ATC210514: Report of the Portfolio Committee on Trade and Industry on Budget Vote 39: Trade, Industry and Competition, dated14 May 2021

Trade, Industry and Competition

Report of the Portfolio Committee on Trade and Industry on Budget Vote 39: Trade, Industry and Competition, dated14 May 2021

 

The Portfolio Committee having considered Budget Vote 39: Trade, Industryand Competition, reports as follows:

 

1. Introduction

 

In the State of the Nation Address (SONA) in February 2021, the President emphasised the need to focus on economic reconstruction and recovery. This would require addressing existing structural challenges, which has been exacerbated by the COVID-19 pandemic, to ensure more inclusive economic growth. The Department of Trade, Industry and Competition (DTIC) plays an important role in contributing towards the implementation of the Economic Reconstruction and Recovery Plan (ERRP). Its emphasis is on creating a conducive environment for the continued development of the productive sectors of the economy. The sectoral masterplans, localisation and beneficiation, regional and global trade, and the creation of a conducive regulatory framework are some of the mechanisms that are available to the DTIC to implement the ERRP.

 

While the allocated budget for the 2021/22 financial year has been reduced as a result of fiscal constraints, the DTIC has added seven Joint Key Performance Indicators (J-KPIs) to enhance coordination between its programmes and entities, as well as to leverage the balance sheets of the development finance institutions (DFIs) to expand off-budget financing opportunities. In addition, the DTIC will seek to utilise its non-financial policy tools and support measures to maximise its impact. These interventions form part of its measures to increase resource efficiencies.

 

1. Constitutional Mandate of the Committee

Portfolio Committees exercise oversight over their respective departments and agencies in line with their Constitutional mandate set out in section 55(2) of the Constitution of the Republic of South Africa, 1996 and section 27(4) of the Public Finance Management Act (No. 1 of 1999). In addition, the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009) also requires committees to consider and report on their department’s strategic plan and APP. Portfolio committees may also advise the Standing Committee on Appropriations in the National Assembly regarding possible amendments, within a budget vote, for its consideration.

 

1. Purpose

The purpose of this report is for the Portfolio Committee on Trade and Industry to report on its deliberations and consideration of the DTIC’s strategic plan, annual performance plan (APP) and budget vote. Furthermore, to make recommendations regarding the approval, amendment or rejection of Budget Vote 39, as well as any other recommendation regarding the implementation of the strategic and APPs of the DTIC.

 

1. Process

The Committee’s consideration of Vote 39 involved an engagement with Mr E Patel, the Minister of Trade, Industry and Competition, and MsM Mabitje-Thompson, the acting Director-General of Trade, Industry and Competition, on 2 March and 4 May 2021. Mr Patel engaged the Committee on the implications of the 2021SONA and Budget Vote in relation to the mandate of the DTIC and provided an overview of the Economic Recovery Plan, given the economic context of the country since the advent of the COVID-19 pandemic. The acting Director-General then presented the DTIC’s Strategic and APPs and an overview of Budget Vote 39.

 

 

1. Policy priorities for the 2021/22 financial year

 

The DTIC’s Strategic Plan for 2020 - 2025 and Annual Performance Plan for the 2020/21 financial year outlines its strategic priorities, which are aligned to the national priorities as reflected in the National Development Plan (NDP), the Medium-Term Strategic Framework (MTSF) and the SONA. These national policy priorities are unpacked below. 

 

1. State of the Nation Address

Delivering the SONA on 11 February 2021, President M CRamaphosa highlighted four priorities for the government for this financial year. These priorities are informed by the state of the South African economy, which is characterized by high unemployment, low levels of economic growth, and high levels of inequality. These have been exacerbated by COVID-19, which has had a devastating effect on lives and distressed the economy since March 2020.

 

The four priorities that the President outlined in the SONA for reviving South Africa were[1]:

 

• winning the fight against the COVID-19 pandemic;
• accelerating economic recovery;
• inclusive economic reforms to drive inclusive growth; and
• fighting corruption and strengthening the state.

 

Priorities that the Portfolio Committee on Trade and Industry is directly responsible to oversee in the DTIC and its entities are Priority 2: Accelerating economic recovery and Priority 3: Inclusive economic reforms to drive inclusive growth.

 

These priorities relate directly to the mandate of the DTIC and its entities including:

 

• the facilitation of economic transformation;
• the promotion of industrial development, investment, competitiveness, and employment creation;
• facilitating broad-based black economic participation; and
• strengthening regional and global trade relations.

 

In terms of accelerating economic recovery, the DTIC is the custodian of the ERRP, which needs to be implemented to address the high levels of unemployment and inequality, as well as low economic growth. Implementing this plan would revive businesses; create jobs for South Africans and consequently reduce poverty levels.

 

In accelerating economic recovery, the President alluded to several interventions that are being used. These include:

 

• Increasing local production: This has been one of the interventions to drive industrialisation in the country. However, now more than ever there is a need to accelerate those efforts even further. Producing goods locally leads to the expansion of businesses, creates opportunities for Small and Medium Enterprises and consequently creates job opportunities.
• Inclusive economic participation: As the custodian of the Broad-based Black Economic Empowerment (B-BBEE) regulatory framework, the DTIC and the B-BBEE Commission are working with the private sector to build more effective ownership agreements, including worker ownership schemes. The amended Competition Act is one of the tools the DTIC uses to foster such inclusive economic participation by requiring the competition authorities to consider the impact on worker ownership during the merger approval process.

• The implementation of Master Plans to support industrialisation and economic recovery: The DTIC has been facilitating the development and implementation of Master Plans since the start of 2019. Thus far, the Sugar; Retail Clothing, Textiles, Leather and Footwear; and Automotive sector master plans had begun to be implemented.

 

In terms of inclusive growth, interventions include:

 

• The continued development and support of Special Economic Zones (SEZs);
• The continued support of the Black Industrialist Programme through the Black Industrialist Fund;
• Further improvement regarding the ease of doing business, in particular, company registration through the Bizportal; and
• Increasing access to markets for South Africa’s exports, particularly in Africa through the African Continental Free Trade Agreement (AfCFTA) which came into force on 1 January 2021.

 

1. Medium-term Strategic Framework

The MTSF for 2019 – 2024 outlines seven priorities of government for the five-year term which are anchored in three pillars, namely; “driving a strong and inclusive economy, building and strengthening capabilities of South Africans, and achieving a more capable state”[2]. These priorities are as follows[3]:

 

• Priority 1: Economic Transformation and Job Creation,
• Priority 2: Education and Skills Development,
• Priority 3: Consolidating the Social Wage through reliable and quality Basic Service,
• Priority 4: Spatial Integration, Human Settlements and Local Government,
• Priority 5: Social Cohesion and Safe Communities,
• Priority 6: Building a capable, ethical and developmental State, and
• Priority 7: A better Africa and World.

 

The DTIC is the coordinatingdepartment in the implementation of interventions in Priority 2: Economic Transformation and Job Creation and a supporting department in Priority 7: A Better Africa and World. These are priorities from which the mandate of the DTIC is derived, in particular; facilitating the creation of an inclusive economy, broadening economic participation, contributing to regional integration, and creating a fair regulatory environment that enables investment, trade, enterprise development, and competition.

