overall objective is to alleviate poverty in areas where there are high levels of unemployment. The budget allocation for 2017/18 financial year is R10.900 million.
Township Revitalisation Programme: The programme involves upgrading of low volume roads from gravel to paving, utilising interlocking pavers to enhance the image of infrastructure in the township with an aim to improve the image and value of townships as decent places of residence. The budget allocated for Township Revitalization Programme is R123.728m.
Massification Infrastructure Delivery Model: The programme involves construction, maintenance and renovations of community assets by using In-house Officials. To date about 149 job opportunities have been created against the target of 168.
The Massification Infrastructure Delivery Model is implemented by the Department through the Expanded Public Works Programme. It is the Premier’s Flagship programme aimed at reducing outsourcing of construction work and optimisation of creation of employment.
In a conventional construction methodology, a construction project is symbolised by a group of Consultants, Contractors and even Sub-contractors. In an effort to reduce the delivery of service and increase the scope of work, this programme does not appoint any contractor for construction responsibilities.
Instead, permanently appointed artisans by the department oversee all Construction and Project Management responsibilities. There is high level of ownership by the community to the projects as the department recruits 100 %local workforce through the municipal unemployed database in partnership with various community leaders.
The Department has identified the following areas as reasons for either under spending or not reaching performance targets:
- Under reporting in relation to the Municipal Infrastructure Grant funded projects;
- Late implementation of projects;
- Insufficient budget to augment EPWP grant;
- Lack of Internal EPWP Steering Committee including dedicated EPWP staff;
- Non-performance of the Metro negatively affects the performance of the sphere; and
- Not paying service providers on time, particularly contractors.
8. Investment in Green Economy
8.1 Solar Photovoltaic (PV) project at Free State National Botanical Garden
This project is a part incentive programme within the Department of Tourism to assist tourism establishments to reduce their operating costs and make tourism more sustainable by installing renewable energy sources. A 50kWp solar PV system connected to the municipal grid (managed by CENTLEC) to ensure stability was installed. The project will facilitate significant savings in respect of the operational costs for the National Botanical Garden. This is part of a broader pilot initiative to retrofit key state-owned attractions with renewable energy systems. The project status: practical completion of the project has been reached and the budget for the project was over R2, 8 million.
8.2 Letsatsi Power Company
The Letsatsi Power Company has contributed to economic development by way of job creation, SMME Supplier Development and Shareholding by Black Owned Companies, during the Construction and Operational phases of the project. The exact figures would be provided by the project company.
The Letsatsi Power Company reached Commercial operational date (a milestone to start generating and supplying power to Eskom) on the 21 May 2014, the project has since undertaken the following Socio-Economic and Enterprise Development initiatives as follows:
- The amount spent on beneficiary entity during the reporting period amounted to R86 756,08 to finance Papa G’s small business center.
- The amount spent on Phelindaba Retail Park: R335 000 during the reporting period.
- The Visannah Designing Studio and General were also supported by Letsatsi Power Company with an amount of R69 406 to purchase 1 Embroidery Machine with Trimmer and 1 Entry level software.
- The Auto Mobile Fix and Repair was also provided equipment and relevant tools with an amount of R46 164.10.
- Various Small Enterprises were also mentored and coached at a cost of R41 160.00.
- Letsatsi Power Company hosted the Small, Micro and Medium Enterprise (SMME) Expo in Bloemfontein on 8 June 2017, the amount spent on beneficiaries and entity was R134 828.38.
The objective of the expenditure to the Expo was to create an SMME database for the project companies to access and implement enterprise development projects. And further provide an opportunity for local businesses to interact with the respective invited Government Departments for legislative /statutory compliance and to access funds from various funding agencies.
9.1 Destea Mangaung and Thabo Mofutsanyana economic development initiatives
- The Province is topping the list in comparison with other provinces in terms of high levels of poverty and unemployment. This is attributed in the main, to mining sector employment reduced by 5.2 per cent in 2016, and the provincial government in its response constituted a steering committee to turn around the existing negative outlook.
- Services sector is also dwindling because online services have overtaken manual jobs in banking and retail sectors consistent with the realities of the fourth industrial revolution.
- The committee also noted that the Free State government have cooperation agreements on economic development with countries like Angola, Cuba, Brazil, China, Lesotho, Madeira, Rwanda, Turkey and Germany. These agreements are within South Africa’s international relations diplomatic framework with these countries.
