Hon Speaker, hon Deputy President, and hon members, the international economic crisis and the local recession threatens to wipe out our economic gains. If the trends continue, we could soon find ourselves back to where we were five years ago.
Our gains are being seriously eroded but we will recover if we take the right steps. We need to use the crisis as an opportunity to mobilise the nation around a programme to defend the economy and to further strengthen it and to defend jobs.
I am addressing the House today to share with hon members the steps that government is taking to address what is the most serious economic challenge since the advent of democracy. The recession was triggered by the global economic crisis and South Africa lagged behind many other economies in the timing of the impact on our production, employment and economic performance. Initial signs were evident from late last year, but the economic data released this year has confirmed the scale of the impact on our economy.
We have recently experienced what has been described as the worst quarterly economic performance in 25 years with serious declines in both manufacturing and mining production. The latest manufacturing data, for June this year, shows that estimated monthly manufacturing production has shrunk by 17,1% and monthly sales have dropped by 19,6% compared to a year ago. Second quarter production shrunk by 18,7% and sales dropped by 20,2% compared to a year ago.
Manufacturing output has been declining since about mid last year. It has now reached levels last seen some five years ago. If these trends persist, it means that four years of modest manufacturing growth since January 2004 has been reversed by the dramatic decline in the physical volume of manufacturing production in the past 12 months. June statistics, the latest that we have, have indicated a 7,3% drop in mining compared to the same month a year ago.
Employment data have shown a large increase in unemployment. The Quarterly Employment Survey of Stats SA for the first three months of this year recorded 179 000 job losses.
The Labour Force Survey for the second three months of this year recorded 267 000 job losses and noted that 302 000 people have become too discouraged to seek employment. Retail sales have declined, with June 2009 figures showing a 6,6 % drop in sales compared to the same month a year ago. This is, therefore, taking us back to mid-2006 levels. As retrenchments and job losses increase, they impact on consumption, leading to lower demand, which could result in a renewed round of job losses.
The total output of the nation, as measured by GDP, declined by 3% for the second quarter of 2009. We have now had three successive quarters of a decline in output. Company capacity utilisation, which measures the extent to which we use the available productive capacity of the nation's workplaces, has declined as has the stock of capital in a number of manufacturing sectors. Capacity utilisation is at levels last seen in 2001 and we are deeply concerned at the prospect of a permanent decline in productive capacity as factories close rather than simply reduce output. Liquidations and insolvencies show a worrying trend, as do increased claims from the Unemployment Insurance Fund, UIF.
In these trends, South Africa is facing the same pressures felt by many other countries with the most serious economic challenge since the Great Depression. What started as a financial crisis has rapidly become a crisis in the productive sector of the economy, and employment has been hit particularly hard. With both developed and developing countries, monetary and fiscal policy has been concentrated on shoring up aggregate demand as the impact of the credit bubble collapse impacted on the real economy. Interest rates have been cut and some central banks have used quantitative easing to further respond to the crisis.
Public sector spending has been ramped up and countries now run large and growing budget deficits. The US and the UK, for example, are now running deficits of 13% and 14% respectively. Global prospects are still uncertain, with evidence that the fragile signs of recovery are largely driven by the effects of the dramatic and co-ordinated government stimulus packages that have pumped liquidity into the global economy at levels not seen in our generation.
International experience has shown that financial crises leave large employment and social damage in their wake even when economies recover. Employment growth in particular lags economic recovery, sometimes by considerable periods of time. It is in this context that government has stepped up efforts to address the impact of the global crisis on our economy and our people.
Fiscal policy has remained expansionary in spite of falls in tax revenues, and the Reserve Bank has cut interest rates repeatedly over the last six months. Earlier this year, government, organised labour, business and community organisations adopted the Framework for South Africa's Response to the International Economic Crisis. That document sets out our collective response to the international economic crisis, which is widely recognised as the deepest and most serious economic crisis in at least the last 80 years.
The framework, which provides the basis for a wide range of actions needed to mitigate the impact of the crisis on the country and our people, was founded on the following broad principles:
The risk of unfairly placing the burden of the economic downturn on the poor and the vulnerable must be avoided; activities aimed at strengthening the capacity of the economy to grow and create decent jobs in the future must be protected and supported as far as possible; planned high levels of investment in the public sector, particularly infrastructure, must be maintained and the private sector must be encouraged to maintain and improve, wherever possible, their levels of fixed direct investment and continue with corporate social investment programmes; and interventions must be timely, tailored and targeted as is appropriate.