 

1. Sustainable Development Goals

The DTIC would be primarily responsible for the second target of Sustainable Development Goal (SDG) 9:Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation, namely to “promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries”[4]. In this regard, one of the DTIC’s core mandates is to facilitate structural transformation of the economy to promote dynamic industrial development, investment, competitiveness and employment creation. It develops industrial strategies and provides incentives to improve the competitiveness of the manufacturing sector and increase market access and demands for locally manufactured goods.

 

Furthermore, in terms of SDG 8:Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all[5], the DTIC can support the improved access of black women and youth to employment and entrepreneurship opportunities. In addition, in terms of SDG 10: Reduce inequality within and among countries[6], the DTIC through its trade negotiations, initiatives to promote and facilitate investment, and the role of the International Trade Administration Commission of South Africa’s (ITAC) tariff line investigations and determinations plays a critical role to achieve this goal.

 

1. Agenda 2063

The work of the DTIC is aligned to aspiration 1 of the African Union’s (AU) Agenda 2063: “A prosperous Africa based on inclusive growth and sustainable development”[7]. In line with this aspiration, the African continent committed to "eradicating poverty in one generation and build shared prosperity through social and economic transformation….”[8]. One of the DTIC’s mandates is to facilitate structural transformation through broad-based economic participation and spatial industrial development. It implements this mainly through Programme 3: Spatial Industrial Development and Economic Transformation and Programme 6: Industrial Financing. Programme 3 has been allocated a budget of R183,4 million. Incentives have also been allocated towards this for the development of SEZs and for black participation. However, the DTIC’s incentives also have transformation criteria, which further facilitates this at a broader level.

 

1. Reimagined Industrial Strategy (RIS) and the Southern African Development Community (SADC) Industrialisation Strategy

The SADCRegional Infrastructure Development Master Plan (RIDMP) aims to “catalyze industrial development and reduce current high costs of doing business, including those related to Non-Tariff Barriers and local procurement of inputs for infrastructure development”[9]. As a Member of SADC, South Africa has to align its national policies and strategies to complement that of the regional community. The NDP 2030 and the RIS therefore are broadly complementary policies to the SADC industrialisation strategy. The RIS is the country’s plan involving the development of Master Plans for 12 priority sectors. This sets out commitments and actions by government, organised business and organised labour in these sectors. Similar to the SADC-RIDMP, the RIS aims to ensure industrialisation through its interventions, one of which is developmental tariff reform. In the current budget, the DTIC provides for the development and implementation of seven Master Plans that it is the lead on, as well as participation in the development of other Master Plans.

 

 

 

1. Department of Trade, Industryand Competition’s Strategic Plan, Annual Performance Plan and Budget

 

The DTIC,as the lead department on economic development in South Africa, is the custodian of economic development policy formulation and planning.[10]The DTIC’s mandate is to[11]:

 

• Promote structural transformation, towards a dynamic industrial and globally competitive economy;
• Provide a predictable, competitive, equitable, and socially responsible environment, conducive to investment, trade, and enterprise development;
• Broaden participation in the economy to strengthen economic development;
• Continually improve the skills and capabilities of the departmentto effectively deliver on its mandate and respond to the needs of South Africa’s economic citizens;
• Coordinate the contributions of government departments, state entities, and civil society to affect economic development; and
• Improve alignment between economic policies, plans of the state, its agencies, government’s political and economic objectives, and mandate.

 

The DTIC executes by focusing on the three economic areas of industry, trade, and competition through its ten programmes, namely:

• Administration;
• Trade Policy, Negotiations, and Cooperation;
• Spatial Industrial Development and Economic Transformation;
• Industrial Competitiveness and Growth;
• Consumer and Corporate Regulation;
• Industrial Financing;
• Export Development, Promotion and Outward Investments;
• Inward Investment Attraction, Facilitation, and Aftercare;
• Competition Policy and Economic Planning, and
• Economic Research and Coordination.

 

These programmes are collectively responsible for administering 45 pieces of legislation mainly in the areas of consumer protection, companies (corporate regulation), competition, industrial development, black economic empowerment, and international trade; and overseeing 16 entities and the B-BBEE Commission.

 

In line with its mandate, the DTIC’s policy and strategic priorities for the period from 2020 to 2025, as set out in its Strategic Plan are the[12]:

 

• RIS:A strategy for South Africa's industrial development through partnerships with the private sector to unleash job-creating investment in various productive sectors. Sector masterplans are one tool that has been used to implement the re-imagined industrial strategy, where partnerships have been built between government, labour, and the private sector to drive long-term sustainable growth and job creation. The priority sectors are the automotive industry; clothing, textiles, leather and footwear; gas; chemicals and plastics; renewable energy; steel and metal fabrication; tourism; high-tech industries; the creative industry; the oceans economy; and agriculture and agro-processing[13].

 

• SEZPolicy and Strategy: A strategy, which aims to promote trade, economic growth, and industrialisation through identifying opportunities and attracting investment into designated areas and designated sectors of the economy[14]. 

 

• Industrial Parks Revitalisation Programme: A programme focusing on broad and inclusive economic development by revitalising old industrial parks in rural and township areas by building infrastructure that will make the areas more attractive for investment. Investment into these areas will consequently lead to the creation of job opportunities[15].

 

• B-BBEEPolicy: A policy for meaningful and transformative participation of black people in the mainstream of the economy.

 

• Black Industrialist Programme:Promotes support to Black Industrialists in the country through financial and non-financial support to broaden participation in the key sectors of the economy[16].

 

• Consumer Protection Policy:The purpose of which isto promote a fair, accessible, and sustainable marketplace for consumer products and services and development of national norms and standards for consumer protection[17].

 

• Companies Policy:A corporate regulation policy focusing on management and registration of companies.

 

• National Credit Policy:The purpose of which isto create and promote a fair and non-discriminatory credit market, accessible to consumers of credit. 

 

• Regional Integration using the AfCFTA:An instrument for driving industrial development in Africa through increasing trade among the African countries.

 

For the financial year, the DTIC’s work and budget will be divided among its ten programmes. These programmes are in line with the DTIC’s mandate and strategic areas, namely: “providing industrial finance, developing industrial infrastructure, strengthening export capabilities and enhancing competition regulation”[18]. The purposeof each programmeis highlighted below.[19]

 

• Programme 1: Administration: Responsible for providing strategic leadership, support and management to the Department and its entities. It is focused on achieving the following key outcomes, namely: (i) implementation of transformation through employment equity and B-BBEE; (ii) youth empowerment through internships; and (iii) promotion of a professional, ethical, dynamic, competitive and customer-focused working environment that ensures effective and efficient service delivery.

 

• Programme 2: Trade Policy, Negotiations and Cooperation: Responsible for facilitating the building of an equitable global trading system by strengthening trading and investment relations with key markets globally. Furthermore, in line with the Africa Union Agenda 2063, developing and promoting regional and continental integration and development co-operation. It is focused on achieving increased intra-African trade to support Africa regional development.

 

• Programme 3: Spatial Industrial Development and Economic Transformation: Responsible for promoting inclusive economic transformation and increasing industrial participation through development and funding of SEZs, revitalisation of Industrial Parks and support for Black Industrialists. It is focused on achieving the following key outcomes, namely: (i) increased and enhanced instruments for spatial development of targeted regions and economic transformation in SEZs and industrial parks; (ii) industrialisation, localisation and exports through the revitalisation of industrial parks; and (iii) investing for accelerated inclusive growth through the mainstreaming of black-owned businesses and participation of black people in the formal economy.

