ATC191204: Report of the Select Committee on Trade & Industry, Economic Development, Small Business Development, Tourism, Employment and Labour West Rand District Municipality and Ekurhuleni Metropolitan Municipality in Gauteng Province, dated 27 November 2019:

NCOP Trade & Industry, Economic Development, Small Business, Tourism, Employment & Labour

REPORT OF THE SELECT COMMITTEE ON TRADE AND INDUSTRY, ECONOMIC DEVELOPMENT, SMALL BUSINESS DEVELOPMENT, TOURISM, EMPLOYMENT AND LABOUR, JOINTLY WITH THE SELECT COMMITTEE ON TRANSPORT, PUBLIC SERVICE AND ADMINISTRATION, PUBLIC WORKS AND INFRASTRUCTURE ON AN OVERSIGHT VISIT TO WEST RAND DISTRICT MUNICIPALITY AND EKURHULENI METROPOLITAN MUNICIPALITY IN GAUTENG PROVINCE, DATED 27 NOVEMBER 2019:

 

The Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour, jointly with the Select Committee on Transport, Public Service and Administration, Public Works and Infrastructure, having undertaken an oversight visit to West Rand District Municipality and Ekurhuleni Metropolitan Municipality in Gauteng Province, from 21-25 October 2019, reports as follows:

 

1. Introduction

 

One of the core challenges of the South African economy is the disparity between provincial economies, and within provinces regions, cities and towns. Larger cities and towns are growing faster than small regions and towns. The key is to reduce the disparities between larger cities and towns. The inequalities were clear demonstrated during the oversight visit in the West Rand District Municipality (West Rand) and the City of Ekurhuleni.  

 

Over the medium term government has set key objectives to address unemployment, poverty and inequality across the country. This requires that government interventions balance private sector activities and demands to lift economic growth and development. What is more concerning is the unending inequality in the economic performance of the regions, despite government economic development interventions.

 

It should be reported that there are some positive signs in government efforts to change standard of living of ordinary people, mostly driven by welfare transfers. Reports by global institutions such as the World Bank commending the effect of welfare transfers (social housing, electrification, access to water and sanitation including social grants) in improving the social lives of people. However more needed to be done in terms of improving service delivery, and outcome of services in terms quality. What is core, is to accelerate economic activity, finding jobs for the unemployed, and improving the quality of education as it relates to Maths and Science, but not forgetting the Arts.

 

The delegation expressed the need to find sustainable solutions to improve economic governance at a local level, to address imbalances between regions and within regions. Partnerships between government at all levels with private sector should be strengthened to drive regional economic development. Coordination in implementing government development programmes should be supported, and cemented.    

 

1. Purpose of the visit

 

The purpose of the joint visit by the two Select Committees was to receive performance reports from West Rand District Municipality and Ekurhuleni Metropolitan Municipality. The presentations covered achievements and implementation plans in relation to the local economic development programmes covering investments in areas such as Transport, Tourism, Special Economic Zones (SEZs) and other development programmes such as Expanded Public Works Programme (EPWP). The delegation also visited projects implemented by the Department of Public Works and Infrastructure Development (EPWP Agri-Park projects in Merafong and Tarlton, Mogale City), and the Department of Tourism (Cradle of Humankind World Heritage Site). The City of Ekurhuleni presented the implementation plan of its Integrated Rapid Transport Programme (IRTP), and the delegation visited construction site of the programme. Further the delegation visited Airport Company South Africa (ACSA) at its head office and received presentation in relation to ACSA’s capital expansion programme.

 

Further, the delegation visited Mayehlome Communications, a company that received financial support from the State Enterprise Financing Agency (SEFA), including Busmark 2000 Pty Ltd, a company, which received financial support from the Industrial Development Corporation. In addition, the delegation visited BUSAMED private hospital) and Mohlalefi Engineering Company, which were partly financed by the National Empowerment Fund-NEF.

 

The Department of Employment and Labour presented its Labour Activation Programme, which is a partnership programme with Unemployment and Insurance Fund. The programme is one of the initiatives of the Department of Employment and Labour efforts to create job opportunities for the unemployed people (beneficiaries of UIF) and the vulnerable people such as young people and women. The programme presents an opportunity to cover people with physical disabilities.

 

1. Delegation

 

The following members formed part of the delegation:

Mr MI Rayi (ANC): Chairperson of the SC on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour

Mr K Mmoiemang (ANC): Chairperson of the SC on Transport, Public Service and Administration and Public Works and Infrastructure

Ms ML Moshodi (ANC)

Mr M Dangor (ANC)

Mr E Landman (ANC

Mr JJ Londt (DA)

Ms HS Boshoff (DA)

Ms BT Mathevula (EFF).

 

The delegation was accompanied by the following officials: Ms Noziphiwo Dinizulu and Mr H Mtileni (Committee Secretaries); Mr Z Ngxishe and Mr T Makhanye (Committee Researchers); Mr L Sishuba (Content Advisor); Mr E Bazier (Committee Assistant) and Mr B Simons (Communication Officer).

 

1. Re-balancing the Regional Economies

 

4.1 West Rand District Municipality (West Rand)

 

The West Rand is part of South Africa historic regions known for gold mining. The West Rand, situated on the western side of Gauteng, extends from Randfontein (the seat of the district) in the west to Roodepoort in the east, and includes the town of Krugersdorp. It is bordered by Bojanala Platinum to the north-west, City of Tshwane to the north-east, City of Johannesburg to the east, Sedibeng to the south-east, and Dr Kenneth Kaunda to the south-west. It comprises three local municipalities: Merafong City, Mogale City and Rand West City. The district municipality is situated relative closely to the hub of economic activity in Gauteng, and is transversed by major national roads, namely the N12 and N14. Further, it forms part of the Cradle of Humankind, a development programme that was declared by the United Nations Educational, Scientific and Cultural Organisation (UNESCO) as the World Heritage Site.

