ATC211119: Report of the Portfolio Committee on Trade and Industry on the Department of Trade, Industry and Competition’s Fourth Quarter Financial and Non-Financial Performance for the 2020/21 Financial Year, dated 12 November 2021

Trade, Industry and Competition

Report of the Portfolio Committee on Trade and Industry on the Department of Trade, Industry and Competition’s Fourth Quarter Financial and Non-Financial Performance for the 2020/21 Financial Year, dated 12 November 2021

 

The Portfolio Committee on Trade and Industry, having assessed the service delivery performance of the Department of Trade, Industry and Competition (DTIC), against its mandate and allocated resources, in particular the financial resources for the period 1 January to 31 March 2021, reports as follows:

 

1.Introduction

For the period under review, the DTIC achieved more than 85,3 per cent of its targets. This was achieved within an environment of sustained economic pressure, which was further exacerbated by the second wave of Coronavirus (COVID-19) infections. With the introduction of the Economic Reconstruction and Recovery Plan (ERRP), the DTIC continued its engagement and consultation with relevant stakeholders to ensure that the necessary strategies would be in place to mitigate against the impact of the COVID-19 pandemic. Notwithstanding this, the period under review reflected a significant decline in domestic investment. Recent statistics released by Statistics South Africa indicated that the positive Gross Domestic Product (GDP) growth for the period under review was driven, in part, by the manufacturing sector (1,6 per cent contribution to the GDP) compared to the 18,1 per cent contribution by the mining sector[1].

 

1.1.Mandate of the Committee

Section 5 of the Money Bills Amendment Procedure and Related Matters Act (Act No. 9 of 2009) requires the National Assembly, through its committees, to annually assess the performance of each national department over an 18-month period. This culminates in a committee submitting a report of this assessment known as a Budget Review and Recommendation (BRR) Report. The overarching purpose of the BRR Report is for the committee to make recommendations on the forward use of resources to address the implementation of policy priorities and services, as the relevant department may require additional, reduced or re-configured resources to achieve these priorities and services. This Act gives effect to Parliament’s constitutional powers to amend the budget in line with the fiscal framework.

 

The current process forms part of the ongoing oversight of the DTIC’s financial and non-financial performance. This will inform the next BRR process. Furthermore, Parliament’s Annual Performance Plan (APP) requires submission of reports on departments’ quarterly performance.

 

1.2.Purpose of the Report

The purpose of this report is to monitor the financial and non-financial performance of the DTIC against its predetermined objectives and quarterly milestones as part of the Committee’s ongoing budgetary oversight. This report assesses the non-financial and financial performance for the fourth quarter of the 2020/21 financial year, namely from 1 January to 31 March 2021.

 

1.3.Method

The Committee was briefed by the DTIC on its fourth quarter performance report for the 2020/21 financial year on 18 August 2021.

 

1.4.Outline of the contents of the Report

Section 1 of the report provides an introduction to the report including its purpose, and method. Section 2 outlines the DTIC’s strategic objectives, assesses its financial and non-financial performance against its APP for the 2020/21 financial year from 1 January to 31 March 2021 and Section 3 outlines the key issues raised by the Committee during deliberations.  Section 4 provides the Committee’s concluding remarks followed by a note of appreciation in Section 5.

 

 

 

 

 

 

2.DEPARTMENT OF TRADE, INDUSTRY AND COMPETITION

 

2.1. Strategic Goals

The DTIC’s performance was in line with its strategic objectives, which guided its work and was aligned to its programmes. The strategic goals were as follows[2]:

• Promoting structural transformation, towards a dynamic industrial and globally competitive economy;
• Providing a predictable, competitive, equitable and socially responsible environment, conducive to investment, trade and enterprise development;
• Broadening participation in the economy to strengthen economic development;
• Continually improving the skills and capabilities of the department to effectively deliver on its mandate and respond to the needs of South Africa’s economic citizens;
• Coordinating the contributions of government departments, state entities and civil society to effect economic development; and
• Improving alignment between economic policies, plans of the state, its agencies, government’s political and economic objectives and mandate.

 

2.2.Overview and assessment of the financial and non-financial performance[3]

This section provides a comparison between the DTIC’s fourth quarter milestones outlined in its APP against its fourth quarter report for the 2020/21 financial year, namely its non-financial performance, and outlines its financial performance.

