Chairperson, Minister Peters, hon members, ladies and gentlemen, Lubala is a small settlement about 35 km from Lusikisiki, and a bit more than an hour's drive from Port St Johns.
The road to Lubala cuts through the green hills of Pondoland, with occasional stray cattle sharing the space with cars on the road. The settlement has 83 households, and has been described as one of the poorest areas in one of the poorest provinces in our country.
Last week I was part of the team that, with Deputy President Motlanthe, visited Lubala where government's antipoverty strategy was launched in 2008. The area remains poor and underdeveloped. Our team visited about a quarter of the households and spoke to fellow South Africans who live without electricity, without running water and without modern sanitation or refuse removal.
Nomantombi Mhluthwa is a 74-year-old grandmother, who is the head of a household of three children. Her story of struggling under bitterly poor conditions was repeated by grandmothers in neighbouring households. Health care and educational opportunities for her and for the people of Lubala are limited.
The residents of the little village rely largely on income from social grants and some limited subsistence farming to feed their families. The village consists mainly of children and old people. This is the story of many, many rural areas.
Young people in Lubala struggle to find jobs in their village or in the surrounding areas and often leave as soon as possible, in many cases sending very little money back to Lubala. About 400 km from Lubala is the industrial town of Dimbaza. A decade ago it had about 140 factories providing work for people from neighbouring villages and towns.
By last year there were only four factories left in Dimbaza. As Dimbaza was deindustrialised it left poverty and development challenges in its wake. Many of those displaced by the contraction of economic activity have not found sustainable alternative employment; some have remained unemployed years after losing their jobs in Dimbaza.
In highlighting the challenges that Lubala and Dimbaza pose for us, hon members, we stare our reality, the South African reality, in the face. We seek through our policies and our implementation to change this reality.
There are opportunities to grow the Eastern Cape economy and expand its industrial base. Let me mention one example: The Eastern Cape currently produces about 20% of the country's milk; so, statistically, every fifth glass of milk you drink comes from the Eastern Cape. Almost half of that milk is processed outside the province.
My staff in the department are now working with the milk producers organisation and government agencies to determine whether there is a viable case for more agri-processing capacity in the province. We need to assess how much of this apparent imbalance is due to poor infrastructural development or lack of support for enterprises and how much is due to what you call bottom-line economics.
Hon members and Chairperson, I have spoken about the challenges of one little village in the Eastern Cape and one industrial town, but you will know from your experience that these stories are not unique to that province. Throughout the country in the provinces that each of you come from, as the official unemployment and income data shows, we face significant and, in many cases, very similar challenges.
The Economic Development department strategic plan and budget has to make a difference to the lives of residents in areas such as Lubala and Dimbaza and those in each of the provinces. I believe that the budget we have tabled and gone through today, together with the provincial and local budgets for economic development, can make a positive difference in the lives of our people. The Economic Development Department, EDD, budget allocation is R418 million, which covers the work of the department and certain entities that report to the department.
We have proposed the distribution of the budget as follows: The amount of R25,8 million for economic planning and co-ordination; R18,2 million for policy development work; R11,2 million for economic development and for dialogue; R44,8 million for administration, the work of the Ministry and capital expenditure; R152 million for small business funding through transfers to Khula and the South African Microfinance Apex Fund, Samaf; R102 million for the competition authorities to strengthen their work; and R64 million for trade administration and promotion to the International Trade Administration Commission of South Africa, Itac.
Hon members will see that the larger part of the budget, namely R318 million of the funding, will be transferred directly to entities that report to the Economic Development department. An important part of our capacity will be the partnerships we forge, particularly with provinces and local governments, to tap into the wider pool of knowledge, people and money that exists out there to address the country's challenges.