 

• Programme 4: Industrial Competitiveness and Growth: Responsible for designing and implementing policies, strategies and programmes to develop the manufacturing and related sectors of the economy with the aim of contributing to the creation of decent jobs, adding value to manufactured products and enhancing competitiveness in the domestic and export markets. It is focused on achieving the following key outcomes, namely: (i) increased industrialisation through the development of Master Plans in National Priority sectors; and (ii) increased localisation through the designation of products.

 

• Programme 5: Consumer and Corporate Regulation: Responsible for developing and implementing coherent, predictable and transparent regulatory solutions that facilitate easy access to redress and efficient regulation for economic citizens. It is focused on achieving an improved regulatory environment conducive for consumers and companies as well as providing access to redress.

 

• Programme 6: Industrial Financing: Responsible for stimulating and facilitating the development of sustainable and competitive enterprises, through the efficient provision of effective and accessible incentive measures that support national priorities. It is focused on achieving more accessible industrial finance measures to support investment in priority sectors in line with approved masterplans.

 

• Programme 7: Export Development, Promotion and Outward Investments: Responsible for increasing export capacity and supporting direct investment flows, through targeted. strategies, and an effectively managed network of foreign trade office. It is focused on achieving the following key outcomes, namely: (i) promoting the growth of exports in the economy as a generator of jobs and contributor to gross domestic product growth; and (ii) diversifying the export bundle, by promoting export growth in priority sectors.

 

• Programme 8: Inward Investment Attraction, Facilitation and Aftercare: Responsible for supporting foreign direct investment flows and domestic investment by providing a one-stop shop for investment promotion, investor facilitation and aftercare support for investors. It is focused on achieving increased strategic investment.

 

• Programme 9: Competition Policy and Economic Planning: Responsible for developing and implementing policy interventions that promote competition. It is focused on achieving policy tools and implementation strategies which contribute to an efficient, competitive economic environment, balancing the interests of workers, owners and consumers and focused on economic development.

 

• Programme 10: Economic Research and Coordination: Responsible for socio-economic research, assessing policy options and engaging stakeholders to facilitate inclusive economic growth. It is focused on achieving the following key outcomes, namely: (i) socio-, macro- and micro-economic policy options developed and assessed to promote inclusive growth; and (ii) policymakers and stakeholders have access to policy-relevant, high quality economic analysis.

 

1. Performance targets for the 2021/22 financial year

 

The section below details the purpose of each programme andits planned performance for the 2021/22 financial year as set out in itsAPP. For the financial year, the DTIC has a total of 80 Key Performance Indicators (KPIs)[20]. In the previous financial year, it had 35 KPIs. Therefore, most of the performance targets for the 2021/22 financial are new.

 

Furthermore, the DTIC introduced the concept of J-KPIs. These are indicators whose achievement is a contribution of more than one structure (the DTIC,its entities and/or more than one work stream contribute towards the achievement of the respective J-KPI. The DTIC noted that the reason for introducing J-KPIs is to maximise the use of financial and human resources, as well as fostering collaboration and coordination between the DTIC and its entities. The table below outlines the seven J-KPIs, their lead programmes and their contributing work streams.

 

Table 1: Joint Key Performance Indicators

J-KPI	Lead Programme	Work streams
1. Report on integrated support to industrialisation in support economic recovery	Industrial Competitiveness & Growth	Master plans, Localisation, Beneficiation, COVID-19 industrial interventions, Partnerships with distressed industries, and New industrial opportunities
2. The completion of the AfCFTA export plan by product, sector, and market	Export Development, Promotion & Outward Investments	Master plans, Industrialisation, Trade policy, and Investment, Industrial finance, and SEZs
3. Report on Investment facilitation and growth: Steps taken to support new investment in key sectors of the economy	Inward Investment Attraction, Facilitation, & Aftercare	Master plans, Localisation, Beneficiation, COVID-19 industrial interventions, Partnerships with distressed industries, and New industrial opportunities
4. An integrated report detailing the economic analysis, challenges, and opportunities, geo-localisation of projects and implementation progress	Spatial Industrial Development & Economic Transformation	SEZs, Industrialisation, Consumer and corporate regulation, Export and exporter development, Investment facilitation, and Industrial finance
5. Report on actions to promote transformation through structural changes in the economy to enable greater inclusion and growth, and empowerment of designated groups	Spatial Industrial Development & Economic Transformation	Master plans, Localisation, New industrial opportunities, Industrialisation, Investment, Industrial finance, SEZs, Structural reforms, Empowerment policy, Legislation, and Implementation of amendments to the Competition Act
6.Report on growing the Green Economy and greening the economy	Industrial Competitiveness & Growth	Master plans, Localisation, Beneficiation, Partnerships with distress industries, and Investments
7.Report on strengthening and building capabilities and agility of the DTIC and its entities, to improve efficiencies in programmes and entities thereby contribute to economic development and ease of doing business	Inward Investment Attraction, Facilitation, & Aftercare	Review of unnecessary red tape, Development of monitoring systems, Innovation to improve service delivery, and Review of legislation to remove unnecessary procedures and requirements

Source: DTIC (2021: 33-45)

 

1. Budget Vote 39: Analysis of the 2021/22 – 2023/24 financial period[21]

The allocated budget for the DTIC has increased to approximately R9,7 billion in 2021/22 from R9,27 billion in the 2020/21 financial year.While the budget has increased by 5% in nominal terms, it has merely increased by 0,7% (R70,9 million) in real terms[22]. While there is seemingly an increase in the DTIC’s budget over the next three years to R10,0 billion in 2023/24, there is a decrease in the budget in real terms. The DTIC’s budget is expected to decrease to R9,19 billion in 2022/23 and R8,9 billion in 2023/24 in real terms. Figure 1 below shows the DTIC’s budget over the medium-term in both nominal and real terms.

 

Figure 1:Overall Budget Allocation

 

 

 

 

 

 

 

Source: National Treasury (2021a: 787) and Madalane (2021a)

 

1. Programme Analysis

The increase in the budget from the 2020/21financial year to the 2021/22financial year is R463,3 million in nominal terms. This increase has filtered through all the programmes except the Industrial Financing Programme. Its budget will decrease by R44 million or 0,89% of the programme’s budget while all other programme’s budget will increase.

 

Table 2 below shows the budget for the 2020/21 and 2021/22 financial year as well as changes in each of the programmes. The largest budgetary increase is in the Competition Policy and Economic Planning Programme where the budget will increase by R183,6 million or 32% of the budget. This is followed by the increase in the Industrial Competitiveness and Growth (R37,6 million); Spatial Industrial Development and Economic Transformation (R34,8 million); and Economic Research and Coordination programmes (R20,5 million).

