111 presentation to the portfolio committee on trade and industry – the dti’s 2009/10 annual...

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Presentation to the Portfolio Committee on Presentation to the Portfolio Committee on Trade and Industry – the dti’s 2009/10 Annual Trade and Industry – the dti’s 2009/10 Annual

ReportReport

Date : 2 November 2010Date : 2 November 2010Director-GeneralDirector-General

Mr Tshediso MatonaMr Tshediso Matona

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Presentation OutlinePresentation Outline

Economic Context Strategic Objectives Achievements against planned targets

Industrial Development Trade, Investment & Exports Broadening Participation Regulation Administration & Co-ordination

Financial Management Challenges

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Economic ContextEconomic Context In the reporting period, 2009/10, the overarching focus and thrust of

the dti’s work has been to take decisive actions to address some of the binding constraints that are impeding the economy’s growth and employment potential, and its diversification and value-adding capacity.

Specifically, the dti finalised the next phase of the Industrial Policy Implementation Plan (IPAP 2).

Although the economy’s positive growth rate reached a post-1994 peak of 5% pa in the period 2004/07 (see figure 1), this did not significantly reduce unemployment which never fell below 22.8%.

This growth has been driven mainly by international commodity price increases; credit-induced consumption; and therefore not sufficiently underpinned by growth of the production sectors of the economy, was an indication of a deep-seated structural problem facing our economy.

The economy’s growth went into reverse during 2008/09 due to the global recession, reaching a low of 1.8% in 2009.

However, the economy quickly recovered in 2009/10, recording a rate of 3.2% in the fourth quarter of 2009 and 4.6% and 3.2% in the first and second quarters of 2010, respectively.

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Economic ContextEconomic ContextFigure: 1 - Real GDP 2004 - 2010q2

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-6

-4

-2

0

2

4

6

8

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Data received from Stats SA, dti graph

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Economic ContextEconomic Context

This recovery was led by the primary sector although the secondary sector also showed solid performance, growing by 7%, a decline from 8.1% in the last quarter of 2009, and led by manufacturing with 8.4% growth in the first quarter of 2010. (Source: Reserve Bank Quarterly Bulletin, June 2010)

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Manufacturing performanceManufacturing performance

Key sub sectors driving the manufacturing sector include the manufacturing of motor vehicles, components and other transport equipment driven by firmer domestic and foreign demand.

Also showing some improvement were other tradable goods such as chemical products and basic metals and steel.

International Trade performanceInternational Trade performance

Export volumes declined by 3.3% in the first quarter of 2010 and that can be attributed to weaker macro-economic conditions in certain European countries as well as the strength of the rand which impeded the competitiveness of the South African products in the international markets.

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The most negatively affected sectors included Machinery and Electrical equipment; Agricultural products and Transport equipment destined for Europe.

The decline further exacerbated the pressure on the balance of payments.

The current account showed a deficit of R12.9 bn in the first quarter of 2010, a deterioration from a surplus of R24.9 bn in the last quarter of 2009.

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Economic ContextEconomic Context Investment performanceInvestment performance

Real gross fixed capital formation increased marginally at an annualized growth rate of 0.2% in the first quarter of 2010 following three consecutive declines of 2.5% in the second quarter, 6.5% in the third and 0.9% in the fourth quarter of 2009, respectively. This growth was a result of investment by public corporations while investment by private business enterprises declined by 0.7% preceded by 4 consecutive declines in 2009.

Employment performanceEmployment performance

Formal non-agricultural employment declined by 3% in 2009, after increasing by 1.8% and 2.9% in 2008 and 2009 respectively.

For the private sector the decline was even higher at 4.8% in 2009, although there was a 1.2% increase in the last quarter.

This decline was mitigated by an increase of 3.7% in public sector employment for the same period.

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Major job loses in 2009 were in:

manufacturing sector losing 87 000 jobsconstruction losing 38 000 jobs; non-gold mining losing 22 500; trade, catering and accommodation losing 66 900; finance and insurance losing 90 200.