The Framework recognises the social partners' collective responsibility to work together to withstand the crisis and ensure that the poor and the most vulnerable are protected as far as possible from the impact of the crisis.
Noting the country's well-developed and advanced system of social dialogue, a strong institution in the form of Nedlac and a tradition of working together as constituents to address the social challenges, it seeks to draw on these strengths in developing and adjusting South Africa's response to the crisis and implementing its various commitments. In addition, the framework recognises the importance of ensuring that the economy is ready to take advantage of the next upturn and that the benefits of such growth are shared by all our people.
In today's statement, I would like to brief hon members on the progress we have made in implementing the framework thus far. In so doing, I would like to draw attention to the context within which this implementation has taken place and, in particular, to point out that following the appointment of a new Cabinet and the reorganisation of government functions, government has worked closely with social partners to speed up implementation.
President Zuma highlighted the centrality of this work in his state of the nation address on 3 June 2009, when he said, and I quote:
It is important now more than ever that we work in partnership on a common programme to respond to this crisis. We take as our starting point the Framework for South Africa's Response to the International Economic Crisis, concluded by government, labour and business in February this year. We must act now to minimise the impact of this downturn on those most vulnerable.
Following the state of the nation address, the task teams provided for in the framework were reactivated. In early July, we agreed to a set of priority areas and all parties rolled up their sleeves to produce action plans to respond to the crisis.
There was a new energy and focus to the response. In all, hon members may be interested to know that 19 meetings have been held since 1 July by the various committees responsible for forging a united position - this is some three meetings a week. More importantly, the energy produced solid results.
On 5 August, the leadership team met with and briefed President Zuma on the progress we had achieved up to that point. That leadership team will be meeting again tomorrow.
To date, we have prioritised the following 12 areas of work: a training layoff scheme for workers at risk of retrenchment; combating customs fraud; support for distressed sectors; social assistance, including child support grants and old age pensions; stronger competition in the food supply chain; food relief; assistance by the Industrial Development Corporation and refocusing its mandate; availability and flow of credit; Expanded Public Works Programmes; leveraging jobs from public procurement; expanding public sector employment in areas of critical need; and public grant conditionalities to ensure that state support achieves the desired results.
In six of these areas, we concluded agreements that are now being implemented: Firstly, to meet the challenge of companies retrenching workers as a result of loss of orders due to the recession we set up a National Jobs Fund to finance a training lay-off scheme.
The scheme entails enrolling workers in training programmes for a period of up to three months. The principle behind the scheme is to use the period of industrial slack to train and reskill workers.
The scheme will be available to workers earning up to R180 000 a year, and the key design elements of the scheme are that it is available to workers as an alternative to retrenchment. During the period of the scheme the employment relationship with the company is maintained, a training allowance of 50% of basic wages up to R6 239 per month will be paid to workers on the scheme, and participating employers will carry the cost of a basic social package to ensure that death, disability and funeral benefits are not suspended during this period.
Training is left to industries and companies to define, but we provided three guidelines: The training should be of value to the company concerned; it can address generic and adult literacy and numeracy needs; and it is an opportunity to roll out and disseminate information and communication technology skills on the shop floor.
The Minister of Labour's work in mobilising all the resources of his Department and reporting agencies has been invaluable in making it possible to launch the scheme in September this year. An amount of R2,4 billion will be placed in the fund, drawn from resources in the National Skills Fund and the UIF.
In order to ensure its successful implementation, it will rely on the collective efforts of a number of state entities: the NSF and the UIF; the Setas; the CCMA; some government departments such as the Department of Labour, responsible for co-ordinating and finalising the drafting of an implementation guide in collaboration with the CCMA and social partners; the Department of Trade and Industry, responsible for ensuring that our distressed sector support is co-ordinated with the training lay-off scheme; and the Economic Development Department, responsible for assessing the economic and developmental impact of the training lay-off scheme.
Most importantly, it requires partnerships between business and labour at workplace level.
The training lay-off scheme is the first of its kind that government has launched and we have designed its implementation to be as simple as possible. A key implementation agency will be the CCMA. The CCMA will help companies and unions to conclude their training lay-off agreements. The CCMA has now trained about 250 staff members, mainly commissioners, on the training lay- off scheme and its implementation. It has a toll-free number and has published a guide to the training lay-off scheme on its website.
The Setas have been asked to set aside resources for the financing of the training courses themselves and to identify appropriate, short, focused training courses. Special board meetings of Setas are now being convened and a number of Setas have advised they will take part in the training lay- off scheme.
