Date: 14/06/2004
Source: Department of Trade and Industry
Title: M Mpahlwa: Trade and Industry Dept Budget Vote 2004/2005
THE DTI BUDGET VOTE, VOTE 32, BY MINISTER OF TRADE AND INDUSTRY, MANDISI MPAHLWA, National Assembly, 14 June 2004
Madam Speaker
Honourable members
Ladies and gentlemen
Introductory remarks
Today, this house, representing all the peoples of South Africa, has to vote on the budget for the Department of Trade and Industry. Today's vote is significant because it is the first budget of the dti to be considered by the third democratically elected Parliament in the tenth year of our democracy. It is also significant for me personally as it is my first budget vote as Minister of Trade and Industry. Allow me, also to, congratulate all of you on your election to the National Assembly.
I would like to use this opportunity today to reflect on the achievements made during ten years of economic freedom and the challenges that we need to address in the second decade of freedom. I will outline the dti's response to these challenges in this financial year and in the medium-term.
REFLECTIONS ON OUR ACHIEVEMENTS AND THE REMAINING CHALLENGES
The achievements made since 1994 to undo apartheid's economic legacy and place South Africa on a new path characterised by economic growth that is shared by all South Africans have been extensively documented elsewhere.
I do not wish to repeat the many accomplishments of the ANC-led government in this regard. However, allow me to remind this house that in 1994 the South African economy was on the verge of crisis and South Africa faced the real possibility that the economy would de-industrialise. Since 1994, there have been significant changes in the structure of South Africa's economy. The reliance on primary commodities has halved since 1994 and new sectors, particularly services sectors have become important contributors to the economy. Manufacturing output has increased. The Motor Industry Development Programme has supported the development of a world-class automotive manufacturing capability in South Africa. Many of our enterprises successfully entered the export market benefiting from the preferential access to important and large markets secured through the negotiation of trade agreements.
Ntsika, Khula and Manufacturing Advisory Centres were created to provide financial and non-financial support to small enterprises. New competition policy and legislation was implemented and a modern international trade administration regime was introduced with the enactment of the International Trade Administration Act.
An industrial policy for South Africa has been set out in the dti's Integrated Manufacturing Strategy. The National Industrial Participation Programme has been implemented to leverage new investment in South Africa from government purchases that exceed ten million US dollars. We have provided R18m to get the Proudly South African Campaign up and running - it is now self-financing with approximately 2000 companies as members. Four Industrial Development Zones have been designated at Johannesburg International Airport, East London, Coega, and Richards Bay. Eleven investment protection agreements and more than seven economic cooperation agreements have been signed with various other African countries, more than eight bi-national commissions have been established with African governments, plus the dti has opened foreign economic offices in Algeria, Nigeria, Ghana, Angola, Senegal and Botswana.
New Liquor and Gambling legislation has been passed by Parliament. A consumer helpline has been implemented and the time taken to resolve a consumer compliant has fallen from an average of three to six months to an average of one to three days. The time taken to register a company or close corporation has fallen and this process has become easier with the introduction of the electronic lodgement system. The National Lottery was launched and to date more than R1bn has been paid to good causes.
A suite of new investment incentives was introduced including the Small and Medium Enterprise Development Programme, the Skills Support Programme, the Critical Infrastructure Programme, and the Strategic Industrial Programme. Over R4bn in new direct investment has been secured through the Strategic Industrial Programme. Through these programmes new jobs have been created and thousands of existing jobs were retained.
The dti is an efficient and effective department capable of delivering on its mandate. The department balanced its budget in the 2003/4 financial year. Significant improvements have been made in employment equity in the department, especially in regard to the appointment of women and African women managers. One-third of chief directors and more than half of the department's Deputy Director-Generals are women.