Last week, I met with members of the Select Committee on Economic Development when we presented our strategic plan and budget. I would like to thank the chairperson, hon Freddie Adams, and members of the select committee for the stimulating and fruitful engagement. I don't know why I'm coming in so infrequently to the NCOP when the engagement is so fruitful. I advised the select committee and we have done some work on the economic development budget of each province and of the main metros for a report that we shared with the members of the executive council, MECs, for economic development. We called them to Pretoria and we said on a PowerPoint presentation, "This is each of your budgets". Last year, these two levels of government, the provinces and the metros, which excludes many of the smaller local authorities, budgeted R6,7 billion for economic development. I'm excluding here the allocations for tourism - only economic development - with the metros accounting for R2,1 billion of this figure. For each three rands that we spend below national level, one rand comes from the budgets of the metros for economic development.
The point of this study was to determine the full value of potential resources for our joint mandate and to work with each other to improve this impact of our spending. If you add the budgets of the national Departments of Economic Development, Trade and Industry, Science and Technology, and Tourism as well as the development finance institutions, we have a potentially large funding resource available and this has to be focused on our priority of development and decent work.
However, economic development is not only promoted through the spending of line departments responsible for this function. The full Budget of the country is a resource we need to tap into.
My colleague, the Minister of Finance, announced in his Budget Speech in February this year that government in all spheres plans to spend R907 billion this year, and R2,9 trillion over the medium term. Over half of this amount goes to provinces and municipalities for education, health, municipal infrastructure and human settlement.
Now, clearly, this money is intended for these functions, but how we spend the money has a dramatic impact on economic development. We can do more for our people if we identify additional opportunities for local procurement by all three levels of government and by other public entities and state-owned enterprises.
To this end we have set funding aside and put it into the economic development budget to establish an office on local procurement and we have budgeted R3,8 million for work in this area. Through the department's programme on planning and co-ordination, we intend to ensure greater synergy in economic development across the different spheres of government.
Our work in partnership with the provinces may be of interest to hon members. We seek to identify the competitive advantages in each province; maximise the employment impact of these provincial strengths and benefit all provinces through exploiting the economic linkages between them.
Some of our work will identify or strengthen corridor opportunities across provinces and projects for economic clusters across sectors and regions. We have built greater coherence between national and provincial development agencies; we have built a strategic relationship with the South African Local Government Association, Salga, and metropolitan councils; and we have worked closely with the National Planning Commission and Minister Manuel to develop special and sector economic development plans, including those for the distressed sectors and regions.
Our work on sector policy will also support the Industrial Policy Action Plan, Ipap, announced by Minister Davies two months ago, as well as rural economic development initiatives. By the end of this financial year, we intend to have reviewed or produced at least five sector plans and ten special plans. National government manages key levers of economic development, including funding for small business development.
On 1 April the Economic Development department, EDD, assumed responsibility for three development finance institutions, namely the Industrial Development Corporation, IDC, Khula and Samaf. If we join their budgets they have in excess of R16 billion available for industrial development, a portion of which will go to business support. Our work will be to ensure that the R16 billion is spent wisely with the best development and decent work outcomes.
We recently announced the R2 million industrial development bond at very attractive interest rates that the IDC placed and which will allow it to expand its resources for job creation. This development bond has been fully taken up by the Unemployment Insurance Fund, UIF, which has placed surplus funds with the IDC.
Nelie Kok and his wife live in Keimoes, a town on the biggest island in the Orange River. They are members of a co-operative consisting of 82 members, which supports 450 people. They are Fairtrade accredited and their products are sold by Fairtrade all over Europe.
Their chief export is raisins and they would like to expand to make use of the 2 000 ha of land that they have, of which only 600 has access to some kind of an irrigation system. What is significant is that they would like to have more control over the value-adding process. In the period ahead, we will examine how well we have assisted entrepreneurs such as Nelie Kok to realise their potential and to create more jobs.