 

Table 2:Overall Budget Allocation by Programme

Programme (R’million)	Budget		Nominal Rand change	Real Rand change	Nominal % change	Real % change
	2020/21	2021/22	2020/21-2021/22		2020/21-2021/22
Administration	829,9	857,7	27,7	-6,9	3,34%	-0,83%
Trade Policy, Negotiations and Cooperation	213,2	233,1	19,8	10,5	9,31%	4,90%
Spatial Industrial Development and Economic Transformation	141,1	183,4	42,2	34,8	29,92%	24,68%
Industrial Competitiveness and Growth	1 650,5	1 759,0	108,5	37,6	6,58%	2,28%
Consumer and Corporate Regulation	304,2	333,3	29,1	15,7	9,56%	5,15%
Industrial Financing	4 915,0	4 871,1	-44,0	-240,3	-0,89%	-4,89%
Export Development, Promotion and Outward Investments	420,8	443,9	23,1	5,2	5,48%	1,23%
Inward Investment Attraction, Facilitation and Aftercare	57,2	70,2	12,9	10,1	22,62%	17,67%
Competition Policy and Economic Planning	686,1	906,3	220,1	183,6	32,08%	26,76%
Economic Research and Coordination	55,2	78,9	23,7	20,5	42,96%	37,20%
TOTAL	9 273,3	9 736,6	463,3	70,8	5,00%	0,76%

Source: National Treasury (2021a: 787) andMadalane (2021)

 

Over the strategic five-year period from 2020 to 2025 and for the 2021/22 financial year, the DTIC’s budget is focused on the implementation of policies, strategies, programmes and incentives aimed at promoting industrial development and broadening participation in the economy. These are implemented through Programme 6: Industrial Financing, and Programme 4: Industrial Competitiveness and Growth, as this is where the bulk of its budget is allocated. For the financial year under review, the two abovementioned programmes account for more than 68% of the total DTIC budget with Programme 6 accounting for 50% and Programme 4 approximately 18%.

 

Shown in the figure below are budget allocations per programmes.

 

Figure 2: Budget Share per programme

 

 

 

 

 

 

 

 

 

 

 

Source: National Treasury (2021a: 787) andMadalane (2021)

 

1. Administration

The Administration Programme is responsible for providing strategic support and management to the DTIC and its entities. The programme accounts for approximately 9% of the total budget. The programme budget will increase by 3,34% in nominal terms from R829,9 million in 2020/21 to R857,7 million in 2021/22. However, in real terms, the budget will decrease by 0,83%.

 

The sub-programmes of the Administration Programme are the Ministry, Office of the Director-General, Corporate Management Services, Office Accommodation, Financial Management Services, and the Marketing Communication and Media Relations.

 

1. Trade Policy, Negotiations and Cooperation

The purpose of the Programme is to facilitate the building of an equitable global trading system by strengthening trading and investment relations with key markets globally. Furthermore, in line with the New Partnership for Africa’s Development, the Programme will promote the development of the African continent through regional and continental integration. This Programme accounts for 2%of the total budget. The Programme’s main appropriation was R213,2 million in the previous financial year, it has increased byR19,9 million to R233,1 million in the year under review. The sub-programmes of this programme are International Trade Development, and African Multilateral Economic Development.

 

1. Spatial Industrial Development and Economic Transformation

The purpose of the Programme is to promote inclusive economic transformation and to industrialise the economy through developing and funding SEZs and Black Industrialists. Similar to the previous programme, this programme accounts for 2% of the total budget. The Programme’s main appropriation was R141,1 million in 2020/21, which has increased by R42,3 million or 30% to R183,4 million.

 

Within this Programme, the sub-programmes are Enterprise Competitiveness, Equity and Empowerment, and Regional Industrial Development.

 

1. Industrial Competitiveness and Growth

The Industrial Development Programme is the second largest of DTIC’s programmes. It is responsible for the design and implementation of policies, strategies and programmes to develop the manufacturing and related sectors of the economy to contribute to the creation of decent jobs, adding value to manufactured products and enhancing competitiveness in the domestic and export markets. The Programme accounts for approximately 18% of the total budget. The main appropriation was R1,65 billion in 2020/21, it has increased by 6,6% to R1,75 billion in 2021/22. This budget funds two significant sub-programmes, namely:the Industrial Competitiveness and the Customised Sector Programmes.

 

1. Consumer and Corporate Regulation

The Consumer and Corporate Regulation Programme is aimed at developing and implementing coherent, predictable and transparent regulatory solutions that facilitate easy access to redress and efficient regulation for economic citizens. With an increase of 9,6%, the budget increased from R304,2 million in 2020/21 to R333,3 million in the 2021/22 financial year.  Within this Programme, there are three sub-programmes, namely: Policy and Legislative Development; Enforcement and Compliance; and Regulatory Services.

 

The Regulatory Services sub-programme is the largest of the three sub-programmes in terms of budget allocation as it comprised transfers to the regulatory entities. The Consumer and Corporate Regulation Programme is supported and partly implemented through the Department’s regulatory entities, namely:the National Credit Regulator, the National Gambling Board, the National Lotteries Commission (NLC),the National Consumer Tribunal, the National Consumer Commission, the Companies and Intellectual Property Commission (CIPC) and the Companies Tribunal.

 

1. Industrial Financing

The Industrial Financing Programme is responsible for improving administration of the DTIC’s incentive through designing and implementing incentives and programmes that support investment, competitiveness, employment creation, and equity. This Programme captures the core mandate of the DTIC, it is the largest programme accounting for approximately 50% of the total budget.  The Industrial Financing budget is the only programme budget that has decreased in comparison to the previous financial year. It has decreased by R240,2 million or 0,9% from R4,91 billion to R4,87 billion in the current financial year.

 

The sub-programmes of the Industrial Financing Programme are Broadening Participation and Industrial Incentives; Manufacturing Incentives; Services Investment Incentives; Infrastructure Investment Support;Product and Systems Development; and Strategic Partnership and Customer Care.

 

1. Export Development, Promotion and Outward Investments

The Export Development, Promotion, and Outward Investments Programme is aimed at promoting South African exports in high growth markets; identifying new markets for South African manufactured products; and enhancing the ongoing promotion of exports. Furthermore, the programme supports the building of trade and investment relationships with other African countries. The Export Development, Promotion and Outward Investments budget will increase by R23,1 million (or 5,5% in nominal terms) from R420,8 million to R443,9 million. This programme’s sub-programmes are Trade Invest Africa; Export Promotion and Marketing; Trade and Investment; Foreign Services Management Unit; and Export Development and Support.

 

 

 

1. Inward Investment Attraction, Facilitation and Aftercare

The purpose of the Programme is to “support foreign direct investment flows and domestic investment by providing a one-stop-shop for investment promotion, investor facilitation and aftercare support for investors”[23]. The previous financial year’s budget of R57,2 million will increase by 22,6% to R70,2 million.

 

1. Competition Policy and Economic Planning

The Programme focuses on developing and implementing policy interventions that promote competition.  Key areas addressed under this Programme are market inquiries, mergers and acquisitions, and investigations regarding the prohibition of abuse of dominance on cases that are of public interest. Furthermore, the implementation of recommendations of market inquiries, mergers and acquisitions, and investigations regarding the prohibition of abuse of dominance to maximise redress on the affected parties. The programme budget for the 2021/22 financial year is R906,3 million, an increase of 32,1% from the previous financial year’s budget. 

 

1. Economic Research and Coordination

The purpose of the Programme is to “undertake economic research, develop trade and industrial policies, and guide legislative processes to facilitate inclusive growth through interventions to increase competitiveness in the economy”[24]. The programme budget of R78,9 million for the 2021/22 financial year shows a 43% increase from the previous year’s budget of R55,2 million.

