Chairperson, hon members, I recently visited Doringbaai, a small fishing village on the West Coast. For many generations, the main source of income for residents was a lobster processing factory which closed a few years ago. No new industrial activity has been set up since then.
Denise Classe was a joint breadwinner for a family of seven. She worked in the lobster factory for more than 20 years, as did her late husband and, at different times, two of her brothers, her mother, father and grandmother. In a good week she earned about R900 and in a slack week R400. When the factory closed, Denise said, "It wasn't only our mouths that went hungry, but also the mouths of our families and neighbours."
Denise and her husband found casual work on local farms, picking potatoes and tomatoes, but this ended in 2007. Her husband then worked as a handyman for a contractor at a mine in a neighbouring town, but the contract and his job ended in 2009.
They eventually sustained themselves on three child grants totalling R720 a month for a family of seven. Her husband died in January this year, and there are many days without food in the house. The family's hopes now lie with a R5 million grant from government to start an abalone farm on the fish processing factory's premises. It is planned to employ about 50 people initially. Denise is one of 5,8 million South Africans without work, either because they are unemployed or they are too discouraged to seek work.
I present to you today the first budget of the Economic Development Department, EDD. This is, of course, the first completely new government department to be created in the 10 years.
The context of the department's formation is clear: many South Africans lead a precarious existence. There are not enough jobs and too many working poor. Take Sibongile Mchunu, a factory worker in Mobeni, who leaves home at 5:15 in the morning and returns at 6:30 pm. She earns R677 a week before deductions. Her daughter receives a child grant. They spend about R300 a week on food for a family of six.
This department was created to address a gap in government's economic policymaking, planning and co-ordination machinery, so that, working with other parts of government, we can have better economic and employment outcomes. The work of the department in the year ahead must address the concerns of Denise Classe, Sibongile Mchunu and the many other South Africans who face the challenges of poverty, inequality and unemployment.
To provide the basis for the budget request we are making today, we prepared a Medium-Term Strategic Plan for three years and a chapter for the Estimates of National Expenditure, published by the Minister of Finance on 17 February 2010. All of this is based on the mandate of the department set by President Zuma last year and the four programmes that we shared with the portfolio committee.
The EDD's budget allocation is R418 million, which covers the work of the department and certain entities that report to it. We propose the distribution of this budget as follows; R18,2 million for policy development work; R25,8 million for economic planning and co-ordination; R11,2 million for economic development and dialogue; R44,8 million for administration for the Ministry and capital expenditure; R152 million for small business funding through transfers to Khula and the SA Micro-Finance Apex Fund; R102 million for the competition authorities to strengthen their work and R64 million to the International Trade and Administration Commission for trade administration.
Permit me to address the different areas of focus of the department for the period ahead. Our policy development work will focus strongly on the elaboration of the developmental growth path. We face a massive unemployment challenge. For the past few decades, the economy has not created enough jobs for all South Africans able and willing to work. This resulted in unemployment levels that are among the highest in the world. It has been compounded by the recession, caused by the most serious economic crisis that the world has seen in 70 years.
In South Africa, as hon members know, three consecutive quarters of Gross Domestic Product contraction followed. Real GDP fell by 1,8% in 2009. Between the fourth quarters of 2008 and 2009, 870 000 people lost their jobs and 518 000 joined the ranks of discouraged work seekers.
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. We call this "the development of a new growth path".
The central ideas in the developmental growth path are to enhance the labour-absorbing capacity of the economy, to build a lower carbon-emission economy and to find ways to connect knowledge and innovation to the challenge of jobs and growth. Through this work, we have identified a number of areas with the potential for new jobs. They are infrastructure development; the green economy; the manufacturing sector; knowledge economy activities; the rural, agriculture 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 how to realise new jobs in each of these areas. It means looking at economic opportunities, mechanisms to maximise the number of jobs that can be created and the policy support required to realise this potential.
Policies are important for the achievement of the growth path but they are not sufficient. We are therefore looking at how to improve the performance and impact of public institutions that are vital to economic development. An example is the duplication in small business development institutions and the lack of coherence in their work.