(Source: Reserve Bank Quarterly Review, June 2010)

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Strategic ObjectivesStrategic Objectives

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Strategic ObjectivesStrategic Objectivesthe dti’s strategic objectives for the period under

review were: Promoting the coordinated and accelerated

implementation of government’s economic vision and priorities;

Promoting direct investment and growth in the industrial and services economy, with particular focus on employment creation;

Raising the level of exports and promoting equitable global trade;

Promoting broader participation, equity and redress in the economy; and

Contributing to Africa's development and regional integration within the NEPAD framework

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The structure of the dti‘s The structure of the dti‘s work work

the dti’s work is organised in terms of the following clusters:

Industrial development; Trade, Investment and Exports; Broadening participation; Regulation, and Administration and co-ordination

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Achievements against Achievements against planned targetsplanned targets

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Industrial DevelopmentIndustrial Development

Finalise and publish a 3-year IPAP Industrial Policy Action Plan 2 (IPAP2) finalised Also undertook work on the Framework to SA Response to the Global Economic crisis, focusing on the IDC fund of R6,2 billion for distressed firms Regarding the energy crisis, the dti participated in the National Energy Response Team and Electricity Growth Management task team and developed criteria for New Large Electricity Connections National Industrial Participation – implemented 20 new projects (total 230 since inception) with $15 billion investment value and 25 000 jobs created

2009/10 targets & achievements - IPAP

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Develop & implement key action plans for priority sectors

Automotives Finalised the Automotive Investment Scheme (AIS) Secured investments to the value of R2,770bn by BMW, including by component producers following the T6 Puma expansion programme launched by Ford in 2008/09 Multi-year Supplier Development Programme finalised for component producers

BPO Finalised review of the incentive scheme based on past experience Completed pilot project for Monyetla training scheme – 90% successful BPO incentive supported 11 enterprises, with R796,8m investment & 11852 projected jobs of which 1854 have already been created

2009/10 targets and achievements - Sectors

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Tourism Niche Tourism draft strategy completed & registration of SA Youth Tourism Confederation being finalised Established groundwork for Tourism Export Council Tourism Support Programme supported 164 projects with projected investment of R2,3 billion & 4 770 projected jobs

Furniture Developed furniture cluster pilot in KZN Launched R20 million Mthatha furniture incubation centre


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Other ongoing sector work Metals – finalised proposal on scrap metal export tax Clothing & Textiles Competitiveness Programme implemented & illegal imports task team established with SARS Creative industries – craft hubs established & Mzansi Stores high-end retail concept developed Bio-fuels – Investment feasibility study for bio-diesel refinery finalised & enabling regulatory environment being addressed


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Other ongoing work Climate Change & Green Industries – Climate Change Response Plan study completed & initial work on green industries undertaken involving solar water heating Modernisation of SA Technical Infrastructure including upscaling of technical & operational capacity of SQAM in line with IPAP2 Developed draft regulations for the National Regulator for Compulsory Specifications, including stakeholder consultation


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Support investment of R 6, 8 bn and R 3,0 bn in new expansion projects via the Enterprise Investment Programme and Tax Incentives respectively

Revised guidelines for EIP, completed AIS & Section 12i Tax Allowance regulations in conjunction with National Treasury EIP supported 448 companies with a total investment of R8,4bn CIP leveraged 4 (target 12) investments worth R8,9bn, with 4832 projected jobs in the mining, energy, manufacturing and chemicals sectors

2009/10 targets and achievements – Industrial Financing

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80 New film and television productions assisted

Attract new investments to IDZs 65 film productions supported of which 45 were South African with a total SA production expenditure value of R1,3bn Coega: 3 investments signed (target 10) with a total investment value of R1,865bn (target R5bn) & estimated 292 direct jobs (target 2000) East London: 6 investments attracted (target 5) with a total investment value of R309m (target R250m) & estimated direct jobs of 2050 (target 360) Richard’s Bay: no investments. Operator Permit was approved Provided assistance to Saldanha Bay, Gauteng, and Mafikeng with feasibility and applications for new IDZs