 

1. Economic classification

Of the total budget of R9,73 billion for the 2021/22 financial year, approximately R1,8 billion (19,3% of the total budget) is the operational budget of the DTIC; R36,4 million (0,4% of the total budget allocation) is allocated to payments for capital assets and the bulk of the budget R7,8 billion (80,4% of the total budget) is allocated to transfers and subsidies to departmental entities and private enterprises, among others. A large proportion of the DTIC’s operational budget is for compensation of employees (R1,0 billion or 55,8% of the operational budget or 10,7% of the DTIC’s total budget). It is worth noting that over the medium-term, the compensation of employees’ budget will decrease by 3,7% between the 2020/21 and the 2023/24 financial years due to the estimated reduction in the number of employees. It is estimated that employees will decrease by 58 employees, 30 employees, and 63 employees over the next three financial years respectively to 1 264 employees in 2023/24. The DTIC’s budget by economic classification is shown in the table below.

 

Table 3: Budget by Economic Classification

Economic classification (R’million)	Adjusted appropriation 2020/21	Appropriation 2021/22	Share of the 2021/22 Appropriation
Current payments	1 759,5	1 875,4	19,3%
Compensation of employees	1 093,0	1 046,6	10,7%
Goods and services	666,5	828,8	8,5%
Transfers and subsidies	7 497,0	7 824,8	80,4%
Departmental agencies and accounts	1 041,3	1 280,8	13,2%
Foreign governments and international organisations	39,9	43,6	0,4%
Public corporations and private enterprises	6 273,8	6 345,2	65,2%
Non-profit institutions	140,9	154,3	1,6%
Households	1,2	1,0	0,0%
Payments for capital assets	16,7	36,4	0,4%
Total	9 273,3	9 736,6	100,0%

Source: National Treasury (2021a: 787) andMadalane (2021)

 

The R7,8 billion of transfers and subsidies will be distributed as follows:

 

• Public corporations and private enterprises (81% of transfers and subsidies or R6,3 billion);
• Departmental agencies and accounts (16% of transfers and subsidies or R1,28 million);
• Non-profit institutions (1% of transfers and subsidies or R154,3 million);
• International institutions for membership fees (0,4% of transfers and subsidies or R43,6 million); and
• Households for employee social benefits (0,01% of transfers and subsidies or R1,0 million).

 

1. Transfers to Entities

The DTIC has 16 entities. Of the 16 entities, three are self-funded, these are the CIPC, the National Empowerment Fund (NEF) and the NLC. While the Industrial Development Corporation (IDC) is self-funded, the DTIC makes transfers for incentive programmes to it, which the IDC administers on its behalf. Transfers to the DTIC’s entities are as follows[25]:

 

Table 4: Transfers to entities

Entities (R’000)	Adjusted appropriation 2020/21	Appropriation 2021/22	Change (2020/21 -2021/22)
Companies Tribunal	20 752	17 313	-16,6%
Competition Commission	302 586	439 550	45,3%
Competition Tribunal	32 342	36 970	14,3%
Export Credit Insurance Corporation of South Africa	162 710	162 710	0,0%
Industrial Development Corporation: Industrial financing	760 228	718 840	-5,4%
International Trade Administration Commission	94 306	106 978	13,4%
National Consumer Commission	51 530	58 505	13,5%
National Consumer Tribunal	47 492	53 515	12,7%
National Credit Regulator	71 272	81 432	14,3%
National Gambling Board	31 027	35 928	15,8%
National Metrology Institute of South Africa: Operations	103 550	121 061	16,9%
National Regulator for Compulsory Specifications	126 126	144 099	14,3%
Small Enterprise Finance Agency	196 786	251 706	27,9%
South African Bureau of Standards	270 421	270 421	0,0%
South African National Accreditation System	28 748	32 967	14,7%
Capital
National Metrology Institute of South Africa	119 741	140 655	17,5%

Source: National Treasury (2021a: 788) andMadalane (2021)

 

The National Metrology Institute of South Africa will continue to receive funding for its infrastructure upgradesover the medium-term. This was approved in the 2016/17 financial year.

 

 

1. Key issues raised by the Committee during its deliberations

 

The Committee raised a number of concerns during its deliberations, including:

 

1. Ease of doing business:Ease of doing business relates to the regulatory environment that either enables or impedes the process of starting, operating and expanding a business in a particular country. According to the 2020 World Bank’s Ease of doing businessranking[26], South Africa was ranked at 84. Given that the President in his SONA had committed to improving this ranking, the Committee enquired whether this should not have been included as a KPI in the 2021/22 APP of the DTIC. The Minister informed the Committee that South Africa is seeking to improve its Easeofdoingbusiness ranking. Government has made an effort to improve its ranking byidentifying four indicators for reform. However, improving the ranking is not solely the responsibility of the DTIC, other departments had a shared responsibility in ensuring that South Africa becomes more attractive to both domestic and foreign investors. As part of government reforms to improve the ease of doing business ranking, he noted that the DTIC is specifically responsible for the Starting a Business Indicator which is included in its APP. InvestSA co-ordinates the working of the inter-governmentalTechnical Working Groups on the Ease of Doing Business Program namely:

 

• Starting a Business;
• Dealing with Construction Permits;
• Registering a Property;
• Paying Taxes; and
• Trading Across Borders.

 

The development of an online biz-portal by the CIPC made registration of companies much easier. As this is part of an integrated approach, the DTIC, according to the Minister, also facilitated the registration for income tax (namely, Pay AsYou Earn), and withholding of taxes (namely Unemployment Income Fund). According to the Minister, the South African Revenue Service (SARS) had improved their Value Added Tax and Corporate Income Tax audit processes which in turn contributed to easier payment of taxes as well as reducing the audit turnaround times. With respect to the registration of property, the DTIC had made the registration more transparent through the publication of the list of documents required for this process. This also included providing support and collaborating with municipalities among others, such as the City of Johannesburg with the registration of its properties. Furthermore, the Minister informed the Committee that obtaining a construction permit had been made easier as companies do not require approval stamps from four different agencies any longer. InvestSA, through its coordinating role, ensures that public entities understand their roles in ensuring that they positively contribute to improvingSouth Africa’s ease of doing business ranking.

 

1. Regulations: The importance of a well-regulated environment to protect business interests as well as that of society cannot be overstated. However, finding the right balance with regard to regulation is critical. This should ensure the optimal functioning of the economy and stimulate business innovation, while meeting national socio-economic priorities, and protecting society, and the environment. The Committee welcomed the undertaking by the Minister to monitor the impact of regulations on economic growth, but enquired whether this would include the impact of over-regulation on the economy and how this would be measured. In his response, the Minister acknowledged the negative impact of over-regulation on the broader economy. He informed the Committee that the DTIC would be instituting reviews to monitor the impact of the implementation of legislation and regulations. Through this process, the DTIC would be able to assess its impact and determine whether any amendments would be required. The Minister was of the view that smarter and more effective regulations are essential to ensure that the perverse effect of it is contained and that unintended consequences would be eliminated.

 

The regulations play an important role to create an enabling environment in the economy. The concern about over-regulation in the economy is important to monitor. The DTICconducts regulatory impact assessments on various laws from time-to-time. Focused regulatory impact assessments on specific laws will ensure that the over-regulation of the economy is monitored. A key objective of regulation would be to ensure that the public objective would be met and that it did not impose any undue costs beyond thelegitimate public purpose that it should pursue.

