Minister of Trade & Industry Budget Speech, responses by ANC & DA
18 May 2021
Budget Vote 2021 Ebrahim Patel, Minister of Trade, Industry and Competition, 18 May 2021. Parliament, Cape Town.
House Chairperson, Honourable Members, fellow South Africans.
The Covid-19 pandemic has deeply scarred the South African economy. While the economic recovery is better than expected, it is still slow and its impact uneven, with larger job losses for lower-paid workers, and severe damage caused to many small businesses. More than ten million South Africans willing to work are unemployed; the 3% growth forecast for this year will need to be stepped up in future to effect a full economic recovery and address the reality of so many South Africans, particularly women and youth who are still left out of the mainstream economy. To speed up economic recovery and ‘build back better’, we need a whole-of government approach.
In my remarks today, I wish to set out the Department’s future strategic focus, based on deeper integration of our efforts to galvanise inclusive growth and build local industrial capacity. Deeper integration will enhance the connection between our policy vision and effective implementation.
We will achieve this by:
– Uniting growth with transformation
– Boosting local production
– Growing exports
– Increasing investment, and
– Expanding the green economy.
I will speak to each of these strategic pillars in turn. They form the basis for the department’s programme of work for the year ahead, which involves a bold set of measures covering greater worker ownership in the economy, higher levels of local industrialisation, a roadmap for producing electric vehicles and working on green hydrogen opportunities, boosting investment levels, and building and strengthening export platforms through the AfCFTA and other measures. First, we must build a new model of growth and economic inclusion that unites South Africans in the economy and promotes transformation. In other words, “inclusive growth”. Growth that benefits everyone and not the few. How do we achieve this “inclusive growth”, which is easy to speak of, but harder to achieve?
It is about sharing wealth and opportunity, breaking free from the shackles of the past, of a society divided between bosses on the one hand, and workers and servants on the other. If we really are all in this together, then our patterns of ownership, power and control
must be transformed. So, by building on our successes, we now need to step up policies that actively promote worker ownership of shares in firms and representation of workers on corporate boards, as well as support for broad-based ownership vehicles in the
economy. What is new in this approach is that worker ownership arrangements should not be in the form of passive dividend-flow arrangements but be accompanied by mechanisms for the voice of labour to be heard in the top decision-making structures in the corporate sector.
In this way a greater democratization of the economy can be realised and the stakeholder model of company law introduced by the 2008 Companies Act can be extended by giving a real voice to workers. This is an important way in which we can create meaningful economic inclusion. This can be the new frontier of economic empowerment. It is not a pipe-dream. Our research has revealed the extent of worker ownership: more than 230 000 workers currently own shares in about 50 companies. It is a vision of industrial democracy that is being executed by significant companies, who recognise the role that they can play in building an inclusive economy. For example, the ground-breaking decision by Coca-Cola to appoint two worker representatives – within the next 4 weeks there will be a ballot of the 8 000 workers to elect their representatives. Pepsico expects to have a worker representative on its Board by September this year.
To advance this agenda further, our annual plan will cover the following actions:
– A Companies Amendment Bill will be prepared within the next three months to set out the modalities for improved representation of worker interests in company decision-making and boards;
– The outcome of the register of worker ownership in the SA economy will be published on an annual basis and we will work with unions and corporates to improve the funding arrangements to ensure that this model provides for real ownership and a greater say in decision-making. We also intend to work with tertiary educational institutions to assist in the further education of worker directors and potential directors.
– A Practice Note under the BB-BEE Act will be gazetted today to provide guidance to regulators and clarity in the market on the treatment of broad-based empowerment vehicles, so that worker ownership schemes, community trusts and union investment vehicles are properly recognised for BEE-purposes. Aside from worker representation, there are other significant steps that must be taken to achieve greater fairness, more opportunity, and deeper transformation in the economy:
– Promoting black industrialists and small businesses is critical. Though we have made progress with BB-BEE , it is clear that we need to bring greater rigour and credibility to BEE statistics and practices and ensure that claims made by firms in their BEE reports are verified. This may require adjustments to the reporting requirements. I will appoint an expert panel to review the current BEE Framework in order to address these legitimate public concerns.
– We recently released a report containing details of R32 billion made available by the dtic-institutions to nearly 800 black-owned entities to grow their footprint in areas such as food production, auto components, textiles, steel and film-making.
– Master Plan implementation of transformation measures, covering some R9bn will begin rollout; and the first allocations from the Auto industry’s Transformation Fund will be made, covering black component suppliers.
– By November, the new JP Morgan Fund to support 500 local firms and small businesses, with R384 million of support through an ‘equity equivalent’ agreement with the state, will begin disbursing funds.
