ATC130513: Report of the Portfolio Committee on Trade and Industry on Budget Vote 36: Trade and Industry, dated 10 May 2013
Trade, Industry and Competition
Report
of the Portfolio Committee on Trade and Industry on Budget Vote 36: Trade and
Industry, dated 10 May 2013
The
Portfolio Committee on Trade and Industry, having considered Budget Vote 36:
Trade and Industry, reports as follows:
1.
Introduction
The
Department of Trade and Industrys (DTI) budget of 2013/14 offers the committee
an opportunity of assessing the progress it has made in overcoming the
challenges it faced in 2009 and achieving its strategic objectives. Among the
challenges in 2009 were a declining clothing and textile sector with its
associated job losses, local companies in distress and the risk of
deindustrialisation and a decline in trade partly due to the lack of
competitiveness and the global financial and economic crisis. This compelled
the government to implement interventionist policies and to accelerate
industrialisation of
This
decision in 2009 to accelerate industrialisation in the economy was reinforced in
the 2013 State of the Nation Address (SONA) by President J Zuma, who has called
on the public and the private sector to work together to create a productive,
investment-friendly environment. The governments R827 billion infrastructure
investment over the next three years
[1]
will facilitate serious private sector productive investment. This is expected
to accelerate industrialisation, generate a pool of strategic skills and boost
much needed job creation
[2]
.
Three key
issues of the SONA that relate directly to DTIs mandate are
[3]
:
·
The
high rate of unemployment
,
particularly
among the youth in the country
.
·
The
need for participation by black South Africans and women in economic activity
Industrial Development, and
·
Strengthening
the countrys economic and investment ties with other regions and specifically
African countries through regional integration.
In line
with the priorities of SONA, the DTI has implemented the Industrial Policy
Action Plan (IPAP II), the 2013 iteration, is seen as a vehicle to accelerate
economic transformation through the re-industrialisation of the South African
economy. The IPAP II is the flagship programme by the Department of Trade and
Industry to enforce the priorities of the country.
The IPAP II, iteration in 2013, streamlines the
activities of the Department under four pillars, namely: the promotion of
labour-absorbing industrialisation, increasing competitiveness, broadening
participation, and creating a regulatory environment that will promote
investment and ease of doing business.
To promote labour-absorbing industrialisation, the Department of Trade
and Industry has developed a strategy for the promotion of industrial
development as the part of its core business. In line with the countrys
industrial development objectives, the Department funds the countrys
manufacturing sector (a sector that has been identified a as labour-absorbing
sector) through a pool of incentives including the
Manufacturing
Competitiveness Enhancement Programme
(MCEP), the Clothing and Textile Competitiveness Improvement Programme (CTCIP),
and the Support Programme for Industrial Innovation (SPII). The decline in
clothing industry has been stemmed and other distressed companies, etc.
Furthermore, the Department has undertaken the initiative to perform
feasibility studies to determine other areas of development in the country
through the Special Economic Zone (SEZ) Programme.
These
programmes are intended to promote investment in beneficiation activities to
add value and diversify output and to expand downstream and upstream
value-chains.
Beneficiation is critical in that the country needed to
shift away from imported goods and rely on locally produced goods. As a result
of the change in demand from our traditional trading partners,
The
Department seeks to broaden participation in the economy through a regulatory
framework. Within this framework, the DTI implements legislation, including the
Broad-based Black Economic Empowerment and Cooperatives Act, that creates
opportunities for previously disadvantaged citizens to participate in economic
activities by means of business ownership and employment in cooperatives and
small, medium and micro enterprises (SMMEs). In this regard, the DTI offers a
range of incentives including the Black Business Supplier Development Programme
(BBSDP), the Co-operatives Investment Scheme (CIS) and the Technology and Human
Resources for Industry Programme (THRIP). The DTI has programmatically linked
youth employment with the priority of creating jobs. It is also intent on
establishing an environment that encourages competition which in turn will
expand the creation of jobs, economic growth and development. This will feed
into a Youth Enterprise Development Strategy.
[5]
Furthermore,
the promulgation of the Intellectual Laws Amendment Bill, which seeks to
protect traditional knowledge and geographic indicators, has been delayed, as
the President referred his reservations regarding the legislation back to
Parliament. The Bill has subsequently been retagged and is awaiting approval by
the National Assembly.
The
important catalytic role industrialisation plays in our developmental economy
relies upon 18 departments working more closely together to ensure a cohesive
implementation in an integrated National Industrial Policy Framework. This
overview provides the economic platform for the committees budget oversight to
ensure the accountability of the Executive and the Accounting Authorities
within a good governance framework that serves the people.
1.1.
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 (No. 108 of 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 require
committees to consider and report on their department and entities strategic
plans. Portfolio committees may also advise the Committee on Appropriations in
the National Assembly regarding possible amendments within a budget vote for
its consideration. In its oversight of policy implementation into legislation,
the committee must ensure that robust, sound and implementable legislation is
developed and can stand the constitutional muster. Every endeavour is made to
ensure that legislation is transformational and constitutionally sound.
1.2.
Purpose
The
purpose of this report is for the Portfolio Committee on Trade and Industry to
report on its consideration of the DTIs strategic plan and budget vote, as
well as the strategic plans of its entities. As the committee covers 14
entities, it had made a strategic decision to annually select a number of
entities to consider ensuring more robust oversight over these. During this
budget oversight process, the committee selected the following seven entities
to oversee their budgets and strategic plans:
·
Companies and Intellectual
Property Commission,
·
Export Credit Insurance
Corporation of
·
National Consumer Commission, and
·
The technical infrastructure
institutions, namely:
-
National Metrology Institute of
-
National Regulator of Compulsory
Specifications,
-
South African Bureau of Standards,
and
-
South African National
Accreditation System.
The DTI budget
of R9.6 billion has broadly been allocated in terms of industrial development
(74.7 per cent), trade, investment and export promotion (5.3 per cent),
broadening participation (10.1 per cent), regulation (2.7 per cent) and
administration (7.2 per cent)
[6]
.
The Companies and Intellectual Property Commission and Export Credit Insurance
Corporation of
The selection
of the technical infrastructure institutions was linked to their strategic
importance in supporting the manufacturing sector and exports and protecting
consumers from unsafe or poor quality products and services. These institutions
ensure the maintenance of quality standards, compulsory specifications,
accredited testing facilities and measurement units.
Furthermore,
the committee has committed to monitoring the development of the Companies and
Intellectual Property Commission (CIPC) and National Consumer Commission (NCC),
as these had been recently established and had experienced significant teething
challenges. These commissions provide critical regulatory functions to
businesses and consumers respectively. The Companies Act, underpinning the creation
of the CIPC, has been lauded as a landmark piece of legislation, creating an
appropriate regulatory environment for companies and business, as well
accommodating the development of SMMEs.
The Export
Credit Insurance Corporation (ECIC) had also been selected, as it provides
services to potential exporters or domestic investors intending to transact
abroad for medium to long term projects. These activities enable the countrys
objectives of supporting regional development through infrastructure and other
projects. Thus, increasing demand for South African skills.
1.3.
Process
Oversight
over Vote 36 involved a robust engagement with the Minister, Dr Rob Davies, and
the Director-General, Mr Lionel October. During this engagement, the budget was
unpacked against the DTIs strategic plan and the priorities of SONA within the
prevailing economic climate. This required the committee to evaluate the
alignment of industrial financing, incentives and other instruments to
industrial policy objectives to ensure a labour-absorbing economy.
The
committee met on 23 April 2013 to consider the DTIs Medium Term Strategic
Framework 2013/14 2015/16. The Minister and Director-General provided the
context within which the DTIs Medium Term Strategic Framework had been developed
and presented its Annual Performance Plan.
The
committee further engaged with the abovementioned entities regarding their
strategic plans and budgets for the 2013/14 financial year on 16 18 April
2013 in line with the noted objectives.
2.
Department of Trade and Industry
The
Director-Generals briefing outlined the strategic objectives and key
interventions as described in the Medium-Term Expenditure Framework (MTEF) for
2012 2015. The five intervention areas or themes are
[7]
:
·
Industrial Development,
·
Trade, Investment and Exports,
·
Broadening Participation,
·
Regulation, and
·
Administration and Coordination.
In order
to ensure alignment of the DTIs programmes to government-wide priorities and
outcomes, the Department identified key strategic outcome-orientated goals.
These are to
[8]
:
·
Facilitate transformation of the
economy to promote industrial development, investment, competitiveness and
employment creation;
·
Facilitate broad-based economic
participation through targeted interventions to achieve more inclusive growth;
·
Build mutually beneficial regional
and global relations to advance
·
Promote a professional, ethical,
dynamic, competitive and customer-focused working environment that ensures
effective and efficient service delivery.
2.1.
Achievements
during the 2012/13 financial year
At the end of March
2013, the DTI achieved the following according to the four quarterly reports for
the 2012/13 financial year. These are grouped according to the DTIs focus
areas, namely industrial development; trade, investment and exports; broadening
participation; and regulation.