2009/10 targets and achievements – Industrial Financing

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Trade, Investment & Trade, Investment & ExportsExports

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Consolidate SA’s position in WTO Doha Development Round & related multilateral negotiations

Continued engagement in WTO Doha Round to secure developmental outcome and led preparation for 7th WTO Ministerial Conference Supported other related multilateral negotiations e.g. Copenhagen Climate Change, G20 processes & World Economic Forum (WEF) & FOCAC, India-Africa, EU-Africa, South America-Africa engagement and TICAD with Japan Finalised overarching Trade Policy & Strategy Framework document Review of Bilateral Investment Treaty (BIT) Policy and successfully opposed litigation by Italian investors based on SA-Italy BIT

2009/10 targets and achievements – Trade Policy & Strategy

Trade, Investment & ExportsTrade, Investment & Exports

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Consolidate trade relations with countries of the North

Continued to engage the EU on an Economic Partnership Agreement that is acceptable to SA & coordinated positions with SADC partners SA-EU Enlargement Protocol signed, extending TDCA preferences to Bulgaria and Romania SA-EU Cheese Agreement implemented Economic Cooperation Agreement signed with Hungary Lobbied for extension of AGOA & inclusion of SA in third country fabric provisions Held technical discussions with the USA on the Trade, Investment, Development and Cooperation Agreement



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Establish & strengthen relations with key countries of the South

SACU-India Preferential Trade Agreement negotiations ongoing Started work on modalities for a SACU-Mercosur-India trilateral trade arrangement Continued engagement with the People’s Republic of China on the Partnership for Growth and Development (PGD), to be incorporated in the Comprehensive Strategic Partnership Agreement (CSPA) SACU-Mercosur PTA submitted to Parliament for ratification MOU on trade and economic partnership signed with Brazil Participated in various activities under the IBSA framework, including providing trade policy support to Ministers



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Promote regional integration in SACU & SADC

Ongoing consolidation of the SADC FTA, involving harmonisation of policies & engagement on the proposed SADC Customs Union Also developed an approach to advance the SADC-EAC-COMESA Tripartite FTA Facilitated the adoption of the SADC Services Protocol Facilitated consensus on focus areas for SACU’s new strategic vision Continued to advance the Spatial Development Initiatives with specific focus on Namibia and Angola Economic cooperation agreements signed with Angola, Nigeria, Zambia, Egypt and Senegal Bilateral Investment Treaty signed with Zimbabwe and agreements with Ethiopia, Uganda and Burundi concluded Participated in various multilateral processes under AU/Nepad to advance African economic development



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Promote SA as an investment destination: targeting R145bn investment value over the MTEF (2009/12)

5 international investment conferences (target 3) 53 investment presentations (target 90) 12 Presidential/Ministerial missions (target 5) 30 inbound missions (target 20) 5 outbound missions (target 12) Project pipeline of R40 bn achieved (target R40bn)

2009/10 targets and achievements – Investment & Exports


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Promote South African exports in targeted markets by training exporters, undertaking trade missions & pavilions

EMIA supported 799 companies (target 1500) 365 emerging exporters trained (target was 200) 49 trade missions (revised target 56) & 23 International Trade Initiatives (target 6) took place 24 pavilions (target 18) were undertaken Facilitated the participation of business people in delegations on State visits to the following countries i.e. Angola (120), Zambia (80), Brazil (60), Nigeria (50), UK (210) Uganda (40) Established new economic offices as part of the South African Missions in Harare, Zimbabwe; Kinshasa, the DRC; and Tehran, Iran

2009/10 targets and achievements – Exports


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Broadening Broadening ParticipationParticipation