– Tomorrow, the Competition Commission will launch a Market Inquiry into online platforms, like e-commerce market places, food delivery, short-term accommodation and travel e-platforms, the first such inquiry under the new legislation; and will later this year release a report on the state of economic concentration in SA industry. I am pleased to announce that Deputy Commissioner, James Hodge, an eminent competition economist will chair the Market Inquiry into online platforms.
– A Policy Statement on Competition Policy for Jobs will also be released tomorrow.
– A Green Paper on the Social and Solidarity Economy will be released for public comment within 60 days, which can assist with the rebuilding of the economy in the wake of the number of formal businesses that have been devastated and to support township and rural enterprises. A further amendment to company law is required to tackle the gross injustice of excessive pay.
A new Bill will that will be finalised within 60 days will require disclosure of wage differentials in companies, stronger governance on excessive director pay, and enhanced transparency on ownership and financial records. Our economy needs a production boost. So the Second Pillar of our deeper integration strategy recognises that we must build local industrial capability, both for the domestic and export markets. South Africa’s import to GDP ratio is too high for an economy that desperately needs more jobs. We import goods worth 25% of our GDP – our propensity to import is out of line with peer countries and developed economies and more can sensibly and sustainably be produced locally. Compare our 25% with China at 14%, India at 16%, Brazil 10%, the US at 12% and the EU at 14%.
The local industrial effort – what we call localisation for shorthand – must be rooted in building both dynamic firms and an inclusive economy. Competitiveness and industrial agility are critical to longer-run localisation efforts. Sector master plans developed and implemented in partnership with business and unions contain the details of how to do this. We also need practical steps to promote, where sustainable, a greater level of beneficiation of our natural resources here in SA.
We have already made progress on this, proving that it can be done. Pre-Covid, we imported R1,1 trillion of non-oil imports, which provides a useful marker of the potential for localisation. In the past year, we built local production capacity – often from scratch – with more than R10 bn of local production of Covid-19 products, ranging from face-masks, hand sanitisers, ventilators and vaccines; and R2 bn of it
was exported to other African countries. SA’s first fuel-cell factory started production in the Dube Trade Port, and a greater proportion of local scrap metal has been used in our foundries.
Further beneficiation actions include a vanadium electrolyte manufacturing plant in the East London IDZ that will begin production later this year, using SA-mined vanadium-oxide to create energy storage solutions, and a nickel sulphite facility has been established in North West using by-products of the PGM mining process to create components for lithium batteries used in electric vehicles. A new edible oil refinery will be built in Richards Bay that will add half a billion rands of local content to the SA economy when it is completed.
We produce not only widgets and cars, but increasingly films and music, too. During the lockdown last year, THE MAURITANIAN, nominated for a few Oscars and BAFTA Awards, starring Jodie Foster and Benedict Cumberbatch, was shot in South Africa, helping to create local jobs. A number of local films are currently being produced.
Last year we had 3 Master Plans in place, covering the auto, clothing and poultry industries. Since then we finalized three more, covering sugar, steel and furniture. These Master Plans cover about 700 000 workers with a combined industrial output of about R300 billion. We selected these industries because they promoted food security and rural development; and two of them are labour-intensive, especially in terms of jobs for women.
Progress in the Master Plans were set out in detail by President Ramaphosa in February covering the additional one million chickens produced, the reduction in sugar imports and the performance of our auto industry; and I subsequently provided Parliament with more details.
For the future, we will be looking at Master Plans that support growth in new economic sectors as well as consolidating existing sectors. In this coming year, our portfolio of new sector work covers among others global business services, film animation, the chemical and plastic sectors, green industry, medical products and capital goods.
To clarify our overall approach to industrialisation, we are releasing today a Policy Statement on Localisation for Jobs, addressing local product development, cracking down on illegal imports and under-invoicing, and implementing localisation modalities through the joint effort with the private sector. This will be complemented by integrated efforts with other Ministries to drive local vaccines development and use of local components in the national infrastructure plan.
Tariff adjustments and rebates are an important policy instrument available to the state to lower or increase import duties, but in future will need to be accompanied more clearly by binding commitments by applicants to improve their competitiveness, create jobs and price restraint.
Our localisation strategy has the support of major corporate players. Thirty CEO champions have been nominated from the private sector, including Mamongae Mahlare from Illovo, Mark Cutifani from Anglo, Vikesh Ramsunder of Clicks, Fleetwood Grobler of Sasol and Fortune Majapelo of Bushveld. They, as much as government, are committed to achieving far greater localisation, recognising its wider benefit for the economy and society. We now have an accord at Nedlac to drive progressive achievement of this, to localize up to R200 billion of additional production over an indicative five-year period. An initial list of forty-two products have been identified for localisation; and R240 million has been raised from the private sector to appoint technical experts to drive localisation, bringing together industrial engineers, supply-chain managers, experts in dealing with illegal imports, and project managers.
