The aim of ITAC, as stated in the Act, is to foster economic growth and development in order to raise incomes and promote investment and employment in South Africa and within the Common Customs Union Area by establishing an efficient and effective system for the administration of international trade subject to this Act and the Southern African Customs Union (SACU) Agreement. The core functions are: customs tariff investigations; trade remedies; and import and export control. Committee observations: . Aluminium investigations - It is a review of tariffs, which has arisen from IPAP 1, who identified intermediate inputs which included aluminium with regard to a review by ITAC, with a view of reducing the costs for downstream value added goods. A recommendation was made to the Minister and the duties were reduced. After this, producers came back to ITAC indicating that some of the raw materials had to be imported, which has then increased their input costs. The investigation had to be reviewed and ITAC is at an advance stage to make a recommendation to the Minister. . Import permit for vehicles - Import permits are for second hand vehicles and no permits is issued for new vehicles. Permits are also issued for vehicles which are utilized by people with disabilities. . Struggling Textile and Clothing industry - one of the problems is the under valuation of imported clothing and textiles, which erodes the tariff protection. Tariff protection for clothing has recently been increased from 40 - 45%, fabrics extended to 22%. There is a unit within SARS that deals with under-invoicing. . Replacement of the Textile and Clothing Incentive Development Plan (TCIDP) - the TCIDP has been replaced by the Production Incentive Scheme, which is part of the DTI strategy, which is in full implementation including skilling and upgrading. . Promotion of local goods produced - where there is domestic production, especially downstream there are tariffs. Domestic production is supported with tariffs. . Relationship with SARS - Once a recommendation is made by ITAC to the Minister of Trade and Industry, the Minister requests the Minister of Finance to implement. The implementation is performed by SARS. SARS and ITAC also work very closely on import and export permits. . Skills of employees - in order to perform the functions at ITAC you need to gain the necessary experience within ITAC itself, and the tertiary institutions will not be in a position to offer this. . Investigation on wheat and sugar - An investigation was performed which resulted in the protection of domestic producers, especially the farmers. . ITAC's link with IPAP II - IPAP II states that ITAC must continue to conduct applications for selective tariff increases or decreases. ITAC therefore takes a developmental approach to tariffs. Where the focus is on the outcomes e.g. domestic production, employment, international competitiveness etc. . Investigation on tyres from China - ITAC did undertake an investigation into the issue of tyres from China. No evidence was found of dumping and injury. ITAC was challenged by tyre manufacturers in the High Court, where the manufacturers were successful, but ITAC appealed which was granted. . Exceeding targets for export and import permits - the reason for exceeding the target is because it is based on historical data. ITAC under estimated, because there were more applications then expected. . Irregular expenditure - The irregular expenditure amount is R155 000 and the amount (loss to fraud) directly related to the official, is R12 000. The official was on suspension for 6 months while the investigation was conducted. . Surplus of R4.3m in 2008/9 - Interest received was initially budgeted conservatively, but R1.5m was received as interest and another big driver of this surplus was the fact that at the start of that financial year there was a staff compliment of 130 and at the end of the financial year 114. 4. Industrial Development Corporation The Industrial Development Corporation of South Africa Ltd (IDC) is a self- financing, national Development Finance Institution (DFI). It was established in 1940 to promote economic growth and industrial development in South Africa. The mandate of the IDC, includes the rest of the African continent and they are active throughout the entire region. They operate in a broad spectrum of industries and with their specialized knowledge and experience; they are able to offer valid and appropriate financial assistance to a wide variety of individuals and companies. Committee observations: . People's reluctance to invest - people are reluctant to invest in businesses during the recession. If the country wants to be competitive, it would need to invest on best practices and bet processes. . UIF Development Bond - The IDC borrows money from various sources of which the UIF is one and the rates that the IDC is paying in relation to these loans is lower than the markets. . Progress on the Joulle project - The Joulle project is still in its development phase, where the prototype has been produced. The IDC has however not taken a decision to invest on a commercial scale. The IDC is still in the process of assessing the risks and exploring the possibilities of partnerships. If the IDC finds that the project is not viable, that it would "walk away" from the project. . Investments in bio-fuel - The IDC's approach are one that underlines non- competitiveness with the food industry. . IDC's role in steel pricing - The