Unabriged budget address: Minister of Trade & Industry Dr Rob Davies

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National Council of Provinces (NCOP) budget vote debate by Trade and Industry Minister Dr Rob Davies

5 May 2010

Chairperson

Members of the Executive Council of Provinces

Heads of provincial departments

Honourable members

Ladies and gentlemen

In addressing this House on previous occasions, we have consistently argued that preserving and enhancing South Africa’s industrial capacity is intertwined with the challenge of promoting a broader and more equitable distribution of economic activity throughout our country. The impact of the recent global economic crisis and recession on the patterns of economic development in our country has reinforced our view. Strong economic forces continue this tendency of concentrating economic activity in established urban areas whilst simultaneously excluding from economic opportunities, people who reside outside the major metros. As we previously reported to this house, industrial development has enormous potential to generate decent work including overcoming regional disparities in economic development.

Firstly, the percentage of the Department of Trade and Industry (dti) budget allocated to industrial development programmes reflects the importance and priority of government to industrial development. The Industrial Policy Action Plan (IPAP), now commonly referred to as IPAP2, is a three year rolling industrial policy action plan for the Medium Term Expenditure Framework (MTEF) period, commencing in the 2010/11 financial year and ending in the 2012/13 year. IPAP2 is designed to expand our industrial base in critical sectors of production and value added manufacturing which are largely labour intensive.

IPAP2 is a product of collaborative and extensive work of the economic sectors and employment clusters of ministers and departments. Although the Department of Trade and Industry stands at the centre of much of industrial policy and practice, IPAP’s success is critically dependent on stronger coherence and mutual support from other departments and agencies.

Honourable members, we are well aware that achieving success will be an enormous challenge. We believe that were it not for our intervention in several areas of the real economy, we may well have faced a greater danger of de-industrialization than is now the case. Our support programmes for the motor industry for instance, have been one success and in this regard a new Automotive Investment Scheme (AIS) has been finalised. In assessing the previous MIDP programme, the extent of the auto component sector’s significant multiplier impact through strong backward linkages to other sectors of the economy, as well as its potential to make a significant contribution to employment creation, became more apparent. The new programme will extend existing benefits previously only available to light vehicle assemblers and their 1st tier suppliers through the Productive Asset Allowance of the Motor Industry Development Programme (MIDP), to all firms in the automotive component sector.

A second example of intervention is the government assistance programme introduced in 2008, which has put South Africa on the global map as a supplier of business process services. Six thousand jobs have already been created in the past two and a half years. The challenge now is to attract new investments. In light of increasing competition for investment in this sector, we will this year be embarking on a review of our strategy to ensure that it is responsive to new realities in the sector.

Further progress can be reported in respect of the Enterprise Investment Programme (EIP), amongst others. 290 projects investing R6.1 billion and creating 11,336 jobs have received approval for manufacturing investment programme grant funding in the past year. More that 60 percent of the approved companies are in those sectors prioritised in our 1st IPAP, namely capital equipment, automotives, chemicals, plastics and pharmaceuticals and forestry and furniture. 68 percent of these approved projects have already started production.

The tourism support programme which is the other subcomponent of the EIP has granted approval to 164 projects with a projected investment of R2.3 billion and creating approximately 5 000 jobs. A third example of our support for industrial development is through the Black Business Supplier Development Programme (BBSDP), which assists and prepares black entrepreneurs to take up business opportunities by providing training and access to productivity and competitiveness enhancing knowledge services.

During the past year, more than 4 000 enterprises across all provinces received technical and standards training, productivity enhancing computer software and marketing and promotional materials. New guidelines will come into effect in the second quarter of this financial year, extending the scope of assistance. This will include a partial grant for productivity enhancing technology, tools, equipment and machinery for those enterprises that have strong potential for further growth and integration into the formal industrial supply value chains.

