Date: 16/11/2005
Source: The Presidency
Title: Mlambo-Ngcuka: Answers to questions in National Assembly


  Questions and Answers for oral reply by the Deputy President, Phumzile Mlambo-Ngcuka in the National Assembly

Question No 23: The leader of the opposition Democratic Alliance (DA) to ask the Deputy President:

(1) Whether the government has formulated a response to the report of the Independent Inquiry Committee into the United Nations (UN) Oil-for-Food Programme, particularly in respect of the sections relating to the involvement of The Presidency, the Department of Foreign Affairs and specific South African companies (names furnished); if not, why not; if so, what action will the government take against firms falling under their jurisdiction in this regard, as urged to by UN Secretary-General Kofi Annan;

(2) whether relations between the government and the Arab Ba'ath Socialist Party influenced South Africa's diplomacy towards the Iraqi Government of Saddam Hussein; if so, how;

(3) whether certain persons (names furnished) or any other person consulted with The Presidency regarding their visit to Baghdad, Iraq, in December 2000 either before or after their visit; if not, when did The Presidency first become aware of such visit;

(4) whether the President or anyone in The Presidency was informed that the President's name was used in his capacity as President of the Republic to give the impression that a certain person (name furnished) was acting on his behalf; if not, what action did The Presidency take when it became aware of this; if so, what are the relevant details?

Reply:

1 and 4. Government has not as yet formulated a response to the report of the Independent Inquiry Committee into the Iraq UN Oil-for-Food Programme. We have instructed the Ministry of Justice to examine the whole report and give advice on the steps that our government should take. Whilst we await the response from the Ministry of Justice, we wish to reiterate that South Africa's Foreign Policy is based on South Africa's national interests and international law, and we reject any insinuation that such policy can be auctioned for private commercial purposes. As far as I am aware, The Presidency was not informed that anybody claimed to be the President's advisor.

2. Honourable Member, with regard to the other parts of your question, as you are aware, the South African Government conducts its international relations with other governments and not political parties. Such interaction is guided by our foreign policy objectives, which are well known and well considered. As such, government had no relations with the Arab Ba'ath Socialist Party.

3. The Deputy Minister of Foreign Affairs, Mr Aziz Pahad, officially visited Iraq a number of times between November 1999 and February 2003. During the November 1999 visit, the Deputy Minister was accompanied by a business delegation, which met separately with the Iraqi business community on trade-related issues. A member of the Department of Trade and Industry was also present on that occasion. Let me also state that business people or any other individuals do not necessarily require government permission in conducting their business with any partner of their choice, as long as this is done within the confines of the law of the land.

Question No 22: Mr L Zitha African National Congress (ANC) to ask the Deputy President:

(a) What are the key elements of the Accelerated and Shared Growth Initiative for South Africa and
(b) to what extent will it assist in meeting the 2014 objectives

Reply:

This initiative is made necessary by the need to ensure that growth in our economy is both accelerated and shared. The approach being taken in the Accelerated and Shared Growth (ASG) initiative for South Africa is first to identify those binding constraints, which, if removed, would improve the performance of the South African economy. So far the key constraints identified have included:

* The relative volatility of the currency
* The cost and efficiency of the national logistics system and capacity of infrastructure and bottlenecks
* The shortage of suitably skilled labour at suitable cost
* Disjointed spatial settlement patterns which contribute to the labour costs
* The lack of sector development strategies. Barriers to entry and competition in some sectors of the economy
* Deficiencies in state organisation, capacity and strategic leadership with greatest impact felt at local government level
* Unnecessary regulatory obstacles to growth and employment especially limit small, medium and micro enterprise (SMME) growth.

The ASG research and discussions now under way seek to address practical and substantial strategies to address these issues. No significant changes in policy are expected, but: (1) Significant improvements in monitoring and evaluation of policy implementation by all members of the Executive and The Presidency, (2) Tighter co-ordination and integration of agreed programmes and interventions bringing in government, state-owned enterprises, private sector and civil society in partnerships, (3) Focus on outcomes and timely interventions.

Emphasis and choice of interventions must respond to a shared growth. It must not replace overall Government Programme of Action, but will focus on those initiatives that are:

(1) Labour absorbing,
(2) Poverty Alleviating,
(3) Growth and Sustainable.

If the binding constraints can be effectively addressed, it is expected that the growth rate and the employment rate will rise to the point that the objectives of halving poverty and unemployment will be achieved by 2014.

Our process of consultation with stakeholders is underway and we will look at their contributions seriously. So far on the part of government we have identified the following interventions:

* Infrastructure development an amount of R320 billion in Medium Term Expenditure Framework (MTEF)
* Human Resources Development
* Second Economy directed interventions especially targeting SMMEs and including Social Infrastructure, Expanded Public Works
Programme, jobs for unemployment graduates
* Provincial initiatives
* Macro economy, striving for a competitive and stable currency
* Service delivery and governance especially at local government level. Ensuring delivery and closing the skills gap
* Sector development.

They have been categorised as immediate priority sectors, which is Business Process Outsourcing (BPO) and Tourism. These are immediate priority because we have been closely working with business and we are ready to implement. The other category is top priority sectors and this is Agriculture and Agri-business Biofuels, Mineral Beneficiation, Cultural Industries and work is being on the chemicals and forestry sectors.