Thirdly, we must increase our exports through trade with the rest of the world. Trade policy needs to be a source of new jobs and expansion of the industrial economy. Last year, we secured a trade surplus of R270bn, the largest on record, mainly due to a decrease in import levels; and exports to the US increased in absolute terms. Agricultural exports have grown; and so too the export of manufactured products such as catalytic converters used to reduce carbon emissions in cars and trucks, mining equipment, and cosmetics.
One of our key successes has been export of services. Last month, SA was named as the most attractive destination for global business services which includes call centres; and some 275 000 workers are now employed in the sector as a result of the dtic incentives and active support to the sector during the pandemic lockdowns, when call centres were kept open safely while their competitors elsewhere were closed.
The key focus of trade policy is the work on the AfCFTA. We made significant progress with the legal framework for the AfCFTA to enable trading legally to commence during 2021, and in December gazetted regulations for the start of trading.
Trade policy is about jobs but it must also help to save lives during this pandemic. For this reason, South Africa supported by India sponsored a formal request at the WTO for a Waiver to enable vaccines, diagnostics and therapeutic products to be produced without some of the restrictions imposed by the TRIPS agreement on intellectual property. To date, more than 100 countries have supported this initiative; and the United States and New Zealand became the first developed countries to back the Waiver request.
This is an extraordinary, watershed achievement and this House should be proud of the leading role that South Africa played in building such a global alliance. To clarify our trade policy stance, we are issuing a Policy Statement on Trade Policy for Jobs and Local Industry on Thursday.
In the period ahead, we will build on these foundations:
– To take our biggest market for manufactured products, the AfCFTA forward, we aim to have rules of origin covering between 87% to 90% of products on our tariff book adopted by Heads of State; and to conclude bilateral offers with a number of countries.
– To support local industry to export, the mandate of the Export Credit Insurance Corporation will be amended from 1 June this year to permit it to provide risk cover for a range of industrial products.
– To support improved trade with the United States, we will within the next 30 days follow up discussions with the new US Trade Representative, Ambassador Katherine Tai, building on constructive meetings held in March and May this year.
– To ensure that exports help the economy to transform, we will launch a new network bringing together black industrialists active in export markets; and
– To address widespread levels of illegal imports, we will finalise discussions with trading partners on measures to combat such activities. Fourth, investments are the lifeblood of growth, and complement the steps to expand our markets through localisation and exports.
At the Investment Conference seven months ago, new pledges of R110 billion were made. The DTIC is now busy on implementation of the pledges and obtain new ones.
One of the most significant was the R16 billion Ford car-making expansion, that we expect will be matched by close to R4.3 billion investment by component suppliers and further investment to strengthen the rail lines between Gauteng and the E Cape port of Coega.
Large new investment has been facilitated by the DTIC through the section 12i scheme in the past 12 months, to build and expand factories across the country like fridge manufacturing in KwaZulu-Natal and a black-owned glass manufacturer in Gauteng.
We will now step up the drive to mobilise new investments in the economy, setting the DTIC a target of R100 billion over the next year, which together with other efforts in the state, can help to achieve the goal for the next Investment Conference.
Fifth, we will expand our efforts on green industrialisation and the just transition Climate change will impact on industrial development as well as human development and security, in a number of ways: through new opportunities for industrial processes and products, constraints to access to export markets and capital markets; and through disruptions to existing business-models based on carbon-intensive technologies.
Make no mistake, climate change represents a very real and grave threat to our future economic prospects, not least because global markets are changing fast. We must recognise the urgency of the situation and take action accordingly. We must not get left behind, with stranded assets and a carbon-dependent economic model.
We have made progress in some areas: with an increasing mix of renewable energy on our grid; assembly of hybrid vehicles using a combination of internal combustion engines and electric motors; work on battery-storage technologies; and a new fridge/freezer production in KZN using solar energy, with more than 2 400 units produced already.
We must step up efforts to build full electric vehicles in SA, to maintain our capacity to export to key markets such as the EU and UK, both of which have set new targets and deadlines to reduce the number of fossil fuel reliant vehicles on their roads. We need charging infrastructure – and must expand the existing 200 charging points for electric vehicles in SA using the agreed SABS standard.
The big opportunity will be in the advancing technologies based on green hydrogen energy, with time projected to be the best solution to humanity’s energy needs.
If the 20th century becomes known as the century of crude oil and nuclear energy, the 21st century may be known as a century of renewable energy and green hydrogen.
SA is well-positioned to become a key player, with our reserves of platinum group metals used as a catalyst in green hydrogen fuel-cells; as well as vanadium used in battery storage technologies.