The growth-path work recognises the crucial role of the private sector in creating jobs. We want to use the potential of social dialogue with organised labour and business to contribute to economic development and strengthen the technical capacity, particularly of small businesses and organised labour.
Our policy work will consider both macroeconomic and microeconomic policies. More than 10 areas have been identified. They range from industrial policy, competitiveness, skills development, and both access to and the cost of capital for businesses.
Sam Khotle is a 27-year-old man with a matric qualification, a certificate for computer services, a credit for a university degree and the dream of becoming an industrial psychologist. Yet, since 2007 he has been working as a petrol attendant in Botshabelo, earning R530 a week because he cannot find better-paid work. An important policy focus of the department will be the creation of sustainable livelihoods and addressing the challenges of enterprises in the second economy. Take the example of Joey Johnson, a 47-year-old who lives in Port Elizabeth. Joey operates a mechanic business from his home. He specialises in Toyotas and Volkswagens. Some days he has work, others not. He cannot afford to buy the parts and tools he needs to expand his business. He wants to build a proper workshop, but he does not know how to get a loan. He does not even have a bank account.
Our policies will seek to transform second-economy activities such as that of Joey Johnson into dynamic, competitive and better-paid activities that are part of the economic mainstream and to use and not waste the skills of the Sam Khotles of our country.
It is about promoting decent work. President Mandela put it well when he said:
The principles of decent work exemplify our common values, our shared respect for dialogue and our concerns about the plight of our impoverished fellow citizens. Decent work is based on the efforts of personal dignity, on democracies that deliver for people, and economic growth that expands opportunities for productive jobs and enterprise development. Decent work also underpins the principle that the purpose of creating work and wealth is to eradicate poverty. Part of what we will do is conduct research and policy development. We will also convene discussions with Members of Parliament, Cabinet members, social partners and economists.
Last year we hosted several policy platforms, including those on the global economic crisis, income inequality and rural economic development. Discussions were also held with companies, industry associations and organised labour on matters such as the exchange rate, industrial policy, trade issues, localisation of the supply chain, factory closures and co- ordination within government.
This evening we will be hosting the first in a new set of policy platforms, The Next Economy Dialogue Series. We are doing this in association with the Cape Times. I will be engaging with Mr Bobby Godsell and Mr Zwelinzima Vavi at the first session.
In the year ahead we will host at least 10 policy platforms to draw South Africans into conversations about policy issues. We will establish a ministerial advisory panel to serve as an ideas forum. It will give an opportunity to test ideas and learn about new developments. We can then take some of these ideas to Nedlac for discussion and dialogue.
I am pleased to announce that we have made good progress in establishing the panel since my announcement of the idea some two weeks ago here in Parliament. Professor Joseph Stiglitz, Nobel Economics Laureate and previously Chief Economist of the World Bank, has agreed to serve on the panel. He will be joined by a number of South African experts such as Professor Haroon Bhorat of UCT; Dr Michael Power, a strategist from Investec Bank; Professor Chris Malikane from Wits University; Mr Goolarn Ballim, Group Chief Economist of Standard Bank; Dr Olive Shisana, the CEO of the Human Sciences Research Council; Mr Geoffrey Qhena, CEO of the Industrial Development Corporation; Dr Simon Roberts, Chief Economist of the Competition Commission; and Dr Neva Makgetla, lead economist in the development planning division of the Development Bank of South Africa.
We will be adding more names to the panel, and we will also have active business people and unionists who will be able to interact with the panel's economists.
By the end of this year we plan to have the core of the Economic Development Institute in place and, by next March, to have produced 10 policy documents on growth and employment issues.
Our work on economic planning and co-ordination will contribute to connecting the dots in government, since economic planning is a critical part of any overall national plan. The department will therefore work closely with the National Planning Commission and Minister Manuel and will develop spatial and sector economic development action plans, including for distressed areas. EDD is actively engaged with provinces. In the last year I have met with my provincial counterparts through Minmec, including meetings at a two-day Spatial Economic Development Symposium, and I addressed three provincial jobs summits. Deputy Minister Mahlangu-Nkabinde visited a number of provinces for detailed engagements.