I call on the Seta board members from business and labour to do everything in their power to ensure full and effective participation by Setas so that workers and companies can obtain the benefit of the training lay-off scheme as soon as possible. Indeed, Speaker, here is an opportunity for Setas to show their value-add and to convince even the sceptics that they are a vital part of the training delivery machinery and are flexible enough to respond to new and unusual circumstances.
Secondly, to address high levels of illegal imports and customs fraud that has led to many thousands of job losses, the capacity of SARS to address customs fraud has been strengthened. The Minister of Finance has facilitated a renewed focus by SARS on measures to improve its impact. SARS has now reported significant progress in respect of investigations and the confiscation of goods.
A number of companies are currently under investigation for smuggling, round-tripping, abuse of incentive arrangements, quota fraud, rebate item abuse and under-declaration of value.
In the clothing and textiles sector, by way of illustration, some immediate outcomes of the antifraud campaign are as follows: In respect of, smuggling, four companies are being investigated and the intention is to initiate criminal proceedings; round-tripping, 15 companies are being investigated and the support of neighbouring customs is required to finalise these investigations; export incentive abuse, 14 companies are being investigated and some duties have already been recovered; counterfeits, during raids a number of goods have been seized; quota fraud, four companies are being investigated and will be criminally charged; rebate item abuse, three companies are under investigation to recover duties; and in respect of under-declaration, five companies are under investigation and will be criminally charged.
Thirdly, to address huge job losses in certain sectors of the economy, we have facilitated discussions at sector level between business and labour, and measures to address their immediate problems have been identified. These include support for distressed companies in the automotive sector; a rescue package for the clothing and textiles industry; increased incentives for the manufacture of capital equipment; transport equipment and fabricated metal products linked to South Africa's Infrastructure Development Programme; and payments by government to small, medium and micro enterprises and other businesses within 30 days.
In the auto sector, business and labour have formulated a commitment that provides that companies receiving crisis-related assistance must commit to a moratorium on retrenchments for the duration of the assistance period with a provision that variation to this commitment, in cases where it is necessary for a firm's survival, be accompanied by requirements for independent verification of financial and other relevant information. So, our social partners have really been working hard.
Fourthly, to address the problems of access to credit and working capital, the IDC has made R6 billion available over the next two years to respond directly to the crisis. Some applications have already been received and approved.
The IDC has 49 funding applications in the pipeline, 23 of which are from existing IDC clients while the remaining 26 are from new or potential IDC clients.
From 1 April 2009 to date, eleven financing applications from distressed companies totalling R743 million have been approved. We will now work with the IDC to improve the employment impact of its funding.
Fifthly, to address food price pressures on consumers at a time of falling family incomes, the Competition Commission's investigations into and prosecution of firms in the food supply chain alleged to have engaged in various forms of prohibited anticompetitive conduct have been stepped up.
Seven parts of the food supply chain are now the subject of attention by the competition authorities: in respect of bread, the commission is prosecuting two separate cases that have now been consolidated into one case, and is investigating a new case; with the milling of maize, the commission is referring the case to the Competition Tribunal for prosecution; in the dairy sector, a case is before the tribunal; with poultry, one case is before the tribunal, with the wider conduct being investigated by the commission; in fertilizer, settlement has been reached with one company, with others being prosecuted; in fats and oils, there is an investigation by the commission; and with regard to supermarkets, the commission has commenced its investigation. These are firm and clear steps taken by the commission to address food price increases.
Finally, Speaker, to address the growing debt faced by many consumers and households, the National Debt Mediation Association, a business initiative to assist over-indebted consumers, has been established to provide rules, standards and processes to address debt restructuring.
These six measures, hon members, constitute a solid start to our joint endeavours, and I wish to thank the leadership of the social partners and government departments for their hard work to have achieved this.
I wish to advise this august House that we are now simultaneously working on two fronts: to properly implement the measures we have announced, and to identify new areas in the framework that can progress to a conclusion.
We recently briefed MECs of six provinces, KwaZulu-Natal, Gauteng, Western Cape, Eastern Cape, Free State and Limpopo on the package and they have endorsed the approach in the framework. Provinces will now identify ways in which they can align their own responses to the recession with the six areas that have been identified so that these measures can have the biggest possible impact. The province of KwaZulu-Natal has taken the lead in convening an economic recovery and jobs summit.
The ministerial cluster on Economic Sectors and Employment was convened this week to receive a report on implementation, and a number of areas were identified that needed to be addressed in the next phase. They include strengthening the use of co-operatives to address the crisis, fast-tracking work on green jobs, identifying measures to deal with persons in vulnerable situations, including women and rural and informal sector workers.