 

West Rand makes up the fifth highest share of Gauteng population, recorded at 6.2 percent in 2017. Mogale City accounts for the highest share of the population of the district at 46.3 percent, and Rand West taking the second spot at 31.8 percent. Merafong City is at 21.9 percent.   

 

In 2018, West Rand is estimated to have contributed about 3.8 percent to the economic output of the Province. The mining industry is the predominating industry that drives the district economy. The decline of the mining industry had a negative impact to the district’s economy. West Rand City and Merafong City economies were the most affected as a result of the decline of the mining industry. Further, output for manufacturing and construction industries also declined, and had impact to the district economy.  

 

In 2018, it is anticipated that the mining industry, which accounts approximately 30 percent t of economic activity in the West Rand, declined by 8 percent considering mining is main contributor to the district economy, a major slump to the industry creates major hole to the economy, thus have a negative effect to employment creation efforts. West Rand and Merafong economies were most affected by the decline of the mining industry. Mogale City’s economy is the relatively diversified compared to the other two municipalities.

 

Slow economic performance with high unemployment has affect household incomes, and spending. Again Mogale City fared better than other economies. Mogale City showed great potential in terms of functional economic activity than West Rand and Merafong City.

 

What is giving hope to the district economy, is the capital investment of the mining companies although it has not yet resulted in improved production. Investment in infrastructure remains a priority as it is the critical stimulus to lift the economy. Slow investment in capital formation is the core challenge that needs to be averted across the country, and that has direct effect to regional economies. Development partnership need to be established to addresses issues across industries in the economy and geography in order to make meaningful impact in the district. Table 1 shows some of the West Rand’s planned infrastructure projects.

 

Table 1: Summary of planned infrastructure projects

Municipality	Current Status Quo	Current Gaps	Estimated Required Budget
Rand West – Network Upgrade: Upgrading of bulk substation for all areas	Most of the substation switchgear including buildings are old and no spares available to repair Not safe to operate Not proper maintenance done for several years	Ageing infrastructure with less capacity to meet current and growing network demands and services Budget constraints	R50 million required per year for the next five years
Rand West – Upgrading of medium voltage network	Increase in number of power outages due to ageing networks, especially on the small holding Networks currently overloaded	Network vandalism Critical positions not filled Budget constraints	R20 million required per year for the next five years
Rand West – Access to electricity	All informal settlements not supplies with basic electricity, only provided with public lighting	New MV & LV networks to be installed New substations to be built Budget constraints	R330 million over the next five years
Rand West – Network Expansion	No bulk supply available to certain developments, existing MV network must be extended.	New MV & LV networks to be installed New substations to be built Budget constraints	R20 million per annum over the next five years
Rand West – Provide bulk MV & LV electrical internal networks in Mohlakeng Ext 5	No bulk electricity infrastructure in the vicinity	Budget constraints	R60 million required
Rand West – Construction of new Borwa substation in Westonaria	New bulk infrastructure	Budget constraints	R 80million required
Merafong – all areas require 6.6 & 11kV distribution maintenance	Ageing infrastructure and redundant equipment	Budget constraints	R million per annum over the next five years
Merafong – Street lights maintenance	Ongoing as per maintenance plan	Network vandalism Budget constraints	R22 million per annum over the next five years
Rand West – Installation of zone metering in the region	Rand West is at 22% of electricity losses Mogale City is at 9% of electricity losses	Budget constraints	R20 million required
Rand West – Replace vandalized pillar meter boxes with new strong boxes	Increased theft and illegal connections in pillar boxes	Budget constraints	R5 million per annum over the next five years
Mogale – Spruit substation distribution area.  Spruit 1 x 20MVA transformer (33kV firm capacity upgrade)	Multi-year project in first phase of project	Insufficient budget to complete project phases	R26 million required
Mogale – Northern suburbs, Diswilmar Ruimsig, Pinehaven etc. Transmission line between Factoria and Libertas substations (33kV firm capacity upgrade)	Multi-year project to be awarded shortly	Insufficient budget to complete project phases	R80 million required

 

 

 

West Rand is one of the poorest regions in Gauteng Province. Unemployment remains a serious challenge that affect South Africa, and has contributed to an increase in poverty and inequality. This has a clear expression in local municipalities although in varying degrees. Most affected municipalities are the smaller towns than big cities or metros. This the case is demonstrated in the West Rand and the City of Ekurhuleni. Economic opportunities are vested in the City of Ekurhuleni compared to the West Rand. Most of the government departments have allocated most of the resources in the City of Ekurhuleni than in the West Rand, thus reinforce the view that the economy needs to be re-balanced.

 

Government decision to increase infrastructure investment should be commended. Further commitment to follow an integrated approach in delivering infrastructure at the local and regional level should be supported and promoted. West Rand requires an integrated transport network system that that will support regional economic development. Rail and road interconnected network is required should ensure all parts of the region are linked to the overall provincial economic development nodes. Broadband and mobile access remains a key priority to support small and large firms in the region in order to flourish and create job opportunities.

 

It was noted by the delegation that West Rand requires an integrated transport network system that would connect on modes of transport including freight transport. Further, the delegation identified a need to improve transport and land use planning. In addition, the West Rand urged the delegation to support the efforts that seek an expansion of Gautrain network / services to the West Rand. This development would have economic spins offs to other industries such as retail industry that would assist in shaping the economy of the region.

 

It was noted that coordination in terms of implementing development programmes was not adequately conducted.  This means that there is a need to improve planning, and all consultation across government should be prioritised. Government development plans should reflect local knowledge and strengths. Capacity and capability of local and regional governing structures should be strengthened. Further partnership with the private sector including institutions of higher learning should be established to improve implementation of infrastructure programme.