 

2.2.1.Non-financial performance[4]

For the period under review, the DTIC had 34 planned quarterly targets and had achieved 29 of these (85,3 per cent of the planned targets). The details per programme are set out below.

 

2.2.1.1.Programme 1: Administration

The Administration Programme had seven performance targets, six of which had been achieved. The performance highlights under this programme were:

• A report on the implementation of the Shared Services Framework had been completed and submitted for approval;
• Three COVID-19 reports had been produced as targeted;
• All eligible creditors’ payments had been processed within legal timeframes;
• 3,9 per cent of employees were people with a disability against a target of 3,5 per cent;
• 53 per cent of employees at Senior Management level were women against a target of 50 per cent; and
• A COVID-19 Plan had been implemented.

 

The one target that had not been met relates to the implementation of the National Macro Organising of Government Phase 2 Plan. However, inputs from branches had been consolidated and submitted to the Director-General in this regard. 

 

2.2.1.2.Programme 2: Trade Policy, Negotiations and Cooperation

Under this Programme, three reports had been planned for the quarter, all of which had been developed. The status reports were on the implementation of the:

• Southern African Development Community-European Union Economic Partnership Agreement;
• African Growth and Opportunity Act; and
• African Continental Free Trade Agreement (AfCFTA).

 

Specific highlights under this Programme included:

• The conclusion of the second round of negotiations on the investment cooperation and facilitation framework between South Africa and the United Arab Emirates (UAE). The purpose of the negotiations is to give comfort to the UAE that its investment in South Africa would be secure despite the absence of a Bilateral Investment Treaty.
• A meeting with the Chinese Ambassador to South Africa to facilitate stronger cooperation on issues relating to customs clearance, mutual recognition of certificates and to address illegal imports.

 

2.2.1.3.Programme 3: Spatial Industrial Development and Economic Transformation

Under this Programme, three implementation reports had been planned and produced. The implementation reports were related to (i) Special Economic Zones (SEZ); (ii) economic transformation; and (iii) industrial Parks.

 

In addition, the DTIC had highlighted the following achievements:

• The DTIC had finalised the approval of seven automotive Original Equipment Manufacturers. Systems have been introduced to implement their R6 billion investment contribution in cash and market access to enhance economic transformation.
• The DTIC, in partnership with Samsung under the Equity Equivalent Investments Programme, participated in the selection and awarding of two Black Industrialist (BI) companies in the E-waste and Recycling sectors. The awarded companies are Matongoni General Trading and Ilanga Waste, a small black women-owned company in the recycling sector.
• Granting of exemptions from the Broad-Based Black Economic Empowerment legislation for the Department of Mineral Resources and Energy on its Risk Mitigation Independent Power Producer Procurement Programme, and for the Department of Tourism on its Tourism Equity Fund.

 

2.2.1.4.Programme 4: Industrial Competitiveness and Growth

There had been four key performance indicators under this Programme. Three of the four quarterly targets had been met. These were (i) the development of the Steel and Metal Fabrication Master Plan; (ii) a progress report on the implementation of Master Plans; and (iii) a quarterly progress report on the support measures to industry to increase localisation of Personal Protective Equipment and other products. One of the targets related to the designation of products for local procurement had already been achieved in the third quarter.  A specific highlight under this Programme was the signing off of the Furniture Master Plan by the relevant stakeholders in March 2021.

 

2.2.1.5.Programme 5: Consumer and Corporate Regulation

Programme 5 had one performance target, which had been achieved. The target was for progress reports on the development or review of the Companies, Liquor and National Gambling legislation to be developed for the Minister’s approval.

 

2.2.1.6.Programme 6: Industrial Financing

Three performance targets had been planned and achieved under this Programme during the observed period. The three targets were:

• A report on the implementation of the ERRP. The DTIC, in this regard, had developed a Memorandum of Agreement on the interest make–up scheme and had submitted this to various banks for consideration. This was to support companies in distress in order to retain jobs and industrial capacity.
• A report on the enhancement of the domestic industrial finance system to crowd-in more funding to enterprises and streamline industrial support.  In this regard, the Industrial Financing web portal had been developed.
• R1,75 billion of leveraged investments from projects/enterprises approved. This target had been exceeded with R5,05 billion investments leveraged which would support over 13 000 jobs.

 

2.2.1.7.Programme 7: Export Development, Promotion and Outward Investments

Programme 7 had three performance targets which had all been achieved. The performance indicators related to (i) the number of barriers processed by the Export Barriers Monitoring Mechanism; (ii) the number of companies assisted under the Export Development and Support (EDS) inclusive of Women, Youth and People with Disabilities (WYPD); and (iii) the number of new applications developed or improved on the Export Data Assistant platform.