- The Provincial government is striving to align its economic growth strategies with local and national government plans and this integrated approach to economic development is being undermined by the misalignment of fiscal allocation for the three spheres.
- Airport development node have attracted R100 million worth of investment.
- About 449 cooperatives have been supported by Mangaung Metropolitan municipality
- Private sector investment is continuously being encouraged by providing basic economic infrastructure such as roads, water and sanitation and world class airport facility.
- The Select Committee was told that the establishment of Metro police is underway and the delays in institutionalising this law and order component is due to newness (6 years old) of Mangaung as a Metropolitan city.
- In Thabo Mofutsanyana district an amount of R244 million has been allocated for bulk infrastructure and R600 million for supporting customised factories.
- In boosting industrialisation and job creation, the Department of Trade and Industry in 2016 has approved R76 million on incentive schemes in the Province.
- In supporting business development, the Free State Business Chamber has assisted in establishing Bed and Breakfast business ventures, hotels, panel beater workshops and enterprises selling braai meat popularly known in townships as tshishanyamas.
- The Provincial Department of Economic, Small Business Tourism and Environmental Affairs (DESTEA) is in the process of establishing an investment facility within the confines of the Provincial Medium Term Expenditure Framework (MTEF) and this will inspire tourism based economic growth in line with peers like Gauteng and Western Cape Provinces.
- The DESTEA has signed a Memorandum of Understanding (MoU) with the South African Tourism under the auspices of the National Department of Tourism.
- DESTEA is collaborating with IDC, NEF and SEFA in prioritising agro-processing as a growth sector for job creation and small business development as is envisaged in the New Growth Path (NGP) and the National Development Plan (NDP). In this regard, Maluti-A-Phofung Special Economic Zone (SEZ) is still in its infancy, systems are in place to implement this growth strategy, and this includes industrial parks in Botshabelo and QwaQwa.
- The Select Committee also noted that the manufacturing firms in the Free State based industrial parks have moved to neighbouring countries, like Lesotho and DESTEA is working with the Department of Trade and Industry to incentivise these firms to reinvest in the Province.
- Provincial government is also engaged in benchmarking activities with countries like Rwanda which have done exceptionally well in implementing the SEZ model for regional economic growth.
- The research unit within DESTEA is experiencing challenges in accessing province based research reports from national public institutions such as Statistics South Africa (StatsSA), Department of Trade and Industry, Economic Development Department (EDD) and the South African Reserve Bank (SARB).
9.2 National Empowerment Fund (NEF) funded Kgahlisa General Supplies project
- In the National Empowerment Fund (NEF) funded Kgahlisa General Supplies project in Botshabelo, the black owned fuel service station employs more than 30 people who are predominantly youth and black.
- The Petroleum industry is highly untransformed in South Africa and is predominantly white controlled in terms of ownership and management.
- The Committee noted with concern that the Kgahlisa General Supplies Project had trouble in gaining stakeholder trust and confidence in the industry particularly with placement of fuel stock orders and meeting payment obligations. For example, a fuel stock order of 300 000 litres per month requires an upfront payment of R500 000 and this might pose a serious challenge in cash flows and sustainability of a black enterprise.
9.3 Kopanong Women’s Enterprise (cooperative)
- The project received assistance from both the Department of Rural Development and Small Enterprise Development Agency (SEDA) in establishing a cooperative and accessing operational funding and markets. Small Enterprise Finance Agency (SEFA) provided financial support for buying 15 sewing machines and SEFA is placing the project under pressure by demanding adherence to repayment commitments that are complicated in the light of existing cash flow challenges.
- The cooperative is servicing orders from South African Social Security Agency (SASSA) for their employee uniforms, shirts for the South African Police Services (SAPS) officials and underwear/uniforms for a small number of schools.
- The Committee noted that the project has the potential demand of supplying sanitary towels on a large scale to clients as far as Qwaqwa, Northern Cape and Mpumalanga Provinces.
- The cooperative has a broader client base to include among others; Edcon, Mr Price, and other retailers such as Shoprite. However, the challenge communicated to the Committee is that the running price is very miniscule and largely unsustainable.
9.4 Department of Roads, Transport and Police
- Around 22 000 km of roads in the Free State Province are gravel and only 6700 km is tarred.
- Between 2015 and 2017 about 12 670 people have been employed in the construction and maintenance of roads in the Province.
- The Select Committee also noted that through the Construction Infrastructure Development Board (CIDB) small contractors are trained in learner-ships from level one to level four.