 

Investment in education, and in skills development is required boost the economy. Particular in developing the skills of young people who most affected by unemployment. Digital skills are also in demand in the economy. Further key focus should on attracting investments in the district economy, boost small business development including supporting local procurement.

 

Tourism is one of the priority industries that offers opportunity to boost local economy, and create job opportunities. Efforts by National Department of Tourism in developing tourism in the district should be doubled to have meaningful impact. Collaborative initiatives across government should be established. Government should leverage current resources to attract private sector to invest in tourism, and further drive economic transformative initiatives in the tourism industry.

 

The delegation as part of the oversight business in the West Rand, the Committee visited the Cradle of Humankind World Heritage Site (Cradle of Humankiind). The Cradle of Humankind is one of eight World Heritage Sites in South Africa, and the only one in Gauteng. It is renowned as the place where humankind originated. It is reported that the first hominid, Australopithecus, was found in 1924 at Taung in the North West Province by Professor Raymond Dart of the University of Witwatersrand. This is one of the major tourist attractions in South Africa. About 600 people per day visit Steinfontein cave where the alleged original fossils of humankind exist. The main mission of the Cradle of Human Kind is to protect, conserve and interpret the Outstanding Universal Value (OUV) of the Cradle of Humankind World Heritage Site. It was established and listed in 1999 on UNESCO’s World Heritage List because of the wealth of fossils found in the area and, in particular, fossils of ancient humans. Initially, the Cradle of Human Kind was Public Private Partnership (PPP) and prides itself on zero transfer and fiscal allocation from government. 

 

The delegation visited the core attractive areas in the site such as the Sterkfontein Caves and Maropeng Center, Maropeng Boutique Hotel and the Stone Park (launched last year on the 24 September on heritage day). The Cradle of Humankind present tourism opportunities for the West Rand to attract domestic and foreign tourists. The delegation further noted that despite the Cradle of Humankind could be viewed as an academic platform it has great potential to create employment, boost incomes and thus lift regional economic development. Further, the delegation urged the national departments such as Tourism Department and the Department of Environmental Affairs including their development agencies and provincial departments (Economic Development), and the West Rand to establish partnership with private sector and higher education institutions (particular reference University of the Witwatersrand-WITS) and local community to mobilise and coordinate resources, and  other bankable development  initiatives  to further develop the site for the benefit of the regional economy.

 

The delegation noted are some of the key development initiatives in supporting the development and growth of the Agric-Parks to boost the economy, and also address unemployment in the district. In line with the NDP 2030 targets, the mega Agric-Parks would promote growth of the smallholder sector through creating new small-scale producers in the district, as well as new jobs.

 

The Gauteng Department of Agriculture and Rural Development (GDARD) in partnership with the West Rand and the three municipalities will continue providing agricultural support through the following development programmes; promotion of skills and support to smallholder farmers through the provision of capacity building, mentorship; providing agricultural infrastructure and extension services; providing production inputs and mechanization inputs. For the programme to be successful implemented it would require government to strengthening new and existing developmental partnerships within all three spheres of government, the private sector and civil society to develop critical economic infrastructure such as roads, energy, water, ICT and transportation/logistics corridors that will support the Agric-Parks value chain.

 

Government has made commitment to enable small farmers to own 70 percent of Agri-Parks, with the state and commercial farmers 30 percent. Current there are two Agri-Parks in the West Rand namely Bekkersdal and Merafong Flora (administer as provincial projects) and one Mega Agri-Parks in Brandvlei, which is administer under the National Department of Agriculture, Land Reform and Rural Development.

 

4.2 City of Ekurhuleni

 

Gauteng provinces comprises of three metropolitans namely City of Johannesburg, City of Tshwane and the City of Ekurhuleni. The latter is the 3rd largest city in Gauteng in terms of size of the economy, and second in terms of the population. City of Johannesburg is largest in terms both the economy and population. Whilst the City of Tshwane is the second largest city in relation to its economy, and third largest city in terms of its population.

Like the national and provincial economic structure, tertiary sector predominates the City of Ekurhuleni’s economy, followed by the secondary and primary sectors. City of Ekurhuleni is classified as the manufacturing, logistics and transportation hub. In 2018, the City of Ekurhuleni is anticipated to have registered poor economic growth.

 

Broadly most of the industries in the economy recorded a decline. The decline of the manufacturing industry’s output contributed to the significant decline of the metro’s economy. Further, construction industry also performed very poor. Government services, electricity and transport output registered an increase.

 

As result of the decline of the manufacturing and construction industries, employment and economic growth in the metro, registered poor performance. The manufacturing industry is the main contributor to the overall economy of the City of Ekurhuleni, hence a decline in the industry holds back the regional economy.  

 

In 2018, City of Ekurhuleni unemployment rate remained higher than both the national and provincial rates. Approximately 26 percent of the labour force is skilled, while 47 percent is semi-skilled and 27 percent is low skilled. The working age population in Ekurhuleni in 2018 was R2.47 million, increasing at an average annual rate of 2.08 percent since 2008.

 

Investment in infrastructure remain a priority as it the critical stimulus to lift the economy. Slow investment in capital formation is the core challenges that needs to be averted across the country, and that has direct effect to regional economies. Like the rest of the country investment in the City of Ekurhuleni been held back due to low business confidence and general weak domestic demand. Governance concerns with regard to operations of most core state companies is also dumped investment.

 

Despite poor investment performance, the City of Ekurhuleni in partnership with the private sector including state owned companies has a plan to drive economic development. The Spatial Development Framework has identified key investment areas to growing the economy of various places within the city.  Vosloorus Corridor was one of the place targeted for investments.