 

1. Covid-19 regulations: A view was expressed that the implementation of the COVID-19 regulations appeared to have been overzealous and onerous resulting in a negative impact on the economy, especially for the liquor and tobacco industries and their upstream and downstream value chains. Furthermore, that the advice from the Ministerial Advisory Councilhad not been followed by the National Coronavirus Command Council (NCCC). The Committee enquired what role the Minister and the DTIC had played in the setting of these regulations.The Minister informed the Committee that the recent release of the reports of the Ministerial Advisory Council, showed that the government had implemented the majority of its recommendations.However, in some instances, through a process of consultation with provinces, business and labour, government had to take into account other factors to ensure that it maintained the balance between lives and livelihoods. With respect to alcoholic beverages, through a process of consultation with liquor stakeholders at National Economic Development and Labour Council, with provinces and the medical fraternity, the impact of alcohol on the behaviour of consumers was a major contributing factor that resulted in the delayed lifting of restrictions to avoid a surge in infections. Consultation with the liquor industry on the liquor regulations was ongoing throughout the COVID-19 pandemic. The Minister informed the Committee that it was the Advisory Council’s responsibilityto assist the President and Cabinet to make informed decisions, based on scientific evidence, to achieve the overall outcomes of effective management of the COVID-19 pandemic to mitigate against the negative impact on the economy and to limit the loss of lives. Furthermore, the DTIC informed the Committee that the COVID-19 Regulations are determined by the NCCC and form part of an inter-governmental consultative process at the National Joint Operational and Intelligence Structure. The DTIC is consulted and engages with stakeholders in government and industry as part of that process. It also participates in consultative meetings and makes comments on the possible measures proposed in the liquor Regulations. However, the final decision on the Regulations lies with Cabinet and the NCCC.

 

1. Impact of poor governance, corruption and state capture on industrialisation: The APP clearly promotes an industrialisation agenda, which highlights economic inclusion as a critical component. Besides the emphasis on the domestically inequitable economy due to former discriminatory policies and structural challenges to growth, the Committee enquired whether a third focus area should not be added with specific reference to poor governance, state capture and corruption as impediments in achieving its industrialisation goals. The Minister informed the Committee that the Annual Report makes reference to ethical and effective leadership, corruption and state capture challenges and the fact that leadership plays a crucial role in influencing an ethical environment in an organisation. While recognising the impact of poor governance, corruption and state capture, the Minister was of the view that the impact of South Africa’sdivisive history and the structural challenges facing the country could not be ignored. He informed the Committee that in 2017 he had commissioned research on the impact of corruption in infrastructure developmentprocurement which had been presented to the Cabinet. The research concluded that based on an assumption of 10% of over-payment on infrastructure contracts as a result of corruption, it would have cost the government R1 billion from the GDP[27] per year. He was further of the view that as a society one needed to unite against the corrosive and damaging effects of corruption, but also to recognise the damaging effect of past discriminatory practices on the majority of South Africans and the structural challenges facing the country.

 

The DTIC was of the view that the challenges of poor governance, state capture and corruption required a whole of government approach and is not limited to its mandate. The government was cognisant of the fact that corruption and non-compliance undermined the localisation programme, which would have a negative impact on economic development, industrialisation, job losses, transformation, and has led to import leakages, which unnecessarily weakened the trade balance. Policies and institutions dealing with this challenge must be amplified and there should be consequences for those affected. Remedies such as criminal and civil punishment, damages and penalties, cancellation of contracts and debarment should also be made public. This would assist in improving public confidence, transparency and accountability in government programmes and services by both South Africans and the international community.

 

In this regard, the DTIC informed the Committee that it would work closely with the National Treasury to develop an effective system of monitoring adherence to localisation regulations and compliance with existing designations. This would include engagements with various sectors to gather information in order to provide concrete evidence on the level of compliance with localisation prescripts. Furthermore, the DTIC would be monitoring the processes with respect to the Procurement Bill to ensure that its proposed provisions entrench and support the localisation ecosystem.

 

1. Policy implementation:  The lack of coherence in planning and implementation of policies resulted in the failure to address the triple threat of poverty, inequality and employment. The District Development Model seeks to promote and support local businesses and ensure job creation by addressing challenges faced by businesses such as poor service delivery, failing public infrastructure, and access to markets including localised government procurement. The Committee enquired, that given these challenges arising from ineffective governance, whether it would be realistic to expect the successful implementation of the ERRP. According to the DTIC, it would be important to acknowledge from the outset that Government had made meaningful progress in reducing poverty through providing basic services such as housing, water, electricity and education to poor households, as well as income support through various social grants. According to Statistics SA, employment has increased from 13,6 million in the third quarter of 2010 to 16,3 million in the first quarter of 2020. The impact of COVID-19 had severely impacted employment in South Africa, as it has done in most countries across the globe. In terms of inequality, it is indisputable that this remains a key impediment to social development and stronger economic growth as growing empirical evidence indicates that more equitable economies tend to grow faster[28].

 

The current Administration has placed significant emphasis on policy coordination. This is reflected in the introduction of the Presidential Coordinating Council which brings together Cabinet and provincial Premiers, which has worked successfully during the COVID-19 period. In addition, the DTIC has continued to convene Ministers and Members of Executive Councils (MECs) meetings which involve meetings of the Minister and the provincial MECs, as the meetings of the DTIC Director-General and provincial Heads of Departments. The ERRP has been presented to these structures.

 

These structures are expected to contribute to the implementation of the District Development Model and therefore improve economic planning, policy coordination and impact, including of the ERRP. 

 

1. South Africa’s policy approach to African regional trade: A view was expressed that South Africa’s approach to African regional trade was to protect its industrial base while promoting a free market in the rest of Africa. The Committee requested that the Minister should clarify and expand on the country’s policy for and view of the role of African economic integration and regional trade in South Africa’s economic growth and development. Furthermore, it enquired whether there were any plans to strengthen small businesses to access trade and/or investment opportunities through the AfCFTA. In addition, the Committee queried what plans were in place for Africa to leverage the AfCFTA as a platform to improve its global competitiveness.

 

The Minister expressed a view that there was broad recognition that trade policy could be a vehicle to enhance domestic industrial development, with sufficient protection for critical local industries. Therefore, it would be critical to strike a balance between sufficient protection to support industry, as well as ensuring access to markets that would encourage competition and innovation. On the African continent, South Africa’s goal would be to facilitate free trade but also to facilitate the development of industrial sectors within these African countries. This would be to ensure a bigger market to further drive and increase the level of local production and create more jobs.

 

South Africa’s policy approach to African regional tradehas been to advance the development integration approach contained in the AU Agenda 2063: The Africa We Want. Development integration combines work on infrastructure development and industrial development co-operation with market integration. These processes are interlinked and mutually reinforcing.

