DTIC 2022/23 Annual Performance Plan; with Deputy Minister

Meeting report

The Chairperson noted apologies, and the Committee observed a moment of silence for those in KwaZulu Natal (KZN) and Langa.

Introductory Remarks by the Deputy Minister
The Deputy Minister of Trade, Industry and Competition, Mr Fikile Majola, noted the devastation across the country before making opening comments about the Annual Performance Plan and Strategic Plan. The Department of Trade, Industry and Competition (DTIC) planned a number of interventions which would take place across the provinces. 

Briefing by the DTIC on the Budget Vote, Annual Performance Plan, and Strategic Plan
Ms Malebo Mabitje-Thompson, Acting Director-General, DTIC, briefed the Committee on the Budget Vote, Annual Performance Plan (APP), and Strategic Plan.

Mr Shabeer Khan, Chief Financial Officer (CFO), DTIC, outlined the budget allocation framework.

The country's imperatives informed the DTIC's 2022/2023 APP to address high unemployment, poverty, inequality, the urgent need to improve economic performance, and inclusive growth. It built on the innovation introduced in 2021, namely greater integration of the work of the Department through joint key performance indicators (KPIs). In this year’s APP, this idea was taken further through the introduction of three succinct outcomes, which replaced the sprawling 17 previous outcomes, bringing greater coherence to the work of the DTIC. The three outcomes were industrialisation to promote jobs and rising incomes, transformation to build an inclusive economy, and a capable state to ensure improved impact of public policies.

Concentrating the work of the DTIC around these three strategic outcomes would allow for better coordination of work across the DTIC’s 18 entities. In the Transformation Outcome, for example, firms in the Township Economy should be able to access dedicated resources from the National Empowerment Fund (NEF) and Independent Development Corporation (IDC) while being protected from unscrupulous lenders through the National Credit Regulator’s (NCR’s) programme. This can demonstrate the quality of the work through new standards outreach by the South African Bureau of Standards (SABS) while being protected from substandard imports by the National Regulator for Compulsory Specifications (NRCS) and International Trade Administration Committee’s (ITAC’s) permit and inspection regimes. In the Industrialisation Outcome, entities laid the groundwork for the green economy, with the National Metrology Institute of South Africa (NMISA) and the South African National Accreditation System (SANAS) building a technical ecosystem that can incorporate new technologies such as green hydrogen. The Export Credit Insurance Corporation (ECIC) could help South African firms access opportunities in Africa’s investment in renewable energy and help the Competition Commission prioritise oversight of the energy sector to ensure fair access for Independent Power Producers (IPPs). In the Capable State Outcome, entities have committed to reducing turnaround times, improving responsiveness, and combating corruption. Similar collaboration continued beyond the DTIC’s entities. For example, the Constitutional Court’s judgement on the Preferential Procurement Regulations requires greater work with individual organs of State; and a revamp of the procurement legislation to give effect to the public policy objectives.

The DTIC sought to contribute to inclusive growth and job creation by measures which included increasing the level of investment in the economy and securing pledges for fresh investment in South Africa of at least R120 billion, largely from the private sector. This was done during 12 months of work with private firms to enable pledged investments to be realised. The industrialisation of the economy needed to be improved by contributing to selected projects during the financial year to achieve the target of R200 billion additional local industrial output over five years. The structural transformation of firms and sectors through customised packages of R22 billion would be supported by the DTIC and its entities, which comprised industrial funding, competitiveness enhancement programmes, or working capital for Small and Medium Enterprises (SMEs).

South Africa’s share of manufacturing global exports, worth about R600 billion, would be maintained through its support and risk-cover on transactions valued at R8.2 billion, expected to be issued; and maintained through improving the composition of exports, with more value-addition; the composition of exporters, with more previously-excluded demographic groups; and the spatial distribution of exporting firms.

The presentation covered the various performance and output indicators in detail and budget analysis and its alignment with the three strategic outcomes. 

(See presentation for further information)

Discussion
Ms H Boshoff (DA, Mpumalanga) noted the presentation addressed climate change, renewable energy, and solar cars, among other issues. She asked how this would be managed in light of the current Eskom debacle, as the country was experiencing stage four loadshedding. She asked how the country would get electric cars on the road if there were no stable electricity network; and how the red tape would be reduced, as this was a problem many small businesses experienced. Many small businesses could not access loans because of the red tape.

She noted the R336.8 billion in pledges of new investments and asked how many of the pledges had been turned into actual payments to South Africa.