[9]
Industrial Development
·
Designated
products
: The DTI had submitted sector designation templates to the National
Treasury for set-top boxes for digital television, oral dosage tender for
pharmaceutical products and school and office furniture.
·
MCEP
: The
programme was launched in May 2012; 189 enterprises were approved for grants
valued at R992.2 million and 33 551 jobs are expected to be retained.
·
THRIP
: The THRIP had
approved support for 1 257 students (57.2 per cent of the target) and 609
researchers (71.6 per cent of the target).
·
Kuvusa investment
: The DTI facilitated the
setting up and launch of the first small scale milling plant which will see the
maize meal at a price being reduced by up to 20 per cent for South African
households in the area. The SMMEs and Co-operatives have always been recognised
as a vehicle for small-scale manufacturing. This has been exemplified with the
establishment of the Kuvusa Mills in
·
SPII
:
Funding
was approved for 53 projects to the total value of R203.5 million, where the
SPII contribution was R109 million and the industrys contribution was R94.5
million.
Trade, Investment and
Exports
·
BRICS
: Participated
in the 3
rd
Contact Group on Economic and Trade Issues (
CGETI
) meeting in
·
Trade promotion
: Organised 22 National Pavilions,
most of which were on new high growth markets such as Asia, Africa, South
America, the Middle East and large markets such as Europe and
·
National Exporter Development Programme (
NEDP
)
: The NEDP was presented
and endorsed by the Economic Sectors and Employment Cluster (ESEC) of Cabinet.
·
Investment
promotion
: Recorded R53.5 billion in the pipeline of investments in sectors such
as
manufacturing, automotives, agro-processing
and mining; steel and cement, renewable energy as well as services in particular
business process outsourcing (BPOs).
·
Export
Market and Investment Assistance (
EMIA
)
scheme
: Assistance was provided to 1 084 enterprises.
Broadening Participation
·
Cooperatives
: The
Cooperatives Amendment Bill was
adopted by the National Assembly. In addition,
314
enterprises were also approved for the
CIS.
·
New programmes
: Aquaculture Development
and Enhancement Programme (
ADEP
)
and Incubator Support Programme (
ISP
)
launched.
·
Broad Based Black Economic Empowerment (
B-BBEE
)
: The B-BBEE Amendment Bill
was
approved by the Cabinet and introduced into Parliament. The
B-BBEE Codes of Good Practice were also
gazetted for public comment. Furthermore,
1 213 enterprises were
approved for the
BBSDP.
·
Small business development
: Hosted together
with private sector partners the
International
Small Business Congress
in September 2012. The Small Enterprise
Development Agencys (
SEDA)
Technology Programme established 10 new
incubators
;
supported 1 258
SMMEs
and approved 376 SMMEs for assistance. In addition, the DTI
implemented
some of the recommendations contained in the
SMME Review Report
.
·
Women
empowerment
: 31 new projects were approved for the Isivande
Womens Fund (
IWF
). Furthermore,
the National Strategic Framework on Womens Economic
Empowerment was finalised and was awaiting presentation to Cabinet.
·
Competitiveness
improvement
: 83 new contracts with new companies participating in
the Workplace Challenge Programme (
WCP
).
·
Informal sector
: The Informal Sector Strategy
draft has been developed and the Reference Group has been established
with the support of the International Labour Organisation.
·
Youth development
: The Youth Enterprise
Development Strategy (
YEDS
) was approved
by the Minister.
Regulation
·
Intellectual
property
: Final Policy Framework on
Intellectual Property
produced incorporating the recommendations
from the Copyright Review Commission Report.
·
Legislation
:
The Draft Policy Framework and Draft Bill on the
Business Reform Registration have been
developed. The Draft Policy
and Bill for
Licensing of Businesses
has been
developed and presented to Cabinet for wider
consultation process. In addition, the Regulatory Impact Assessments (RIA) on
the
National Credit Act
and
Business Act Review had been
developed.
2.2.
Key
strategic interventions for 2013/14 period
The IPAP II will remain the instrument for
re-industrialisation going forward for the ultimate goal of creating
labour-absorbing economy. For further build on the successes of the past
financial year, the Department has identified key areas of interventions crucial
for job creation and economic growth that will be implemented in the 2013/14
financial year through the IPAP.
These
include
[10]
:
·
Upscaling industrial policy by
tabling the annual rolling IPAP aimed at achieving economic growth and job
creation. Through this it would enhance competitiveness and achieve
governments objective of decent employment through inclusive growth.
·
Developing three sector specific
action plans to influence and respond to the changing economic environment to
enhance the countrys manufacturing potential.
·
Submitting designation templates
to the National Treasury for two subsector/sectors for local procurement under
the Preferential Procurement Policy Framework Act.
·
Undertaking two key research
projects that would facilitate the development of interventions to expand
value-added activities in existing and new sectors of the economy including
beneficiation.
·
Implementing the Special Economic
Zones (SEZ) programmes to strengthen industrialisation through the spread of
economic opportunities.
·
Continuing support for technical
competencies via the Technology and Human Resources for Industry Programme
(THRIP) in the chemical, information and communication technology (ICT), metal
and minerals, agriculture, biotechnology and energy sectors.
·
Supporting 20 new projects to the
value of R43 million through the Support Programme for Industrial Innovation
(SPII).
·
Supporting students enrolled for
the tool-making apprentice and industrial upgrading programmes.
·
Approving 940 enterprises to
participate in the Export Marketing and Investment Assistance (EMIA) scheme.
With respect to trade, investment
and exports, the DTI intends to
[11]
:
·
Conclude the negotiation of the
SADC-EU (European Union) Economic Partnership Agreement (EPA)
, the
SACU
-India Preferential Trade Agreement (
PTA
), the
TFTA
[12]
and produce a status report on progress towards the conclusion of trade
negotiations.
·
Produce a report
on the progress of implementing the agreed programmes and projects for
priority development areas in
SACU,
SADC FTA and Spatial Development Initiative (SDI)
infrastructure
projects.
The Committee looks forward to the speedy and
successful conclusion of these negotiations, especially with respect to the
EPAs.
With regard to broadening
participation, the DTI will
[13]
:
·
Set aside R119 million to support
existing incubators and small, medium and micro enterprises (SMMEs) with a
performance monitoring report to be produced on its progress.
·
Submit the National Strategic
Framework on Gender and Women Empowerment for cabinet approval. A phased-in
implementation report will be produced
.
·
Seek the approval of the
business cases for the establishment of the Co-operative Development Agency, as
well as the Co-operative Tribunal.
·
Finalise the informal sector and
the youth enterprise development strategies
2.3.
Overall
departmental budgetary allocation
The
Department of Trade and Industrys expenditure has been increased by an average
annual growth rate of 11.9 per cent between the 2009/10 and the 2012/13
financial years.
In the 2010/11 financial
year, expenditure declined from R5.9 billion in 2009/10 to R5.7 billion in
2010/11. However, expenditure has been on an upward trend since the 2011/12
financial year increasing to R6.8 billion and to R8.3 billion in the previous
financial year. In the current financial year, expenditure is expected to be
R9.6 billion,
increasing from R8.35 billion in 2012/13, a real increase of 8.55 per cent.
The
Departments expenditure is forecasted to reach R11.4 billion by the 2015/16
financial year.
[14]
The
Departments expenditure between the 2009/10 and 2015/16 financial year is
depicted in the graph below.
The Department of Trade and Industrys budget is
divided among its seven programmes, namely:
·
Administration,
·
International Trade and Economic
Development,
·
Broadening Participation,
·
Industrial Development: Policy
Development,
·
Consumer and Corporate Regulation,
·
Incentive Development: Incentive
Administration, and
·
Trade and Investment
Figure 1: DTIs budget share per
programme (2013/14)
Source:
Own calculations based on National Treasury (2013a)
Over the
medium term, the Departments spending will be centred on the implementation of
policies, strategies, programmes and incentives aimed at promoting industrial
development and broadening participation in the economy. These are implemented
through the
Industrial Development:
Incentive Administration
and the
Industrial
Development: Policy Development
programmes,
which use the bulk of the Departments allocation over the medium term (approximately
75 per cent of the total budget) (see Figure 1).
The largest share of the budget amounting to R5.5
billion (58 per cent of the total budget) is appropriated to the
Industrial Development: Incentive Administration
Programme. This is followed by the
Industrial Development: Policy Development
Programme (R1.6 billion or 17 per cent of the total
budget) and the
Broadening
Participation
Programme
(R
968.3
million or 10 per cent of the total budget). The lowest
allocations were to the
International
Trade and Economic Development programme
(R138.6 million or 1 per cent of the total budget) and
the
Consumer
and Corporate Regulation
programme (R256.2 million or 3 per cent of the total budget).
The increase in the Departments budget for the 2013/14
financial year was mainly as a result of real increases in the
Trade and Investment South Africa and the
Industrial Development: Incentive Administration programmes budget allocations
which increased in real terms by 26.1 per cent and 15.1 per cent respectively.