In particular, we want to find ways of drawing more South Africans, through their community and NGOs structures into the partnership to respond to the recession. [Time expired.] [Applause.]
Speaker, a rescue plan in response to the international economic crisis implies the need for an immediate response to an immediate threat. Government did not respond immediately, neither was its response aimed at the immediate concerns arising from the economic downturn.
There is a fundamental difference between structural determinants and cyclical changes - a conceptual divide that government would do well to understand. Structural problems require long-term policy solutions, while cyclical issues require action in the short term. This difference should inform the approach that we need to take in determining the response to our crisis.
The global economic downturn is a cyclical phenomenon, where financial markets stopped functioning as they should, due to a shortage of liquidity. It was a monetary crisis requiring an immediate monetary solution. That is why governments intervened to act as the bank of last resort, and thereafter introduced stimulus packages in an attempt, in the short run, to smooth the worst of this severe downward phase of the economic cycle.
What is our government doing? The Minister mentions a very long list of activities that government plans to implement to address the impact of the crisis. In particular, these include strengthening the capacity of the economy to grow, public sector spending, corporate social interventions and cushioning the impact on the vulnerable.
He mentions training initiatives, addressing competition, expanding public sector employment, and training for retrenched workers - a very broad sweep of activities, required for the functioning of an economy. Clearly, our government is focusing on structural problems, which it should have tackled a long time ago, rather than addressing the immediate cyclical issues.
A year ago, the International Panel on Growth presented its findings on the structural problems in our economy. Its key findings were that very few South Africans were working, the less skilled needed to be absorbed into the economy, and the binding constraints on the speed limit of our economy needed to be relaxed.
These problems require our attention, but it is not the place of a temporary rescue plan to try and address deep-seated problems in the economy. These problems can be resolved through systemic structural changes, such as a liberalised labour market that will encourage job creation, scrapping the ineffective Seta system in favour of an effective apprenticeship system, and trade policy that accommodates small and large exporters.
If these structural problems are not addressed by means of adequate structural changes, then our economy will not be able to take full advantage of the next upward phase of the business cycle. Resolving these structural problems will take time even if government commits itself to action, but this will not resolve the cyclical problem that we have now.
South Africa is no exception; many businesses cannot draw credit to invest or pay their own suppliers, and are thus forced to close down and retrench workers. Keeping economic activity alive through this cycle will retain jobs and this is where government should focus its efforts. Business enterprises need access to appropriate credit facilities that they cannot obtain from conventional sources. If the government had responded quickly, South Africa would not have seen the number of job losses experienced thus far.
Across the world, unions and business are making agreements on how best to keep people in jobs. We need to have these conversations in South Africa, and government needs to make the environment easier to do this. Government needs to respond now by taking resolute action on the immediate threats to our economy and, in this way, demonstrating that it is willing and able to perform its role as facilitator, not controller, of economic activity. Thank you. [Applause.]
Speaker, hon Deputy President, hon members, we thank the government for this initiative to help the South African people to grow and restore our economy.
In the light of the current domestic and international economic crisis, we need an extraordinary plan, commitment and discipline. However, we need to remain cautious and vigilant as far as the opportunity that lies before us is concerned, because a grant of this magnitude can create a marked difference for the people of South Africa.
It is within this context that we propose that the two most important areas we need to consider are the small to medium enterprises that employ the largest portion of the South African workforce, and the shortage of skilled workers in specific industries and we therefore call for targeted training.
The questions we need to ask are the following: What type of intervention will yield the most important and effective results? What instruments do we need to use? Which of the industries in our economy have the greatest potential to anchor it? How can we best provide skills to satisfy the demand in these industries to ensure sustainability? The issue, therefore, is sustainability. Training without guarantee of absorption can be very counterproductive. How then do we support SMMEs to weather the current economic climate and prevent further retrenchments?
What we need, at this point, is an activist state, a state that is disciplined, a state that is rooted in ensuring that we deliver on the needs of the people.
At the current stage, in our view, we need interventions in five areas. These are agriculture, infrastructure development, manufacturing, the service industry and knowledge-based industries. This implies truly targeted training.
We propose that a detailed study be undertaken to ensure that the allocations made are used to their fullest potential for the recovery and sustainable growth of our economy. We also propose that a panel of experts be established to determine the areas that represent the greatest need. This panel of experts should study the weaknesses that we have experienced in South Africa - the weaknesses of Setas that have failed our country.
It is also essential to engage our society at large. We want to submit that, while we agree with the participation process that the Minister has alluded to, a participatory mood within this context has not been created in the country. We have not seen full participation of the people. Thank you. [Time expired.]