Already, SASOL and one large car-maker have launched a partnership to explore fuelcell technologies across the N3 corridor between Joburg and Durban. As countries reconstruct their economies beyond Covid-19, renewable energies and renewable technologies will play a critical role.
Covid-19 reminded us that in a globalised world, if we get it wrong, the price all of us pay is huge. And hence we must continue to ensure an economy that is congruent with international best practice in the field of energy production, that is climate friendly.
Climate change demands that we rise to this challenge and seize the vast opportunity that it presents. The technologies we’re talking about provide an opportunity and a solution, and this allows South Africa to play to its advantage.
To unlock the opportunities, our action plan will focus on the following:
– On electric vehicles, I have today issued a draft sector green paper containing a proposed roadmap to local production, setting out options being considered by auto-makers, unions and government, with steps and tentative timeframes required. We now seek public comment on the document to finalise the strategy within 90 days.
– On hybrid vehicles, Toyota plans its first production-run this year, providing consumers with greener cars assembled in SA
– On the green hydrogen economy, I have mandated the IDC to be the industry commercialization agency to work with the DSI on achievement of its roadmap, and will appoint a panel led by Dr Johann van Zyl, an experienced global carmaker, to finalise a report on the practical actions to be taken to realise the opportunities for SA.
– On renewable energy, the IDC is mandated to partner with viable solar, wind and other renewable energy projects with the private sector To unlock the potential of these 5 strategic pillars, the state will need to integrate its own work and that of the private sector and labour into a more compelling growth and transformation story. Deeper integration, enhanced state capability and more spatial development at District and metro level and with SEZs will be needed.
We will implement steps to boost state capacity and agility, improve the ease of doing business and cut bureaucracy and red tape, replacing them with smarter regulation.
Our focus is on clear and concrete actions:
• This month, the first 4 black auto component manufacturers under the new Industry Transformation Fund will be supported; and rebate certificates for local clothing manufacturers will be issued, stimulating potentially R250 million local clothing manufacturing;
• In June, we launch the fund for technical resources required to implement our localisation initiative, and Solar Africa Energy will open its solar carport manufacturing facility in Silverton in Pretoria;
• In July, South Africa’s auto component sector will expand its capacity, when production of steering systems begins from the expanded ZF Lemfoerder factory in the Eastern Cape;
• In August, black industrialist Dalisu begins commercial production from its sodium sulphate plant in Piet Retief, to replace current imports;
• In September, Pepsico launches its new Development Fund to bring more emerging farmers into its supply-chain, and finalise a worker representative on its board;
• In October, production of industrial helium commences from a new facility in Free State, making SA one of only 8 countries globally to produce this vital gas; and the dtic and IDC funded film, Happily Ever After will have its global release on Netflix;
• In November, the first units of the new Toyota Corolla hybrid vehicle rolls off the production line in SA; and the next SA Investment Conference is expected to be convened.
• By December, Aspen Pharmacare based on capacity is expected to have produced its 100 millionth dose of the COVID-19 vaccine in Gqeberha;
• In January next year, Scaw Metals begins production of steel products from its expanded facility;
• In February, a new aluminium packaging facility for the beverage industry starts production in Gauteng;
• In March, our digital infrastructure will expand through establishment of a new
data centre in Gauteng; and
• By April, the first building in the Tshwane SEZ for new Ford car component firms will be completed; and the BAIC light vehicle assembly plant will start commercial production in the Coega SEZ. Important steps are being taken. There is real action on the ground-floor of our economy.
With deeper integration, and bolder ambition, the progress that we made will be a springboard for the inclusive growth this economy urgently needs and our people deserve.
In conclusion, I wish to thank Deputy Ministers Gina and Majola, as well as Lionel October who served for 10 years as DG and the team led by Acting DG Malebo Mabitje-Thompson, for their invaluable contributions; the Boards and leadership of the dtic agencies and our social partners for the work done this past year. It is my pleasure to table the Budget of the Department today before the National Assembly.
Budget Vote speech for DM Gina – 2021
Deputy Minister Majola.
Fellow South Africans.
One of the outstanding and renown motivational speaker specializing on the coping mechanisms for grieving mothers who have lost kids, Megan Hillukka, once said:
“It is understood that the beauty of a rainbow does not negate the ravages of any storm. When a rainbow appears, it does not mean the storm never happened or that we are not still dealing with its aftermath. It means that something beautiful and full of light has appeared in the midst of the darkness and clouds. Storm clouds may still hover, but the rainbow provides a counterbalance of colour, energy and hope”.