 

Firstly, the AfCFTA constitutes the market integration pillar that aims to reduce tariffs among AU Members and customs unions, boost intra-Africa trade and create conditions for greater investment in Africa as firms seek to take advantage of an increasingly open and integrated African market. Secondly, infrastructure development on the African continent is driven through the Programme for Infrastructure Development in Africa (PIDA). The PIDA Action Plan is being implemented through the Presidential Infrastructure Championing Initiative and seeks to integrate the continent’s rail, road and ports infrastructure to facilitate the flow of goods across Africa. Apart from the obvious benefits of having well-developed infrastructure, infrastructural development also provides opportunities for African firms to supply a range of industrial inputs for construction and maintenance of rail, road and port developments. Thirdly, industrialisation is at the heart of transformation of the African economy and there is some evidence showing that, since 1990, manufacturing employment share has grown in a number of African countries, but with modest value-added growth. Countries can build on their acquired manufacturing experience to produce both for the region and the rest of the world. Industries like basic metals, chemicals and cement production can benefit from regional markets and there is considerable scope for processing agricultural output into food and beverage products. New opportunities to expand participation in value chains in apparel, automotive assembly, and pharmaceutical and medical products are also emerging.

 

While intra-African trade is comparatively small, covering around 16%-18% of South Africa’s total trade, this trade is predominantly in value-added manufactured products within existing regional trading arrangement, such as SADC. Implementation of the AfCFTA will widen the market, assist in boosting trade in such higher value-added, manufacturing products and underpin further industrialisation. In this respect, effective rules of origin are increasing levels of African produced inputs into the products traded under the preferential terms of the AfCFTA. These rules will contribute to protect, diversify and grow the industrial base in all African countries, including South Africa, and ensure that a greater share of the benefits of intra-African trade accrue to African producers.

 

To seize all opportunities brought by the AfCFTA – not only through market access but also through the infrastructure and industrial development pillars –South Africa is incorporating an AfCFTA Chapter in all the sectoral Master Plans and in the district development strategy. In addition, South Africahas begun consultations with other African countries on the development of cross-border value chains covering a range of industries, including automotives, iron and steel, agro-processing, clothing and textiles, chemicals and pharmaceuticals, ICT infrastructure, transportation and logistics, and financial sectors. Dedicated discussions focusing on these sectors are already underway with SACU Member states and we will expand the discussion with others over time.

 

In terms of strengthening small businesses to be able to capitalise on the opportunities presented through the AfCFTA,the DTIC will be leveraging a series of measures and programmes, namely:

 

• The Export Marketing and Investment Assistance (EMIA) fund provides dedicated support, including to SMMEs, to market their products and services in targeted markets, conduct market research and business intelligence as well as participate in outward trade and investment missions. The EMIA fund also supports inward buying missions from other African countries who wish to interact and engage South African suppliers.
• The Export Barriers Monitoring Mechanisms has been established as a single channel to resolve barriers to trade and investment faced by South African companies across the continent.
• The National Exporters Development Programme will be leveraged to boost the capacity and knowledge base of existing and emerging exporters by running targeted training, information sharing and trade missions.

 

In addition, the above measures and programmes will be further strengthened through the development of the AfCFTA Export Plan and the District AfCFTA Strategy Helper. Both the AfCFTA Export Plan and the District AfCFTA Strategy Helper will be assessing and targeting export and investment opportunities that South African SMMEs and their counterparts across the continent can derive benefits from.

 

With regards to outward investment, the focus will be through public and private sector coordination to leverage existing and upcoming South African investments to pull along a significant portion of the South African supply chain, further opening up opportunities for SMMEs to supply goods and services to clients across the continent. To this end, the DTIC will be working closely with DFIs and financiers (such as Development Bank of Southern Africa (DBSA), Export Credit Insurance Corporation (ECIC), IDC, Public Investment Corporation and commercial banks) to support greater participation of SMMEs in projects financed by them.  Itwill also be working collaboratively with its African counterparts to ensure that local content and national economic empowerment policies are considered.

 

In the area of improving competitiveness, SACU has launched initiatives for member states to start developing and integrating their industrial value chains in a number of key sectors, to leverage export opportunities on the continent through the AfCFTA, as well as in other global markets.

 

1. Skewed trade patterns: The Committee welcomed the initiative by the DTIC to address the challenges of the composition of South Africa’s trade patterns, particularly with China. The Committee enquired whether the DTIC is considering a trade agreement with China to address access to markets and provide for dispute settlement mechanisms to allow legal recourse for challenges such as dumping in the clothing and textile industry.  The Minister informed the Committee that it would not be in South Africa’s interest to have a free trade agreement (FTA) with China. According to the DTIC, a FTA, which must be reciprocal and result in the reductionof import tariffs to zero on substantially all products, would pose considerable danger to the South African manufacturing sector. China is the world’s largest manufacturer and is highly competitive across a broad range of products/industries. Opening up the South African manufacturing sector, which does not enjoy the same economies of scale or competitiveness, could result in significant de-industrialisation and neutralise the initiatives implemented in recent years to grow the manufacturing sector and create jobs. Any gains into the Chinese market through a FTA would not offset the losses, as most South African manufacturers are unlikely to be competitive in that market, nor be able to supply the required volumes. An FTA would essentially expand and “lock in” the current pattern of trade where South Africa primarily exports minerals to China, while importing higher value-added manufactured products. Therefore, thefocus is on finding niche markets in value chains at advanced/high-skill levels of manufacturing in the Chinese and other developing country markets. Export promotion initiatives are key in this respect.

 

With regard to recourse in the event of unfair trade practices, the trade remedy provisions of the WTO agreements have been domesticated through South Africa’s International Trade Administration Act, administered by the ITAC. Anti-dumping, safeguard and countervailing duties can be implemented following a successful application to, and investigation by, the ITAC.

 

1. Access to the Black Industrialist Programme:There was a view expressed that access to the Black Industrialist Programme has been limited to well-connected individuals rather than promoting the development of black industrialists especially among women- and youth-owned enterprises. The Committee enquired what the selection and adjudication process was for companies, and whether gender and other demographics played a role in this process. The Minister was of the view that it would be very unfortunate that the many hard-working South Africans who started their respective business with their life savings would, by receiving support from government, be viewed as being corrupt and that the support were provided as a result of their connections. The DTIC informed the Committee that access to the Black Industrialists Scheme is open to all Black-owned enterprises that apply and comply with the requirements as stipulated in the Black Industrialists Scheme guidelines.  Part of the requirements is that the company that applies forgrant funding should provide evidence of co-funding from either commercial banks or DFIs orany other recognised third party funding, where applicable. The governance and decision-making processes lies with the Black Industrialist Funding Forum, which is comprised of members from the DTIC, IDC, DBSA, ECIC, NEF and Small Enterprise Finance Agency, duly appointed by the Minister. Approved entities with more than 50% Black Female Ownership constituted 20% (27 entities) of the total approved projects to the value of R825 million. Approved entities with more than 50% Youth Ownership constituted 7% (nine entities) to an amount of R221 million.

 

1. Policy framework for illegal imports: Illegal imports have a detrimental impact on especially the manufacturing sector, such as the clothing and textile, and sugar industries. The Committee enquired whether the DTIC had any policy framework to address these challenges. The DTIC informed the Committee that the Inter-Agency Working Group was established to combat illicit trade that imposes enormous costs to the South African economy by eroding domestic industrial capacity, revenue and employment. Addressing illicit imports is vital to meeting the objectives of the various Master Plans that the DTICis implementing. A Rapid Response Team between SARS, the DTIC and the Chinese Embassy was established to deal with illegal imports and trade facilitation issues. Improved control and elimination of illegal imports is key in the efforts to reclaim domestic market share lost to illegal imports.