Today, we have a more vibrant and a more robust economy, an economy capable of competing in a global market. However, not all South Africans are benefiting from this modern, competitive, and growing economy. As the President has articulated so well in speeches to this assembly, many South Africans are excluded from the fruits of the first economy, are unable to take advantage of the increasing number of economic opportunities because they do not have the right skills; they are not easily able to get information about these opportunities and about support available from government; they are not able to collateralise their assets to start their own enterprises. These South Africans toil in the second economy, engaged in mainly survivalist activities, and are particularly vulnerable to the marginalising tendencies of the economic phenomenon we have come to call globalisation.
Honourable members, this presents a major challenge to this government and to the dti. We need to build a single economy that benefits all South Africans: an economy in which the rate of unemployment is halved over the next ten years, in which the incidence of poverty is halved over the next ten years, an economy characterised by higher levels of equity, and an economy that is growing and creating more and more economic opportunities. This is the mandate that we have been given by the people of South Africa. And it is this mandate that provides the starting point for the dti's work programme over the next five years.
Madam Speaker, today the dti and its nineteen agencies stand before this parliament as a vital instrument for the attainment of this economic vision. Collectively, our average annual budget for the next three years is R3bn, the value of the assets on our consolidated balance sheet exceeds R30bn, and we employ 5500 staff. As Minister of Trade and Industry, it is my undertaking to you today, that I, together with the dti team including the Chief Executive Officers and Chairpersons of the nineteen agencies (who are here in the public gallery), will harness all of these resources in support of growth, employment creation, equity and poverty eradication.
THE ROLE OF THE DTI GROUP OF AGENCIES
As a newly appointed Minister of Trade and Industry one of the first things that I came to realise was that the dti is a huge organisation with a very wide mandate, and that I was responsible not only for leading the department but also for leading these nineteen agencies. My confidence in committing these agencies to our vision of growth, employment, and equity is testimony to the work the dti has done over the past five years to bring these agencies together to form a strategically focused group - the dti Group. These agencies include development finance institutions such as the Industrial Development Corporation, Khula Enterprise Finance (Pty) Ltd, and the National Empowerment Fund. Regulatory agencies include the Competition Commission and Competition Tribunal, the National Gambling Board and the National Lotteries Board, the Micro Finance Regulatory Council, the Companies and Intellectual Property Registration Office, the Estate Agency Affairs Board and the International Trade Administration Commission. Specialised service delivery agencies include small enterprises support agencies such as Ntsika and Namac, and technology support agencies including the Council for Scientific and Industrial Research, Technology for Women in Business, and the South African Bureau of Standards. Madam Speaker, I would like to formally congratulate Martin Kuscus, a former MEC in the Northern Cape, on his recent appointment by Cabinet as the new Chief Executive Officer of the South African Bureau of Standards.
Many of you might wonder why am I placing so much emphasis and importance on these agencies. The reason is that every year we transfer more than R1 billion, more than one-third of the dti budget, to these agencies. Thus it is extremely important that these agencies deliver on their mandates. If the agencies do not deliver then the dti will not be able to deliver.
Our response to these challenges - charting the dti's way forward over the next 5 years
Madam Speaker, the dti is committed to ensuring a higher level of economic growth, more jobs, less poverty, and more equity, by 2014. These are the department's ten-year goals. Honourable members may ask us how we intend to achieve these goals? In response, I can answer that the dti will achieve these goals by ensuring that in the next three years we work to increase the contribution that small enterprises make to the economy and significantly progress broad-based black economic empowerment. We will work to increase the level of investment in the economy overall and in priority sectors as well as to expand market access opportunities for our goods and services and raise export levels. As the dti we will contribute towards building skills, technology and infrastructure platforms that enterprises can benefit from and seek to reposition the economy in higher value-added manufacturing and services activities. We will also take steps to provide economic citizens in our country with greater access to redress.
These are the dti's seven strategic objectives for the next three years. These objectives address the need to encourage the growth and development of the first economy, increasing its propensity to create jobs, while also addressing the challenges of the second economy.