She asked for more feedback on the Mpumalanga Special Economic Zone (SEZ) and said this had been on the table for quite some time. No mention had been made during the presentation about this specifically, despite starting a few years before. Clearly, it had not been finalised yet.

Mr M Dangor (ANC, Gauteng) asked how one turned pledges into actual cash and if personnel existed in foreign missions to attract and turn those pledges into investments which could be linked to projects and companies in South Africa. He asked if any funding would be used to subsidise internships and tradesmen through apprenticeship programmes, so small industrialists could take people up in those industries and get subsidised salaries to move the furniture industry forward. Currently, the country was importing furniture, whereas the country exported furniture in the past.

The Chairperson said in the last APP of 2020/21, the Committee asked the report to consider the global economic context and outlook. This overview would have been beneficial. It would have been useful to include Gross Domestic Product (GDP) growth by sector in provinces, the manufacturing sector’s performance, and international trade (exports) according to commodities. The report should indicate the top ten trading partners rated by exports and imports and trade with Brazil, India, China, South Africa (BRICS), and other countries on the continent. He thought these would have been included, as was requested in 2019.

One of the indicators under administration was to improve the structure of the DTIC. Mr Dangor asked how often the DTIC structures would be improved and if the Department’s continuous restructuring caused anxiety amongst staff. He noted the change in approach to the performance indicators and said it confused the Committee to compare the APPs across years. He had the previous APP report in front of him, and under ‘Administration’ it said “100 percent eligible creditors’ payment made within 30 days”. This was not in the current APP under ‘Administration’. The vacancy rate was not indicated in the current APP, and there were no targets on the audit outcomes. Many departments set targets to achieve a clean audit. This was not included in the report unless it was couched somehow in Programme One. He noted something was said about 25 percent procurement being approved towards the programme for businesses owned by women, youth, and persons with disabilities. On 9 August 2020, the President said there would be 40 percent women-owned businesses. He asked if the 25 percent was not contrary to the statement made. Under Programme One, a target was set to achieve a fully functional Anti-Corruption Unit. He asked if this Unit and the Entities Oversight Unit would be established during this financial year.

He noted the annual client satisfaction survey and said Parliament also had such a survey conducted on a quarterly basis. The Department did it annually, and he asked if it would perhaps be better to do it quarterly. In 2023/24, there was no target for the number of interns in the Department. He asked for clarity on this, particularly why there was a target for 2022/23 but nothing for 2023/24 and 2024/25. One of the stakeholders said there was not much going on with the social compact, and there were only talks about talks. He asked if there was anything beyond talks about talks.

On the issue of trade policy, he said it spoke about five priorities, and he asked for clarity on the five priority sectors. South Africa and India had proposed a waiver on applying certain provisions of the treaty’s agreement. He asked how far this was and asked for updates on the status of the various bills.

The review of the Liquor Amendment Bill and the proposed changes gave the impression the Liquor Amendment Bill would be tabled before Parliament but it had not happened. Under this programme, it spoke about ‘measures’ and Mr Dangor asked what this meant. The National Credit Amendment Act, in the last APP, spoke about the National Credit Amendment Act Implementation Plan, which would be tabled at some point. He asked about the difference between the National Credit Amendment Act Implementation Plan and the Bill.

Responses
The Acting DG replied to the questions about the electric vehicles and Eskom’s electricity generation. The electric vehicles being looked at were ones where the energy was ‘self-created.’ Not all electric vehicles needed to be plugged in. The technologies being looked at were based on the understanding they would generate their own electricity. The Department was worried about loadshedding more generally and the implications for industry. The energy provision environment needed to be stabilised so investors could go ahead with investing.

Regarding reducing red tape, there had been some improvements, especially improving productivity and the provision of technologies to assist the core of the Department and improve turnaround times. Sustained solutions were being put in place and would, over time, improve the legislative and regulatory environment.

The information requested by the Chairperson could be shared with the Select Committee. A significant amount had already been turned into investment. Where the investment did not materialise, this was reflected. The Department was in discussions with the Department of International Relations and Cooperation (DIRCO). South Africa needed to improve its footprint as far as economic cooperation was concerned. This would provide some market intelligence. As requested, the Department would provide a broader economic context in its next presentation.

The 25 percent relating to women, youth and persons with disabilities was seen as an incremental target. The CFO would speak to this. The hope was that this would increase to 40 percent over three years, so the Department was in line with what the President had said.

The Department intended to finalise the Anti-Corruption Unit and the Entities Oversight Unit this financial year. The annual survey would be applied, but the advice regarding a quarterly survey was noted; it would serve the Department better.