Chairperson, It has gone to pass that 2020 as a year, represented the worst to human kind. The massive losses of life through pandemic and the economy almost grinding to a halt, was the worst experience that the World had to navigate. We are still grappling with the reality that many companies and even more worse, the SMMEs, which were the hardest hit by the hard lockdown are facing liquidity challenges, if not at the edge of insolvency. The global headwinds associated with the disruptions of supply chains plunged our economy into an off-balance, but its overall resilience from total collapse represent a glimmer of hope as we chart a path forward in fixing it within the context of the Economic Reconstruction and Recovery Plan (ERRP). The ERRP, as Megan Hillukka would have said, does not negate the ravages of any storm (the Covid ravages). The appearance of a rainbow does not mean that the storm is over – and that we are not dealing with its aftermath – it simply means something beautiful and full of light has appeared in the mist of the darkness and clouds.
Honorable members, we are here today to commit that we are geared towards coordination of a reset button for our economy to claw it back to a sustainable pedestal. We commit ourselves that re-industrialisation, protecting of vulnerable sectors against the global vicissitudes, whilst locating Localization at the core of our policy objectives, will inform our forward-looking approach. We invite the nation into navigating with us this minefield, and travel with us in this path as we seek to reconstruct and make substantive recovery measures for what has been lost as a result of Covid-19 throughout the economy.
Small Medium Enterprises, which represents the largest employer, experienced devastating the effects of COVID-19. For those SMMEs that are100% black owned, the picture is even more worse because of their fragility. The strategic implication of this is the fact that there is going to be a reversal of the strides that we have covered over the last 20 years, as government, in our deliberate efforts made in building the black owned companies. Post-Covid, black owned companies will be in a difficult conundrum because they have fragile balance sheet with no collateral to assist them in accessing credit even in times where government had cut the base for lending rate. There is also a real danger that because of liquidity challenges, more and more of the BBBEE Level 1 companies may face closures and be forced to sell either their large percentage shareholding to non-black companies thereby lose their BBBEE 100% ownership to avoid insolvency. We are concerned about this reality because it represents a fundamental reversal of the very foundations and the objectives of the BBBEE and transformation policy instrument in our economy.
The B-BBEE Commission last year released a report on the state of women progress in ownership in enterprises referred to as the National Status Report on B-BBEE (National Trends). It is with absurdity that in terms of the Report, management control and ownership scorecard for women are still far below the acceptable levels in terms of companies’ agenda for inclusion. Majority of women still don’t sit in company boards where decisions and votes are made yet having shares, this is evident even where they have 50% shareholding or above. We must make it our campaign as leaders both in government and private sector to discourage women from accepting “silent control” in companies without decision-making.
We must fight against corporate patriarchy where women are bullied into inactive silent partners, only good enough for receiving dividends without board participation. These areas of concern have been and continues to be a battlecry for many women in the corporate environment, let’s intensify a campaign to address this anomaly. This state of affairs perpetuate the distorted nature of economic ownership in South Africa, in terms of demographics as women remains majority, especially African women. We must make a call “there must be nothing without us”
President Ramaphosa directed us through his announcement of a new approach on industrial policy – which is the reimagined industrial policy plan. This policy plan is anchored on sector specific growth approach with clear measurable targets. It is within this context that we must understand the dtic leadership, working with sectoral industries, in establishing sectoral Masterplans. Industry’s commitment to the imperatives of the Masterplans is critical for us as it is an important element for our approach to Localization. At the back of the COVID-19 pandemic, we continued the work with sectoral stakeholders around negotiating and finalizing some Masterplans.
Chairperson, The Sugar Master Plan was formally signed off by all stakeholders on the 16th of November 2020. An achievement of 15% growth in local sales, addicting 188,233 tons compared to 150 000 tons; 22% increase in direct market procurement of local sugar, including retailers and in wholesales; 7% increase in soft drink manufacturer procurement of local sugar.
But in the overall, the annual sugar production in South Africa has declined by nearly 25%, from 2.75 million to 2.1 million tons per annum over the past 20 years. The number of sugarcane farmers has declined by 60% during this period, and sugar industry related jobs are estimated to have reduced by 45%. Two sugar mills which are Illovo and Hullet are facing extreme difficulty. These are bad news for the sector given the stated ambitious goals as contained in the Master Plan. Factors that have driven this decline has been:
- Distorted global prices, that are below South Africa’s cost of production
- Increasing volumes of low-priced tariff-free exports from eSwatini into the SACU market.
- The Health Promotion Levy (or HPL), and the Covid-19 impacts
As part of the Master Plan, R 1 billion was set aside by the industry for purposes of transforming the sector with regards to the BBBEE as a critical element of inclusivity. Progress is being made in this area as SASA is now implementing it, with R400m already been spent for over a 2 year period.