In the context of these evidence based achievements, we will continue to ensure that industrial financing as well as incentives enjoy attention. Honourable members, I had an opportunity to speak on matters of trade policy in the National Assembly yesterday and I don’t want to repeat the points in detail here. I however welcome the keen active interest that the National Council of Provinces continues to take in international trade matters and want therefore to make a few points.

Firstly, we will soon finalise our strategy outlining how trade policy will contribute to steering our economy onto a new economic growth path.

Secondly, the Southern African region and the African continent will be at the centre of our international trade engagements and we will intensify efforts to strengthen developmental regional integration in Southern Africa and extend integration across Africa.

Thirdly, we will work with our sister countries to transform SACU into a vehicle for deeper integration, through coordinated economic development strategies. And we will also work to extend African integration through the pursuit of the Trilateral SADC-EAC-COMESA free trade agreement.

Fourthly, developing countries have become more important in the global economy over the past few decades. We will benefit from building stronger trade and investment relations with these new poles of economic growth in the world economy. Greater effort will go into building these ties, which could help us diversify our trade and investment relations. We can also benefit from the potentially rapid and dynamic economic growth in the South at a time when the recovery in developed countries is expected to be slow.

In line with this approach, South Africa and other members of SACU concluded and signed a preferential trade agreement (PTA) with MERCOSUR in 2009, the first with another developing region. Parliament has now been asked to ratify the agreement. During the course of this year, we will intensify negotiations for the preferential trade agreement that SACU and India initiated in 2007. Similarly, we will continue our engagement with China to develop a Partnership for Growth and Development (PGD). Our objective is to promote increased volumes of value added exports to China and to increase inward investment in beneficiation projects.

Finally, we will continue to build trade and investment relations with key countries in the North. Economic relations with the European Union (EU) remain important, as they are our largest trade and investment partner. We will seek to extend and deepen the benefits of AGOA. The Trade, Investment Development and Cooperation Agreement (TIDCA), a cooperative trade arrangement concluded by SACU in 2009, will build on the benefits of AGOA. Further, we will work to ensure that the engagement with the US supports regional integration in Southern Africa.

Honourable Members, industrial policy requires a supportive regulatory environment to support business and protect consumers. In 2008, the department piloted three pieces of legislation through Parliament which were assented to by the President in April and August 2009 for implementation in October this year. This legislation will impact on all our citizens.

The first of these is the new Companies Act which simplifies business registration and reduces unnecessary onerous financial reporting burdens on SMME’s. The act provides new protection against unscrupulous practices for businesses in financial distress.

Secondly, for the first time, the new Consumer Protection Act provides safeguards for consumers through compulsory product description and labelling, product safety, product choice and information disclosure.

Thirdly, the implementation of the Competition Amendment Act, will allow sector wide and general market inquiries to be conducted to deal with uncompetitive outcomes and competitive constraints in certain sectors of our economy.

To implement the new pieces of legislation, the necessary regulatory processes will be finalised this year. Given that the new laws will impact on all our citizens in all our provinces, we are beginning to initiate and undertake widespread education and awareness campaigns.

With regard to the FIFA 2010 World Cup, we have published for comment, FIFA ticketing regulations. These regulations seek to ensure that the granting of temporary licences provide opportunities for SMME’s from previously disadvantaged communities. May I also use this opportunity to thank all the MEC’s and provincial authorities for their cooperation in developing the 2010 Liquor policy and regulations. While we have been concentrating on developing new regulations, we are at the same time undertaking an impact assessment and comprehensive review of the gambling industry and legislation. In consultation with my colleagues at provincial level, we have established a gambling review commission to assess the extent of gambling activities and its socioeconomic impact.

The commission has conducted public hearings and will produce a report which we intend tabling in Parliament in the second half of this year.

Chairperson, enterprise development remains a key objective. We continue to learn as we implement. Based on these learnings, part of our response to improve support for SMME’s is based on the one stop shop framework.

This framework provides for the collocation of SMME’s support services through the relevant agencies. The Small Enterprise Development Agency (SEDA) is engaging with relevant provincial and municipal structures to not only collocate, but to co-fund the delivery of some of the products and services within the SEDA branches.