Core investment area is primary located around the OR Tambo International Airport within the Kempton Park-Boksburg and Germiston triangle. City of Ekurhuleni is in the drive to increase investment through Special Economic Zones (SEZs) with the support of the national and provincial government. The OR Tambo SEZ will focus on beneficiating some of the countries mineral resources. It is envisaged to be the country’s hub for the manufacturing of food, jewelry, diamond beneficiation, fuel cells and aerospace. Broadly the strategy is linked to the idea of establishing a viable Aerotropolis programme. The multi-site development consists of several industry-specific precincts and is developed in phases over a 10- to 15-year period.

 

As already stated elsewhere in this report that the City of Ekurhuleni is classified as the manufacturing, logistics and transportation hub. The some of the envisaged SEZs will focus on transport and logistics in particular freight rail, logistics and warehousing within the Springs area. Transnet is already developing an intermodal facility through Southern Palace Consortium.

 

With the aim to create capacity and expand capability to lift industrialisation. The City of Ekurhuleni will establish the Ekurhuleni Industrial Development Programme with the aim to maximize capabilities in smart and advance manufacturing, aviation & aerospace, logistics and transportation industries to drive economic competitiveness.

 

The Gauteng’ Advanced Manufacturing Centre located in City of Ekurhuleni is important manufacturing centre in South Africa, and is commonly described as the “workshop of the country”.  It has a strong, established manufacturing base that is characterized by mining and heavy manufacturing to light industry and Fast Moving Consumer Goods (FMCG), thus forms an important part of Gauteng’s Transformation, Modernization and Re-industrialization programme. The City of Ekurhuleni will continue to support and promote the Gauteng’ Advanced Manufacturing Centre in effort to support implementation of the Gauteng’s Transformation, Modernization and Re-industrialization programme, which aims to transform and modernise Gauteng economy and its regions.

The City of Ekurhuleni has a development idea to grow other places, particular township areas.

 

Planning and investment to improve functioning of the Public Transport remains government priority. In the main, public transport should be safe and secure, reliable and sustainable public transport that addresses user needs, including those of commuters, learners, targeted categories of passengers (pensioners, the aged, children, pregnant women, persons with disabilities, tourists) and long distance passengers, this is advocated by the 2017 Draft White Paper on National Transport Policy. Further, Public Transport should be affordable and be accessible to work, commercial and social services in urban and rural areas. It is against this background that delegation set an engagement with the City of Ekurhuleni.

 

The delegation received a presentation on the update to the roll-out of the Integrated Rapid Public Transport Network (IRPTN) in the City of Ekurhuleni. The City of Ekurhuleni outlined that the main objective of the IRPTN is to provide a new and attractive integrated public transport network that includes roads and rail transport services that would serve all users. It was reported that the public transport investment initiatives seeks to responds to the City of Ekurhuleni’s transport vision, which aims to providing accessible, affordable and integrated transport services that are competitively-priced while adhering to global standards.

 

The table outline key historic milestones of the IRPTN project and the scoping study in the City of Ekurhuleni

Year	Key Milestone(s)
2007	National Public Transport Action Strategy approved by cabinet
2008	Ekurhuleni Metropolitan Municipality (EMM) Scoping Study, and Integrated Transport Plan
2009	Modal Integration Strategy Action Plan
2010	Metropolitan Spatial Development Framework
2012	First Operations Plan (subsequently refined in 2015)
2013	Commencement of Complementary Route and Non-Motorised Transport (TMC) construction
2014	Commencement of Trunk Route construction
2015	Completion of detailed designs for Trunk Routes, Stations, Pedestrian Bridges, Transport Management Centre (TMC) and Depot; Preparation to commence negotiations with MBT industry, eg. draft Vehicle Operating Company Contact (VOCC), formation of Working Groups, establishment of EPTI, etc.; IRPTN Brand approval
2016	Commencement of Station construction Completion of the TMC.

 

It was noted by the delegation that the establishment of the (IRPTNs) fits in large cities including in appropriate district and local municipalities. Further, it was noted that the networks should incorporate all modes of public transport services. In the case of the Bus Rapid Transport (BRT), the delegation was informed that the first route has been opened and included Ivory Park and Tembisa in the north to Germiston and from Ketlehong in South to Germiston through Alberton. The second route, Kempton to OR Tambo and Benoni through Boksburg North, and southwards through Boksburg towards Vosloorus. The third route covers OR Tambo International Airport to Gemiston. The fourth route include Kempton Park to Kwatsaduza via Benoni and Brakpan with a southerly spur to Germiston. The last route, route five covers Daveyton to KwaThema.

 

The delegation was briefed on the institutional arrangements. The City of Ekurhuleni reported that the IRPTN Unit was established through the Management Entity within the City of Ekurhuleni’s Transport Department. This was done during the planning phase. Further the Transport Management Company (TMC) would be established and would be owned by the City of Ekurhuleni and managed by the Management Entity with specialist service may be appointed to provide technical and operational services to the TMC.

 

With regard to the Phase 1 of the IRPTN, the delegation was informed that one Vehicle Operating Company (VOC) would operate the service through a 12 year negotiated contract with City of Ekurhuleni. The VOC would mainly be a private company owned and operated by existing public taxi transport industry. In terms of the depot infrastructure it was explained that City of Ekurhuleni would own the stations and made them available to VOC on a loan-for-use basis in terms operator contract. The stations services infrastructure will be owned and managed by City of Ekurhuleni and key functions such as money handling shall be performed by the City of Ekurhuleni. Certain functions such as security and cleaning services would be outsourced.

