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Presentation to the Standing Committee on Presentation to the Standing Committee on AppropriationsAppropriations

Date : 11 August 2011Date : 11 August 2011Presented by: Director-General Presented by: Director-General

Mr Lionel OctoberMr Lionel October

Introduction

• The information presented is based on the 2010/11 Audited Annual Financial Statements

• The Auditor General SA expressed an unqualified audit opinion on the 201/11 Annual Financial Statements

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Overview of expenditure The budget allocation for the 2010/11 financial year was

R6,194,208 million as compared to R 6,402,076 million in 2009/10. The expenditure for 2010/11 was R5,796,741 million, i.e. 93,6% of the budget, and in 2009/10, it stood at 97,6 %, i.e. R 6,237,955 million.

This spending pattern should be considered in the context of the departmental cost drivers, comprising mainly incentive schemes and transfer payments. Approximately 58% of the expenditure consisted of incentives and 22% of transfers to the departmental agencies. The remaining funds were utilised for operational expenses.

The under spending was mainly in the division responsible for Incentive Administration, viz, The Enterprise Organisation division, by 4.09%, which is mainly attributable to the Automotive Investment Scheme (AIS).

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Budget vs. expenditure for the 2010/11 financial year – per programmeProgramme 2010/11 Unspent as %

of final appropriation

Final Appropriation

Actual Expenditure

Variance Expenditure as % of final

appropriationR’000 R’000 R’000

Administration 443,251 435,815 7,436 93.3% 0.12%

International Trade and Economic Development 125,088 106,949 18,139 87.0% 0.29%

Empowerment & Enterprise Development 814,034 801,173 12,861 99.6% 0.21%

Industrial Development 1,156,961 1,142,033 14,928 94.38% 0.24%

Consumer and Corporate Regulation 195,531 145,021 50,510 96.13% 0.82%

The Enterprise Organisation 3,046,652 2,792,994 253,658 82.37% 4.09%

Trade and Investment South Africa 353,476 328,582 24,894 99.94% 0.40%

Communication & Marketing 59,215 44,174 15,041 100% 0.24%

Total 6,194,208 5,796,741 397,467 6.42% 6.42%

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Budget vs. expenditure for the 2010/11 financial year – economic classification

Economic classification 2010/11 Unspent as % of final

appropriationFinal

AppropriationActual

Expenditure Variance Expenditure as

% of final appropriationR’000 R’000 R’000

Compensation of employees 551,748 514,935 36,813 93.3% 0.59%

Goods and services 545,826 474,830 70,996 87.0% 1.15%

Interest and rent on land 276 275 1 99.6% 0%Departmental agencies and accounts 872,762 838,980 33,782 96.1% 0.55%

Universities & technikons 16,298 14,793 1,505 90.8% 0.02%Foreign governments and international organisations 39,084 36,642 2,442 93.8% 0.04%Public corporations and private enterprises 4,105,170 3,859,334 245,836 94.0% 3.97%

Non-profit institutions 37,800 37,800 - 100% 0%

Households 2,754 1,657 1,097 60.2% 0.02%

Payment for capital assets 20,183 15,189 4,994 75.26% 0.08%

Payment for financial assets 2,307 2,306 1 99.9% 0%

Total 6,194,208 5,796,741 397,467 6.42% 6.42%

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Economic classification 2010/11 Unspent as % of final

appropriationFinal

AppropriationActual

Expenditure Variance Expenditure as %

of final appropriation

R’000 R’000 R’000

Compensation of Employees 551,748 514,935 36,813 93.3% 0.59%

Goods & Services 545,826 474,830 70,996 87.0% 1.15%

Interest and rent on land 276 275 1 99.6% 0%

Transfers to: 5,073,868 4,789,206 284,662 94.38% 4.60%

Departmental agencies 872,762 838,980 33,782 96.13% 0.55%

Manufacturing incentives, including:

1,389,176 1,144,261 244,915 82.37% 3.95%

**Automotive Production & Development Programme

538,000 294,252 243,748 54.69% 3.94%

Programme payments 1,216,984 1,216,225 759 99.94% 0.01%

Infrastructure incentives 1,224,374 1,224,337 37 100% 0%

Export Incentives 274,636 274,511 125 99.95% 0%

Other 95,936 90,892 5,044 94.74% 0.08%

Payments for capital assets 20,183 15,189 4,994 75.26% 0.08%

Payment for financial assets 2,307 2,306 1 100% 0%%

Total 6,194,208 5,796,741 397,467 6.42% 6.42

Budget vs. expenditure for the 2010/11 financial year – economic classification

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** Amounts in respect of AIS are already included under the manufacturing incentives