 

During the period under review, the DTIC had assisted 317 companies under EDS inclusive of WYPD (134 or 42 per cent were male; 183 or 58 per cent were female; 99 or 31 per cent were youth; and 304 or 96 per cent were Black) and had developed two support platforms, namely: the District AfCFTA Strategy Helper (DASH) and the Southern African Custom Union Export Scoping Engine.

 

2.2.1.8.Programme 8: Inward Investment Attraction, Facilitation and Aftercare

Programme 8 had three performance targets, two of which had been achieved. These were:

• Seven companies had been assisted with various regulatory matters against a target of six companies, and 132 visa/permit requests had been evaluated and recommended to the Department of Home Affairs.
• An investment pipeline of R11,1 billion had been facilitated against a target of R8 billion.

 

The target for a statistical report on Company registration within one day had not been reported on.

 

2.2.1.9.Programme 9: Competition Policy and Economic Planning

All three performance targets in this Programme had been achieved, namely:

• A report on participation in Mergers and Acquisitions for the fourth quarter;
• The 2021 Annual Review Report on the Implementation Progress of Public Interest Conditions, for the period ending 31st March 2021;
• A report on the implementation of Recommendations for a completed market inquiry for the period ended 31 March 2021, namely the Grocery Retail Market Inquiry; and
• A report on the analysis of the 3rd Quarterly Reports of the Competition Commission (CC) and Competition Tribunal (CT), the quarterly Competition Oversight meeting between the DTIC and the Competition Authorities, and the approval process of the 2021/22 APPs of the CC and CT.

 

2.2.1.10.Programme 10: Economic Research and Coordination

Two performance targets had been planned under Programme 10. These related to the production of analytical policy and research reports. For the period under review, the DTIC had produced three analytical policy reports and two research reports, namely the:

• Employment Analysis of the Quarterly Labour Force Survey for the 2020 4th Quarter;
• Investment Analysis Report of the 2020 4th Quarter;
• Economic Analysis Report on Infrastructure Spending;

• ICT and Digital Economy Master Plan for South Africa; and
• Fourth Industrial Revolution Industrialisation Opportunities: 3D Printing/Additive Manufacturing.

 

2.2.2.Financial performance[5]

The R9,31 billion DTIC budget for the 2020/21 financial year had been adjusted down by R37,4 million to R9,3 billion during the medium-term adjustments process in October 2020. Actual expenditure by the end of the fourth quarter had been R9,0 billion (97,5 per cent of the total budget) with underspending of R233,5 million.

 

2.2.2.1.Programme Expenditure

The main contributors to underspending were the Industrial Financing Programme with R91,1 million underspending; the Competition Policy and Economic Planning Programme with R61,9 million underspending; the Economic Research and Coordination Programme, which underspent by R17,9 million; and the Industrial Competitiveness and Growth Programme with R16,2 million underspending. The financial performance of the DTIC’s programmes including further detail on the budget and expenditure per programme is depicted in the table below.

 

Table 1: Fourth Quarter Expenditure by Programme
Programme	Budget (R million)	Actual expenditure (R million)	Expenditure as % of Budget	% Variance
Administration	820,5	814,1	99,2%	0,8%
Trade Policy, Negotiations and Cooperation	109,4	103,1	94,2%	5,6%
Spatial Industrial Development and Economic Transformation	110,6	105,4	95,3%	4,7%
Industrial Competitiveness and Growth	1 642,5	1 626,3	99,0%	1,0%
Consumer and Corporate Regulation	292,3	288,5	98,7%	1,3%
Industrial Financing	5 012,4	4 921,3	98,2%	1,8%
Export Development, Promotion and Outward Investments	400,5	377,8	94,3%	5,7%
Inward Investment Attraction, Facilitation and Aftercare	58,9	56,7	96,3%	3,7%
Competition Policy and Economic Planning	775,4	713,5	92,0%	8,0%
Economic Research and Coordination	50,8	32,9	64,9%	35,1%
Total	9 273,30	9 039,6	97,5%	2,5%

Source: DTIC (2021b)

 

The DTIC attributed its underspending to the following factors, amongst others:

• The contraction in the global and domestic economy, which affected a number of its activities in the areas of trade export missions and pavilions. These had either been cancelled or postponed. There had also been slower than planned incentive disbursements due to the deferment of investment milestones.
• The National Macro Organisation of Government, the Minister for the Public Service and Administration’s directive to not fill posts at the Deputy Director General level, and the COVID-19 lockdown had resulted in delays and impacted on the filling of vacancies.
• The exchange rate fluctuations during the financial year had resulted in savings to certain international organisations of which South Africa is a member.
• The impact of COVID-19 had resulted in the slow disbursement to the Tirisano Construction Fund as some of the construction companies had not been able to make their annual financial contributions.
• Certain transfer payments could not be made due to outstanding compliance documentation.