 

With regard to the collection of fares, an integrated fare management system (IFM) would be implemented with a split function between the City of Ekurhuleni and consortium of technical specialist. The consortium shall be appointed through an open tender system. Further, the VOC would own the buses, and financed through operating contract.

 

The City of Ekurhuleni provided update on the status of the infrastructure roll-out and the progress on the transport industry transition. In terms of the infrastructure roll – out; Phase 1, bus lanes, streets lights along dedicated bus lanes and pedestrian walkways has been completed. The infrastructure layout on the Transport Management Centre has also been completed. With regard to the transport industry transition, the City of Ekurhuleni reported that the negotiations are still on-going and the following agreements have been signed to date; i.e Memorandum of Agreement (MoA), Section 67 on transfer of funds for current operations, interim compensation for current operations and market surveys approach methodology.

 

Further, City of Ekurhuleni reflected on the challenges encountered in implementing the project. The main challenge relates to delays in construction caused by work stoppages, community unrests, unreasonable sub-contractor demands, underperforming contractors, inclement weather. The other challenges relate to industry transition and stakeholder engagements. The delegation noted that generally many municipalities have experienced slow or inadequate implementation of transport plans. Many development projects were poorly planned, including poor design and construction that leads to cost over-runs. Government has spent billions of rands in projects that are not completed in time within contractual timelines. The case of the City of Ekurhuleni’s IRPTN poses similar challenges that could compromise the implementation of the programme. Spending and monitoring of the City of Ekurhuleni’s IRPTN need to be closely monitored. That would mean that the National Treasury including both the national and provincial transport departments should closely monitor the implementation of the programme. The delegation noted governance issues including procurement of goods and services if not properly handled could compromise the implementation City of Ekurhuleni’s IRPTN.

 

The strategic role of the Civil aviation industry form part of the government broad strategic objective to boost trade, attract investment and lubricate tourism in effort to grow the economy, and address poverty, inequality and unemployment. It is alongside the government broader strategic objective that the delegation during the oversight visit to the West Rand and City of Ekurhuleni that it had a meeting with the Airport Company South Africa (ACSA). The main interest of the delegation was to have deeper appreciation of the planned capital expenditure by the ACSA.

 

The delegation was informed that ACSA’s legislative mandate is derived from the Airports Company Act, No 44 of 1993, as amended. ACSA is mandated to undertake airport function, which also includes the acquisition, establishment, development, provision, maintenance, management, operation and control of any airport, or any facility or service at any airport. In terms of the footprints, ACSA operates nine airports in South Africa including the country’s three major international airports – OR Tambo, Cape Town International and Durban’s King Shaka International. Further ACSA alluded that it has airport concession contracts in India, Chhatrapati Shivaji International Airport in Mumbai and Brazil, Guarulhos International Airport in São Paulo (both are equity investments). Further, in South Africa, ACSA providing advisory services to the Oribi Airport in Pietermaritzburg.   In addition, it provides airport advisory work in several countries in Africa, which covers Ghana, Rwanda, Liberia, Zambia.

 

It was reported that the business model of ACSA need to ensure that it take into account environmental considerations, economic regional developmental goals, and to ensure that the infrastructure it provides enhance the competitiveness of the civil aviation industry. Further to ensure that it provides safe, effective and efficient services, and meeting the accessibility, reliability and mobility of users. The delegation emphasised the need to ensure that rail, road and air network should be integrated to better serve the needs of the local and regional economies. This is the issue that ACSA also aired, however emphasised that policy and programmes that seek to stimulate economic activity she be better coordinated. The development programmes’ outcomes should lead to the demand for civil aviation services, and other economic spin offs such as the growth of tourism.

 

ACSA reported that it has a planned capital expenditure (capex projects) amounting to approximately more than R10 billion on major infrastructure expansion over the next five years. The capex project in OR Tambo International Airport, would cover the construction of new Remote Apron Stands, Western Precinct and Midfield Cargo Development. The Midfield Cargo Development is anticipated to cost R13,94 billion, and expected to completed by 2028. With regard to the Western Precinct, ACSA anticipate that the project would cost R887 million, and to be completed in 2020, and the Remote Apron Stands is expected to cost 2.4 billion and to be competed in 2022.  

 

With regard to the Cape Town International Port, ACSA reported that it will invest R3.86 billion for the construction of the Re-aligned Run-Away project, which is expected to be completed in 2022. The construction of the Terminal 2 Development is anticipated to cost R2,8 billion, and expected to be completed in 2023. Further, new capex is earmarked for the construction of the new Domestic Arrivals Terminal. The project is expected to be completed in 2020.

 

Further investment is earmarked for the development of the struggling (anticipated revenue not being realised) Durban’s King Shaka International Airport. For this development initiative, R298 million is expected to be spent to cover the construction of a Bravo Taxiway extension, and the construction of two wide-body aircraft stands. The project is estimated to be completed in 2022.

 

Further, the delegation was reported that further capex would focus on five regional airports, namely East London, George, Bram Fischer, Kimberley, Port Elizabeth, and Upington. In relation with the East London International Airport, the departure lounge would be expanded which includes increased airline lounge, additional security processing and queuing maze reconfiguration, additional retail opportunities and future enablement of airline offices. The project is expected to cost R74 million, and planned to be completed in 2021.  With regard to the George International Airport and Bram-Fischer International Airport projects, which entails the expansion of the departure lounge, arrival and departure concourses, additional check counters and security checkpoints. The projects are estimated to cost R91 million and R62 million respectively. The two projects are planned to be completed in 2024.