Reasons for under spending

Item Amount unspent

Unspent as % of final

appropriation

Reasons

R’000

Automotive Production & Development Programme

243,748 3.94% The Automotive Investment Scheme (AIS) was launched in May 2010. The AIS Adjudication Committee was established in December 2010 and the first meeting was held on 6 December 2010. 53 Projects have been approved by the Adjudication Committee with the total concession amount of R1,861 billion as on 31 March 2011. R293,918 million was paid during the first quarter of the new financial year.

Goods & Services

70,996 1.15% • Outstanding foreign mission accounts from DIRCO. The account for March 2011 was only received on 19 May 2011 and charged against the budget for 2011/12• Postponement of the SACU Tripartite Summit from February to June 2011• Payments for funds earmarked for variation orders for a building currently occupied by CIPC could not materialise pending their move to new premises • Cost savings initiatives on venues and facilities as well as on travel contributed to the saving

Compensation of Employees

36,813 0.59% Vacancies

Departmental agencies

33,782 0.55% Delays in the establishment of the National Consumer Commission and the Companies and Intellectual Property Commission.

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Vacancy report

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Baseline vacancy reduction

Recruitment efforts

* Excludes posts additional to the establishment

2010/11Quarter 4

(1.1.11 – 31.3.11)

2010/11Quarters 1 - 4

2011/12Quarter 1

(1.4.11 – 30.6.11)

Posts filled through appointments

19 138 42

Posts filled through promotions

29 97 27

Total recruitment efforts *

48 235 69

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Interventions to ensure reduction of vacancy rate:

• Clean up of establishment to identify redundant posts to be redesigned in order to create posts in line with new priorities, eg IPAP2. Resulted in old untriggered vacancies being abolished and new vacancies being created and triggered for filling.

• Directives were issued in terms of turn around times for advertising and filling of positions to be concluded in a three month period. Non compliance resulting in posts being abolished or redesigned for new posts needed.

• Improved monitoring and reporting on vacancies through focus session held to review progress made per position. Reporting done monthly to Chief Operating Officers, Deputy Director-Generals and Director-General.

• Improvement of recruitment turn around times through:

– Providing additional capacity to Recruitment Office

– Outsourcing of recruitment processes

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Summary of key achievements for the Summary of key achievements for the 2010/11 Financial Year2010/11 Financial Year

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Key Achievements for 2010/11 FYKey Achievements for 2010/11 FYIndustrial Development: Industrial Development: Industrial financingIndustrial financing

Launched the 12i Tax allowance for investment in new manufacturing assets and Training of staff - 2 applications received

Automotive Investment Scheme (AIS) launched and finalised leading to investment commitments of R13bn from assemblers and component suppliers, supporting 24,000 jobs in the sector. Large increases in levels of volumes and localisation

Rollout of the Clothing Textile Competitive Programme (CTCP) and Production Incentive (PI) with 106 and 94 companies benefiting under the CTCP and PI respectively

R40 million investments made and 950 jobs created. R42 million new investment commitments approved linked to 806 jobs. 3,400 are currently being trained under the Monyetla II Programme – 70% guaranteed employment by BPO consortium

Improved the performance of incentive programmes by submitting amended guidelines for BPS & EIP

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Key Achievements for 2010/11 FYKey Achievements for 2010/11 FYIndustrial DevelopmentIndustrial Development

ProcurementAgreement by National Treasury, Economic Development Department and the dti to process amendments to PPPFA regulations to designate sectors for local production and alignment with B-BBEE codes. Amendments await promulgation by National Treasury

the dti has developed a sector designation methodology and is compiling necessary research to designate a range of sectors

Trade

Early warning system developed by South African Bureau of Standards (SABS) identifying technical barriers to trade for exporters launched and distributed to exporters on a monthly basis

Africa Regional Development Developed concept note on areas of cooperation towards a SACU regional industrial policy. This was warmly received by SACU member states. Engagements are currently underway to finalise joint projects

THANK YOU