Date: 27/06/2005
Source: Government Communication and Information System
Title: Mpahlwa: Monitoring and Evaluation media briefing, June 2005
Media briefing by the Economic, Investment and Employment Cluster on the Programme of Action
This briefing provides the context of the detailed update of the Programme of Action following the completion on 22 June of the second cycle of cluster reports to Cabinet.
1. Broad Economic Stance
1.1 The economy is firmly on a higher growth range, emphasising the economic turnaround that has been achieved. Our fiscal deficit has been reduced from 4.6% in 1996 to just 1.5% of our Gross Domestic Product in 2005, and interest rates and inflation rates are both at their lowest rates in decades. Business confidence is at record levels, and South Africa has had its credit rating upgraded. This has helped spur strong consumer demand enabling South African economic growth to remain resilient in the face of slower global economic growth. The positive turnaround of the South African economic has thus created a strong platform for accelerated growth in the next decade, with an emphasis on achieving higher levels of productive investment, employment creation, exports, and productivity.
1.2 In accelerating growth to build the real economy, the implementation of the Microeconomic Reform Strategy (MERS) will be prioritised, capacitated and, where necessary, fast-tracked. There will also be targeted interventions to bridge the divide between the first and second economies. Finally, there will be steps taken to improve the capacity of the state to implement growth and development policies in an efficient, effective and coordinated manner.
2. Increased levels of investment in the public sector
2.1 State owned enterprise (SOE) investment will play a critical role in accelerating growth. Plans for SOE investment have been put in place and fund raising strategies are well advanced. Major investment drives include Transnet’s Capex funding totalling over R40 billion and Eskom’s R95 billion plan for the next five years. These will have a positive impact on infrastructure and also provide opportunities for the capital markets.
2.2 A priority is the implementation of an appropriate regulatory framework to stimulate new SOE investment in infrastructure. This implementation will happen as part of the strengthening of sector regulations. In particular, there is a need improve regulations and regulatory capacity in electricity, transport and communications with a view to facilitating, among other things, developmental pricing policies that promote increased investment and economic activity.
3. Increased levels of investment in the first economy
3.1 Accelerated growth in the years ahead will, to a large degree, be investment-led. Levels of investment in the first economy have increased by over 9% in the past two years. There has been strong investment in the motor, tourism and agro-processing sectors. This positive trend is continuing with the East London industrial development zone acquired new investors in June 2005 in its bid to be a hub for vehicle and agro processing manufacturing. This comes after the Coega/ Ngqura IDZ recently secured its first investor.
3.2 The levels of investment in the first economy will be increased in the years ahead. This will be facilitated by introduction of developmental pricing in electricity is expected to encourage large investments. The increased SOE investment plans will also be leveraged to increased private sector investment.
3.3 Increased investment, particularly for strategic investors, will be promoted through government giving more coordinated signals to investors across all spheres of government. This will include coordination targeted at ensuring that the 2010 World Cup supports private sector investment, such as the growth of the tourism sector. 4. Lower cost structures and enhance competition 4.1 Reducing cost structures and increasing competition are high priorities for achieving accelerated growth. Ongoing activities in July 2005 include the launch of the first Regional Electricity Distributor (RED 1), the development of the freight logistics strategy, finalization of the National Ports Authority Bill, and the imminent submission to ICASA for the licensing of the Second National Operator. 4.2. Government intends sending a strong message to all sectors and firms in the economy that there must be increased competition to promote the growth of downstream and value-adding economic activity, which holds the key to a sustainable and job-creating economy. In particular, government is focused on lowering the costs of key resource-based inputs and telecoms prices. Government interventions in this regard include the strengthening of the competition regulatory frameworks, including considering fast-tracking particular measures (such as those to eliminate import parity pricing in key sectors).
5. Key sector development strategies
5.1 As part of implementing the MERS, government is committed to developing the growth, employment and equity potential of priority sectors. In this regard, government is finalising the chemical sector strategy. Sector strategies for business process outsourcing; tourism; and textiles, clothing and footwear sectors are also at an advanced stage. An overall strategy for the services sector is also at an advanced stage, with framework already drafted. In agriculture, the cotton and livestock strategies and draft Aquaculture strategy have been completed. The strategies for the ostrich, grains and fruit industries will be completed by December 2005.