The allocations for the other programmes decreased in real terms. (See Table 1)
Table 1: Budget Summary
Department of Trade and Industry
Programme
|
Budget
|
Nominal
% change
|
Real
% change
[15]
|
|||
R
million
|
2012/13
|
2013/14
|
2014/15
|
2015/16
|
2012/13-2013/14
|
|
Administration
|
697.2
|
690.1
|
720.6
|
748.3
|
-1.02
|
-6.27
|
International Trade and Economic Development
|
134.7
|
138.6
|
150.7
|
156.9
|
2.90
|
-2.56
|
Broadening Participation
|
940.0
|
968.3
|
1 004.0
|
1 054.9
|
3.01
|
-2.45
|
Industrial Development: Policy Development
|
1 492.7
|
1 606.5
|
1 771.3
|
2 049.8
|
7.62
|
1.92
|
Consumer and Corporate Regulation
|
248.1
|
256.2
|
248.2
|
258.3
|
3.26
|
-2.21
|
Industrial Development: Incentive Administration
|
4 560.9
|
5 543.1
|
5 645.7
|
6 704.1
|
21.54
|
15.09
|
Trade and Investment
|
277.5
|
369.7
|
417.4
|
432.4
|
33.23
|
26.16
|
TOTAL
|
8 351.1
|
9 572.5
|
9 957.9
|
11 404.7
|
14.63
|
8.55
|
Source:
National Treasury (2013a)
In terms of the economic classification, the majority
of the DTIs budget (84.2 per cent) consists of transfers mainly through
incentives to businesses or to its entities, compared to 82.2 per cent in the
2012/13 financial year. The DTIs transfers also grew in real terms by 11.2 per
cent since 2012/13. The DTI has decreased its budget share allocated to current
payments from 17 per cent in 2012/13 to 15.6 per cent in 2013/14. This share
has increasingly been dominated by compensation to employees (R854.2 million in
2013/14, which grew in real terms by 9.9 per cent). However, payments on goods
and services declined in real terms by 11.8 per cent since 2012/13.
A brief budget analysis per programme follows based on
the tables listed in Appendix A:
Programme 1: Administration
The Administration programme
provides strategic support and management to the Department and its agencies.
The programme also ensures successful implementation of the Departments
mandate.
The programme has six
sub-programmes, namely, the Ministry, the Office of the Director General,
Corporate Services, Office Accommodation, Financial Management, Media Relations
and Public Relations, and Communications.
In the 2013/14 budget, the
Administration programme accounted for 7 per cent of the Departments total
budget with a value of R
690.1
million. The budget allocation decreased by 6.3 per cent in real terms from
R697.2 million in 2012/13 to R690.1 million in 2013/14 (see Table 1). The
decrease in the programme is mainly as a result of a decrease in the corporate
services sub-programme associated with reduced spending in goods and services,
such as advertising services, contractors and printing services. The Committee
welcomes the efficient budget allocation by DTI which focus on its core mandate
of industrial development and broadening participation compare the decrease in
the administration programme.
Within the
Administration programme, the largest appropriated sub-programme is the
corporate services accounting for 54 per cent of the Administration budget allocation
with a value of R372.5 million. However, the Corporate Services budget decreased
by 13.9 per cent in real terms since the 2012/13 financial year. The Financial
Management sub-programme and the Communications sub-programme are the second
and third largest appropriated sub-programmes accounting for 14 per cent and 12
per cent of the total Administration programme budget respectively. (See Table
A.1)
The
largest increases in sub-programmes were increases in the Financial Management
sub-programme and the Office Accommodation sub-programme. In the 2013/14
budget, the Financial Management sub-programme increased by 83.8 per cent in
real terms and the Office Accommodation sub-programme by 67.5 per cent in real
terms.
Programme 2:
International Trade and Economic
Development
The International Trade and
Economic Development (ITED) programme provides direction on national trade
policy to promote economic development; build an equitable multilateral trading
system; strengthen trade and investment relationships; and promote African
development.
The
ITED
programme is the smallest of the Departments programmes based on its
appropriation. With a budget of R138.6 million, the programme accounts for 1
per cent of the Departments total budget. The programmes budget has increased
from R134.7 million in the 2012/13 financial year to R138.6 million in the
2013/14 financial year. However, in real terms the budget has decreased by 2.56
per cent.
The programme has two
sub-programmes, namely
International
Trade Development
and
African Economic Development
.
In the 2013/14 financial year, the International
Trade Development
sub-programme
accounts
for 68 per cent while the African Economic Development sub-programme accounts
for 32 per cent of the total programme budget. (See Table A.2)
In
terms of the economic classification, ITED has allocated 70.5 per cent of its
budget for current payments and 29.1 per cent for transfers. The main
contributions to current payments are compensation for employees (79.1 per cent
of current payments) and travel and subsistence (16 per cent of current
payments). Transfers will mainly be towards the Regional Spatial Development
Initiative being administered by teh Development Bank of
Programme 3:
Broadening Participation
This programme aims to develop
policies and strategies to create an enabling environment for SMMEs, and to improve
the competitiveness of local and provincial economies to achieve equity, growth
and job creation. The Broadening Participation Programme has three
sub-programmes which are: the Enterprise
Development, Equity and Empowerment, and Regional
Economic Development
.
The
Broadening
Participation Programme is the third largest programme of the Department by
appropriation. In the 2013/14 financial year, with a budget of R968.3 million,
the programme accounts 10 per cent of the Departments total budget. The
programmes budget has increased from R940 million in the 2012/13 financial
year. However, in real terms, the budget has decreased by 2.45 per cent. This
is as a result of decreases in the
Enterprise Development sub-programme budget of 2.15 per cent in real
terms and the Regional Economic Development sub-programme of 12.72 per cent in
real terms while the Equity and Empowerment sub-programme increased by 5 per
cent in real terms.
The
Enterprise Development
sub-programme
accounted for the largest share of appropriation in the programme with more
than 90 per cent of the total programmes budget. (See Table A.3)
The Broadening
Participation programme intends to spend R861 million or 88 per cent of its
allocation on transfers in 2013/14. The transfers included R484.5 million to
the SEDA, as well as R119.2 million for the Technology Programme SEDA
administers on behalf of the DTI; R160.6 million for the THRIP) administered by
the National Research Foundation; and R53.9 million for the SPII administered
by the Industrial Development Corporation (IDC). It should be noted that the
SEDA is responsible for providing non-financial support to SMMEs while the
Small Enterprise Finance Agency (SEFA), located within the mandate of the
Economic Development Department, provides financial support to SMMEs.
In
addition, this programme will be overseeing the establishment and functioning
of the Cooperatives Development Agency and Tribunal, as well as the Broad-based
Black Economic Empowerment Commission over the medium term, once their
respective establishing legislations come into force
[16]
.
At this stage, it is not clear whether financial provision has been made in the
existing budget for the requisite financial resources to establish and fund
these entities once the legislation is promulgated.
Programme
4:
Industrial
Development: Policy Development
The
Industrial Development: Policy Development Programme is responsible for the
design and implementation of 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.
This is one
of the main programmes of the Department, and takes up the second largest share
of the Departments budget despite having just two sub-programmes: the
Industrial Competitiveness and the Customised
Sector Programmes.
The programmes budget has
increased from R1.49 billion in the 2012/13 financial year to R1.6 billion in
the 2013/14 financial year, an increase of 1.92 per cent in real terms (see
Table A.4). In the 2013/14 financial year, an amount of R60 million will be
transferred by the Department to the National Metrology Institute of South
Africa, this amount has increased by R35 million from the initial transfer of
R25 million made in the 2012/13 financial year. This has contributed greatly to
the increase in this programmes budget.
The
programme allocated 92.3 per cent of its budget for transfers. This mainly consisted
of (percentage share of the programmes budget):
·
Clothing and Textile Production Incentive
administered by IDC:
R758.3 million (47.2 per cent)
·
Research Contribution to the South African
Bureau of Standards: R 205 million (12.8 per cent)
·
National Regulator for Compulsory
Specifications: R103 million (6.4 per cent)
·
National Metrology Institute of
·
National Metrology Institute of
·
Customised Sector Programmes administered
by
IDC: R68 million (4.2 per cent)
·
Intsimbi National Tooling Initiative: R54.4
million (3.4 per cent)
·
National Cleaner Production Centre
administered by the Council for Scientific and Industrial Research: R43.7
million (2.7 per cent)
·
South African National Accreditation System:
R33.5 million (2.1 per cent)
Incentives
and other financial measures to promote industrialisation are also provided by
the IDC through industrial financing. The committee welcomed the IDCs support
in this regard.