Secondly, we continue with the implementation of our Broad Based Black Economic Empowerment (BBBEE) initiatives. Following the closure of the public commentary period, a team of the dti and National Treasury are working on aligning the Preferential Procurement Policy Framework Act (PPPFA) with the BBBEE Act. One of the aims of this alignment is to strengthen industrial development in support of the new growth path of our economy. We will further strengthen the BBBEE legislation by creating a punitive dispensation to prevent circumvention of BBBEE while on the other hand, developing incentives to promote compliance with BBBEE policy.

The launch of the BBBEE Advisory Council signifies an important milestone. This is so because one of the key functions of the council will be to monitor the implementation of BBBEE by all organs of state, public entities, government departments, sector charter councils and the general public at large.

Aspects of the act that require immediate attention include dealing with fronting, the policy implementation framework, regulation of the verification process and refinement of the Codes. In the area of cooperatives development, in consultation with NEDLAC, we are finalising the Co-operatives Development Strategy and a Co-operatives Amendment Bill. My colleague, Deputy Minister MaNtuli, will spell out some of the key issues later in the debate.

Honourable members, with regards to regional economic development, our efforts have not always yielded the requisite results. However, as I indicated earlier, we believe that industrial development is a key component for addressing economic regional disparities. Going forward, our policy focus will be on financial and institutional support as well as specific measures for supporting and developing small scale industries through the promotion of regional industrial clusters. Our regional industrial clusters programme will therefore have the following features:
* The use of an industrial cluster approach to unlock economic development in underdeveloped areas
* The identification of economic regions agglomerating a number of municipalities within and across provinces and implementing targeted economic development strategies for each economic region as opposed to individual municipalities
* The concentration and coordination of various support measures within the dti, support from other government, state owned enterprises and the private sector, to support enterprises within the supported cluster, and
* The provision of a wide-range of business development support services to enterprises within supported clusters. In addition, we will work with other spheres of government to support local economic development (LED).

Chairperson, as part of these efforts to broaden participation in economic activity, the dti is also increasing support for entrepreneurial development. We have begun doing so by undertaking innovative collaborative and strategic partnerships with institutions of higher education. We have also set targets for skills development, to produce additional engineers and technicians and to increase the number of qualified mathematics and science teachers.

The advancement of women’s economic empowerment cannot simply be a platitude. We have therefore integrated gender equity measures into our programmes to facilitate the participation of women in the economy and to enhance their contribution to the overall objective of economic empowerment.

Further initiatives for this year include seeking Cabinet approval for:
* Strengthening the South African Women Entrepreneurs Network (SAWEN) as an Apex body for women sectoral organisations, to enhance advocacy and institutional representation efforts of women in the country, and is being spearheaded by Deputy Minister Ntuli
* A Strategy on Gender and Women Economic Empowerment outlining integrated solutions that include directly tackling barriers hindering women’s economic participation.

In addition, given the higher than average rate of unemployment of our youth, interventions that will increase the participation of youth in the economy and that will create jobs for young people are becoming increasingly important. We will therefore submit the youth enterprise development strategy to Cabinet for approval during this financial year.

Finally, to deliver on our mandate, the dti has to be a high performing organisation. Beginning with the Human Resource Development (HRD) strategy we are well on the road in developing a professional programme for economists, specialising in industrial policy and sector work. All in all, greater support will be provided for our bursary scheme, our post graduate research programme, internship programme as well as various functional skills and management development programmes.

Good progress has been made in filling our senior management positions. In addition to this, we are focussing on the development of women in the department to create a pool of talent for senior management positions.

Finally chairperson, in light of the challenges facing the public service around financial mismanagement, I would like to commend the department for its efforts in continuously receiving unqualified audit reports from the Auditor-General and in ensuring that suppliers are paid within 30 days. I thank you and trust that this house will support budget vote 35.

Issued by: Department of Trade and Industry
5 May 2010

Source: Department of Trade and Industry (http://www.dti.gov.za/)