5.2 The Precious Metals and Diamonds General Amendment Bill is due to be promulgated soon, with the drafting of regulations to commence by the third quarter of 2005. In addition, incentives for beneficiation of minerals and metals are currently being developed. In general, the identification and support of specific beneficiation projects is a priority for government.
5.3. Going forward, there will be a sharpening of prioritisation of sectors and resource allocation for sectoral interventions, in order to focus managerial and financial resources on the major opportunities for growth, employment and equity. This will include strengthened coordination of national and provincial industrial policies and implementation programmes.
6. Enhance international economic relations
6.1. Several important achievements have been reached in terms of international economic relations. These include the conclusion of SACU agreements with Mercosur and EFTA, the inclusion of ten new EU members into the SA-EU agreement, mobilisation of G7 support for African development, launch of the India-Brazil-SA business forum, and the establishment of the Permanent Trade Forum (bringing together the different government departments). Currently government is finalising the national export and market access information strategy to use opportunities to improve access to EU and US markets using the SA-EU trade agreement and AGOA.
6.2. Both the G90 and G20 countries are mobilising resources in order to conclude a common position for the WTO Ministerial meeting in Hong-Kong later this year. South Africa will continue to play a leading role in ensuring that the positions developed in preparation of the WTO Ministerial conference promote the interests of developing countries and the poor. For South Africa, the completion of the Doha Round will lead to benefits to the second economy through increased exports of agricultural produce.
6.3. Economic development of South Africa is intertwined with that of the continent. Therefore priority has been given to the implementation of the NEPAD framework. As part of this, government will be working to define a South African strategy for African economic development, which will inform the activities of the South African public and private sectors.
7. Enhance economic inclusion and impact on the Second Economy
7.1. Accelerating economic inclusion is a priority to ensure that economic growth benefits the majority of South African, especially those have been or remain economically marginalised. A critical aspect of enhancing economic inclusion is through the promotion of small and micro businesses. The integrated small business strategy is to be tabled to Cabinet for approval by July 2005. 7.2 The Cooperatives Bill and implementation strategy have been revised and tabled to Parliament in May 2005. In addition, the process of finalising the incentives and capacity building for grants start-up is nearly completed. Khula and the newly established Enterprise Development Agency (SEDA) and other relevant institutions have been given a mandate to support cooperatives. SEDA is currently being rolled-out to provinces, with three provincial offices already operational. The Community Public Private Partnership has been integrated into SEDA. The agricultural credit scheme (MAFISA) and the Apex microfinance scheme have recently been launched. 7.3 The Draft Code of Good Practice on BEE will be completed by July 2005. The tourism, ICT, and financial charters have been completed, with the property and transport charters being finalised. 7.4. The Second Economy is an analytical tool to assist government focus its interventions to reduce the economic marginalisation of certain communities and activities. Attention is being given to the potential for integrating the needs of those in the Second Economy into the economic cluster programmes and policies, for example, through strengthening the mutual benefit of between rising Second Economy demand and local suppliers. This briefing itself integrates reports on programmes to address challenges of the Second Economy within each section rather than as a separate section. 8. Labour force with skills needed by the economy
8.1. The Growth and Development Summit agreement remains on of the key government’s interventions to contribute to employment and skills development. As per GDS agreement, government managed to enrol 80 000 learners as per first phase of the National Skills Development Strategy by March 2005. 8.2. Through the SETA and the National Skills Fund projects 53% of firms employing between 50 and 150 workers are receiving skills development grants. 8.2 Immigration regulations to recruit targeted scare skills in the short-term skills have been finalised, and the new regulations published for comment. The Act is to come into operation with effect from July 2005. 9. Increased R&D Spending and the diffusion of new technologies
9.1. Research and Development is one of the critical cross-cutting area identified under the MERS and it plays an important role in creating conducive environment for innovation and productivity in the economy. R&D spending in South Africa increased from 0.76% in 2002 to 0.81% in 2004, hence moving closer to the target of 1% of GDP by 2008.
Conclusion
Much progress has been made. Going forward, there will be a renewed focus on prioritisation, capacitation and resourcing of implementation across all spheres of government.