Zero was seen in the 2023/24 and 2024/25 periods because interns would be employed for two years, not on an annual basis. The Department took the advice of the Chairperson and would monitor this quite closely.

The Chairperson said that in the APP tabled in July 2021, the Committee was informed about the proposed SEZs progress. He asked for updates about each of the SEZs. 

Mr Maoto Molefane, Acting Deputy Director-General: Spatial Industrial Development and Economic Transformation, DTIC, said in Mpumalanga, the Department struggled with capacity and cooperation from the province. Consensus had been reached about the direction in which to go. The challenge was about the capacity to implement. The project management unit had been requested to operationalise some of the investments attracted. It would be operational in six months, around July 2022. The Department’s own money would go into the infrastructure. The only challenge was location. A location close to the railway line was desired, which was outside of the SEZ. The Department was working with the province to ensure it accelerated the process.

There was also a challenge regarding the SEZs around the M4. When the province applied to SANRAL, SANRAL was of the understanding the SEZs would immediately have many companies and rejected the application based on the fact there would be a massive influx of traffic which would cause congestion. The Department appointed a traffic engineer through the DTIC to assist and work with SANRAL to ensure there was consensus and clarity. Based on the work undertaken and the Department’s involvement, it would be able to achieve the desired goal. The SEZs were affected by the investment climate. There had been a significant increase in investment. In the last financial year, the number of companies in the SEZ had significantly increased, and the Department was busy finalising the Quarter Four report. This would be ready by the end of the month.

He highlighted a number of objections received relating to the Environmental Impact Assessment (EIA) applications. It included the construction of the coal power station. The Department was proceeding with all the other manufacturing plants in the meantime. Provinces and municipalities were encouraged to contribute toward the infrastructure. Provinces contributed R600 million and were putting up the infrastructure. DTIC requested additional funding for the infrastructure.

In the Wild Coast in the Eastern Cape, investors were interested and were busy building the infrastructure. The province had allocated money for bulk infrastructure, specifically fencing. No one was waiting on paperwork to process these projects. All spheres of government needed to contribute toward the infrastructure provision. SEZs needed to be about the development of a region.

The Northern Cape SEZ was centered around smelting mineral processing. The application had been submitted to the DTIC and was under consideration. The DTIC would be engaging with the province on this. The smelting part had already started. There was an interim board appointed to drive development. These were examples of what was being done on the ground.

In the absence of a coherent approach, part of the challenge was that everyone wanted an SEZ, even where it was not viable. All these initiatives were being brought under one coherent plan.

Ms Niki Kruger, Chief Director: Trade Negotiations, International Trade and Economic Development Division, DTIC, said she would respond to the questions about the services sectors. Transport, communication, finance, tourism, and business services were key priorities. The aim was to finalise these specific commitments by June 2022 and then move on to other outstanding sectors and negotiate specific commitments in these sectors. There have been a lot of discussions in recent months. The proposals would need to go through a formal approval process. The aim was to have it approved by all ministers by 17 June 2022.

Dr Shandokane Evelyn Masotja, Deputy Director-General (DDG): Consumer and Corporate Regulation Division, DTIC, replied to the questions about the legislative programme. The Chairperson was correct in saying in the 2020/21 financial year, an Implementation Plan was outlined for the implementation of the Act. In 2019, when the Department gave feedback to the Portfolio Committee on legislation, a social impact assessment was presented to the Committee to note some of the issues raised by stakeholders regarding implementation. There were consultations held with the industry, the Minister, and the regulators to see how the implementation could be seamless, cost-effective, and not be burdensome to the fiscus. On this basis, the discussions were ongoing. Instead of implementing legislation which might have unintended consequences and challenges, it was decided it might be better to reconsider some of the issues which could be amended. This was why the National Gambling Amendment Bill was now being referred to. It was an Act, but concerns were raised first in the social impact assessment and then in the consultations with stakeholders. Issues were identified that required further consideration. There were parts of the Act which might need to be amended before it was legislated. There was a need to ensure cost-effectiveness and seamless implementation of the legislation to ensure it did not create unintended consequences, particularly to the consumers it was intended to support and provide for. The intention was to provide for low-income earners, but consumers might be negatively affected because of the challenges such as implementation costs raised by the study and consultations. The plan was to look into the areas of concern and bring the amendments to Parliament. The Department would consider consolidating the issues, consulting further, and going into the different processes required.