In addition, we will also focus on African economic development and coordinating South Africa's contribution to NEPAD. The dti will continue its work to unlock the potential of priority sectors. These priority sectors include clothing and textiles, agro-processing, metals and minerals, chemicals, and the automotive sector, as well as tourism, cultural industries like music, film and crafts, and the information and communications technology sector. We are also investigating the job creation potential of various sub-sectors of the services sector, including an oil and gas service hub, as well as the growth potential of the paper and pulp sector and the aerospace industry.
We will continue to provide the day-to-day services that keep the economy functioning including the registration of companies and close corporations, issuing import and export permits, issuing the general system of preferences, or GSP, certificates to companies that are exporting, adjudicating on mergers between companies; investigating and resolving consumer complaints; and issuing technical standards to ensure product safety and quality. We will strive to perform these routine, but nonetheless essential, activities as efficiently and economically as possible.
We will measure our progress in meeting these objectives on an annual basis through a new monitoring and evaluation system, and next year I will report back to this house on the results of this evaluation.
I would now like to talk about what the dti will be doing in each of these areas:
INCREASING THE CONTRIBUTION OF SMALL ENTERPRISES TO THE ECONOMY
The creation of new enterprises and the development of existing enterprises are crucial. We have a solid foundation to work from in this area: each year on average approximately R1bn is given to South African enterprises by the dti - this R1bn takes the form of grants to mostly small- and medium-sized enterprises, not loans. In other words, this is money that does not need to be repaid to government. In addition, loans, equity financing and loan guarantees are provided to small enterprises through Khula, the IDC and, starting from 1 June 2004, the National Empowerment Fund. Last year, Khula provided more than 600 loan guarantees to the value of R180m, disbursed loans worth R100m, and disbursed R20m through its equity fund. Khula also set up three new retail finance institutions last year.
In response to the call to the dti to address the gap that exists in the market for small loans to micro-enterprises, the dti will launch the Apex Fund later this year as the President indicated in his State of the Nation Address a few weeks ago.
Ntsika and Namac provide technical and non-financial support to small enterprises. In the last financial year, these two organisations have trained and mentored more than 15 000 enterprises, and trained more than 280 service providers who help small businesses. More than 2000 small manufacturing firms were also supported creating more than 1700 new jobs and saving nearly 15 000 existing jobs. In recognition of the success of these two organisations, we have decided to merge them into a single enterprise development agency to provide a more streamlined and accessible service to entrepreneurs. The new organisation, to be up and running later this year will combine the best that Ntiska and Namac currently offer.
SIGNIFICANTLY PROGRESSING BROAD-BASED BLACK ECONOMIC EMPOWERMENT
Earlier this year, President Mbeki signed the Broad-Based Black Economic Empowerment Act into law. Our focus now is to ensure that this important piece of legislation is implemented. We have set ourselves six key tasks for this financial year. The first task is to appoint the members of the advisory council on black economic empowerment. We are currently discussing potential nominees to the council with the Presidency. The second task is to gazette the code of good practice referred to in the legislation to provide more direction on the obligations of enterprises. Working to align the broad-based black economic empowerment strategy with National Treasury's preferential procurement legislation and regulation is the third task we must complete this year. We will continue to be involved in the negotiation of charters in strategic sectors of our economy. Progress has been made in several sectors, including the maritime transport sector, mining, financial services, petroleum, agriculture and tourism. The fifth task we set ourselves has already been completed: the National Empowerment Fund was re-launched at the end of May and several new products that provide financial support to black enterprises, including collectively owned enterprises and cooperatives, are now available. R2bn has been made available to capitalize the NEF for this purpose. An education campaign on the strategy and legislation will also be launched in the next few months.
As the champion of broad-based black economic empowerment, the dti must lead the way for the rest of government in terms of procuring goods and services from black and women-owned enterprises. Thus, I am also committing the dti to procuring not less than fifty percent of required goods and services from black and women-owned enterprises.
RAISING THE LEVELS OF INVESTMENT IN THE ECONOMY
The dti is currently conducting an extensive survey of the investment climate in South Africa. This survey will provide us with a better understanding of the specific constraints faced by firms that may act as impediments to investment. The results of the survey will be presented to Cabinet in January.