 

The capital expansion project in Port Elizabeth International Airport entails a full redevelopment of the existing terminal. The project scope includes the increase overall size to accommodate up to 4.5 million passengers annually. The project cost estimate is R10 million for the concept development fees. With regard to the Kimberley Airport, ACSA has planned to relocating the baggage claim area, re-organising the retail area and adding conferencing/meeting areas. The project is expected to cost R9 million, and anticipated to be completed in 2021. The Upington International Airport would also receive infrastructure investment. ACSA has planned to expand the departure lounge, reconfiguration of both the security screening and the baggage claim area. The project is estimated to cost R2.5 million and to be completed in 2021.

 

The 2017 Draft White Paper on National Transport Policy advances that some of the strategic objective of the Civil Aviation in South Africa should promote the National Interest, and facilitate the expansion of trade and tourism (including sport and adventure tourism). This is the view wired the engagement of the delegation and ACSA. Hence the delegation emphasised the need to improve planning of development initiatives in all spheres of the government including how resources are allocated and used to enhance growth of local and regional economies. The delegation welcomed the presentation, and appreciated the fact that ACSA is amongst the State Owned Companies that have not requested bail-outs from government. Although, ACSA has demonstrated relatively strong financial health, more need to be done to enhance governance. In addition, procurement programmes should support SMMEs, and enhance relationship of ACSA and other private sector players including paying accounts with service providers in time. Further, the delegation appreciated the representation of women in the management. This effort would aid in the transformation efforts in the aviation industry.

 

Further the delegation lifted the importance of the creation 'Aerotropolis' at airports. The City of Ekurhuleni including EThekwini are exploiting this opportunity to anchor industrial development around major airports. Improving the relations between ACSA and the local governments need no further emphasis. Further, public investment should meet broader socio-economic considerations, and combined with return on investments.

 

 

 

 

 

1. Development Projects Visited

 

Busmark 2000 (Pty) Ltd: It was established in 1973 by Pierre Moll. Today, the company is 100 percent owned by Patuxolo Nodada, and his family. It is the manufacturer of the several metro commuter buses such as MyCiti bus and Gautrain bus. Busmark employs over 290 workers in Randfontein area in Johannesburg and about 234 employees in Cape Town. Approximately 80 percent of Bus Rapid Transit (BRT) buses are manufactured by Busmark across all provinces in South Africa. The delegation was informed that the company would soon be opening a bus depot and workshop in Mthatha in the Eastern Cape for repair and services.

 

Further, Busmark has established partnership with an AB350 consortium of bus owners which includes taxi operators. The partnership will see AB350 getting shareholdership interest in Busmark business. According to the company the partnership will pave a way for new business model that seeks to harmonise operations in the bus and taxi industry. Thus it will place the taxi and bus industry in a strategic position to fully gain in the Bus Rapid Transport (BRT) project.

 

It was reported that Busmark is expected to receive R2 billion from IDC to upgrade its production plant into smart factory. The smart factory initiative form part of the integrated industrial development of the known as the West City Development Area. Initial, the company received an amount of R673 million, also funded by the IDC, which played a crucial role in the development of the Cape Town plant.  

 

The niche market of Busmark is in city bus market, which forms the core part of the of the sales portfolio. Busmark supplied the first generation of the Gautrain buses. Currently is in partnership with Real Africa Works (RAW), a new South Africa original equipment manufacturer (OEM). Further, the delegation was informed that the core business of the company is to design, develop, manufacture, service and maintain buses on behalf of the local and internal OEM. As the second tier OEM it carries local content (steel structure, fibreglass including composite internal and external components), which is 96 percent. The 1st tier OEMs supply engines and axles. Busmark’s manufactured buses carry the branding of the 1st tier OEMs such as Volvo, Mercedes, Scania, MAN, Isuzu, Raw and Hino. It was further reported that a new generation of buses powered by batteries and hydrogen fuel cells will soon be introduced in the African market. The hydrogen fuel cell bus is a result of a partnership of Busmark with the Council and Industrial Research including the University of the Western Cape.     

 

The original manufacturing plant of Busmark is based in Randfontein, and it has another factory in Cape Town. It was reported that Busmark’s buses including the factories comply with national and international stardandards. Busmark is recognised by National Treasury and the Department of Trade and Industry, and Competition through its industrial regulatory bodies as the supplier buses that comply with national and international standards.

 

Further, Busmark informed the delegation that it has established relations with the Bus and Taxi Industry Trust. Although the Busmark is not fully qualified to receive support from the Black Industrialist Programme. Through the relationship it has established with the Bus and Taxi Industry Trust it would be able to receive support from the Department of Trade and Industry, and Competition to roll out centres of excellency across the country bus and taxi industry.  

 

Busmark has a forward looking intention to penetrate and expand in African markets. It was reported that current, Busmark has an estimated 20 percent bus operation in Zimbabwe. It is looking to expand in Kenya and in Nigeria. In the short to medium term, the company planned to launch factories in Zimbabwe, Kenya, Nigeria and Ghana.   

 

The biggest challenge for Busmark in the African market is the poor infrastructure. However, the design of the buses that are manufactured for the designated African market can sustain the conditions.

 

It was emphasised during discussions that South Africa need to used aggressively the international trade agreements to create trade opportunities for the South African companies. It was highlighted that South African membership in Brics should create more opportunities for South Africa including other countries in the Continent to penetrate markets of other Brics member countries. Trade trend within Brics countries need to be balanced. Further, the African Continental Free Trade Agreement (AfCFTA) presents opportunities for many South African businesses to expand their business operations in Africa. Busmark should position itself to grab the opportunity. However, it was identified that the sporadic xenophobic incidents (“Afrophobic”) create reputational damage to South Africa that has an impact on South African business operations or that want to expand their business operations in Africa. It was emphasised that efforts need to be made to exterminate the reputational damage.