Programme
5:
Consumer
and Corporate Regulation Programme
The Consumer and Corporate
Regulation Programme is aimed at increasing opportunities for previously
disadvantaged South Africans by attracting both domestic and foreign
investment; increasing investor confidence through developing world class
regulatory frameworks for monitoring, compliance and enforcement; and creating
competitive, fair and efficient markets by having effective financial,
economic, governance and related regulatory institutions. Policy and
Legislative Development, Enforcement and Compliance, Regulatory Services are
sub-programmes of the Consumer and Corporate Regulation Programme.
The programmes budget has
increased from R248.1 million in the 2012/13 financial year to R256.2 million
in the 2013/14 financial year. However, in real terms, the programmes budget
has decreased by 2.2 per cent.
At a
sub-programme level, expenditure for the Policy and Legislative Development
sub-programmes budget decreased by 10.9 per cent; the Enforcement and
Compliance sub-programme increased by 12.9 percent; and the Regulatory Services
sub-programme budget decreased by 2.21 per cent in real terms for the 2013/14
financial year. (See Table A.5)
The Regulatory Services
sub-programme budget of R206.5 million is to be transferred to regulatory
agencies including the National Credit Regulator (29.4 per cent), National
Gambling Board (13.4 per cent), National Consumer Tribunal (17.5 per cent),
National Consumer Commission (21.5 per cent), and the Companies Tribunal (5 per
cent). The real decrease in this sub-programme is a concern as the cost of
ensuring compliance and enforcement for these regulatory agencies are increasing.
Programme
6:
Industrial Development: Incentive
Administration
Programme
The
Industrial Development: Incentive Administration
Programme is
responsible for improving the Departments incentive administration by designing
and implementing incentives and programmes that support investment,
competitiveness, employment creation and equity. This programme, in conjunction
with the Industrial Development: Policy Development programme, form the basis
for support to implement IPAP II.
In the 2013/14 budget, the
Incentive Administration
Programme is
the largest expenditure programme accounting for 58 per cent of the
Departments total budget with a value of R
5.5 billion. The programmes budget is also the
second fastest growing programme budget after the
Trade and Investment South Africa
programme at 15.09 per cent growth in real terms.
As a result of cash flow
challenges related to disbursing incentives, the DTI has moved towards broadly
grouping related incentives. This has enabled it to more easily move funds
between the incentives to accommodate unforeseen peaks and troughs in the submission
of incentive claims.
At a
sub-programme level, the
Manufacturing
Investment Incentives sub-programme takes up the largest share of the programme
budget and has the largest sub-programme budget increase. The Manufacturing
Investment Incentives budget increased from R2.8 billion in the 2012/13
financial year to R3.6 billion for the 2013/14 financial year, an increase of
18.4 per cent in real terms. The Infrastructure Development Support
sub-programme takes up the second largest share of the budget with R1.1 billion
and a 12.15 per cent real growth.
The
Broadening Participation Incentives sub-programme
is the only sub-programme to have a budget decrease. This sub-programmes
budget declines by 11.7 per cent in real terms from R179.7 million in the
2012/13 financial year to R167.5 million in the 2013/14 financial year.
(See Table A.6)
The
programme intends to transfer 96.7 per cent of its budget to public
corporations and private enterprises in 2013/14. This has increased from 95.9
per cent since 2012/13. Compensation to employees is the next largest
contribution to the budget at 2.6 per cent. Expenditure on goods and services
will only be 0.6 per cent of the budget and has decreased in real terms by 10.2
per cent.
Programme
7:
Trade and Investment
This programme is aimed at
increasing the quality and quantity of domestic and foreign direct investment;
promoting South African products in high growth markets; facilitating markets
for South African manufactured products and services; and enhancing the ongoing
promotion of exports and investment.
With a
programme budget of R369.7 million for the 2013/14 financial year, the
Trade and Investment
At a sub-programme level, the Export Development and Promotion
sub-programme increased by 61 per cent in real terms followed by the
International Operations sub-programme with an 18.82 per cent increase while
the budget for Investment Promotion and Facilitation sub-programme decreased by
17.41 percent.
The 61
per cent increase in the Export Development and Promotion sub-programme is as a
result of the Departments aim to
increase
exports and improve the Governments interaction with the private sector in the
2013/14 financial year.
The Trade and Investment South Africa
Programme will spend 64.3 per cent of its budget
on current payments and 35.3 per cent on transfers. In terms of current
payments, compensation of employees forms the bulk of expenditure (60.3 per
cent of current payments), followed by subsistence and travel (14.2 per cent of
current payments) and operating leases (9.5 per cent of current payments).
Transfers are mainly to the Export Credit Insurance Corporation for the
Interest Make-Up Fund (84.5 per cent of transfers), followed by the Proudly
South African Campaign (8.1 per cent of transfers).
3.
Key issues raised by the Committee
during its deliberations
The
Committee raised a number of concerns during its deliberations including:
3.1
Budget allocation
:
The committee enquired whether the DTIs budget allocation over the Medium Term
Expenditure Framework (MTEF) was skewed towards industrial development with a
small percentage allocated towards trade promotion and if this implied that industrial
development was the departments priority. The Minister in his response
informed the committee that budget allocations are not indicative of priorities
but rather the nature of DTI programmes. The majority of DTIs budget was transferred
to support various incentive programmes, especially those contributing towards
industrial development. For
3.2
Trade relations with
3.3
Manufacturing of mining equipment:
The committee expressed concern with regard to the production of mining
equipment as
3.4
NCC
Budget:
Views were expressed in the Committee that the NCC
should be adequately funded in order to fulfil its mandate. It would appear that
the staff complement of the NCC consisted of less than 30 per cent of the
approved organisational structure and due to financial constraints this would
only reach 30 per cent by the end of this financial year. The committee was of
the view that this would compromise the NCC in performing its task of
protecting the consumer. The Committee was assured that the DTI has been supporting
the NCC, however, its additional budgetary requirement can only be addressed
through the MTEF once the NCC develops a credible track record regarding its
spending patterns. Despite this condition, the DTI would accommodate a
shortfall, if necessary. The NCC has been stabilised and a process of
addressing the vacancies is being embarked on.
4.
Companies and Intellectual
Property Commission
The
CIPC presented its strategic plan for 2013 - 2018 as well as its annual
performance plan. The CIPC is still in its transformational phase, establishing
itself as a regulator and improving its credibility among stakeholders and
customers. This required the CIPC to understand the needs and expectations of
its customers, as well as the global environment it operates in.
Although the CIPC is accountable to the DTI,
its activities overlap with the mandates of various other departments such as
Arts and Culture, Science and Technology and Economic Development.
The
CIPC identified three key strategic objectives for the 2013/14 financial year
to achieve its vision and mission, namely to
[17]
:
·
Improve the competiveness of the
South African economy by enhancing the reputation of South African businesses
and the South African business environment;
·
Contribute to a knowledge-based
economy and competitive local industries by promoting creativity and indigenous
cultural expressions and knowledge; and
·
Promote broader formal economic
participation by enhancing the service delivery and extending its reach.
The
revised and updated strategic plan identifies four strategic focus areas for
the CIPC. These are ensuring information reliability and the integrity of the
database, to improve the relevance of the CIPC to its customers, to enhance the
ease of doing business, and to demonstrate the CIPCs economic impact.
The
CIPC has been reviewing its structure and working processes, reviewing its
service delivery model and aligning it strategically. Currently, the CIPC is
involved in two projects, namely data cleansing to ensure the integrity of the
information on its database and ensuring the establishment of the call-centre.
The CIPC is working closely with the South African Revenue Services and the
Department of Home Affairs to ensure greater verification capability and
integrity of information.
4.1.
Budget
allocation
The
CIPCs strategic plan is aligned with its budgeted expenditure through the
programmes listed in Table 2.
Table 2: Budget Summary
Programme
|
Budget
|
Nominal % change
|
Real % change
|
|
R
million
|
2012/13
|
2013/14
|
2012/13-2013/14
|
|
Business Regulation and
Reputation
|
248
084.0
|
282 484.0
|
13.87
|
7.83
|
Innovation and Creativity
Promotion
|
139
900.0
|
178
300.0
|
27.45
|
20.69
|
Service Delivery and Access
|
65
600.0
|
78
200.0
|
19.21
|
12.89
|
TOTAL
|
453
584.0
|
538
984.0
|
18.80
|
12.53
|
Source:
Own calculations based on CIPC (2013b: 19)
4.2.
Key
issues raised by the Committee during its deliberations
The
committee welcomes the successes achieved by the CIPC with the International
Monetary Fund and the World Bank ranking South Africa 35
th
in the
world for ease of doing business, as it recognised the need to
make it easier for business to register. The committee
enquired whether the CIPC has a project to simplify the registration process by
developing a one-stop shop to decrease the time needed to complete all the
necessary inter-agency requirements for registration, as well as to limit the
number of businesses being deregistered.
In
response to the issue of simplification of the registration process, the
Commissioner informed the committee that currently they were in on-going
discussions with other departments and agencies to facilitate the ease of
doing business by developing an integrated service from different points. For example,
the South African Revenue Service may register companies as part of the VAT
registration process and also allow companies to submit their registration
documents for CIPC simultaneously. An IT system should then be developed that
would enable agencies to access and pass-on the required information. This will
be an attempt to enhance compliance and verification of information.