More than R500m in investment incentives will be allocated to enterprises in this financial year. In addition, R32m will be allocated to the development of sector strategies. Two new investment incentives will be launched in the next three months promoting labour-intensive activities in our economy: an incentive for the film industry, and an incentive for the call-centre and back-office-processing industry. R72m will be spent on investment promotion and facilitation activities including the hosting of the 7th meeting of the President's International Investment Council this coming weekend. As was mentioned in the President's opening address to Parliament, more than twenty investment road shows will be undertaken to market the investment opportunities available in priority sectors this year.
In the post-Enron world, corporate governance of companies is a very important factor influencing investor confidence. A review of South Africa's corporate law has been conducted and a policy paper will be published in due course outlining government's plans to modernise and reform the Companies Act.
EXPANDING MARKETS FOR SOUTH AFRICAN GOODS AND SERVICES
South Africa is a relatively small economy and if we are to expand production we need to export our goods and services to the rest of the world. Many enterprises have in the last year questioned the wisdom of pursuing export markets as the Rand appreciated against the US Dollar and as demand dampened in the global economy. However, those exporters that took a longer-term perspective have successfully weathered this difficult period, have identified ways to improve their competitiveness and in partnership with the dti. As global economic conditions have improved, we have since seen a return to form in our manufacturing output statistics.
The dti is focusing on expanding markets for South African goods and services through negotiating preferential trade agreements with key markets such as the United States. These particular negotiations are at an advanced stage. We are also negotiating with EFTA - a group of European countries that are not members of the European Union, as well as with the South American trading bloc, Mercosur. Market access opportunities are indeed expanding, and the accession of ten additional members to the European Union recently, and to the free trade agreement South Africa has with the EU, is a significant development that our exporters must take advantage of in the longer run. Our firm-negotiating stance as part of the Group Twenty at the World Trade Organisation on the question of agricultural subsidies has been produced concessions by the European Union. However, we still have a long way to go in the negotiations we will continue to play an active and leading role at the WTO to advance the interests of developing nations.
R200m is being allocated to the Export Credit Insurance Corporation and R112m will be made available to exporters through the Export Marketing and Investment Assistance programme. Last year this programme assisted more than 5 500 exporters, most of them small enterprises.
CONTRIBUTING TOWARDS BUILDING PLATFORMS FOR MORE COMPETITIVE ENTERPRISES
All enterprises, whether they are small in size and owned by emerging entrepreneurs, or whether they are huge South African multinationals like SABMiller, will benefit from an economy that has lower cost structure. Lowering the cost structure of our economy is a central aim of government's Microeconomic Reform Strategy. The dti is looking at the role to be played by competition policy in this regard.
Enterprises also need access to skilled workers, new technology, and economic infrastructure like telecommunications, energy and transport at an affordable price. Although these issues fall within the ambit of other government departments, we believe that the dti can make an important contribution. R100m will be disbursed to provinces and local authorities for critical infrastructure projects. R135m is allocated to the development of human resources in technology and science-related fields. This programme, known as THRIP, supported more than 1000 researchers and 2600 students last years. Increasingly the participants in this programme are African women. R83m will be used to support industrial innovation by enterprises and R48m will be allocated to technology incubators that assist small enterprises to adopt and adapt new technologies. R10m is available for a technology venture capital fund and R6m for the Technology for Women in Business programme.
INCREASING VALUE-ADDITION IN SOUTH AFRICAN MANUFACTURING AND SERVICES SECTORS
The dti's Integrated Manufacturing Strategy sets out the department's vision for the development of a strong, sophisticated and competitive manufacturing sector. An updated version of this strategy will be released in the forth quarter of this year. Just last week, we hosted a United Nations Industrial Development Organisation symposium on the question of competitiveness with a particular focus on how competitiveness can be pursued in a manner that benefits all without exacerbating existing inequalities and unemployment levels. Partnerships with business and organised labour are critical for ensuring that the gains of higher rates of productivity are equitably shared. In support of these types of partnerships, we have allocated R7m to the Workplace Challenge, R7m for the Fund for Industrial Development, Growth and Equity at Nedlac, and R13m for the Sector Partnership Fund.
