Committee Report Trade and Industry Budget

Meeting report

Opening Remarks
It was noted that the list of Members of the Committee should be updated as soon as possible because new Members were not reflected in the report.

The Chairperson explained that she has put it in formally but the processes of Parliament required this sort of information to be on ATC. Therefore, when new Members are put to a Committee it cannot be only an individual per se but must follow the process in Parliament. That process required a formal letter to be tabled at the Speaker’s office indicating that each Member has been added to this Committee with effect from this date, and this Member has been discharged, and discharged means removed and put elsewhere. Currently, only Ms E Louw (EFF) has been put on the ATC. Mr F Shivambu (EFF) was discharged and was put as an alternate.

Draft Report on Budget Vote 34: Trade and Industry
The Chairperson said they should go through the report page by page. It should be noted that this budget depended on a backward look and forward look. To unpack this, it means that the budget depended of the Annual Report and the Auditor-General’s report. The concern was this is not clearly spelt out in this report.

The Chairperson asked the support staff to indicate exactly when the Investment Unit was given money because it is a recently established unit or division.

Mr A Williams (ANC) said they had meetings with many entities and would try to give them more money, for instance, National Metrology Institute of SA, where they wanted recapitalisation to happen, they wanted the Broad Based Black Empowerment (BBBEE) Commission to get resources. He asked where they should put those issues in this report.

The Chairperson said she would draft the introduction, not her introduction or a unilateral decision, but informed by Members’ inputs. These are the comments Members should make and that is why she asked about the Investment Unit.

The Committee Researcher said the Investment Unit was separated from Trade and Investment SA (TISA). Initially it was the Trade and Investment Unit. It took its funds with it when it was separated and that was indicated in the 2016/17 budget vote.

Mr Williams said therefore in the introduction they will include NMISA needs to be given more resources so that it can become up to date with its building, etc. The National Empowerment Fund will also feature in the introduction or they will come in later.

The Chairperson said they will also come in later but the introduction will feature the mandate of the Department of Trade and Industry (DTI), what drives the DTI, and consider the issue around NMISA, BBBEE Commission, National Empowerment Fund, etc.

The Chairperson said she had studied the report and it was a very well informed report and staff had captured all the issues. On page 3 of the report the mandate of the Department has been captured clearly which is derived in a number of legislations, which include: the Companies Act; the Manufacturing Development Act; the Broad Based Black Economic Empowerment Act; and the Consumer Protection Act.

Furthermore, the DTI supports outcome 4 (decent employment through inclusive growth), outcome 7 (comprehensive rural development and land reform), and outcome 11 (create a better South Africa and contribute to a better Africa and a better world) of the National Development Plan (NDP).

On page 4 the report notes policy priorities for 2017/18 financial year and alignment with national, regional, continental and global development agendas.

On page 5 the report notes the alignment between the SADC regional Industrialization Strategy, the National Development Plan and the Industrial Policy Action Plan.

Page 6 looks at the Budget Analysis: Overview of the Budget Allocation 2015/16 – 2018/19.

Page 7 looks at the Budget allocation per programme. For 2017/18 financial year, DTI’s work and budget will be divided among its eight programmes.

From page 9 up to page 12 the report explains the budget analysis per programme.

Pages 13 – 15 notes key issues raised by the Committee during its deliberations. These issues include: State Owned Enterprises (SOEs) acting as barriers to the objectives of Industrial Policy Action Plan (IPAP); the Status of African Growth and Opportunity Act (AGOA); Development Funding; Awarding of contracts as part of the Black Industrial Programme (BIP); Criteria for companies within the Special Economic Zones (SEZs); and the DTI Incentive Programme.

Mr Williams said they should use strong language in their recommendations to State Owned Entities because SOEs do not adhere to the recommendations of the Committee.

The Chairperson agreed with Mr Williams and that point should be noted in the report.

Page 15 notes the entities that report to the Minister of Trade and Industry. In terms of its core functions, the DTI is responsible for overseeing 14 entities. Of the 14 entities, three are fully self-funded; these are the Companies and Intellectual Property Commission (CIPC), the National Empowerment Fund (NEF), and the National Lotteries Commission (NLC). Other entities include the newly established BBBEE Commission.

Page 16 notes the establishment of the BBBEE Commission. In 2013, the Broad-based Black Economic Empowerment Act was amended to provide for the establishment of the BBBEE Commission, an entity that would monitor compliance with and enforce implementation of the Act. Page 17, explains the strategic goals of the BBBEE Commission.