The CIPC
informed the Committee that it was not in a position to provide accurate
figures with respect to de-registered companies and would address the matter to
provide an accurate figure. At the time, the CIPC had been dealing with the
last bulk de-registration process with the intention to do this on a monthly
basis in future.
The
committee raised a concern with respect to the call-centre and the percentage
of unanswered calls and the accessibility of the CIPC to stakeholders. The CIPC
acknowledged that one dropped call was one too many but that one should be
realistic on how a higher answering rate could be achieved. It assured the
committee that improved accessibility to the public was being prioritised.
During the last engagement with the committee, the CIPC shared its intentions
to follow the Swedish Model for its call centre. This should have been in
operation by the end of January 2013. However, due to the call centre licences
only being received in March 2013, the system had been upgraded in April 2013
and was expected to be in full operation in May 2013.
5.
Export Credit Insurance
Corporation (ECIC)
The Acting
Chief Executive Officers briefing outlined the mandate and key strategic goals
aligned with governments objectives in its Strategic Plan 2013/14 2015/16.
The ECICs mandate is to facilitate export trade and cross-border investments
between South Africa and the rest of the world in line with its enabling
legislation, the Export Credit and Foreign Investments Insurance Act (No. of
1957) as amended. The ECIC is a public company, established in terms of the
Companies Act. It therefore pays tax, is subject to the Public Finance
Management Act, and is designated as a section 3B entity.
The ECIC
[18]
is driven by five strategic goals which are to:
·
Facilitate export trade and investments outside
·
Build mutually-beneficial local, regional and global strategic relations
to advance
·
Promote a professional, competitive and customer-focused workforce that
ensures an effective and efficient service to its customers.
·
Create enterprise-wide risk awareness and effective corporate governance
and risk management practices.
·
Consistently utilise sound business environment and social principles by
applying international best practice.
The ECICs
strategic goals are aligned with the DTIs objectives to build mutually
beneficial regional and global relations, to advance South Africas exports,
and to promote a professional, competitive and customer-focused working
environment that ensures effective and efficient service delivery.
The
current global economic environment and the depressed economic outlook of
The ECIC
highlighted
·
Its capacity to underwrite large transactions on a long-term basis.
·
Interest make-up support for competitive pricing.
·
·
Its strong financial banking sector with its footprint in
·
ECIC insurance is seen as guaranteed by the South African government.
The ECIC
informed the committee that it is working closely with the Industrial
Development Corporation to offer performance bond insurance for SMME exporters.
In line with the IPAP, the ECIC also offers special products for boat-builders
such as the provision of insurance for advance payment guarantees required by
overseas buyers, and insurance for a working capital facility offered by a bank
during the boat-building phase.
One of the
key goals of the ECIC is to facilitate export trade and investment outside
5.1.
Budget
Allocation
The ECIC
informed the committee that it did not receive any funds from the fiscus and
that it was financially self-sustainable. However, it administered the Interest
Make-Up Fund, an export incentive scheme, on behalf of the Trade Investment
South Africa Programme. This amounted to R 110.3 million in 2013/14 from R24.6
million in 2012/13
[19]
.
The ECIC also indicated that to fund and enhance its capacity to implement its
projected growth strategy, it has increased its operating costs and staff
complement.
5.2.
Key
issues raised during the deliberations
The committee enquired about the level of debt and defaults
associated with the ECIC. The ECIC responded that it has an obligation to pay
claims but this is paid over a period of time so that it does not compromise
the financial stability of the organisation. It is important to pay claims to
maintain credibility in the market in which the ECIC operates and to comply
with insurance related legislation.
The committee enquired how the ECIC deals with fraudulent
claims. The ECIC adopted the equator principle which introduced cross-cutting
international standards used by international financial institutions such as
the World Bank.
The communication strategy of the ECIC is critical in
reaching all stakeholders. The issue of advocacy is critical and how it ensures
that ordinary citizens know of its existence.
It is not clear from the presentation how big its footprint in
The
committee enquired about the impact of the BRICS partnership on the ECICs
growth potential. It confirmed that the BRICS partnership provides numerous
opportunities for collaboration among its partners. Recent examples were in
6.
National Consumer Commission (NCC)
The Acting
Commissioner outlined the revised strategic plan (2012/13 2016/17) and the annual
performance plan and the rationale for the revision of its strategic plan. He
highlighted that the NCC, during the first two years, was purely focusing on
complaints resolution without establishing the appropriate corporate governance
mechanisms and the necessary financial management systems to ensure compliance
with the relevant legislation. It would also appear that the NCC has been
acting
ultra vires
as the Consumer
Protection Act (CPA) (No. 68 of 2008) stipulates that the NCC is responsible
to
promote the resolution of disputes arising in terms of this Act, but it is
not responsible to intervene or directly adjudicate such dispute.
The Acting
Commissioner informed the committee that the strategic framework had not been aligned
with the CPA, and that the previous strategic plan and annual performance plans
submitted had been ambitious given limited financial resources and appropriate
skills to implement the plans. It was against this background that the NCC had revised
its strategic and annual performance plans to
ensure that the institution is well
established, while meeting existing stakeholder expectations and demands
.
In line with its new strategic approach, the NCC
[20]
informed the committee that:
·
Conciliations would be shifted to
the respective industry bodies through a process of accreditation of ombud
schemes;
·
The NCC would cease conciliations
incrementally as the alternative conciliation mechanisms became operational;
and
·
The NCC will approach the provincial
consumer protection authorities to prepare to deal with consumer disputes that
arise within their respective provinces.
6.1.
Budget
Allocation
In the
2012/13 financial year, the NCC received R48 million from the DTI. The expected
appropriation for 2013/14 was R44.5 million, a 7.27 per cent decrease.
According to the 2013 Estimates of National Expenditure, 75 per cent of this
budget would be spent on meeting the NCC objective to promote compliance with
the CPA and 25 per cent on achieving a well governed and capacitated
organisation.
One of the
key risks that will apply pressure on the budget will be legal costs to deal
with on-going and new court cases and cases brought before the National
Consumer Tribunal. This is expected to reduce over time from R2.6 million in
2013/14 to R1.1 million in 2015/16
[21]
.
It is expected that there should be fewer court challenges as precedence
related to the CPA is set by the National Consumer Tribunal and courts.
6.2.
Key
issues raised by the Committee during its deliberations
It
appeared that once the NCC phased out conciliations, it would mainly act as a
vehicle that refers consumer complaints to provincial consumer bodies and ombud
schemes. In this regard, the committee asked for clarity regarding this
incremental approach adopted by the NCC. The NCC informed the committee that it
has the responsibility to facilitate the amicable resolution of complaints
received from consumers, so it would be important to empower these identified institutions
and ensure that they have the capacity to deal with complaints once it is
referred. It has developed referral protocols with the provinces and is
currently in the process of engaging industry associations and ombud schemes to
determine an appropriate process. This approach is dependent on how soon ombud
schemes would be in operation. During this period, the NCC would continue
addressing complaints.
The
committee welcomes the announcement by the DTI of the establishment of a
consumer ombudsman to address complaints resolutions. However, it requested
that the relevant contact details of the body are accessible to the general
public.
The
NCCs 2013/14 annual performance plan indicated a target to register and
analyse 50 per cent of complaints and the other 50 per cent would be referred.
A concern for the committee would be the mechanism to determine on what basis
the other 50 per cent of complaints would be referred and to which bodies as
there appears to be limited accredited consumer protection bodies.
The NCC informed the committee that the
intention would be that at least 50 per cent of the complaints received would
be analysed within 8 days to determine whether it should referred or
investigated.
Recent
reports with respect to vacation clubs whose vigorous methods entrap people to
purchase products remained a concern. The NCC informed the committee that
currently approximately eight investigations were underway with regard to
vacation clubs and its practices which are against the spirit of the CPA.
The
committee commends the Acting Chairperson and the NCCs staff for stabilising
the NCC but seeks clarity with regard to the ICT structures and the mechanisms
in place to address this shortcoming. The NCC acknowledged that their ICT
remains inadequate to support sufficient operations at the Commission. The
acquisition, implementation and maintenance of ICT infrastructure will be
critical to enhance and ensure service delivery.
Furthermore,
the committee is concerned about the apparent differing interpretations of the
CPA and whether staff members in the NCC have a common understanding of the Act
and the NCCs mandate. The NCC informed the committee that the differing
interpretations were associated with the industry and that no common case law
existed in
7.
National Metrology Institute of
The main
mandate of
the
NMISA
is contained in the Measurement
Units and Measurement Standards Act (No. 18 of 2006). This is to provide for
the:
·
Use of measurement units of the
International System of Units (SI) and certain other measurement units;
·
Designation of the national
measurement units and standards;
·
Keeping and maintenance of the
national measurement standards and units and
·
Establishment and functions of the
NMISA.