PROVIDING ECONOMIC CITIZENS WITH ACCESS TO REDRESS
Many ordinary South Africans do not know where to turn to for assistance when they have problems that are of a commercial nature: when they are wrongly blacklisted by a credit bureau; when something they bought doesn't work properly; or when their monthly instalment for new furniture is much higher than what the retailer advertised. This year, the dti is focusing on consumer protection, especially in respect to consumer credit issues like indebtedness and reckless lending. New policies and new legislation will be finalised this year. Education and communication campaigns will be run and R23m will be allocated to the enforcement of compliance with existing laws in this area. A consumer protection policy and a new consumer credit policy are being introduced this year. The corporate law reform project will also enable the dti to provide economic citizens with access to redress.
AFRICA
The renewal of the African continent is a priority for this government. The dti does a considerable amount of work in this area. We have a unit dedicated to African economic development with an annual budget of R17, 7m. Last year, twenty trade and investment missions to other African countries took place. Ten investment protection and bilateral cooperation agreements were signed and the groundwork was prepared for the conclusion of several more such agreements during this financial year. We have found that we are spending more time supporting South African enterprises investing on the continent and I am pleased that the conduct of these companies is improving. It is critical that the huge trade surplus South Africa currently enjoys with the rest of the continent is reduced and that the production capacity of other African economies is boosted. South African companies invested in the region are increasingly procuring their supplies locally rather than from South Africa and are integrating themselves into the local economies of these countries. This trend is to be welcomed but needs to be strengthened. This year the dti will focus on the development of a comprehensive approach to this matter that deals with infrastructure, investment by South African companies in other African countries, increasing the levels of trade between African states, supporting private sector development on the continent, and building the governance and institutional capacity of the Southern African Development Community and the Southern African Customs Union. Cabinet has decided that the dti will henceforth be the lead department that will coordinate South Africa's work on NEPAD, especially NEPAD'S economic agenda, in conjunction with the Department of Foreign Affairs. We will thus be considering ways to expand our capacity in this important area of work.
EXPANDING OUR OUTREACH TO ECONOMIC CITIZENS
Many of our people are not aware of the support that is available to them from the dti and the dti's agencies. The dti recognised a few years ago that this was an area that required more effort. In 2002, the dti established its own marketing division - an innovative move for a government department. This division is mandated to ensure that our economic citizens know about the dti, know what products and services the dti can offer them, and find it easy to make contact with the dti. Since then the dti successfully introduced a toll-free customer care line that now receives more than 16 000 calls every week from economic citizens around the country. More recently, the dti has implemented a campaign targeted at raising awareness about the department amongst potential entrepreneurs in the second economy - ozo ithola ka njani o hlale ekhoni! R75m is allocated in this financial year to improving the dti's outreach.
UNDERTAKING TO DELIVER ON FLAGSHIPS
Madam Speaker, the dti's strategic plan for 2004 to 2007 has been tabled in this house and this document deals comprehensively with the work of the dti over the next three years. I have touched only on some of the highlights from the strategic plan this afternoon.
From the many activities and tasks that the dti will be performing this year, I would like to draw the attention of Honourable Members to the department's flagship projects - some of which I have briefly mentioned. These are the deliverables that we believe are absolutely critical for addressing the second economy challenge in the short-term. Many of these deliverables were included in the President's State of the Nation Address.
Firstly, we will introduce into Parliament new consumer credit legislation to replace the outdated Usury Act of 1968 and the Credit Agreements Act of 1980, improving the protection of consumers who engage in credit transactions as well as addressing and preventing over-indebtedness of consumers.