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Foster growth of SMMEs & Cooperatives by creating an enabling environment & providing support

the dti finalised a policy proposal for preferential procurement from SMMEs (of ten products) which requires NT support for implementation the dti launched a call centre operated by seda to promote timely payment to SMMEs, as well as developing other support tools Align all SMME programmes with provincial economic development departments to ensure accessibility. DM Ntuli has been championing this work and has prepared a report Legislative amendment of 2005 Cooperatives Act formulated and gazette for public comment, as well as a Cooperative Development Strategy agreed with stakeholders in Nedlac Established 100 youth-owned e-cooperatives and 20 women owned cooperatives

2009/10 targets and achievements – Enterprise Development

Broadening ParticipationBroadening Participation

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Support SMMEs & Cooperatives through various incentive programmes

Black Business Supplier Development Programme (BBSDP) supported 4008 enterprises (target 1600). The programme has been redesigned to align it with transformation objectives/access Cooperative Incentive Scheme (CIS) supported 264 cooperatives, mostly in rural provinces (target 220) Small & Medium Enterprise Development Programme (SMEDP) refocused to assist firms in distress due to the recession The Technology and Human Resources for Industry Programme (THRIP) - 214 projects funded (target 230) & leveraged R227m from private sector and supported 298 enterprises (64% of which are SMME’s) and 1936 students (target 2240) and 685 researchers.

2009/10 targets and achievements – Enterprise Finance & Technology Support


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Support SMMEs & Cooperatives through various incentive programmes

Support Programme for Industrial Innovation (SPII) supported 57 projects (target 80) with a total project value of R359m seda Technology Programme supported 29 incubators resulting in the creation of 243 new SMMEs & supporting 675 SMMEs with 6778 projected jobs Other support provided via the Technology Transfer Programme (66 SMMEs & on quality 1052) & the TechnoGirl Programme (10 schools & 100 learners) Assisted 23 cooperatives with market access including international exhibitions

2009/10 targets and achievements – Enterprise Finance & Technology Support


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Establish institutional framework for implementing B-BBEE Enhanced access to finance for women entrepreneurs

B-BBEE Advisory Council established & its work plan adopted Made inputs into draft Preferential Procurement Regulations to align PPPFA & BBBEE Act 30 B-BBEE Verification Agencies accredited Launched women funding and support programmes - Bavumile programme & Isivande Women’s Fund Started repositioning of SA Women Entrepreneurs Network (Sawen)

2009/10 targets and achievements – B-BBEE & Women Empowerment


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RegulationRegulation

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Complete law reform processes

The following Acts were assented to by the President: Consumer Protection Act 68 of 2008, Companies Act 71 of 2008, Competition Amendment Act & started to develop regulations for this legislation, including the Gambling Act & processes to establish relevant institutions Intellectual Property Amendment Bill finalised & introduced into Parliament Developed regulations for the protection of the World Cup 2010 event & ticket sales Developed regulations to guide the improved distribution of the National Lottery Distribution Fund

2009/10 targets and achievements – Law ReformRegulationRegulation

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Review regulations & strengthen enforcement & monitoring compliance

Conducted legislative/policy reviews in the following areas: Estate Agency Affairs, National Lottery Policy & Gambling Review Commission established Conducted research to support policy work in the following areas: Intellectual Property, Effect of advertising in the Gambling & Liquor Industries, Greyhound/Dog Racing and Shareholder Activism More than 50 campaigns conducted on consumer protection, company regulation, intellectual property, liquor regulation & SMME opportunities for the World Cup 2010

2009/10 targets and achievements – Policy reviews, research and awareness campaigns


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Strengthen enforcement & monitoring compliance

Conducted inspections on Country of Origin Labelling Notice (109), on IP & Counterfeit goods (82) & on liquor (106)

2009/10 targets and achievements – Enforcement


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Administration & Administration & CoordinationCoordination