NMISA
published its Annual Performance Plan for the period 2013 to 2015. Its five
strategic objectives of NMISA are to
[22]
:
·
Ensure that
·
Build and maintain an
internationally recognized national metrology system as the foundation for the
South African measurement system.
·
Strengthen the metrology system as
a key component of the Technical Infrastructure that is aligned with
international best practice.
·
Provide essential support to South
African enterprises competing in a fast-paced global economy and provide
appropriate assistance to SMMEs to enable their acceptance in the formal supply
chain.
·
Provide essential support for public policy
objectives with regards to measurement compliance issues in terms of health,
safety and the environment.
NMISAs
strategic objectives are in line with the twelve national outcomes as well as
the Industrial Policy Action Plan (IPAP). According to NMISA, the Agencys
activities underpin a comprehensive standards, quality assurance, accreditation
and metrology (SQAM) environment to lock out unsafe and poor quality imports
and lock in access to increasingly demanding export markets; to support
successful law enforcement; and to protect
the environment and consumers.
[23]
7.1.
Budget
Allocation
In the 2013/14 financial year, NMISAs projected income
amounts to R157.8 million, increasing by R64.5 million from its 2012/13 income.
The DTI provides the largest proportion of the entitys income accounting for
93 per cent of the income with R145.9 million for the 2013/13 financial year.
In the 2013/14 financial year, the grant from the DTI increased by 69 per cent
in real terms since the 2012/13 financial year.
Income from services rendered at R10.6 million declines by 4.4 percent
in real terms.
[24]
Table 3: Budget allocation in
relation to the strategic goals
Strategic Goal
|
Resource Allocation (R 000)
|
Internationally benchmarked
and accepted measurement standards in support of competitive economic
infrastructure and an improved quality of life
|
57 862
|
Traceability, measurement
expertise and services disseminated to South African commerce and industry
through certified reference materials, appropriate technology and skills
transfer.
|
23 315
|
Requisite expertise and
competencies established and maintained according to internationally
acceptable standards
|
35 798
|
Upholding the principles of
good corporate governance and compliance to regulatory frameworks
|
27 874
|
Source:
NMISA (2013: 55-57)
NMISAs
annual performance plan outlines the Agencys outcomes and performance
indicators as well the budget for the financial year 2013/14. The performance
outcomes are linked to the budget for the same period. (see Table 3)
7.2.
Key
issues raised by the Committee during its deliberations
The
committee welcomed NMISAs ability to address its budget constraints through
research contracts and providing access to its facilities in the absence of the
Chief Executive Office and a Chief Financial Officer. NMISA informed the
committee that the position of the CFO has been filled with only the position
of the CEO being vacant. NMISA welcomed the increase in its budget and that
most of the funding would be utilised for the private-public partnership
project with the rest of the funds used for the recapitalisation of the
organisation. Furthermore, challenges highlighted by NMISA are in relation to
its employment equity profile as well as the ability of NMISA to contribute
towards the growth of new businesses given the current constraints associated
with equipment.
A concern
for the committee is the need for NMISAs technical infrastructure to be
upgraded, particularly given its contribution to the energy efficiency agenda.
NMISA is currently considering replacing old equipment which has been an
on-going process in securing the necessary funds from the National Treasury in
this regard. NMISA informed the committee that it must establish the national
measurement standard and put the necessary infrastructure in place to ensure
that it will be able to measure energy efficiency.
8.
National Regulator for Compulsory
Specifications (NRCS)
The
NRCS
is a
national regulatory agency,
established through the National Regulator for Compulsory Specifications Act (No.
5 of 2008). The Agency is mandated to promote the safety of the public and
protect the consumer by developing and enforcing compulsory specifications in
the interest of public safety and health or for environmental protection
[25]
.
It also regulates imported and locally manufactured products and issues health
guarantee certificates for fishery products destined for the EU and the
In its
Annual Performance Plan for the period 2013 to 2015, the NRCS identified five
strategic objectives to achieve its mandate, which are:
·
To utilise a risk-based approach
to maximise the potential compliance with all specifications and technical
regulation falling under the mandate of the NRCS.
·
To optimise the scope of the NRCS
regulatory activities to protect people in
·
To inform and educate industry and
consumers regarding their rights and obligations with respect to specifications
and technical regulations.
·
To ensure that highly engaged,
competent people are in the right place at the right time to enable effective
execution of the NRCS strategy.
·
To ensure that the NRCS is a capable organisation
with fit for purpose resources available to support decision making and
action.
According
to IPAP II, the technical infrastructure institutions will continue to
reprioritise their activities to support the development, accreditation and
enforcement of standards that can create, scale-up and resuscitate industries,
while simultaneously contributing to broader social benefits. In this regard,
the NRCS supports:
·
the identification of industries
such as Agro-processing and green energy;
·
the strengthening of enforcement
of existing and new compulsory specifications for IPAP sectors;
·
the strengthening of the South
African technical infrastructure to support industrial development;
·
the updating of the National
Building Regulations and Building Standards Act; and
·
the transition from Trade
Metrology to Legal Metrology.
In its
engagement, the NRCS informed the committee that in executing its functions of
protecting the consumer and environment, it will focus on the enforcement of
technical regulations with the emphasis of locking out non-compliant goods. In
addition, through its regulatory function, it addresses failures in the market
system whereby businesses may produce, import or sell products or services that
may harm the consumer and/or the environment or may fall short of what is
promised in terms of quantity or safety (trade metrology)
[26]
.
The NRCS acknowledged the need to balance the burden of overregulation with the
benefits of pragmatic, focused regulation. It would be critical for the NRCS to
develop market-related intelligence capacity and to establish closer relations
with other regulatory entities to enhance its functional capacity.
8.1.
Budget
Allocation
The Agencys income is divided into five income groups.
These are:
·
Services/Assessment
·
Levies for compulsory
specifications
·
Levies (prior year)
·
Core funding from the DTI
In the 2013/14 financial year, the Agency budgeted for
an income of R265.9 million, an increase from the previous financial years
income of R244.9 million. The DTI was the single, largest source of funding for
the NRCS. For the 2013/14 financial year, according to estimates, the DTI would
fund the NRCS with an amount of R103 million. This amount makes up 39 per cent
of the NRCS operating income. The largest share of the Agencys revenue income
is acquired from services sundered by the NRCS, levies for compulsory
specifications with an amount of R123.9 million and acquired through the
provision of accreditation services assessment revenue amounting to R35.5
million.
8.2.
Key
issues raised during the deliberations
The
committee welcomed the balanced approach adopted by the NRCS with respect to
regulation in that it encouraged entrepreneurship.
During the
committees engagement with the SABS it highlighted the fact they have the
necessary laboratory capacity to check for foreign proteins in meat products
which are currently under-utilised due to lack of standards or compulsory specifications.
With regard to meat products, the NRCS informed the committee that it was in
the process of developing the compulsory specifications. With the finalisation
of the specifications for meat products, the NRCS would utilise the SABS
laboratories for testing.
Furthermore,
the committee enquired whether products entering
The
committee enquired to how the system of testing can be more effective and the
role NRCS plays with respect to government procurement. The NRCS responded that
its role is guided by its mandate. The NRCS only provides technical support
where a tender process involves an area which falls under its regulatory
authority.
The
committee enquired who is responsible for regulatory standards of products
within the building industry. Building regulations remain the competency of the
municipality with the NRCS role only required during dispute resolutions with
regard to specifications of building material.
A concern
for the committee was the NRCS high employee costs. The NRCS noted the
concerns with regard to its staff complement and informed the committee that it
made use of interns to assist with the enforcement of compliance to compulsory
specifications. The current structure presents a medium to long term vision of
the organisation. In respect of employees costs, the NRCS informed the
committee that it is complying with the approved policies as well as going
through a grading exercise to address disparities within the organisation which
will unfortunately contribute to high cost.
9.
South African Bureau of Standards
(SABS)
The SABS legislative mandate
is
established under the
Standards Act, 2008 (Act No. 8 of 2008). The Agency is mandated to:
·
Develop, promote and maintain
South African National Standards (SANS);
·
Promote quality in connection with
commodities, products and services; and
·
Render conformity assessment
services and assist in matters connected therewith.
[27]
The
SABS strategic objectives are centred on themes aligned to four perspectives,
namely: growth, customer centricity, productivity and competent and empowered
employees
[28]
.
In its engagement with the committee, the SABS highlighted its strategic
objectives, which are to:
·
Increase the use of
standardisation services by broadening the geographic footprint, as well as the
scope of the services offered to the South African economy.
·
Improve customer and stakeholder
relations by focusing on delivery of standardisation solutions aligned to their
needs.
·
Increase and improve the
operational performance of the SABS to enable delivery of quality outputs for
customers.
·
Deliver and retain a competent
workforce that is aligned with the organisational mandate.