IDC is a minority shareholder in ArcellorMittal, with the result that it has little influence as these decisions are taken by the majority shareholder. . Automotive components - last year the main focus on components was on survival. There are however signs that the in terms of motor assembly plants are moving in the direct direction, where there is an upswing and where the IDC is in the process of funding a number of local manufacturers. . Developments at Coega - Coega did not develop as expected. The IDC does not deal with industrial development zones (IDZs). One of the core projects of Coega was the Aluminium Smelter, but due to the electricity crisis the project had to be canned. The IDC is however looking at other investments in the region. Coega would need more critical mass in order to be successful as an IDZ. . Funding to companies in distress - The uptake of the funding is below the expectations of the IDC, with R1.4 billion approved of the R6.1 billion allocated for the period to March 2011. Twenty eight (28) companies in distress has been assisted by the IDC. . Advocacy campaign regarding funding to companies in distress - The IDC had several interviews in a variety of media; it also had a number of workshops, and 20 of these were held with the relevant sectors. . Investments in the rest of Africa - according to the IDC there is an increased demand and the target was exceeded due to the projects, which required large capital investments, for example the sugar plant in Tanzania. . IDC's percentage of the 500 000 jobs to be created - The IDC was responsible for 8% of the 500 000 jobs to be created. Within this number the IDC only focused on long term employment and not on short term employment. . Bonuses to staff - Bonus offered to staff costs in 2009/10 is much lower than what was expected and this affected the figures. . The committee noted that more time to scrutinize the Annual Report of the IDC should be made as there are still outstanding issues to be discussed with them. A follow-up meeting need to be scheduled with IDC. 8.5. Khula Enterprise Finance Limited Khula Enterprise Finance Ltd (Khula) is dedicated to the development and sustainability of small businesses in South Africa. A leader in its field, it has a proud history of more than 13 years' service of involvement in the rapidly growing and economically vital, small and medium enterprise (SME) sector. The company is a wholesale finance institution which operates across the public and private sectors, through a network of channels to supply much- needed funding to small business. Khula's channels include South Africa's leading commercial banks, retail financial institutions, specialist funds and joint ventures. Its primary aim is to bridge the "funding gap" in the SME market not addressed by commercial financial institutions. Committee observations: . Khula's existence since being established - since Khula's inception it disbursed R2,5 billion. In 2002 the loan book was R34m and in 2010 it grew to R640m. Bad debt stood at R40% in 2002 and in 2002 it declined to 12%. The institution grew but maintained risk at an acceptable level. . Mentorship provided by Khula - Khula emphasised that the mentorship provided will be intensified, where mentorship will become critical with the loans provided. Khula has an agreement with Seda, with regard to pre-loans and once these loans are approved Khula will assist. . Footprint of Khula - A Memorandum of Understanding has been signed with Seda, since they have a bigger footprint than Khula. The Post Office is also a possible partner in order to extend Khula's footprint throughout the country. . Implementation of Khula Direct - The Business Plan for Khula Direct was approved in 2008 and in 2009, the modelling and design was developed as well as the implementation plan. It is envisaged that Khula Direct will be rolled-out at the beginning of next year. . Recovery of debts ('Bad debts") - According to Khula, "bad debts" is a market wide challenge, and the global economic crisis contributed to this and when making loans available, it is a systemic risk that Khula have to take. . Khula's relationship with Retail Financial Institutions (RFIs) - Khula acknowledged that the relationship with RFIs need to be reinforced. Khula have developed a booklet which have been distributed country wide, which informs members of the public on how to access funds for SMEs. Khula reiterated that it was established as a wholesale financier, which means it does not lend directly but where it lends money to intermediaries, who in turn lend money to businesses. It is exactly for this reason that the implementation of Khula Direct is fundamental, where they will have a greater impact on SME development in the country. . Meetings of the audit committee - the committee met four (4) times during the period under review (in accordance with the PFMA). 5. South African Micro-finance Apex Fund The South African Micro-finance Apex Fund (Samaf) is a wholesale fund that distributes its funds through Retail Financial Intermediaries (RFIs). The term "financial intermediary" refers to a wide range of Financial Institutions dedicated to the provision of small scale financial services to the Enterprising and working poor households. It includes Non Governmental Organizations (NGOs), Savings and Credit Cooperatives (SACCOs), Financial Services Co-operatives (FSCs), Co-operative Banks, private commercial banks, and non-bank financial institutions (MFIs).