Secondly we will implement the broad-based black economic empowerment strategy following the enactment of the BEE Act earlier this year. This will include the appointment of the President's Advisory Council on BEE and the gazetting the Codes of Good Practice, as well as aligning preferential procurement legislation and regulations with the BEE strategy.
Thirdly, the dti will introduce new financial and non-financial support to cooperative enterprises, as well as submit legislation to Parliament to introduce an appropriate regulatory environment to support the development of these forms of enterprise.
Fourthly, the Apex Fund will start providing loans ranging from R20 and R10 000 to micro-enterprises in the second-half of 2004 to address market failures in lending to micro-enterprises.
Fifthly, a new Enterprise Development Bill will be tabled in this house to provide a framework for the development, adjudication and payment of incentives to enterprises in all sectors, not just manufacturing, in a transparent and streamlined way.
Sixthly, a single enterprise development agency will be established to provide more effective and accessible non-financial support to small enterprises around the country through the merger of Ntsika Enterprise Development Agency and the National Manufacturing Advisory Centres.
Seventhly, a comprehensive strategy to increase levels of intra-African trade in support of the objectives of NEPAD will be finalised.
Our eighth flagship project this year is the development of a strategy to promote a more equitable geographic spread of sustainable and productive economic activities throughout all of South Africa.
The dti's ninth flagship project is to identify ways to improve the delivery of the dti's services to the second economy.
CONCLUDING REMARKS
Today the dti's budget for 2004/5 is before this house. I trust that I have been able to give Honourable Members confidence that in voting R2.84bn to the dti the people of South Africa are receiving value for money; that the dti will deliver on its commitments, that it will contribute towards growth, employment and equity.
I would like to take this opportunity to thank Comrade Alec Erwin, my predecessor, for solid foundation that he laid at the dti from which we can indeed build a better life for all.
Thanks must go to my Deputy, Lindiwe Hendricks, who unfortunately cannot be with us today as she is representing South Africa at the United Nations Conference on Trade and Development in Brazil. My next five years at the dti seem less daunting knowing that she will be at my side to share her experience.
DG, Alistair Ruiters, and your team, you have made my transition from National Treasury to the dti a smooth one and I look forward to working closely with you.
I would also like to thank the ad hoc parliamentary committee, chaired ably by Dr Rob Davies, for processing the dti's budget in this short time period. I have not, as yet, had an opportunity to engage with the committee about the department's work but will definitely be doing so in the near future.
Outside this chamber, we are exhibiting our department's products and services. I would like to invite members to view the exhibition upon the conclusion of today's deliberations, to take the information brochures that will be distributed and circulate these within your constituencies.
I thank you.
Issued by: Department of Trade and Industry
14 June 2004
Source: Department of Trade and Industry
Title: M Mpahlwa: Trade and Industry Dept Budget Vote 2004/2005
THE DTI BUDGET VOTE, VOTE 32, BY MINISTER OF TRADE AND INDUSTRY, MANDISI MPAHLWA, National Assembly, 14 June 2004
Madam Speaker
Honourable members
Ladies and gentlemen
Introductory remarks
Today, this house, representing all the peoples of South Africa, has to vote on the budget for the Department of Trade and Industry. Today's vote is significant because it is the first budget of the dti to be considered by the third democratically elected Parliament in the tenth year of our democracy. It is also significant for me personally as it is my first budget vote as Minister of Trade and Industry. Allow me, also to, congratulate all of you on your election to the National Assembly.
I would like to use this opportunity today to reflect on the achievements made during ten years of economic freedom and the challenges that we need to address in the second decade of freedom. I will outline the dti's response to these challenges in this financial year and in the medium-term.
REFLECTIONS ON OUR ACHIEVEMENTS AND THE REMAINING CHALLENGES
The achievements made since 1994 to undo apartheid's economic legacy and place South Africa on a new path characterised by economic growth that is shared by all South Africans have been extensively documented elsewhere.