For
the 2013/14 financial year, the SABS informed the committee that it intends
intensifying its economic impact of standardisation, and implementing a laboratory
improvement plan to establish world class laboratories whose revenue is
sufficient to meet overheads.
9.1.
Budget
allocations
The
agencys budget is divided into five groups from which income is acquired. The
income groups are as follows: testing, certification, training, standards,
rental and core funding.
In the
2013/14 financial year, the SABS projected income of R823.6 million. The
largest share of the entitys income amounting to R306.2 million will be acquired
through the provision of product and system certification services followed by
the testing services with an income of R266.1 million. The DTI is the third
largest source of income with a projected amount of R179.8 million to be
transferred by the Industrial Development: Policy Development programme.
9.2.
Key
issues raised by the Committee during its deliberations
In its
interaction with the SABS, the committee wanted to ascertain how the SABS
monitored testing by independent stakeholders serving the industry. Currently,
the SABS does not have the necessary capacity to do all testing, as standards
are voluntary. In order to build confidence in a product, even if it is not a
regulated product, companies request that their products are tested to provide
the necessary assurance to the consumers that the product is safe.
The
committee enquired whether SABS laboratories would be able to handle increased
volumes if additional testing is required and what strategies are in place for
increased volumes of testing. The SABS informed the committee that for any
products to receive the SABS mark of approval, products would have gone through
multiple and continuous tests. Once a product has been SABS approved, samples
are collected at random times and are tested bi-annually to ensure that it
remains compliant with industry standards. It is critical that the SABS
responds to the policy imperatives and drivers of government to ensure that it
will be able to test products.
With
respect to genetically modified organisms (GMOs), the SABS have been proactive
and bought the necessary instruments to test products and ensure that it is
ready when legislative and regulatory requirements are in place to test
products for GMOs. It would appear that a disjuncture exists between the market
and a clear regulatory environment.
The
committee enquired whether the SABS supports SMMEs and co-operatives in
providing testing facilities with respect to products which are critical for
the development of the economy. The SABS engaged the Technology Innovation
Agency (TIA) to assist SMMEs with regard to testing, but this support will only
be available when the SMMEs product is aligned with the sectors it supports.
Currently, the SMMEs are not assisted with regard to standardisation.
A concern
for the committee is that consumers do not clearly understand the mandate of
the SABS, whether it is accessible to the general public, and whether its
communication strategy is effective. The SABS acknowledged that since 2008 the
market still does not understand its mandate and that it is not a regulatory
body.
The
committee enquired whether the SABS has any responsibility to ensure that
products being sold by street vendors are safe for public use and consumption. It
also asked what enforcement tools were available to the SABS to ensure that standards
were adhered to, promoted and maintained in the industry. As the SABS is not
responsible for surveillance, the NRCS would be responsible to ensure that
products sold by street vendors meet the standards. The SABS mandate limits it
to complaints about products with the SABS mark that do not comply with the
relevant standards. It is government that determines when standards are
voluntary or not and if it affects the safety of consumers, compulsory
specifications apply. Only when a product has a SABS mark would SABS be in a position
to ensure compliance with standards. The SABS advised the committee that it
would not be feasible for every standard to become a compulsory specification due
to monitoring and surveillance difficulties. Products that are a risk to the
safety and health of society should have compulsory specifications.
10.
South African National
Accreditation System (SANAS)
The
SANAS
is a
national accreditation body aimed
at providing an effective accreditation system that is internationally recognised
and providing a good laboratory compliance and monitoring system.
It
is mandated to:
·
Accredit or monitor organisations
within its scope of activity for Good Laboratory Practice (GLP) for compliance
purposes.
·
Promote accreditation to
facilitate international trade and enhance the countrys economic performance
and transformation.
·
Promote the competence and
equivalence of accredited bodies.
·
Promote the competence and
equivalence of GLP-compliant facilities.
[29]
SANAS
published an Annual Performance Plan for the period 2013/14 to 2015/16. Its
strategic objectives to:
·
Improve its operational efficiency
to deliver services with a spirit of excellence.
·
Provide accreditation support for
industrial development and the protection of the health and safety of the South
African public and the environment.
·
Promote the acceptance of
SANAS-accredited results among global partners to advance
·
Support regional integration and
relations to advance
10.1.
Budget
Allocation
Its budget is divided into five groups from which
income is acquired, namely revenue from
accreditation
provision and knowledge transfer (research and development), the transfer from
the DTI, interest earned and sundry income.
In the 2013/14 financial year, the Agency projected an
amount of R76.1 million, an increase from the previous financial years income
of R64.9 million. The largest share of the Agencys income amounting to R35.2
million was acquired through the provision of accreditation services. The DTI was
its second largest source of income, in the 2013/14 financial year; it is
projected that the DTI will transfer R32.6 million. Other sources of income for
the 2013/14 financial year are research and development (R5.9 million),
interest (R1.0 million) and sundry income (R254.7 million).
The Agencys budget is divided into six expenditure
groups. The groups are:
·
Administration
·
Accreditation Provision
·
Marketing and Communication
·
Regional Development
·
International trade facilitation
·
Research and Development
The largest share of the budget amounting to R31.1
million is spent on providing accreditation services. This is followed by
administration expenses (R20.7 million), research and development (R
7.5
million), and
marketing
and communication
(R
2.9
million).
10.2.
Key
issues raised by the Committee during its deliberations
Clarity
was sought on the role SANAS played in ensuring that imported products are
compliant with local specifications. SANAS recognised that it should proactively
contribute to IPAP II by ensuring that the required standards are developed and
that the necessary skills are available to perform accreditation functions in
alignment with the IPAP outcomes. This should be done in collaboration with
other technical infrastructure institutions with regard to accreditation and
verification.
The
committee is concerned with the vacancy rate currently within SANAS given its
critical role in facilitating the accreditation of testing agencies to conduct conformity
testing of manufacturers and exporters goods to international standards so
that the results are credible and internationally accepted. At present of a
staff complement of 72, only 57 staff members were full time employees. SANAS
is in the process of addressing its racial profile with respect to specialised
areas such as assessors and methodologists who in the past were predominately
white males. Women represent 65 per cent of the staff complement at SANAS.
The
committee further enquired whether SANAS was in the process of recapitalising its
capital assets given the variation in figures. SANAS informed the committee
that it was in the process of procuring a building hence the variation as it
also reflected debt servicing costs.
With
regard to the verification of transport parts, SANAS informed the committee
that the transport industry was still in its infant stages in terms of testing
components. Currently, the SABS was dealing with new standards with respect to
the transport industry.
11.
Conclusion
Having
considered the information shared and reports from the DTI and its entities
with respect to their strategic and annual performance plans, the committee has
reached the following conclusions:
11.1
The National Industrial Policy
Framework remains one of governments main instruments to facilitate the
transformation of the economy and set
11.2
The DTI, through its
implementation of IPAP II, seeks to accelerate industrialisation the country
through the promotion of value-added products that can compete in the export
market and against imports. Furthermore, this state-led industrial policy will
address challenges facing strategic industries to promote industrial
development and job creation. Support for core productive and labour-absorbing activities
of the economy such as manufacturing, mining and agricultural value chains is therefore
critical.
11.3
IPAP II is also linked to the
broadening of economic participation of the historically disadvantaged and the
marginalised regions of the industrial economy to redress the inequalities of
the past. The committee welcomed the support of small-scale manufacturing,
particularly in agro-processing, as it can be catalyst for rural development
and job creation.
However, high
administered prices, wild cat strikes and interruptions to the infrastructure
build programme could pose a threat to the sustainability of the manufacturing
sector.
11.4
Beneficiation of minerals,
agricultural commodities and other goods presents a great opportunity for
industrialisation in that it has the potential to deepen and extend upstream and
downstream value-chains and stem the loss of other linkages and broader
manufacturing capabilities, such as research and training. Africas upward
economic growth path would also accelerate the demand for commodities in the
future which would present further opportunities for
11.5
11.6
In pursuit of new markets,
11.7
The committee was of the view that
the DTI needed to establish a permanent presence in foreign missions in
strategic locations.
11.8
The technical infrastructure
regulatory regime requires alignment to enhance the implementation of IPAP II.
The credibility of these technical infrastructure institutions in relation to setting
standards, developing compulsory specifications, assessing conformity with
standards and compulsory specifications, maintaining national measurement
standards, and accrediting competence of various role-players is of critical
importance to the economy.
11.9
The committee was of the view that
the NCC is inadequately funded given its mandate.
12.
Acknowledgements
The Committee would like to thank participants from the Ministry of Trade
and Industry, the DTI and its entities at the meeting.
The
Committee also wishes to thank its Committee support staff in particular the
Committee Secretary, Mr A Hermans, the Content Advisor, Ms M Herling, and the
Researcher, Ms Z Madalane, for their professional support and conscientious
commitment to their work.
The
Chairperson thanks all Members of the Committee for their active participation
during the process of engagement and deliberations and their constructive
recommendations made in this report.
13.