 

2.2.2.2.Expenditure by Economic Classification

In terms of the economic classification, as alluded to in the programme analysis above, there had been significant underspending in compensation to employees (R7,1 million), goods and services (R9,1 million), and transfers and subsidies (R148,4 million). The DTIC’s financial performance by economic classification is depicted in the table below.

 

Table 2: Fourth Quarter Expenditure by Economic Classification

Programme	Budget (R million)	Actual expenditure (R million)	Expenditure as % of Budget	% Variance
Current payments	1 653,2	1 568,9	94,9	4,1
Compensation of Employees	1 093,0	1 017,9	93,1	6,9
Goods and services	560,1	551,0	98,4	1,6
Transfers and subsidies	7 575,6	7 427,2	98,0	1,9
Payments for capital assets	43,6	42,7	98,0	2,0
Payments for Financial Assets	0,9	0,9	99,8	0,2
Total	9 273,3	9 039,7	97,5	2,5

Source: DTIC (2021b)

 

 

 

3.Issues raised during the deliberations

The following issues related to the performance of the DTIC were raised during the Committee’s deliberations:

 

1. Risks to the Global Economic Outlook: Notwithstanding the positive global economic outlook, significant risks remain that could potentially derail the outlook. These include the slower pace of the vaccination drive especially in developing countries, development and the spread of new variants as a result of delays in vaccine procurement and distribution, and an unexpected tightening of the financial conditions. The Committee was of the view that economic growth in South Africa could not happen in isolation of the ability of local governments to deliver services in support of the District Municipal Model (DDM) as well as the DTIC’s localisation drive. The Committee enquired what measures were being considered by the DTIC to ensure local governments’ contribution to South Africa’s economic recovery. The DTIC informed the Committee that vibrant and growing economies at a district municipality level were critical to stimulate growth and job creation in the South African economy as a whole. However, district municipalities need to be capacitated to be able to plan adequately and effectively implement these plans.  In order to achieve this, government introduced the DDM, which was approved by Cabinet in 2019. The DDM informs government’s approach to improve integrated planning and delivery across its three spheres with district and metropolitan spaces as focal points of investment.

 

Furthermore, the DTIC informed the Committee that it supports the DDM through the development and implementation of single infrastructure development plans for SEZs and Industrial Parks in all provinces.These plans are developed in partnership with other national government departments, provinces, municipalities and state-owned entities. For this financial year, the DTIC is developing district economic briefs which will inform the export strategies it is developing for district municipalities and metros.

 

Various industrial master plans have also been spear-headed by the DTIC in order to support economic recovery as part of the implementation of the Re-imagined Industrial Strategy as well as the ERRP. These master plans are a collaborative initiative, bringing together social partners from government, business and organised labour. Local government forms part of the key stakeholders from government, particularly in the effort to expedite implementation.

 

1. Impact of corruption on economic growth: The Committee was of the view that the fourth quarter report of the DTIC’s financial and non-financial performance failed to reflect on the impact of state capture and corruption on economic growth. The Committee enquired whether state capture and corruption had contributed to slower economic growth in the fourth quarter. The DTIC acknowledged that although the South African economy had been performing well before the 2008/09 recession, brought on by the global financial crisis, the country has struggled to move out of the low-growth environment due to both the global developments and domestic structural challenges. One of the main structural challenges is the electricity load-shedding crisis, which has weighed down economic growth and confidence leading to the economy growing by below two per cent per annum over the last few years.  This has been further compounded by the lockdown restrictions under the risk-adjusted strategy to curb the spread of the COVID-19 pandemic. The easing of some of the restrictions and the implementation of the measures under the ERRP has resulted in relatively positive economic performance over the last three quarters (from July 2020 to March 2021).