 

The company informed the delegation that the City of Ekurhuleni has ordered 210 buses as part of the city BRT public transport development project. Of the 210 buses source by the city 30 were already manufactured to be ready for the launch of roll-out of the BRT project in other places within the city. However, the City of Ekurhuleni has not paid the transaction order. In addition, Airports Company of South Africa (ACSA) also did not pay for 20 buses that are already manufactured and ready to be delivered. This was matter that the delegation felt it needed to be addressed as it could affect the commercial relationship between government agencies and the business.

During the discussions, the delegation was informed how the taxi industry in KwaZulu-Natal was affecting the implementation of the BRT in the province. The delegation noted the concern and agreed that the matter should be observed and addressed.   

 

Mohlalefi Engineering: The Company was established by Mr Martin Matisite in April 2017. It has a total of 43 employees. Currently supplying 8 mines in South Africa such as Glencore, Anglo American and Merafe resources and one mine in Zambia. In the medium to long term the Company has the goal to reach African and Global markets. The Company offers a Anchorflex products which offer several roof support solutions to various mines. The products offer critical safety components to support underground mining operations.   

 

The company is 100 percent black youth -owned. One of the core pillars of the company is to be a leader in research and development in order to be ahead of competitors. The NEF has so far finance the company with an amount of R15 million (secure a 49 percent participation interest in the business) to invest in Bankable Feasibility Study (BFS) toward the manufacturing of the Anchorflex and shotcrete products used in the mini industry. The business is located in the industrial sites in Alberton.

 

The company is currently producing 5500 underground support units with a pilot plant expansion plan to provide 10 000 units per month to mining companies in South Africa and SADC region. The aim is produce 500 000 units per annum in order to meet projected book order. 

 

The pilot plant is also necessary to certify all products in accordance with best practise. Other BFS objectives include a Project Information Memorandum and a Base Case Financial Model for graduation to full-scale plant.  

 

The objectives of the BFS includes investigation into locating the envisaged full scale commercial plant in poverty stricken areas. The BFS would focus on the following:  

• Location and design;  
• Market research update and Intellectual Property (IP) research;
• Plant Technical feasibility and financial viability validation;  
• Implementation of pilot plant and scale up plan. 

 

The company’s engineering products are ISO 9001 and ISO 1800 accredited, and the Council for Scientific and Industrial Research (CSIR) independently evaluates new products and an IP protection process is then initiated.

 

The UIF Labour Activation Programme aims to enhance employability prospects of work-seekers with the central objective to reduce high unemployment rate in the country. The Public Employment Services branch oversees the recruitment and selection aspect of the Labour Activation Programme.

 

The programme is the initiative of the Department Employment and Labour in partnership with the UIF with the aim to develop and enhance critical skills. The Construction Sector Education and Training Association (CETA) plays a major role of an implementing agent.

 

The Tembisa Training programme is under the administration of the Kempton Park Labour Centre, which recruits and place Learners in the programme. The Learners are trained in the following construction areas; Brick laying, Painting, Tiling and Plumbing. The duration of the course was designed run for three months consisting of 70 percent practical and 30 percent theoretic work. The Learners are expected to receive R1500 as a stipend over the duration of the programme.

 

During the discussion with the stakeholders including the learners. The delegation was informed by the learners that they were ill-treated by some of the officials facilitating the training, and about two months they did not received stipends (caused tension between the Learners and service provider). Further, the learners complained that they were not given reasonable time to sign contracts in order to familiarise with the content of the agreement.

 

The delegation also heard concerns that community members from the Ivory Park were complaining about the smaller number of participants from the Ivory Park, whilst the training venue was located in the community. The community members demanded that a large number of learners should be from Ivory Park as the training venues were in Ivory Park.

 

The UIF Labour Activation Programme in the main targets beneficiaries of UIF with the focus retraining and reskilling so that they can transition to other industries in the economy. The Learners who are beneficiaries of UIF claimed that they were assured that they were not going forfeit their UIF benefits by the virtue of participating in the learnership programme. But they found out when they were claiming their benefits that the UIF has terminated their benefits.

 

Further, Learners emphasised that some of the challenges identified were as result of poor communication among critical stakeholders; Department Employment and Labour and CETA. The Department Employment and Labour and UIF gave an underrating that all matters raised by the Learners would be resolved.

 

The delegation observed that the despite the challenges raised by the stakeholders. The programme present opportunities that Learners should grab. The skills that they would acquire would position them better in the labour market, thus increase their chances of participating in the economy (either as artisans or entrepreneurs). Further, the delegation acknowledged the composition of the participants, which was predominantly young people, and blended with elderly people.

 

It was further emphasised by the delegation that the Department Employment and Labour and UIF should speedily resolve the issue of late payments. The date was set by the UIF, 31 October 2019 to clear all the outstanding issues that hinders the implementation of the programme.

 

Although the CETA attributed the delays into payments of stipends to the industrial action that affected the business operation at the CETA. The delegation urged that the implementation of the programme should be strengthened and should be better coordinated.

 

Busamed Group (Modderfontein Private Hospital): Busamed is a private health care group, which is the first black owned healthcare group. The company owns and operates private hospitals nationwide. It aims to be the innovative quality centred South African health care company, which is advancing the provision of healthcare in world class facilities with dynamic, inclusive partnerships for all. Each of the hospitals under the Busamed umbrella has core specialties, together with in-house ancillary services like radiology, pharmacy, pathology and physiotherapy.

The NEF has so far invested R228 million for the growth of the company. The group opened four new hospitals in five years and acquired three more. Busamed is the first infrastructure project for the National Empowerment Fund’s Project Development Fund.

Growth of Busamed has been made possible through an investment by National Empowerment Fund in partnership with private sector institutions such as Standard Bank and Future Growth Asset Management. Currently the NEF holds approximately 14.5 percent and others shares vested to other other investors. To date, Busamed has grown be a business worth over 2.5 billion.