In the year ahead, the department will work with provincial economic development departments to ensure the coherence of spatial economic development plans between national and local spheres, and with the new growth path.
Our work on sector policy aims, among others, to support the Industrial Policy Action Plan announced last month, as well as rural economic development initiatives. By the end of the next financial year, we intend to have reviewed or produced five sector plans and 10 spatial plans.
Our work will only be successful, however, if government operates as a coherent team. The Ministry is therefore participating in a number of interdepartmental and interministerial committees, including committees on energy, poverty, broadband, the aerospace industry, the pebble-bed modular reactor, trade policy and National Health Insurance.
The EDD's focus in these forums is on how to improve job opportunities and support economic development. This same focus also informs our work on the councils on which we serve, such as the Broad-Based Black Economic Empowerment Council, the Human Resource Development Council and the Electricity Stakeholders Council.
From 1 April, the EDD will guide the work of three economic regulatory bodies, namely the Competition Commission, the Competition Tribunal and the International Trade Administration Commission; and three development finance institutions, namely Khula Enterprise, the South African Micro- Finance Apex Fund, Samaf, and the Industrial Development Corporation.
As the reporting authority for these agencies, the EDD will provide oversight, strategic direction, ongoing review and the development of policy frameworks. We will review international trends and lessons learnt and promote alignment between the policies and strategic plans of these entities and those of government.
We plan to finalise proposals for small business funding by November this year. We have also set a target to generate financing worth R2 billion for small businesses, targeted growth sectors and companies in distress.
Development finance institutions, DFIs, and investment bodies control assets and investments worth hundreds of billions of rands. There is scope to improve the development and employment yield of DFIs, public and private sector investments, retirement funds and the Public Investment Corporation.
The international experience shows that successful industrialising countries are ones that use their public and private investment institutions well. This is not a new idea in South Africa. At the 2003 Growth and Development Summit, business, labour, government and community organisations agreed to target 5% of investible funds into development areas and activities. What has been lacking to date has been appropriate instruments to give effect to this commitment. Various options that combine prudent investment policy with development goals are open to us, including the issue of a development bond.
As an example of this, the IDC has recently issued a R2 billion bond that has been taken up by the Unemployment Insurance Fund. The bond is priced at highly beneficial rates, and the funding that the IDC provides through the utilisation of the bond will fund businesses with labour-intensive operations that are creating and saving jobs.
The competition authorities will be strongly supported in their efforts to combat price-fixing, collusion and tender-rigging. In the past 12 months, the tribunal has issued fines of close to half a billion rand for anticompetitive conduct. In the past three months alone there have been no less than 30 admissions of wrongdoing by companies, mainly related to price- fixing. I have mentioned the importance of building a lower carbon-emission economy. The green economy has huge potential for employment creation in the energy, agriculture, manufacturing and services sectors, including ecotourism.
Other countries are steaming ahead to build their green economies. For example, the green economy in China is reported to employ more than 1,1 million workers and is growing by 100 000 new jobs a year. We will allocate R2 million for policy and co-ordination work on the green economy and green jobs and will mobilise additional resources for the actual investment.
To promote employment and decent work opportunities we will establish an office on local procurement. We have budgeted R3,8 million for work in this area. The Department of Economic Development intends to monitor local procurement within the state while supporting and promoting the work of the Proudly South African campaign.
We have created a programme to promote social dialogue in order to foster economic development. Its role will be to help negotiate social pacts on our country's challenges as well as to undertake the technical work to support such pacts.
Building on our successful national social dialogue, for the year ahead we plan to develop social dialogue on growth and social equity issues at sector and workplace level so that we build partnerships at the heart of the wealth-creating machinery of our country.
We will set up a series of knowledge networks by November this year to bring together economic expertise across the state and we will host the first annual economic development conference before the end of the forthcoming financial year.
We have established a subprogramme to address the role of productivity, innovation and entrepreneurship in driving economic growth and development.
Alice Mpatuli is a South African entrepreneur. She was retrenched after 30 years in the textile industry. She established her own cut, make and trim business in rented premises with rented machines. Work is piecemeal and sporadic and because of this she can employ people only on short-term contracts. Alice needs to learn basic management skills and needs to access financing to buy her own equipment and machines.