 

With regard to state capture, the DTIC informed the Committee that the Zondo Commission of Inquiry into allegations of state capture in the public sector; including organs of state such as: Transnet, Eskom, South African Airways and Denel, provides some explanation for the extent of the financial mismanagement at these enterprises. Evidence submitted to the Commission suggested that financial leakages have set back planned projects, infrastructure expansion and maintenance as well as the expected provision of the services by these State-Owned Enterprises, which impedes on the sectoral output filtering through to general economic growth.

 

The DTIC informed the Committee that it is irrefutable that corruption is harmful to the investment climate and significantly slows down foreign direct investment.Corruption, perceived or real, has a potential to lower investor confidence and undermine government’s efforts to attract foreign direct investment to boost economic growth and create jobs. This also contributes to poverty and inequality as resources are diverted away from critical public and social services for the most vulnerable members of the society.

 

In October 2019, the president estimated corruption to have cost the country as much as R1 trillion. This figure is approximately one third of GDP at 2010 constant prices. It is therefore important for all South Africans to support decisive action undertaken to confront state capture and corruption.

 

1. Rise in unemployment: One of the key missions of the DTIC, among others, is to broaden participation in the economy to strengthen economic development. This was severely compromised with the onset of the COVID-19 pandemic and its adverse effect on the global economy, including on South Africa. As a result of the global pandemic, unemployment increased mainly affecting the youth. The Committee enquired what measures the DTIC would be considering to reverse the trend of increasing unemployment especially among the youth. The DTIC informed the Committee that the Small, Medium and Micro Enterprises (SMMEs) Payroll Assistance was being administered by the Department of Small Business Development. It targeted employees of SMMEs (employers) that would not be able to claim from the Unemployment Insurance Fund (UIF), as their employers had not being registered with the UIF. Furthermore, the DTIC’s continued incentive programme which aims at enhancing sustainability to the manufacturing companies, provides a platform for longer-term employment creation.

 

Six Master Plans had been introduced in the following sectors: Clothing, Textiles, Footwear and Leather; Poultry; Sugar; Steel industry; Furniture; and Auto Industry. These sectors are envisaged to stimulate and grow the economy, hence creating jobs in the process.

 

Localisation had been a key component of Government’s economic policy since 2014. It had been re-ignited to address the economic impact and effects of the COVID-19 pandemic. It focuses on building local industrial capacity for the domestic market and for export markets and seeks to address the issues of:

• Resilience and innovation,
• Increased competitiveness,
• Transformation, economic inclusion and jobs for women and youth,
• Greater beneficiation of mineral resources,
• Development of jobs in new industries and the green economy,
• Enhancement of government support for industrial sectors,
• Capacity building for the African market and the rest of the world, and
• Infrastructure development.

 

The DTIC is of the view that successful localisation efforts would expand the South African economy, providing opportunities and jobs for a greater number of South Africans. To ensure that historically disadvantaged South Africans can take advantage of the opportunities, government introduced the BI Programme, providing funding to black entrepreneurs who own and operate their businesses.

 

1. Decline in domestic investment: The decline in domestic investment over the fourth quarter of the 2020/21 financial was a major concern for the Committee. This decline was further exacerbated with the second wave of COVID-19 infections in the fourth quarter. This would have further contributed towards lower investment with the prospects of an economic rebound being severely compromised. This was despite significant increases in investment by public corporations and government. The Committee enquired what measures were being considered by the DTIC to improve fixed capital investment, including measures to increase the capacity of local manufacturers to stimulate economic growth. According to the DTIC, the master plans aim to build dynamic firms and local industries’ capabilities as suppliers to domestic, regional and global markets by reducing the proportion of imported intermediate and finished goods; improving the efficiency of local producers and developing export competitive sectors that could expand the sales of South African products on the continent and beyond.

 

Investment commitments made included, amongst others:

• Bader SA (Pty) Ltd, located in Ga-Rankuwa, Gauteng, is a company with 800 employees. It has invested R300 million in additional capacity to manufacture automotive leather and split leather.
• The poultry industry has invested R1,5 billion in additional capacity.
• Sizabantu Piping Systems (Pty) Ltd was investing R70 million for the extrusion of 630mm PVC-O pipes and this would create a further 26 permanent employment positions.
• Mentholatum South Africa (Pty) Ltd, in Cape Town, the only local toothbrush manufacturer, has had a few meetings with the Clicks Group Limited to supply a portion of their imported toothbrushes. In 2018, the import value of toothbrushes was just above R241 million, and Clicks has set aside between R10 and R30 million in support of localisation. Discussions in this regard were at an advanced stage.