Mr Speaker, in my ridiculously short minute I can only note that the government's response, as outlined by the Minister, seems to be based on the notion of a temporary crisis, a period of bad weather, a cyclical period of downturn which will bring us back to where we were before it all started. It therefore reflects the notion: Let's try to freeze the present situation until the weather improves and we will be fine. I hope he gets it right.
I, however, beg to differ. I think that this crisis is a structural crisis. It needs to be addressed in the context of what can survive in a future environment characterised by massive manufacturing capacity having been moved around the world by the effects of the crisis itself.
A crisis is a time for opportunities. It is a time in which bold actions can be taken. It is a time to look at where South Africa is going to be after the crisis - whether we will develop the capacity to produce products for the global market.
In that sense, government should also take the opportunity to take bold measures to develop an industrial policy for the country - a new industrial basis for after the crisis. This might not seem to be the time to do so, but it is the time in which the need for survival may press us to take such bold action.
By the same token, let us liberalise the market, as Dr George was saying. Let's finally fulfil the promise of getting rid of exchange controls, which has been echoing in this Chamber for many years. Let's look at the skills within the market, the monopolies ...
Hon member, your time has expired.
My one minute?
It's more than one minute, hon member.
Speaker, the ACDP welcomes the briefing by the Minister.
We wish to point out that today's Financial Mail states: "It's a sign of how bad our economic condition has become when economists express relief that real GDP contracted by only 3%."
And we know we still have a long way to go, with the economy expected to contract by a full 2% this year.
For South Africa to emerge from recession, manufacturing and retail must recover, requiring a global recovery to raise demand for our manufactured exports and revival for the stressed South African consumer.
The former appears to be on track if you look at Japan, Germany and France, which are exiting recession, and the US, UK and Europe, which are showing promising signs - they are speaking of "green shoots".
However, the recovery for the South African consumer will take much longer, with household debt levels at record highs and ongoing job losses.
We believe that the measures announced today by the Minister will go a long way. The challenge, however, will be in the implementation. They must be properly implemented; therein lies the challenge. I thank you.
Speaker, hon Deputy President, hon Deputy Speaker, members of the executive, hon colleagues, I greet you all. Let me start by appreciating the Minister's initiative of tabling this statement. I believe it will help to clarify issues around the framework response to the public and the people affected so that, in turn, those affected can begin to take the necessary steps to provide for their own wellbeing.
In the same breath, I would also like to take this opportunity to applaud government, under the leadership of the President, together with other stakeholders, our social partners, who participated in this agreement process, on their sterling work. It takes people who have themselves experienced such difficulties to be able to adequately respond in the manner you have. In other words, to understand it, you should have lived it. Otherwise you will respond like other members here are responding. This is what we mean when we say: Working together, we can do more.
I also want to remind you that the social partners are also from the business sector, unions and civil society; it is not only government. Therefore, it would be wrong to direct all issues to government, because this is the country's response and the country, through various social partners, have participated in this particular response plan.
The framework response, as reported today, is highly commended and it could not have come at a better time. We all know that the most severely affected in this regard are the previously disadvantaged individuals, those who come from the poorest of the poor communities and backgrounds. Hence, we will urge that the framework response, objectives and intentions are implemented without failure.
From our side, as legislators, we will be following the implementation process and we will help, through our oversight, to ensure that no worker is compromised by either government bureaucracy or the companies concerned, under the training lay-off scheme.
We appreciate the fact that no additional money is going to be transferred to the training lay-off scheme from the National Revenue Fund. This is due to government's appreciation for the fact that we are already in a recession and cannot continue to overburden the government fiscus and should rather use flexible means to achieve the intended goal. This is applauded and should be encouraged, especially due to the fact that amongst the participants were stakeholders from the civil society who ordinarily would have expected government to foot the bill without any compromise.
We also request the Minister and the task teams involved in the crafting of this response plan to ensure that the process after the companies' applications is not derailed or does not take longer than anticipated, and that Setas' courses must respond to our economy's needs.
We are excited about the fact that the implementation of the plan will start as early as September this year, and that there are companies that have already applied for both the training lay-off schemes and the IDC's stimulus fund for the distressed sectors.
We need, as the House, to support this initiative and this particular response plan, because our role is to ensure that that plan gets implemented. We should, therefore, strengthen our oversight role so that the timelines, as set by government and its social partners, are met without any failures. I want to conclude by commending the steps taken, especially against those who are defrauding customs. Halala, government! Continue with the good work. Thank you very much. [Applause.]
Debate concluded.