Due to initial success of the Group, to date private hospitals under the Busamed stable are the following:

• Bram Fischer International Airport with 110 beds;
• Gateway Private Clinic with 160 beds;
• Harrismith with 120 beds;
• Hillcrest Private Health and Oncology Centre with 200 beds;
• Modderfontein with 170 beds;
• Paardevlei Private Hospital with 100 beds; and
• Lowveld with 50 beds.

 

The delegation was reported that in the medium to long term, Busamed in partnership with other stakeholders aims to reach 2000 beds. The delegation noted the crucial role that Busamed plays in an effort to change the private hospital industry in South Africa, which predominated by three main hospitals.

The three groups hold more than 79 percent of the market share, and rest is own in more fragmented manner by independents. The delegation highlighted that the recent published report on Healthcare Market Inquiry, led by former Chief Justice, Sandile Ngcobo confirmed that the private health hospital industry is dominated by Netcare, Mediclinic and Life Healthcare group of hospitals.

Further, the delegation acknowledged the investment contribution in the creation of jobs. The Modderfontein Private Hospital is one of the Busamed greenfield projects, and by its nature has created jobs during construction phase and during the operation phase. Hospitals are some of the crucial labour intensive industries.

It was reported that Busamed within the short space of its existence has collected several awards. The awards include Discovery Health Top 20 Awards in three consecutive years (2015,2016 and 2017). In 2018 Busamed won the PMR Africa Silver Arrow Award. 

Mayehlome Communications CC: Mayehlome Communications company was formed in 2007, and it is a 100 percent black owned company. The company is the supplier of Personal Protective Equipment (PPE) and Corporate Merchandise. It was reported that the company has established a partnership with Dromex, a company responsible for sourcing protective work wear from leading international partners.  The company is located in the West Rand, Mogale City. Recently it has won a three-year contract from SAFCOL to supply PPE. In order to service the contract, the it received twelve month revolving facility to the value of R4,3 million from SEFA, and the financing is only earmarked for the SAFCOL contract. The nature of the financing facility from SEFA, it cannot be shifted to service other secured contracts. Besides the SAFCOL contract, the company supply PPE to the some of the petroleum-retail fuel stations. It has also secured a three-year contract to supplying Lesedi Local Municipality with the PPE. The company has plans to expand to other provinces to penetrate public sector market. Further, the company intends to increase its presence in the mining industry.  The company informed the delegation that the major hindrance to its growth plans is finance. Commercial banks have no appetite to finance small enterprises. Also it indicated that it would like SEFA’s application processes to be improved. Delays in approving funding has the impact in servicing contracts. In most cases small business loss lucrative contracts because of slow financing processes. The delegation urged the company to maximise its efforts and tap into huge opportunities presented by the mining industry market. Further it should also approach other Development Finance Institutions (DFIs) such as National Empowerment Fund. It was emphasised by the delegation that development finance agencies should find innovative ways to better service small enterprises, particular in conducting finance application processes.

 

1. Recommendations

 

1. The delegation noted the role of government entities such as Small Enterprise Development Agency, Small Enterprise Finance Agency and National Empowerment Finance Agency play in supporting the growth of SMMEs. The delegation further noted the imbalance of allocation of resources between regions and within regions and the cumbersome process in assessing applications to finance SMMEs. The two Committees recommend that all government entities supporting SMMEs to streamline the application process to financing SMMEs, and one–stop centres should be rolled out nation-wide, and partnerships with municipalities and private sector should established to broaden the reach of services to the SMMEs. This recommendation could be implemented over the short-to-medium term, guided by the availability of the resources. 
2. The delegation noted economic opportunities that the Cradle of Humankind presented in the West Rand. The two Committees recommend that the national departments such as Tourism and of Environmental Affairs, including their development agencies and provincial departments (Economic Development), and the West Rand establish a partnership with private sector and higher education institutions (particular with reference to the University of the Witwatersrand (WITS)) and the local community to mobilise and coordinate resources, and other bankable development  initiatives to further develop the site for the benefit of the regional economy. This recommendation could be implemented over the short, medium and long term.
3. It was noted that the transport networks should incorporate all modes of public transport services. Government should explore the possibility of extending the Gautrain development initiative to reach the West Rand. This initiative has the potential to stimulate other economic activities in the West Rand. This recommendation could be implemented over the medium-term period.
4. National Treasury and the Department of Transport should pay special attention in the implementation of the City of Ekurhuleni’s IRPTN. As stated in this report, many development projects in local municipalities were reported to be poorly planned, including poor design and construction that lead to cost over-runs. As a result, government has spent billions of rands on projects that are not completed within contractual timelines. The National Department of Transport and City of Ekurhuleni should provide the Select Committee on Transport, Public Service and Administration, Public Works and Infrastructure, and with oversight reports in terms of the implementation of the City of Ekurhuleni’s IRPTN. The oversight reports should be submitted to the Committee before the end of the 2019/20 financial year.
5. The delegation noted the important work executed by the Department of Employment and Labour through the Labour Activation Programme in partnership with the Unemployment Insurance Fund in an effort to create employment opportunities. With regard to the Tembisa Training programme, the Delegation noted poor management of the programme. This has led to late-payments or non-payment of the participants in this programme by the CETA. The delegation identified that that the UIF would transfer funds on time to the CETA in order the participants in the programme are paid according to agreed timeframes. The two Committee recommends that the Department of Employment and Labour in partnership with the UIF, and with the support of the Department of Higher Education and Training, investigate the conduct of the CETA in administering the payments in relation to the Tembisa Training programme, and any programme that funded through the Labour Activation Programme (which the CETA plays a role in transferring payments). The report should be submitted to the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour by the end of the 2019/20 financial year.  

Report to be considered.