Chairperson, for about two decades now, the furniture industry has been under severe strain as a result of the impact of deregulation and opening up of our economy to global competition. Our furniture industry submerged to the heavy-handed competition against imported furniture, often cheaper than ours, coming from China, Vietnam, Italy and from other markets. The net effect of this has been the near collapse of the local industry with massive jobs losses.
As a response to this reality, we have just concluded the work around Furniture Masterplan, after extensive consultative process in 2019/2020 with the entirety of the industry. The minister and the industry signing it off in March 2021. We are working on establishing various work streams per each pillar of the Masterplan. We want to rebuild the industry as part of re-industrialisation, transformation and catching up with new technologies used in the sector. With AfCFTA, South Africa stands a chance of growing the sector through Continental exports.
We are noting the positive progress in the Clothing, Textile, Leather and Footwear in line with sector CTLF Masterplan. The industry is responding well in committing to the targets as outlined in the Masterplan. The industry has committed to the skills development, the Department is engaging with the TVET College on working out the curriculum development. One of the concerns that we have as government in the industry is the lack of transformation, black Africans are finding it difficult to break the glass ceiling. One of the good component about the Masterplan is the transformation imperatives which forces the industry to be inclusive of the previously disadvantaged people.
Honorable chairperson, we want to make a call that South Africans must buy local as part of building local industries and protect our jobs. Before buying any items, let’s consciously check if these are locally produced.
Special Economic Zones and Industrial Parks.
We have seen the rapid growth of the Special Economic Zones (SEZs) such as Coega, Dube TradePort, East London, Tshwane Automotive sector which demonstrates the significant role played SEZs Programme in the country. We continue to be optimistic about the different investor pipelines committed to each SEZs before COVID-19 economic knocks globally. Our survey points out to the reality that investors’ appetite still remain to the Zones. As part of the Economic Reconstruction and Recovery Plan (ERRP), SEZs will be an important element of reigniting manufacturing led industrialization in an accelerated manner. We have embarked on a new SEZ approach that draws in all spheres of government to a partnership in the planning, development and management of Zones.
Whilst many of the SEZs are well effectively standing on their own feet, with strong governance and solid management, we are paying attention to few designated SEZs which must be developed in order to begin attract more investors. It’s satisfying that even before these SEZs are operational, already there are investors waiting to settle, out of interests. We are working on finalizing the business case of Bojanala SEZ in North West along the platinum belt. We are building management capacity for Maluti-A-Phofung SEZ in Free State, addressing governance issues and building of its infrastructure through Development Bank of Southern Africa. We are finalizing the Namakwa SEZ application in Northern Cape. We are held back by the conclusion of environmental impact assessment (EIA).
We are addressing the policy issues with regards to the scheduling of SEZ companies registration as it relates to inhibitions posed by PFMA against the provisions of the SEZ policy. This problem is affecting in particular the Western Cape Atlantis SEZ as it cannot be scheduled appropriately to do its work as a government agency.
We continue with our programme of revitalization of the industrial parks across the country. By reviving industrial parks, our intervention is promote decentralization of industrialization to the less economic activity laden areas such as townships and semi-rural areas. The revitalization programme is meant to improve industrial infrastructure which has aged because of investors exits in the last few decades. Working with provincial governments, we are attracting investors again to settle in these parks and create jobs. To date, R770 million has been approved through the dtic’s critical infrastructure programme (CIP) fund for revitalization of industrial parks in 7 provinces.
Part of the revitalization is building of Digital Hubs within the parks so as to create central points for technology, promotes innovation and facilitating the creative businesses around these regions. We have completed the revitalization project in Botshabelo Industrial Park which will be opened soon in Free State. We anticipate completion within this financial year work around Mandeni in KwaZulu Natal.
Consumer Protection Work
We are paying attention to the work of protecting consumers especially during this time of the pandemic. More reported consumer’s exploitations have necessitated our focus through the Consumer Commission. In the mist of COVID-19, the National Consumer Commission has stepped up its work against retailers who have escalated the prices of COVID-19 immune system essentials like Garlic, Lemon and Ginger. Curbing of price gouging which began with inflation of prices for sanitizers, masks and other essentials.
Another important area has been the work around the mushrooming of pyramid schemes. The National Lockdown resulted in hundreds of South Africans losing their income or some receiving less than what they normally received. While the country was grappling with the effects of Covid-19 and the National Lockdown, most South Africans took a lot of financial knock and food security was threatened. Unscrupulous people used the Covid-19 disaster to their advantage and preyed on desperate and unsuspecting victims. The Consumer commission has successfully investigated and shut most of them down, working with other organizations such as Financial Service Board (FSB).
Work around the imports, looking at labelling requirements by the Commission. In promoting compliance with the Country of Origin Labelling (COOL), we have increased our work on inspections as an enforcement tool to check the levels of compliance and non-compliance. SARS has reported the high levels of non-compliance with the Country of Origins Labelling especially with regards to the clothing, textiles, shoes and leather categories working with SARS. A lot of arrests have made between in Durban and Cape Town Ports.