 

 

1. Conclusions

 

Having considered the information shared and reports from the DTICwith respect to its strategic and annual performance plans, the Committee has reached the following conclusions:

 

5.1     The Committee welcomed the introduction of Joint Key Performance Indicators, which should ensure better coordination between programmes of the department and entities to support industrialisation, trade under the African Continental Free Trade Agreement, economic recovery, and building a capable state.  

 

5.2     The Committee supported the DTIC’s efforts to maximise its reduced budget by leveraging non-financial tools and its development finance institutions’ balance sheets to support inclusive economic growth. In particular, the Committee noted the introduction of monitoring systems for localisation and beneficiation; implementation of the Economic Reconstruction and Recovery Plan; and export barriers. 

 

5.3     The Committee was encouraged by the DTIC’s processes to ensure equity and fairness in the adjudication of incentives and non-financial support offered to businesses including those under the Black Industrialists Programme.

 

5.4     The Committee welcomed the DTIC’s plan to contribute to the District Development Model, which is a government-wide integrated district-based approach aimed at addressing service delivery challenges, improving localisation and job creation, promoting and supporting local businesses, while ensuring the participation of local communities.

 

5.5     The Committee remained concerned about the impact of the COVID-19 regulations on various sectors and highlighted the need for the DTIC to monitor the protracted impact on these sectors.

 

5.6     The Committee raised concerns about South Africa’s skewed trade relations with countries. It requested the DTIC to consider measures to manage such trading relationships to promote more balanced trade.

 

5.7     The Committee welcomed measures to improve South Africa’s Ease of Doing Business ranking such as the development and upkeep of the Ease of Doing Business website.

 

5.8     While the DTIC has measures to improve the Ease of Doing Business and there are inter-governmental Technical Working Groups, the Committee noted the need for improved coordinated efforts with other departments to further improve the Ease of Doing Business.  

 

5.9     The Committee welcomed the implementation of the African Continental Free Trade Agreement, as it presents an opportunity for South Africa to strengthen regional integration and trading relations, attract and facilitate investment, and improve access to markets for African goods.

 

5.10   The Committee commended the continued contribution of the DTIC and its entities to the implementation of the Economic Recovery and Reconstruction Plan.

 

5.11   The Master Plans for the sugar value chain; retail clothing, textiles, leather and footwear; automotive; steel and metal fabrication; furniture; and poultry sectors have been developed and are being implemented by the DTIC. The Committee welcomed this and called on the DTIC to fast track the development of the remaining Master Plans to assist the chemicals; and plastic sectors. 

 

5.12   The Committee is encouraged by the DTIC’s progress on broadening participation through ownership. It particularly supports the DTIC facilitating the design and implementation of worker ownership schemes by the private sector.

 

 

1. Acknowledgements

 

The Committee would like to thank Mr E Patel, the Minister of Trade, Industryand Competition, and MsM Mabitje-Thompson,the acting Director-General of the DTIC, for their cooperation and transparency during this process. The Chairperson wishes to thank all Members of the Committee for their active participation during the process of engagement and deliberations and their constructive recommendations reflected in this report. The Committee also wishes to thank its support staff, in particular Mr A Hermans, the Committee Secretary, Ms M Sheldon, the Content Advisor, Ms Z Madalane, the Researcher, Ms Y Manakaza,the Committee Assistant, and Ms T Macanda, the Executive Secretary, for their professional support. 

 

 

1. Recommendations

 

The Portfolio Committee on Trade and Industry, having considered the 2021 proposed Budget Vote 39: Trade, Industry and Competition, recommends that the House adopts Budget Vote 39: Trade, Industry and Competition.

 

The Democratic Alliance abstained.

 

Report to be considered.

 

References

 

African Union Commission (2015). Agenda 2063: The Africa We Want. [Internet]. Available from < https://au.int/en/agenda2063>.

 

Cingano, F. (2014) “Trends in Income Inequality and its Impact on Economic Growth”, Organisation for Economic Co-operation Development (OECD) Social, Employment and Migration Working Papers, No. 163, OECD Publishing. [Internet]. Available from:<http://dx.doi.org/10.1787/5jxrjncwxv6j-en>.

 

Department of Monitoring, Planning and Evaluation (2020)Medium Term Strategic Framework 2019 – 2024. Government Printers: Pretoria.

 

Department of Trade and Industry. (2012). The Policy on the Development of Special Economic Zones in South Africa. [Internet]. Available from:<http://www.thedtic.gov.za/wp-content/uploads/Policy_SEZ.pdf>.

 

Department of Trade and Industry (2016) Industrial Parks Revitalization Programme.[PowerPoint presentation]. 7 September.Select Committee on Trade and International Relations,Parliament of the Republic of South Africa, Cape Town.

 

Department of Trade, Industry and Competition (2020) Strategic Plan for 2020 – 2025. Government Printers: Pretoria.

 

Department of Trade, Industry and Competition (2021)Annual Performance Plan 2021/22.Government Printers: Pretoria.

 

Madalane, Z. (2021) Budget Analysis: Vote 39: Department of Trade, Industry, and Competition. Research brief. Parliament of the Republic of South Africa.

 

National Treasury (2021a)Estimates of National Expenditure: Vote 39 – Trade, Industry, and Competition. Government Printers: Pretoria.

 

National Treasury (2021b) Budget Review 2021. Government Printers: Pretoria.

 

Ramaphosa, M. C. (2019)State of the Nation Addressby His Excellency Cyril Ramaphosa, President of the Republic of South Africa in the Joint Sitting of Parliament. Cape Town, 20 June.

 

Ramaphosa, C.M. (2021) State of the Nation Address by His Excellency CyrilRamaphosa, President of the Republic of South Africa in the Joint Sitting of Parliament. Cape Town, 11 February.

 

Southern African Development Community (2015). SADC Industrialization Strategy and Roadmap 2015 – 2063.

 

United Nations Development Programme (n.d.) Sustainable Development Goals. [Internet]. Available from: <http://www.za.undp.org/>.

 

World Bank Group (2021) Ease of Doing Business in South Africa. [Internet]. Available from:<https://www.doingbusiness.org/en/data/exploreeconomies/south-africa>.  

 

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[1]Ramaphosa (2021)

[2]Department of Planning, Monitoring and Evaluation (2020: 6)

[3]Department of Planning, Monitoring and Evaluation (2020: 5)

[4] United National Development Programme (n.d.)

[5] Ibid

[6] Ibid

[7]AU Commission (2015)

[8] Ibid

[9]SADC (2015)

[10]National Treasury (2021)

[11]DTIC (2020)

[12]DTIC (2020)

[13]Ramaphosa (2019)

[14]Department of Trade and Industry (2012)

[15]Department of Trade and Industry (2016)

[16]DTIC (2020)

[17]Ibid

[18]National Treasury (2020a: 640)

[19]DTIC(2020: 37, 40, 41, 43, 45, 46, 47, 49, 50 and 52)

[20]DTIC (2021)

[21] National Treasury (2021a: 785-854)

[22]Real termsrefer to the inflation-adjusted figures.Inflation estimates are 4,2%, 4,2% and 4,4% respectively for the three years from 2021/22 to 2023/24 (National Treasury (2021b: 28)).

[23] National Treasury (2021a: 806)

[24] National Treasury (2021a: 809)

[25]Transfers to entities are denominated in nominal terms.

[26]World Bank (2021)

[27]Gross domestic product

[28]Cingano(2014)