The EDD guides the work of three economic regulatory bodies, namely the Competition Commission of South Africa, the Competition Tribunal of South Africa and the International Trade Administration Commission of South Africa called Itac. The commission agencies have had considerable success in recent months with their investigations and actions against companies that are involved in price-fixing and collusion. Over the past decade, about R1,1 billion has been collected in penalties from companies that have been found guilty of anticompetitive behaviour. The global economic recession has had a damaging impact on employment in South Africa. Even before the recession, our economy was struggling to create sufficient jobs for those South Africans able and willing to work. Faced with these realities and the challenges of very high inequality and deep levels of poverty, we are working on ways to improve the employment performance of the economy and create many more decent work opportunities and better social outcomes.
This work we group under our policy work and we call it the "development of a new growth path". The central idea of this developmental growth path is to enhance the labour-absorbing capacity of the economy; to build the lower carbon emission economy; and to find ways to connect knowledge and innovation to the challenges of jobs and growth.
Through this work we've identified a number of areas where we believe new jobs can be created, namely infrastructure development; the green economy; the manufacturing sector; the knowledge economy activities; the rural agricultural and agro-processing sector; tourism and business process services; the social economy, which includes co-operatives; public sector growth; and the continental and regional economy. We are now working on bedding that down into real opportunities and identifying the provincial dimension.
The green economy, for example, has huge potential for employment creation in the energy, agricultural, manufacturing and service sectors, including ecotourism. Government departments, working together, are pursuing these opportunities in solar, wind and nuclear energy generation; solar heating geysers; biofuels and co-generation; repairing environmental degradation; ecotourism; smart manufacturing; waste management; the regulation of energy efficiency of commercial buildings; and the installation of more energy- efficient equipment.
It is apposite that my colleague, Minister Peters, follows immediately after me because she's been a leading proponent of turning the energy challenge into a green economy opportunity.
In our own budget, we will allocate R2 million for work on the green economy and green jobs and we will mobilise additional resources for investment. The IDC is already investing in a number of green economy projects ranging from solar power plants to manufacturing activities in the green economy.
We are conscious of the number of policy challenges; one of them is in skills development. We are a country with a relatively weak skills base for the modern economy that we are seeking to build. We need to produce more engineers, artisans, technicians and agricultural specialists to strengthen the economy and improve our competitiveness. By the end of this year, we plan to have the core of an economic development institute in place, which will draw together leading economists and development practitioners. It will commission research, seminars and workshops; and create a database of global economic development initiatives and institutions. We will make its resources and ideas available to provinces and use it as a means to develop a common knowledge platform across government.
I believe that there is no contradiction in advocating strong and vibrant competition in the private sector on the one hand, while supporting joint planning, co-operation and sharing to promote economic development, on the other hand. Competition and co-operation are not mutually exclusive; it's about finding the balance. One big part of our work, therefore, will be social partnerships to draw in the ideas of business and labour and to share that with communities.
Last year we hosted a very successful policy platform on rural development in KwaZulu-Natal. By the end of the financial year we will hold an economic development conference, which will also deliberate on the special dimensions of economic planning and co-ordination. For the year ahead, we are planning to develop social dialogue on growth and social equity issues at sector and workplace level so that we can build partnerships at the very heart of the wealth-creating machinery of the economy.
We have established a subprogramme to address the role of productivity, innovation and entrepreneurship in driving economic growth and development. The department will promote workplace productivity agreements and foster entrepreneurial endeavours in the economy, particularly among black entrepreneurs.
In the first month that the EDD was officially established, it took responsibility for co-ordinating government's work within the framework of South Africa's response to the international economic crisis. We have now launched 20 actions in this programme. One example is the training layoff scheme as well as the funding that the IDC is providing to companies and sectors in distress.
I spoke earlier of the challenges of the recession; we are confident that we can repair the damage of the recession and build an inclusive economy. We will maximise the economic development impact only by working together. Each of us has a role to play because the economy is about all of us, and employment growth and development are in the interests of all of us. I thank you.