District Development Model.
The President in 2019 introduced a concept of District and Model (DDM) as a new mechanism to effect intergovernmental relations, and eliminate silo mentality from different spheres of government. For us in the dtic DDM has enabled us to find creative ways of appreciating important mission for bringing economic development at a district level, coordinating provincial government, and district municipalities. In my capacity as a champion of Namakwa District in Northern Cape, since last year, we have had fruitful engagements which has resulted in setting up political and technical team. the product of those committees has produced a long range Nine-Point Plan for Namakwa District, with much focus on catalytic infrastructure. A single plan of development is made on the basis of achieving “One district, One plan and One budget”.
We are on a path to reconstruct our economy. We might have taken a knock but our economy has proven to be resilient, and this becomes an important aspect to build on. The setback notwithstanding, our head as a country has remained above the parapet. We are calling for the private sector to join hands with government and cooperate in reigniting our economy back. South Africa is country of enormous resistance and we are confident that we will weather the storm. I will like to take this opportunity to thank minister Patel for his political leadership and guidance, and also extend appreciation to Deputy Minister Majola. But I want to pay a special tribute to our out gone Director General, Mr Lionel October, who had led this Department as an Accounting officer since 2011. He has steered the ship very well. The DTIC is a solid tight ship that at the centre of trade and industry’ policies with him playing the no small part.
Together we will overcome!
Budget Vote Speech by Fikile Majola, Deputy Minister of Trade, Industry and Competition, National Assembly
Honourable House Chairperson
Deputy Minister Gina
Leaders of Business and Labour
Today we have an opportunity to reflect on how far we have come since the onset of the pandemic; Covid-19 which forced us to declare a national state of disaster in March 2020. The pandemic has compelled us to constantly search for new ways to navigate the challenging circumstances confronting us in order to save lives and livelihoods.
We have demonstrated our resilience as a nation. Our collective efforts, as we continuously defy the consequences of the devastating pandemic, have shaped how our economy responds. In this regard, we would like to acknowledge the sterling leadership of President Ramaphosa in our combined national effort against the pandemic.
As I begin, I would like to borrow from the words of one of the greatest and true sons of our beloved continent, Kwame Nkrumah when he said, “It is clear that we must find an African solution to our problems, and that this can only be found in African unity. Divided we are weak; united, Africa could become one of the greatest forces for good in the world.”
We recall these wise words because of the daunting task currently facing our continent, the creation of the African Continental Free Trade Area, the AfCFTA, which I shall return to later.
The Economic Reconstruction and Recovery Plan driven by the Re-imagined Industrial strategy places emphasis on Master Plans as key drivers to attract investment, build capable local industries and create jobs.
The completed and signed masterplans signal the collective commitment of all social partners in ensuring success in their respective industries. The process to finalise more master plans is currently underway.
The Steel and Metal Fabrication masterplan is now completed. This Masterplan will guide the stabilization and progress of the industry.
Guided by the objectives of the Steel masterplan, Deputy Minister Gina and I have initiated a process to work with critical stakeholders in the West Coast to revive the Industry. This will see the revival of direct jobs, indirect and induced jobs in the West Coast and South Africa as a whole.
The Automotive Masterplan commits to double production from 600 000 cars to 1.2 million cars and double employment in the automotive value chain from 112 000 in 2015 to 224 000.
Following the adoption of the Poultry Masterplan in 2019, we are seeing positive developments towards increasing localisation. In this regard, additional 1 million birds were produced per week in 2020 (growth of 5% in volume) and we have seen the reduction of total value of imports by 17% in 2020 compared to 2019.
The Tshwane Automotive Special Economic Zone (SEZ) is a key launch pad towards developing Tshwane as the first Automotive City in the African continent.
This project has surpassed government’s localisation policy imperatives and has empowered 45 percent local businesses in the construction phase, qualifying it as a model project for localisation.
Since 2014, Localisation has been a key component of Government’s economic policy to build and protect local industrial capacity. Many of the World’s largest economies including the United States, China, India and countries in the European Union are doing the same to actively protect and promote their domestic firms through a range of policy measures.
Honourable members, Government continues to enhance its integrated approach through integrated planning and implementation at a local space, in order to achieve high-level impacts in line with the District Development Model.
As the dtic, we are working together with the Gauteng Provincial Government and Sedibeng district municipality to integrate all the potential economic development activities that will underpin the sustainability of the new district economic development model and achieve the reversal of deindustrialisation.
We aim to achieve this through the collective efforts of national government, the private sector, SOEs and universities to direct infrastructure initiatives and human capital development interventions.