The Liquor Amendment Bill was ready according to the National Economic Development and Labour Council (NEDLAC) process. It was tabled at one of the parliamentary committees and there were comments made on the Bill. This was being reviewed. When the pandemic occurred, the Department realised the issue of liquor abuse in the country was quite serious. During the different adjustment levels, the impact of liquor was evident in the country. The Department realised the challenges were bigger than some of the provisions made in legislation. These provisions were therefore under review. Following the experiences and lessons learned during the pandemic, there was a need to look at a coordinated approach. Other departments were being consulted. The next step was to approach Cabinet with the discussion points to strengthen various measures. Liquor abuse was a big issue which required a concerted and integrated approach.

The Companies Act Amendment Bill had been ongoing for some time. In 2019 there was a process at NEDLAC and this process went on for some time. There were a lot of issues which needed to be addressed. There were a number of areas of disagreement between constituencies and stakeholders. The process was reopened to streamline and simplify the issues and get greater understanding and consensus. More time was given for consultation. There were substantive issues in the amendment and discussion processes which resulted in a further Bill which was advertised and gazetted in October 2021. The process was underway and those stakeholder comments and submissions were being considered. The intention was to finalise the process, go to Cabinet, and attempt to introduce the legislation. The Bill looked at the issues identified by the regulators, issues of disclosure, remuneration, shares of companies, and meeting international obligations. The issue of red tape was being addressed and processes were being simplified and clarified. The red tape issues were being addressed in the Bill. The other Bill would be looking at the representation of workers on boards. It was an important intervention which spoke to transformation. There would be more consultations on this.

The National Gambling Amendment Bill had been in parliamentary processes and was currently in the mediation process. The Department had made this one of its APP priorities and would support the different processes required to finalise the Bill.

CFO Khan replied to the questions on the procurement targets. This tied in closely with the transformation objective of the Department and was an important area of work. The Department was working quite closely with the Department of Women, Youth and Persons with Disabilities and National Treasury to see how best it could be implemented. The Department was looking into how best to centralise the database to be used as an instrument to drive this, as it was an important area.

The Deputy Minister said on matters relating to Eskom, there were serious challenges being faced. However, progress was being made. Action was being taken by the Minister of Mineral Resources and Energy, as seen in the announcements of the week before. He repeated the previous responses regarding vehicles that needed to be self-reliant and not rely on external energy sources.

Engagements would take place over the coming weeks with the various stakeholders such as SANRAL on the SEZs. Progress was being made. He was going to the Eastern Cape the following day and one of the things which would be looked at was what progress had taken place in the Wild Coast Industrial Park.

He replied to the issues regarding the pledges and said DIRCO was leading the Department. A couple of weeks before, there was a launch toward a coordinated mechanism for economic diplomacy across the African continent. The whole of government needed to coordinate to drive implementation into markets and ensure more current foreign investment, and this coordination was important. 

He replied to the questions on restructuring the Department. He said the Minister’s approach was that the Department needed to ensure it could improve its performance to create integration and focus. Optimisation was required to ensure a positive impact could be created. The intention was not to create anxiety, and the Minister was mindful of this. The social compact progress had been quite slow but this was improving. The Department was in a difficult space compared to a few years earlier.

The Chairperson said the Department should be invited to address and brief the Committee on specific programmes. Some of the outcomes and outcome indicators were meaningless to Members as no detail was provided on the report's outcomes. An outcome indicator could not simply be the report, but it needed to include the report's outcomes. The Committee needed to measure the activities outlined in the reports and the Committee needed the detail and the percentage improvement. The Committee also needed the details about the SEZs and investment attracted, particularly those already operational. The phases did not indicate specific timeframes and more details were needed about the financing of the industrial plans.

The other issue raised in the APP the year before was the Department’s consultation on the Public Procurement Bill. The APP said the consultations were taking place on this with NEDLAC. One of the stakeholders said the Bill had not yet been tabled at NEDLAC, but the APP the year before said the consultation was taking place with NEDLAC. Clarity was needed on this, as it had been more than a year and the Bill was still not with NEDLAC.

The Committee wanted updates on the various bills and its role in provinces. Most of the programmes seemed to speak to the issue of red tape. The Committee received a number of complaints from the public about policies, and specifically about some of the requirements contained in the policies. Part of reducing the red tape was allowing individuals to raise issues directly.

The Deputy Minister said the comments made had been noted.

Closing Remarks
The Chairperson said he would likely see the Deputy Minister and Department again when the Budget Vote was debated.

The minutes were deferred as there was not a quorum. There were no further announcements.

The meeting was adjourned.