Pages 18 to 19 explains the Annual Performance Plan of the Commission and the performance Indicators by programme for the 2017/18 financial year.

Page 20 explains the Medium-Term Budget Analysis of the BBBEE Commission. Pages 21 – 22 lists the key issues raised by the Committee during its deliberations which include: Lack of political support for BBBEE Commission; Status of Fraudulent BBBEE Certificates; Non-compliance by SOE and the lack transformation through BBBEE; and the Budget of the BBBEE Commission.

Mr S Mbuyane (ANC) said they should clearly indicate what they mean about political support to the BBBEE Commission.

The Chairperson said the Committee was concerned with the assertion of the Commissioner that one of the threats was the lack of political support. Therefore, the Committees’ view was that for the successful implementation of the BBBEE political support from Government and its agencies was critical.

Page 23 of the report deals with the establishment, the mandate and the strategic goals of Export Credit Insurance Corporation of South Africa (ECIC). And on pages 24 to 25, it explains the Annual Performance Plan with regard to the Performance indicators per strategic objective.

Pages 26 up to 32, deals with the National Empowerment Fund looking at its strategic goals, APP, Budget analysis per programmes; MTB Analysis, and key issues raised by the Committee in its deliberations.

Pages 33 to 37, deals with the National Metrology Institute of South Africa (NMISA, and also looking at its strategic goals, APP, Budget analysis per programmes; MTB Analysis, and key issues raised by the Committee in its deliberations.

The Chairperson said on pages 38 to 39, the report deals with the conclusions of the Committee. She read as follows:

The Committee having considered the information shared and reports from the DTI and its entities with respect to the strategic and annual performance plans, the Committee reached the following conclusions:

The committee was concerned that Government and public entities were not complying with the procurement of designated products, which undermined the localisation drive and job creation.

The Committee was of the opinion that the necessary monitoring and enforcement measures should be introduced to ensure that barriers to industrial development were removed to facilitate economic transformation and growth

A major concern for the Committee was that SOEs, which should be champions of industrialisation drive, appeared to be impediments to its progress. The Committee strongly condemns the non-compliance with the Preferential Procurement Policy Framework Act (PPPFA) and BBBEE regulations by SOEs, which curtailed the objectives of the localisation and transformation drives.

Trade remains one of the vehicles through which economic transformation could be accelerated. The impact of the recent political changes in the United Kingdom of Great Britain and Northern Ireland, and United States of America on South African trade relations remains a concern for the Committee. The Committee was of the view that South Africa should maintain the benefits derived from AGOA, and negotiate new trade agreements post-BREXIT that would further benefit South Africa.

The Committee welcomed the approach by the DTI that all investors located within the SEZs, and Industrial Parks, should give preference when employing local labour and procuring from domestic suppliers.

The Committee acknowledged the contribution of the Manufacturing Competitiveness Enhancement Programme (MCEP) towards industrialisation and job creation. However, the Committee was of the view that longer term incentives should be introduced to ensure improved policy certainty for investors.

The lack of political support regarding the implementation of and compliance with, the BBBEE Act remains a concern for the Committee Support from Government and SOEs is critical and that an unambiguous position on the matter must be communicated. Failure to do so would compromise the objectives of the legislation as well as delay economic transformation.

The Committee welcomed the measures introduced by the BBBEE Commission that would curtail the issuing of fraudulent BBBEE certificates and ensure compliance with legislation.

The Committee welcomed the initiative by the Export Credit Insurance Corporation (ECIC) in exploring establishing a South African Export Import Bank.

The Committee agreed with the assertion by NEF that economic transformation has been negligible.

The Committee welcomed the announcement that the NEF will become a subsidiary of IDC and the additional funding facilities it had secured, as this would ensure its sustainability.

The Committee recognised the challenges faced by NMISA in relation to its infrastructure recapitalisation project as it is critical to ensure that the national measurement standards are able to support industrialisation.

The Committee unanimously agreed with all these conclusions.

The Chairperson said the support staff would make corrections to the draft report before the Committee adopts the final report on Friday. Members of the Committee could make other recommendations and send them to the support staff before a final draft is adopted by the Committee.

The Chairperson read through the acknowledgements of the Committee, thanking the Ministry of Trade and Industry, the DTI and its entities. The Committee also thanked the support staff for their professional support and commitment to their work.

The Chairperson also thanked all Members of the Committee for their active participation during the process of engagement and deliberation, and constructive recommendations made in this report.

The meeting was adjourned.