Issued by: Government Communication and Information System (GCIS)
27 June 2005
Source: Government Communication and Information System
Title: Mpahlwa: Monitoring and Evaluation media briefing, June 2005
Media briefing by the Economic, Investment and Employment Cluster on the Programme of Action
This briefing provides the context of the detailed update of the Programme of Action following the completion on 22 June of the second cycle of cluster reports to Cabinet.
1. Broad Economic Stance
1.1 The economy is firmly on a higher growth range, emphasising the economic turnaround that has been achieved. Our fiscal deficit has been reduced from 4.6% in 1996 to just 1.5% of our Gross Domestic Product in 2005, and interest rates and inflation rates are both at their lowest rates in decades. Business confidence is at record levels, and South Africa has had its credit rating upgraded. This has helped spur strong consumer demand enabling South African economic growth to remain resilient in the face of slower global economic growth. The positive turnaround of the South African economic has thus created a strong platform for accelerated growth in the next decade, with an emphasis on achieving higher levels of productive investment, employment creation, exports, and productivity.
1.2 In accelerating growth to build the real economy, the implementation of the Microeconomic Reform Strategy (MERS) will be prioritised, capacitated and, where necessary, fast-tracked. There will also be targeted interventions to bridge the divide between the first and second economies. Finally, there will be steps taken to improve the capacity of the state to implement growth and development policies in an efficient, effective and coordinated manner.
2. Increased levels of investment in the public sector
2.1 State owned enterprise (SOE) investment will play a critical role in accelerating growth. Plans for SOE investment have been put in place and fund raising strategies are well advanced. Major investment drives include Transnet’s Capex funding totalling over R40 billion and Eskom’s R95 billion plan for the next five years. These will have a positive impact on infrastructure and also provide opportunities for the capital markets.
2.2 A priority is the implementation of an appropriate regulatory framework to stimulate new SOE investment in infrastructure. This implementation will happen as part of the strengthening of sector regulations. In particular, there is a need improve regulations and regulatory capacity in electricity, transport and communications with a view to facilitating, among other things, developmental pricing policies that promote increased investment and economic activity.
3. Increased levels of investment in the first economy
3.1 Accelerated growth in the years ahead will, to a large degree, be investment-led. Levels of investment in the first economy have increased by over 9% in the past two years. There has been strong investment in the motor, tourism and agro-processing sectors. This positive trend is continuing with the East London industrial development zone acquired new investors in June 2005 in its bid to be a hub for vehicle and agro processing manufacturing. This comes after the Coega/ Ngqura IDZ recently secured its first investor.
3.2 The levels of investment in the first economy will be increased in the years ahead. This will be facilitated by introduction of developmental pricing in electricity is expected to encourage large investments. The increased SOE investment plans will also be leveraged to increased private sector investment.
3.3 Increased investment, particularly for strategic investors, will be promoted through government giving more coordinated signals to investors across all spheres of government. This will include coordination targeted at ensuring that the 2010 World Cup supports private sector investment, such as the growth of the tourism sector. 4. Lower cost structures and enhance competition 4.1 Reducing cost structures and increasing competition are high priorities for achieving accelerated growth. Ongoing activities in July 2005 include the launch of the first Regional Electricity Distributor (RED 1), the development of the freight logistics strategy, finalization of the National Ports Authority Bill, and the imminent submission to ICASA for the licensing of the Second National Operator. 4.2. Government intends sending a strong message to all sectors and firms in the economy that there must be increased competition to promote the growth of downstream and value-adding economic activity, which holds the key to a sustainable and job-creating economy. In particular, government is focused on lowering the costs of key resource-based inputs and telecoms prices. Government interventions in this regard include the strengthening of the competition regulatory frameworks, including considering fast-tracking particular measures (such as those to eliminate import parity pricing in key sectors).
5. Key sector development strategies
5.1 As part of implementing the MERS, government is committed to developing the growth, employment and equity potential of priority sectors. In this regard, government is finalising the chemical sector strategy. Sector strategies for business process outsourcing; tourism; and textiles, clothing and footwear sectors are also at an advanced stage. An overall strategy for the services sector is also at an advanced stage, with framework already drafted. In agriculture, the cotton and livestock strategies and draft Aquaculture strategy have been completed. The strategies for the ostrich, grains and fruit industries will be completed by December 2005.