Recommendations
The
Portfolio Committee on Trade and Industry, having considered the 2013 proposed
Budget Vote 36: Trade and Industry, recommends that:
13.1
The Minister should consider
increasing the budget for the Trade Investment South Africa Programme to
establish and fund a presence in strategic foreign missions.
13.2
The Minister should consider
increasing the allocation to the Consumer and Corporate Regulation Division
programme, particularly to the National Consumer Commission, and the possibility
of new agencies being created in the near future.
13.3
The Minister should consider the
establishment of a single board responsible for all technical infrastructure
institutions to enhance co-ordination among these institutions.
13.4
The House approves Budget Vote 36 in
terms of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of
2009) (the Money Bills Act).
Report
to be considered.
References
·
Companies and Intellectual Property
Commission (2013a) Strategic Plan 2013 2018.
·
Companies and Intellectual
Property Commission (2013b) Annual Performance Plan 2013/14 2015/16.
·
Department
of Trade and Industry (2012) Strategic Plan 2012/13 2016/17.
·
Department
of Trade and Industry (2013a) Annual Performance Plan 2013/14 2015/16.
·
Department
of Trade and Industry (2013b)
Presentation to the Portfolio Committee on Trade and
Industry: the dtis 2012/13 Third Quarter Report. 24 April 2013.
·
Department
of Trade and Industry (2013c) Third Quarter Report for the 2012/13 Financial
Year: 01 October 31 December 2012.
·
Department
of Trade and Industry (2013d)
Presentation to the Portfolio Committee on Trade and
Industry: the dtis 2013/14-2015/2016 Annual Performance Plan. 23 April 2013.
·
Export
Credit Insurance Corporation (2013) Presentation
to the Portfolio Committee on Trade and Industry: ECIC
Corporate Strategic Plan 2013/14 2015/16. 18 April 2013.
·
National Consumer Commission
(2013a) Presentation
to
the Parliamentary Portfolio Committee:
Trade and Industry:
Strategic and Annual Performance Plans of the
National Consumer Commission-2013/14. 18 April 2013.
·
National Consumer Commission
(2013b) Annual Performance Plan (2013/14 to 2015/16).
·
National
Metrology Institute of
·
National
Regulator for Compulsory Specifications (2013a)
NRCS Strategic Plan & Annual Performance Plan.
17 April 2013.
·
National
Regulator for Compulsory Specifications (2013b) Annual Performance Plan for the
Fiscal Years 2013 2016.
·
National
Treasury (2013a) Estimates of National Expenditure: Vote 36: Trade and Industry.
·
National
Treasury (2013b) Budget Review.
·
National
Treasury (2013c) 2013 Budget Speech. 27 February 2013.
·
South
African Bureau of Standards (2013) Corporate Plan (2013/14 2015/16).
·
South
African National Accreditation System (2013) Annual Performance Plan 2013/14
2015/16.
·
Zuma,
J. (2013) State of the Nation Address. Joint sitting of Parliament of the
Republic of
Appendix
A: List of budget tables per programme
Table A.1:
Administration sub-programmes
Programme
|
Budget
|
Nominal % change in 2013/14
|
Real % change in 2013/14
|
|
R million
|
2012/13
|
2013/14
|
||
Ministry
|
37.4
|
39.4
|
5.35
|
-0.24
|
Office of the Director General
|
84.5
|
84.6
|
0.12
|
-5.19
|
Corporate Services
|
409.6
|
372.5
|
-9.06
|
-13.88
|
Office Accommodation
|
5.2
|
9.2
|
76.92
|
67.54
|
Financial Management
|
49.2
|
95.5
|
94.11
|
83.81
|
Media Relations and Public Relations
|
11.0
|
14.1
|
28.18
|
21.38
|
Communications
|
100.3
|
74.8
|
-25.42
|
-29.38
|
TOTAL
|
697.2
|
690.1
|
-1.0
|
-6.27
|
Table
A.2:
International Trade and
Economic Development Programme
Programme
|
Budget
|
Nominal % change in 2013/14
|
Real % change in 2013/14
|
|
R million
|
2012/13
|
2013/14
|
||
International
Trade Development
|
83.9
|
85.6
|
2.03
|
-3.38
|
African
Economic Development
|
50.8
|
53.0
|
4.33
|
-1.20
|
TOTAL
|
134.7
|
138.6
|
2.9
|
-2.56
|
Table A.3: Broadening Participation Programme
Programme
|
Budget
|
Nominal % change in 2013/14
|
Real % change in 2013/14
|
|
R million
|
2012/13
|
2013/14
|
||
|
847.9
|
876.1
|
3.33
|
-2.15
|
Equity
and Empowerment
|
38.5
|
42.8
|
11.17
|
5.27
|
Regional
Economic Development
|
53.6
|
49.4
|
-7.84
|
-12.72
|
TOTAL
|
940.0
|
968.3
|
3.0
|
-2.45
|
Table A.4: Industrial Development: Policy
Development Programme
Programme
|
Budget
|
Nominal % change in 2013/14
|
Real % change in 2013/14
|
|
R million
|
2012/13
|
2013/14
|
||
Industrial
Competitiveness
|
508.1
|
589.6
|
16.04
|
9.89
|
Customised
Sector Programmes
|
984.6
|
1 016.9
|
3.28
|
-2.20
|
TOTAL
|
1 492.7
|
1 606.5
|
7.6
|
1.92
|
Table A.5:
Consumer and Corporate
Regulation Programme
Programme
|
Budget
|
Nominal
% change in 2013/14
|
Real
% change in 2013/14
|
|
R
million
|
2012/13
|
2013/14
|
||
Policy
and Legislative Development
|
27
|
25.4
|
-5.92
|
-10.91
|
Enforcement
and Compliance
|
20.3
|
24.2
|
19.21
|
12.89
|
Regulatory
Services
|
200.9
|
206.5
|
2.78
|
-2.7
|
TOTAL
|
248.1
|
256.2
|
3.26
|
-2.21
|
Table A.6:
Industrial Development:
Incentive Administration
Programme
Programme
|
Budget
|
Nominal
% change in 2013/14
|
Real
% change in 2013/14
|
|
R
million
|
2012/13
|
2013/14
|
||
Broadening Participation Incentives
|
179.7
|
167.5
|
-6.79
|
-11.73
|
Manufacturing
Investment
Incentives
|
2 878.6
|
3 600.3
|
25.07
|
18.44
|
Services Investment Incentives
|
508.1
|
600.2
|
18.13
|
11.86
|
Infrastructure Development Support
|
963.9
|
1 141.5
|
18.43
|
12.15
|
Product and Systems Development
|
13.3
|
15.1
|
13.53
|
7.51
|
Business Development and After Care
|
17.2
|
18.6
|
8.14
|
2.40
|
TOTAL
|
4 560.9
|
5 543.1
|
21.5
|
15.09
|
Table A.7:
Trade and Investment
Programme
|
Budget
|
Nominal
% change in 2013/14
|
Real
% change in 2013/14
|
|
R
million
|
2012/13
|
2013/14
|
||
Investment Promotion and Facilitation
|
61.0
|
53.2
|
-12.79
|
-17.41
|
Export Development and Promotion
|
100.6
|
171.2
|
70.18
|
61.15
|
International Operations
|
115.8
|
145.3
|
25.47
|
18.82
|
TOTAL
|
277.5
|
369.7
|
33.2
|
26.16
|
[1]
National Treasury (2013c)
[2]
DTI (2013a)
[3]
Zuma (2013)
[4]
[5]
DTI (2012)
[6]
National
Treasury (2013a)
[7]
DTI (2012)
[8]
DTI (2013a)
[9]
DTI (2013b
and 2013c)
[10]
DTI (2013d)
[11]
DTI (2013d)
[12]
The TFTA is a negotiation between the East
African Community (EAC), the Common Market for Eastern and Southern Africa
(COMESA) and SADC.
[13]
DTI (2013d)
[14]
National
Treasury (2013a)
[15]
The
real percentage
change calculations are based on an estimated 2013 Consumer Price Index of 5.6
per cent (National Treasury 2013b: 6).
[16]
The Cooperatives Amendment Bill is awaiting
debate by the National Council of Provinces while the Broad-based Black
Economic Empowerment Amendment Bill is currently being considered by the portfolio
Committee on Trade and Industry.
[17]
CIPC
(2013a)
[18]
ECIC (2013)
[19]
National
Treasury (2013a)
[20]
NCC (2013a)
[21]
NCC (2013b:
14)
[22]
NMISA
(2013)
[23]
NMISA
(2013)
[24]
NMISA
(2013: 55)
[25]
These mandates are expressed
in a number of pieces of legislation including the Trade Metrology Act (No. 77
of 1973), the National Building Regulations Standards Act (No. 103 of 1977), and
the Foodstuffs, Cosmetics and Disinfectants Act (No. 54 of 1972).
[26]
NRCS (2013)
[27]
SABS (2013)
[28]
SABS (2013)
[29]
SANAS
(2013)
Documents
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