 

The DTIC also informed the Committee that it makes multiple incentive schemes available to improve investment and increase capacity of local manufacturers. These incentives include the following:

• The Manufacturing Competitiveness Enhancement Programme, which provides working capital and funds niche projects with potential for job creation, diversification of manufacturing and contribution to exports.
• The Clothing and Textiles Competitiveness Programme, which aims at assisting the industry in upgrading equipment and increasing competitiveness in relation to low cost producing countries.
• The Agro-Processing Support Scheme, which aims at stimulating investment by agri-businesses in order to increase capacity, modernise machinery and improve productivity.
• The Automotive Investment Scheme, which supports investment in new or replacement models and components that will increase production volumes and strengthen the automotive value chain.  

 

1. Importance of the vaccination drive: As part of its promotion of vaccination, the DTIC presentation used the slogan “More jabs, more jobs”.  However, some Members stated that despite their support for vaccination, vaccination should remain voluntary, in light of vaccines, such as Pfizer and others, not yet being fully approved by the United States’ Food and Drug Administration (FDA). Furthermore, it would appear that some employers are making vaccination a mandatory requirement, which in the opinion of some Members may contribute to further job losses where employees are resistant to being vaccinated. The Committee enquired how a speed up in vaccine production and the rollout of vaccination would contribute to job creation. The DTIC informed the Committee that the global economy, including South Africa, was showing strong signs of recovery from the COVID-19 induced decline. According to the International Monetary Fund’s World Economic Outlook, released in July 2021, the global economy was projected to grow by 6,0 per cent in 2021 and 4,9 per cent in 2022 and the South African economy by 4 per cent and 2,2 per cent in 2021 and 2022 respectively. However, significant downside risks still exist, amongst those, was the slow pace of vaccination drives, especially in developing countries. This was attributed to vaccine hesitancy as well as uneven access to vaccines due to lack of resources and vaccine nationalism amongst others.

 

When the COVID-19 pandemic broke out in early-2020, global economies including that of South Africa were shut down in an effort to arrest the spread of the virus by limiting human movement. As a result, the global economy declined by 3,2 per cent in 2020 while the South African economy recorded a 7 per cent contraction. The rebound experienced in the past three quarters (July 2020 to March 2021) and the projected growth in 2021 are a result of the gradual opening up of the economy.

 

The DTIC was of the view that if the speed of vaccination picked up, the spread of the virus would be arrested, leading to the reopening of the economy and the creation of jobs.

 

Although South Africa started its vaccination drive later than some countries, the vaccination drive was picking up and there were two vaccines being rolled out, Pfizer and Johnson & Johnson (J&J). Although the J&J vaccine was still only approved for emergency use by the FDA, the Pfizer-BioNTech COVID-19 Vaccine, was fully approved by the FDA for the prevention of the COVID-19 disease in individuals 16 years of age and older. Therefore, the vaccines that were being rolled out in South Africa were safe and there was no scientific reason to doubt their safety.

 

 

According to the DTIC, the Aspen Pharmacare Holdings Limited was already manufacturing the J&J vaccine in Gqeberha, Eastern Cape, to supply South Africa and the rest of the African continent. Also, the World Health Organisation, the Medicines Patent Pool, Afrigen Biologics (Pty) Ltd, the Biologicals and Vaccines Institute of Southern Africa, the South African Medical Research Council, and Africa Centres for Disease Control and Prevention have signed a letter of intent to bring together partners to establish the South African messenger ribonucleic acid technology transfer hub that will allow for greater and more diversified vaccines manufacturing capability, strengthen African regional health security and respond more equitably to the current COVID-19 pandemic and future pandemics.

 

All these efforts bring along the localisation of vaccine manufacturing in the country; and improve the vaccine accessibility which in turn increases investment, technology transfer and job creation.

 

1. Local public procurement and allocations for youth-owned business: The Committee enquired whether there were ‘set asides’ for youth-owned businesses as part of the DTIC’s local public procurement drive and the designation of products and/or sectors. The DTIC informed the Committee that the Supreme Court of Appeal, on 2 November 2020, declared the entire Preferential Procurement Regulations as invalid, in particular, Regulation 4 dealing with the pre-qualification of tenders for designated groups (black and WYPD), and Regulation 9 on subcontracting. This meant that organs of state cannot disqualify prospective contractors who were not majority black-owned without first considering their bids on the functionality, price and Black Economic Empowerment scoring. The judgment thus affected ‘set asides’. National Treasury has approached the Constitutional Court of South Africa for an application to appeal the judgment and the order from the apex court regarding this matter was being awaited. Furthermore, National Treasury would be better placed to advise on the ‘set asides’ because they are outside the legislative ambit of the DTIC.