The policies and programmes we develop at the Department of Economic Development must provide an answer to the challenges that Alice Mpatuli and many like her face.
The EDD will promote workplace productivity agreements and foster entrepreneurial endeavours in the economy, particularly those of black entrepreneurs.
In the month the EDD was established, we assumed responsibility for co- ordinating government's work on the Framework for South Africa's Response to the International Economic Crisis. Our dialogue programme will now focus on better implementation of the actions under this Framework. Working closely with our social partners, we have already launched about 20 actions to address the crisis, from efforts to respond to communities in distress, to vulnerable workers and troubled enterprises and sectors.
We set up a training layoff scheme supported by funding of R2,9 billion to provide companies with an alternative to retrenchment by providing funding for training.
Richard Matsomela has worked at BMW at Rosslyn since 1999. Orders in the auto industry worldwide declined markedly as a result of the economic recession. Richard says, "The recession affected us a lot. It frustrated us. I didn't know where to go, where to start. The possibility of a shutdown troubled me. I'm paying bills, schools fees, transport and a bond."
As part of a strategy to avoid retrenchment, BMW and Richard's trade union, Numsa, accessed the training layoff scheme. Through this effort BMW placed over 1 100 workers on the scheme and trained workers in a variety of skills accredited with the Seta. They also paid social security contributions and workers received 50% of their wage.
We launched a fund for enterprises in distress, and the IDC allocated R6,1 billion to support companies hard hit by the crisis. Applications to the value of R1,1 billion have been approved. We worked with the CCMA to strengthen efforts to avoid retrenchments in the economy. More than 15 000 jobs have now been saved through these three interventions.
To address the challenge of food prices, we asked the competition authorities to speed up their investigations of price-fixing and cartels in the food supply chain. We are now looking at 10 parts of this industry and a number of companies have been prosecuted.
Government has increased the age for child grants to ensure that this limited lifeline offered to many families is not withdrawn during the recession. An additional 750 000 children will now be covered by the child grant.
In the year ahead, we will expand the number of actions that are successfully carried out under the framework. We will hold at least 10 social dialogue- and capacity-building engagements, and conclude a number of economic development agreements with social partners at national, sectoral and workplace levels.
We have established a programme on administration to build an effective, dynamic department. Over the past nine months, we undertook the legal work to establish the department; developed a budget for the establishment phase as well as for the three-year period to 2013; recruited a core of staff on contract to commence work on policy and co-ordination; secured and furnished new offices; wrote a strategic plan for the department; developed a staff structure for a staff complement of 264 persons; and undertook the first job evaluations in the department.
You would be pleased to know that we received more than 1 000 applications for the first 13 posts we advertised recently and expect to make the first permanent appointments by June this year.
We have set an ambitious programme of work because our times require ambition and purpose. We will implement it in a phased manner.
In closing, I would like to thank my colleague, Minister Rob Davies, and his department for supporting the EDD in our establishment, and Minister Pravin Gordhan for the support of National Treasury with the finalisation of the Budget.
I would like particularly to acknowledge Deputy Minister Mahlangu-Nkabinde and the small, dedicated team in the Ministry and department for their role in bringing our work to this point. I would like to acknowledge the social partners for their commitment to implementing the framework. I look forward to working with them in the coming months in promoting economic development and decent work opportunities for all our people.
In closing, I spoke earlier of the challenges of the recession and the opportunities that we are identifying with the new Growth Path. We are confident that we can repair the damage of the recession and build an inclusive economy.
I conclude with the words of United States President Franklin Roosevelt, from his inaugural address in 1937, in the middle of the Great Depression, when he said:
Our progress out of the depression is obvious. But that is not all that you and I mean by the new order of things. Our pledge was not merely to do a patchwork job with second-hand materials. By using the new materials of social justice we have undertaken to erect on the old foundations a more enduring structure for the better use of future generations.
In that purpose we have been helped by achievements of mind and spirit. Old truths have been relearned; untruths have been unlearned. We have always known that heedless self-interest was bad morals; we know now that it is bad economics.
These words are as apt today as they were 73 years ago. I thank you.