Time frames are tight and we will have to share details early in 2006. In the first two years between 2006 to 2007 we should make meaningful progress, by 2009 we will have to evaluate if we are getting the growth we need, by 2014 we should have made a significant impact in relation to unemployment and poverty. Question No 24: Prince NE Zulu (IFP) to ask the Deputy President:

(1) Whether the government has any plans to utilise taxes for industrial development in order to stimulate job creation; if not, why not; if so, what plans;
2) whether the projected 6% growth will have the capacity to halve unemployment by 2014; if not, why not; if so, what are the relevant details;
(3) whether a review of some governmental regulations will improve the business environment and increase industrial competition; if not, why not; if so, what are the relevant details?
(4) whether she will make a statement on the matter?

Reply:

The general approach of government is to ensure that company and personal income tax, and other taxes, is low enough to encourage investment.

As a general rule tax incentives should be used with great care as such incentives might have unintended consequences (resulting in an unfair playing field) with a loss in tax revenue and no or very limited long-term benefits for the country. However, there is sector specific taxation regime for the gold mining sector for example-its intention is to find the right balance between an incentive to invest and a fair return to government.

Another measure that government introduced to encourage job creation in the country was to provide indemnity to those individuals and businesses who had invested their money outside the country outside of the law. Amongst government's aims in this instance was to ensure that the money comes back to the country and is used to invest in job creation.

There is one taxation provision specifically designed to encourage the employment of the unemployed. This tax incentive is provided to employers under the Income Tax Act, section 12H, in the form of an annualised deduction of between R17 500 and R25 000 when a learnership agreement is signed, and a further annualised deduction of R25 000 when the learner successfully completes the learnership.

There are several investment incentive programmes, such as the Small and Medium Enterprise Development Programme that do not use the tax mechanism directly.

It is government's wish to have halved unemployment even before 2014. That is the reason why we are working tirelessly to ensure that every government department has in place a programme that is meant for the achievement of that goal.

Recently the Industrial Development Corporation (IDC) announced a R1 billion financial package aimed at supporting small and medium enterprises (SMEs). R600 million of this fund will be targeted at SMEs preferably those in poor provinces, township and rural areas. The interest rate charged will be prime minus 5% and average cost per job will be R150 000 per annum. The maximum amount to be given per entrepreneur is R25 million. R200 million is set aside for Pro-Franchise Scheme. It will target poor provinces and will exclude Gauteng and Western Cape. The target is to create 10 jobs per franchise. R100 million is set aside for Horticulture and the other R100 million is set aside for Forestry targeting communities with land next to established forests.

A recent study undertaken by the Development Policy Research Unit at the University of Cape Town indicated that the rate of employment growth has for the period between 1995 and 2004 been approximately 76% of the rate of GDP growth. This means that the environment that the government has created is conducive to the creation of employment and therefore the achievement of our 2014 goal.

As we proceed with our work on ASG, we will embark on a modelling exercise to test the impact of different initiatives on Growth, Poverty Alleviation and Job Creation. The government is currently in the midst of an investigation into the regulatory environment for small business, and has discussed the findings of initial research papers with business and labour. Regulations in several sectors were examined, including tax administration, municipal regulations, labour regulations and sector specific regulations. Indications are that regulatory reform could improve the growth rate of small businesses, and therefore increase levels of competition and competitiveness in the economy. However, the investigation has not yet reached the point of making recommendations to Cabinet; it is still work in progress.

It is encouraging to note, however, that while investigations into the regulatory environment for small business are still continuing, there is already a positive response from our people who have already started registering their businesses.

Let me conclude by emphasising government's commitment to the creation of job opportunities, drastically cutting down poverty, establishing an environment conducive to investment in the country and a dedicated human resource strategy.

Question No 25: Ms NP Khunou (ANC) to ask the Deputy President:

What measures are the government putting in place to address the challenge of graduates who are struggling to find employment?

Reply:

There are several factors that cause current rates of graduate unemployment. These have been well documented by studies from the University of Cape and the Human Sciences Research Council. Among others, research suggests that non-responsive academic programmes and poor preparation for the world of work reduces graduates' chances of securing early employment. It should also not be forgotten that the process of transformation in the institutions of higher learning started very late leading to the continued shortage of important skills particularly among black people. The responses from government are as follows. Through the Accelerated and Shared Growth Initiative, we have identified sectors that would absorb unemployed graduates. In partnership with relevant role players in the private sector, we have identified Tourism, Business Process Outsourcing, Community Development Work, which is also part of Expanded Public Works Programme now, Financial Services, Project Management, Agriculture and Agro-processing, Child and Youth Care Work, Probation Service, Minerals Beneficiation, as well as Water and Sanitation as sectors and programmes that have a higher potential to absorb most of our young people. We are working with Umsobomvu Youth Fund and other relevant departments such as Public Works, State-owned Enterprises with large infrastructure programmes, Department of Trade and Industry, Department of Labour and Department of Public Service and Administration to develop a comprehensive response in that regard. Focus will not be limited to the above mentioned areas.

Other interventions have been the rollout of internships in the public service, which has benefited thousands of unemployed graduates. Umsobomvu possesses a database of unemployed graduates which will draw from stakeholders committed to assist us to improve the database and ensure it will easily available to stakeholders.

Honourable Members, let me conclude by emphasising that this government is committed to economic advancement, job creation and poverty alleviation for all South Africans - young and old. The production of quality graduates with intermediate and high-level skills is central to our accelerated and shared growth strategy. The Minister of Education has engaged private sector to work with the Department of Education on ensuring that Further Education and Trainings (FETs) produce relevant graduates from FET system.

Contact: Terrence Morapedi Manase The Presidency
Tel: (012) 300 5296 / (021) 464 2189
Fax: 086 683 5296
Cell: 082 338 6707

Issued by: The Presidency
16 November 2005