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Attract, develop & retain professional & skilled officials

Completed and implemented the Human Resource Development Strategy, Human Resource Plan, Human Resource Retention Strategy and the Revised Performance Management System Reduced the baseline vacancy rate from 18.3% to 6.3% Strengthened the recruitment & selection processes by introducing competency assessments for all management & professional segments Facilitated speedy appointment processes of boards and CEO’s of agencies to maintain stability & performance Implemented corporate transformation initiatives involving gender representation (achievement at 42% compared to 41% in 2008/09) & people with disabilities (where target of 2% was exceeded)

2009/10 targets and achievements – Human Resource Management

Administration & CoordinationAdministration & Coordination

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Attract, develop & retain professional & skilled officials

Developed a framework for industrial economists cadre development with Wits University which will have its first intake of students in Feb 2011

2009/10 targets and achievements – Human Resource Management


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Intensify fight against corruption

Ethics Management Framework adopted & implemented revised fraud prevention plan Zero tolerance for fraud and corruption through decisive action following disciplinary hearings Rated second at 86% on the Minimum anti-corruption capacity audit by DPSA, with SARS at 87% holding the first position.

2009/10 targets and achievements – Fraud & Corruption


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Robust financial management function

Payment of service providers within 30-days

Finance unit has continued to produce unqualified audit reports Payment to service providers occurs within 30-day time period New Service Delivery Improvement Plan developed ICT Infrastructure upgraded to improve network responsiveness

2009/10 targets and achievements – Financial Management & Service Delivery


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Enhanced media interaction and effective management of events

Intergovernmental coordination & stakeholder relations

Improved relations with the media, due to easy accessibility of Ministers and senior officials. Conducted 7 site visits (target 12) to projects funded by the dti Issued 64 media releases (target 40) 102 events organised (target 100), including Taking the dti to the People the dti is part of intergovernmental clusters: Economic, International Relations & Governance the dti convened MINMEC quarterly & participated regularly in Nedlac & in industry/CEO forums

2009/10 targets and achievements – Communication & Marketing


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Financial performanceFinancial performance

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Five Year Comparison of budget vs Expenditure – R’000

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2005/06 2006/07 2007/08 2008/09 2009/10

Budget 3,907,420 3,942,028 5,479,433 5,126,893 6,402,076

Expenditure 3,631,304 3,804,720 5,295,250 5,057,064 6,237,955

Unspent 276,116 137,308 184,183 69,829 164,121

% Unspent 7.07% 3.48% 3.36% 1.36% 2.56%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Budget

Expenditure

Unspent

% Unspent

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Categories against which the department’s expenditure had been

incurred

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2009/10 2008/09

R'000 % R'000 %

Total Allocated Budget 6,402,076 5,126,893

Less: Payments to agencies 1,440,308 22.5% 1,269,549 24.76%

Less: Compensation 445,577 7.0% 383,077 7.47%

Less: Incentives 3,762,528 58.8% 2,802,962 54.67%

Incentives capital 1,407,324 22.0% 983,507 19.18%

Other incentives 2,355,204 36.8% 1,819,455 35.49%

Less: Goods & Services 503,661 7.9% 524,101 10.22%

Less: Other Payments 60,230 0.9% 55,298 1.08%

Less: Capital 25,599 0.4% 22,077 0.43%

Total Unspent 164 121 2.56% 69,829 1.36%

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ChallengesChallenges Although the department has made achievements against

planned targets, the following were some of challenges experienced during the reporting period: The reorganisation of government entailed that many

departments had to review key areas of work, which delayed achievement of coherence

The effects of the recession The need to enhance capacity, both financial and human

resources to deliver on the outcome of decent employment through inclusive growth

Managing achievement of targets against requirements for stakeholder consultation

Fragmentation of support across different spheres of government and lack of coordination across government and support agencies

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Thank you

111 presentation to the portfolio committee on trade and industry – the dti’s 2009/10 annual...

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