 

1. Incentive programmes: The provision of incentives is a critical tool to stimulate and facilitate the development of sustainable, competitive enterprises in support of national priorities. For the period under review, it would appear that there had been a slowdown in the disbursement of incentives, which resulted in underspending for the Industrial Financing Programme. The Committee enquired about the level of uptake in provinces especially among BIs. In addition, where there was low uptake in more rural provinces, whether this could be attributed to lack of awareness of the available programmes and/or the capacity of businesses located there to submit proposals and meet the necessary requirements. According to the DTIC, the Industrial Financing Branch experienced a low uptake of applications in more rural areas across incentive schemes. With the impact of the COVID-19 pandemic negatively affecting a number of industries, many businesses’ propositions submitted with applications were not commercially viable. This resulted in many applications being rejected due to lack of commercial viability and in some cases lack of co-funding. To correct this, the Branch was collaborating with national Development Finance Institutions, namely the Industrial Development Corporation and the National Empowerment Fund, as well as provincial financial agencies to improve accessibility, especially in rural areas.

 

4.Conclusions

Based on its deliberations, the Committee drew the following conclusions:

 

4.1     The Committee noted that despite the improved global economic outlook, risks remain which may potentially compromise South Africa’s economic recovery. These risks relate to the development and spread of new variants, as a result of the delay in vaccine procurement and distribution.

 

4.2     The Committee recognised the negative socio-economic impact of the COVID-19 pandemic, especially with regard to the rising unemployment levels, especially among the youth. The Committee welcomes the DTIC’s support provided to the Youth Employment Scheme (YES) as well as support given to youth-owned or managed businesses.

 

4.3     Corruption, state capture and the unstable supply of electricity remains of concern to the Committee, as the failure to address corruption in all its forms may further compromise economic growth.

 

4.4     The Committee noted that despite significant public investment, private investment lagged behind which had been worsened by the second wave of COVID-19 infections for the period under review.

 

4.5     The Committee was of the view that the above-mentioned factors could slow down the domestic economic recovery and may lead to further fiscal constraints.

 

4.6     To mitigate the socio-economic impact of the COVID-19 pandemic, the Committee encouraged the DTIC to persist in its implementation of the interventions as mandated by the Economic Reconstruction and Recovery Plan and to consider creative ways to reach and include businesses in more rural provinces.

 

4.7     The Committee noted with concern the decline in domestic investment during the fourth quarter despite significant increases in investments by public corporations and government. It, however, welcomed the investment by companies such as Bader SA (Pty) Ltd, Sizabantu Piping Systems (Pty) Ltd, and firms within the poultry industry.

 

4.8     The Committee welcomed the collaborative social compact between government, business and organised labour on the various master plans spearheaded by the DTIC as part of the Economic Reconstruction and Recovery Plan, and to further mitigate against the decline in economic growth due to the COVID-19 pandemic.

 

5.Appreciation

The Committee would like to thank the Acting Director-General of the Department of Trade, Industry, and Competition, Ms M Mabitje-Thompson, as well as her team, for their cooperation and transparency during this process. The Committee also wishes to thank its support staff, in particular the committee secretary, Mr A Hermans, the content advisor, Ms M Sheldon, the researcher, Ms Z Madalane, the committee assistant, Ms Y Manakaza, and the executive secretary, Ms T Macanda, for their professional support and conscientious commitment and dedication to their work.  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.

 

 

References

 

Department of Trade, Industry and Competition (2020) Revised Annual Performance Plan 2020/21. Pretoria.

 

Department of Trade, Industry and Competition (2021a) Verified Fourth Quarter Report for The 2020/21 Financial Year.

 

Department of Trade, Industry and Competition (2021b) Fourth Quarter Performance Report 2020/21. [Powerpoint presentation] 18 August.

 

 

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[1] DTIC (2021b)

[2] DTIC (2020)

[3] DTIC (2021a) and (2021b)

[4] DTIC (2021a)

[5] DTIC (2021b)