- The Committee was also informed that the big contractors awarded government contracts are resisting to implement the provisions of Preferential Procurement Policy Framework Act (PPPFA) of 2011, which stipulate that 30 per cent of the contract value must be sub-contracted to the small contractors.
- The Committee also noted that the Mangaung Metropolitan City and the Department of Roads, Transport and Police never had a bilateral engagement to discuss the implementation of the Bus Rapid Transit (BRT) system.
- It was reported that corruption is rampant in various testing stations issuing drivers’ licences and the Department of Roads and Transport is weeding out corrupt officials and instructors replacing them with those in possession of impeccable professional records.
- A forum for assessing and approving economic development and industrialisation projects qualifying for financial support from national development finance institutions is now housed within the office of the Premier for centralised coordination.
- An observation was made about an ‘obsolete’ taxi rank, which was reportedly idling for about 5 years within Mangaung Metropolitan City. The provincial Department of Roads and Transport indicated that project is the responsibility of the municipality.
9.5 Transnet Education Training Authority (TETA)
- Learners are predominantly youth below 35 years of age coming from various Provinces (KwaZulu Natal: 31); (Gauteng: 56); (Eastern Cape – Buffalo City: 5 and Uitenhage: 30).
- The programme allocates R150 000 per annum for an individual with a monthly stipend of between R1500 and R1700.
- About 50 per cent of the learners get recruited by Transnet as part of a broader exit strategy.
- In addition to the technical skills imparted to the learners, life skills form part of the package. However, the lack of entrepreneurial training as part of the programme has been identified as a weakness and a risk factor not in support of the goals of NDP.
- There is high turnover in the programme as some students take up available employment opportunities in the labour market while others abandon the programme to further their studies in non-technical fields of learning.
- Some of the employers in the labour market are reluctant to employ the trainees for reasons known only to them. This is disconcerting precisely because the Select Committee was informed that industry players in the private sector do participate in the curriculum development of TETA.
9.6 Provincial Department of Public Works and Infrastructure
- The Select Committees noted that a number of municipalities in the Free State have high levels of non-compliance with reporting requirements of the Expanded Public Works Programme (EPWP).
- The national Department of Public Works indicated that guidelines for transparency are being put in place to ensure transparency and fairness in recruiting EPWP participants.
The committees were also informed that the Provincial Department of Public Works and Infrastructure has not been responsible for maintaining dilapidated health facilities in the Province and the Premier of Free State has only directed the Department to do so as from 10 April 2017.
10.1 Destea, Mangaung Metro, Thabo Mofutsanyane economic development initiatives
- The Mangaung Metro should provide the Select Committee on Economic and Business Development with an updated land and asset register.
- The Select Committee on Trade and International Relations will engage the Department of Tourism on its plans to support the Provincial government of Free State in boosting domestic tourism and creating jobs through SMME development.
- In ensuring integrated economic development among the three spheres of government, DESTEA needs to coordinate and solicit inputs from other spheres of government in terms of what is it that they are doing to contribute towards job creation and poverty reduction in the Province.
- In dealing with non-compliance with transformation targets, the Department of Energy (DoE) should use the legislative authority to develop policies and implement existing ones such that oil majors (for example) are compelled to comply and ensure that the petroleum value chains are as inclusive as possible. This can be made possibly particularly through the issuance of operating licences.
- The petroleum industry must be forced to accommodate black entrepreneurs even in the upstream level of the value chain especially in hydrocarbons.
10.2 Kopanong Women’s Enterprise
- The Committees recommended that, DESTEA should engage with NEF to determine how the cooperative could be assisted to access funding and other essential non-financial support (eg access to markets and increased production).
10.3 Department of Roads, Transport and Police
- On the issue of the idling taxi rank in Mangaung Metropolitan City, the Select Committee recommended that the matter be referred to the relevant Select Committee on Cooperative Governance and Traditional Affairs.
10.4 Provincial Department of Public Works and Infrastructure
- The Provincial Department of Public Works and Infrastructure should provide a report to Parliament on a comprehensive implementation plan that deals systematically with the issue of compliance as well as maintenance and repairs of government buildings- especially health facilities.
- The Select Committee further suggested that a project approach be employed in implementing the EPWP programme in order to realise value for money on expended public funds and enhance accountability by adhering to project timelines and outcomes.
- The National Department of Public Works should provide a progress report to the Select Committee on Economic and Business Development on two issues: The first being the development of guidelines on the implementation of EPWP programmes. The second being an updated asset register for land and buildings in the Free State Province.
Report to be considered.
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