5.2 The Precious Metals and Diamonds General Amendment Bill is due to be promulgated soon, with the drafting of regulations to commence by the third quarter of 2005. In addition, incentives for beneficiation of minerals and metals are currently being developed. In general, the identification and support of specific beneficiation projects is a priority for government.
5.3. Going forward, there will be a sharpening of prioritisation of sectors and resource allocation for sectoral interventions, in order to focus managerial and financial resources on the major opportunities for growth, employment and equity. This will include strengthened coordination of national and provincial industrial policies and implementation programmes.
6. Enhance international economic relations
6.1. Several important achievements have been reached in terms of international economic relations. These include the conclusion of SACU agreements with Mercosur and EFTA, the inclusion of ten new EU members into the SA-EU agreement, mobilisation of G7 support for African development, launch of the India-Brazil-SA business forum, and the establishment of the Permanent Trade Forum (bringing together the different government departments). Currently government is finalising the national export and market access information strategy to use opportunities to improve access to EU and US markets using the SA-EU trade agreement and AGOA.
6.2. Both the G90 and G20 countries are mobilising resources in order to conclude a common position for the WTO Ministerial meeting in Hong-Kong later this year. South Africa will continue to play a leading role in ensuring that the positions developed in preparation of the WTO Ministerial conference promote the interests of developing countries and the poor. For South Africa, the completion of the Doha Round will lead to benefits to the second economy through increased exports of agricultural produce.
6.3. Economic development of South Africa is intertwined with that of the continent. Therefore priority has been given to the implementation of the NEPAD framework. As part of this, government will be working to define a South African strategy for African economic development, which will inform the activities of the South African public and private sectors.
7. Enhance economic inclusion and impact on the Second Economy
7.1. Accelerating economic inclusion is a priority to ensure that economic growth benefits the majority of South African, especially those have been or remain economically marginalised. A critical aspect of enhancing economic inclusion is through the promotion of small and micro businesses. The integrated small business strategy is to be tabled to Cabinet for approval by July 2005. 7.2 The Cooperatives Bill and implementation strategy have been revised and tabled to Parliament in May 2005. In addition, the process of finalising the incentives and capacity building for grants start-up is nearly completed. Khula and the newly established Enterprise Development Agency (SEDA) and other relevant institutions have been given a mandate to support cooperatives. SEDA is currently being rolled-out to provinces, with three provincial offices already operational. The Community Public Private Partnership has been integrated into SEDA. The agricultural credit scheme (MAFISA) and the Apex microfinance scheme have recently been launched. 7.3 The Draft Code of Good Practice on BEE will be completed by July 2005. The tourism, ICT, and financial charters have been completed, with the property and transport charters being finalised. 7.4. The Second Economy is an analytical tool to assist government focus its interventions to reduce the economic marginalisation of certain communities and activities. Attention is being given to the potential for integrating the needs of those in the Second Economy into the economic cluster programmes and policies, for example, through strengthening the mutual benefit of between rising Second Economy demand and local suppliers. This briefing itself integrates reports on programmes to address challenges of the Second Economy within each section rather than as a separate section. 8. Labour force with skills needed by the economy
8.1. The Growth and Development Summit agreement remains on of the key government’s interventions to contribute to employment and skills development. As per GDS agreement, government managed to enrol 80 000 learners as per first phase of the National Skills Development Strategy by March 2005. 8.2. Through the SETA and the National Skills Fund projects 53% of firms employing between 50 and 150 workers are receiving skills development grants. 8.2 Immigration regulations to recruit targeted scare skills in the short-term skills have been finalised, and the new regulations published for comment. The Act is to come into operation with effect from July 2005. 9. Increased R&D Spending and the diffusion of new technologies
9.1. Research and Development is one of the critical cross-cutting area identified under the MERS and it plays an important role in creating conducive environment for innovation and productivity in the economy. R&D spending in South Africa increased from 0.76% in 2002 to 0.81% in 2004, hence moving closer to the target of 1% of GDP by 2008.
Conclusion
Much progress has been made. Going forward, there will be a renewed focus on prioritisation, capacitation and resourcing of implementation across all spheres of government.
Issued by: Government Communication and Information System (GCIS)
27 June 2005
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