Through these collaborative efforts of the three spheres of government in the Western Corridor, we are making progress in diversifying the West Rand economy from reliance on mining to include bus-manufacturing, agri-business and agro-processing, renewable energy and tourism. Similar initiatives are underway in other provinces.
We are taking steps to raise the profile of the Black Industrialist Programme as part of our overall transformation objectives.
The Black Industrialist Scheme (BIS) addresses the low representation of black industrialists with majority ownership and provides the support they need to transform their organisations into viable, sustainable enterprises that address the twin national priorities of local economic development and economic inclusivity.
The BIS incentive invested more than R4 billion in projects owned by black industrialists, about 20% of which were accessed by black female industrialists.
To illustrate the success of this scheme let me highlight one of the supported black industrialists by the dtic over this period, the Toronto Group (Pty) Ltd. The group will manufacture charcoal for the export market (Europe) and has also activated carbon for water treatment and purification.
Construction of the facility is 55% complete and the project is scheduled to go live by August/September 2021. All procurement during construction has been 100% local, 30% from black suppliers.
In terms of the need to advance the quest for inclusive growth across our economy, we acknowledge the catalytic role the National Empowerment Fund (NEF) has championed as the agency of government mandated to grow meaningful black economic participation.
Government is pleased with the strides the NEF has made in attracting over R8.8 billion in third party funding demonstrating the entity’s capacity as a catalyst for unlocking economic value.
Over the past year the dtic allocated over R640 million to the NEF for the support of businesses that have been at the forefront of fighting the COVID-19 pandemic, for women empowerment, for economic distress and for manufacturing enhancement.
Let me focus on the achievements we have made on the negotiations and implementation of the African Continental Free Trade Area (AfCFTA) over the last 12 months and I will also touch on what remains to be done.
The AfCFTA brings us a step closer to realising the historic vision of an integrated market in Africa – and creating a basis for increasing intra-African trade.
There is general concern that Africa’s share of world trade is small – estimated at 3%. Intra-regional trade is also relatively small: between 16%-18% compared to intra-Asian trade at 52%, intra-North American trade at 50% and intra-EU trade at 70%.
The COVID-19 pandemic in March 2020 disrupted our work programme. However, negotiations restarted in September 2020, with SA chairing the meetings of both AMOT and COM. There was an intensive process leading to the 5 December 2020 Summit.
The Summit took into account that AU Members are at different stages of readiness to operationalize preferential trade. Not all had ratified; or submitted tariff offers; and not all rules of origin were agreed. To date agreement on the rules of origin has reached 86% of all tariff lines.
The 5 December 2020 Summit provided the legal framework to allow AU Members/Customs Unions (CUs) to agree to operationalize preferential trade amongst them in a somewhat flexible manner.
The process of assessing and verifying tariff offers is currently underway. To date, thirty-six (36) countries have submitted their instruments of ratification. In SACU, Botswana is yet to ratify the Agreement but it has indicated that other SACU Members can move ahead while it completes its internal processes.
In parallel, negotiations are ongoing on rules of origin and working towards increasing the tariff offers (from the current level of 86%) to 90%. We hope to complete this work by June 2021.
The AfCFTA provides opportunities for South Africa / SACU to export to North, West and East Africa. Intra-African trade is largely in value-added manufactured products and over three quarters of intra-African trade takes place within regional trading blocs. South Africa will benefit from the opening of trade in East, West and North Africa as a result of the operationalisation of the AfCFTA.
During 2020, South Africa exported R11.6 billion of goods to the Rest of Africa.
A recent study by the World Bank estimates that when implemented effectively, by 2035 the AfCFTA is set to lift 30 million Africans out of extreme poverty and 70 million from moderate poverty.
The remarkable progress would not have been achieved without the unwavering leadership and commitment of member states across the continent including our own country. South Africa chaired the African Ministers of Trade (AMOT) since September 2020 and was vice-chair of the Council of Ministers from November 2019; and chaired the structure since January 2021
Very soon, we will be commemorating and acknowledging the successes of the African Union, I would like to pay homage to one of Africa’s true sons, the man who was widely known as ‘Mwalimu’, Julius Kambarage Nyerere. As Africans, we should remember his words when he said:
“Unity will not make us rich, but it can make it difficult for Africa and the African peoples to be disregarded and humiliated…My generation led Africa to political freedom. The current generation of leaders and peoples of Africa must pick up the flickering torch of African freedom, refuel it with their enthusiasm and determination, and carry it forward”.
Honourable Chairperson, as I conclude, let me join DM Gina in appreciating the guidance of Minister Patel, the support from our team of officials and lastly, extend our gratitude to the former Director-General, Mr Lionel October for his unwavering support.
I thank you