I do not wish to repeat the many accomplishments of the ANC-led government in this regard. However, allow me to remind this house that in 1994 the South African economy was on the verge of crisis and South Africa faced the real possibility that the economy would de-industrialise. Since 1994, there have been significant changes in the structure of South Africa's economy. The reliance on primary commodities has halved since 1994 and new sectors, particularly services sectors have become important contributors to the economy. Manufacturing output has increased. The Motor Industry Development Programme has supported the development of a world-class automotive manufacturing capability in South Africa. Many of our enterprises successfully entered the export market benefiting from the preferential access to important and large markets secured through the negotiation of trade agreements.
Ntsika, Khula and Manufacturing Advisory Centres were created to provide financial and non-financial support to small enterprises. New competition policy and legislation was implemented and a modern international trade administration regime was introduced with the enactment of the International Trade Administration Act.
An industrial policy for South Africa has been set out in the dti's Integrated Manufacturing Strategy. The National Industrial Participation Programme has been implemented to leverage new investment in South Africa from government purchases that exceed ten million US dollars. We have provided R18m to get the Proudly South African Campaign up and running - it is now self-financing with approximately 2000 companies as members. Four Industrial Development Zones have been designated at Johannesburg International Airport, East London, Coega, and Richards Bay. Eleven investment protection agreements and more than seven economic cooperation agreements have been signed with various other African countries, more than eight bi-national commissions have been established with African governments, plus the dti has opened foreign economic offices in Algeria, Nigeria, Ghana, Angola, Senegal and Botswana.
New Liquor and Gambling legislation has been passed by Parliament. A consumer helpline has been implemented and the time taken to resolve a consumer compliant has fallen from an average of three to six months to an average of one to three days. The time taken to register a company or close corporation has fallen and this process has become easier with the introduction of the electronic lodgement system. The National Lottery was launched and to date more than R1bn has been paid to good causes.
A suite of new investment incentives was introduced including the Small and Medium Enterprise Development Programme, the Skills Support Programme, the Critical Infrastructure Programme, and the Strategic Industrial Programme. Over R4bn in new direct investment has been secured through the Strategic Industrial Programme. Through these programmes new jobs have been created and thousands of existing jobs were retained.
The dti is an efficient and effective department capable of delivering on its mandate. The department balanced its budget in the 2003/4 financial year. Significant improvements have been made in employment equity in the department, especially in regard to the appointment of women and African women managers. One-third of chief directors and more than half of the department's Deputy Director-Generals are women.
Today, we have a more vibrant and a more robust economy, an economy capable of competing in a global market. However, not all South Africans are benefiting from this modern, competitive, and growing economy. As the President has articulated so well in speeches to this assembly, many South Africans are excluded from the fruits of the first economy, are unable to take advantage of the increasing number of economic opportunities because they do not have the right skills; they are not easily able to get information about these opportunities and about support available from government; they are not able to collateralise their assets to start their own enterprises. These South Africans toil in the second economy, engaged in mainly survivalist activities, and are particularly vulnerable to the marginalising tendencies of the economic phenomenon we have come to call globalisation.
Honourable members, this presents a major challenge to this government and to the dti. We need to build a single economy that benefits all South Africans: an economy in which the rate of unemployment is halved over the next ten years, in which the incidence of poverty is halved over the next ten years, an economy characterised by higher levels of equity, and an economy that is growing and creating more and more economic opportunities. This is the mandate that we have been given by the people of South Africa. And it is this mandate that provides the starting point for the dti's work programme over the next five years.
Madam Speaker, today the dti and its nineteen agencies stand before this parliament as a vital instrument for the attainment of this economic vision. Collectively, our average annual budget for the next three years is R3bn, the value of the assets on our consolidated balance sheet exceeds R30bn, and we employ 5500 staff. As Minister of Trade and Industry, it is my undertaking to you today, that I, together with the dti team including the Chief Executive Officers and Chairpersons of the nineteen agencies (who are here in the public gallery), will harness all of these resources in support of growth, employment creation, equity and poverty eradication.
THE ROLE OF THE DTI GROUP OF AGENCIES
As a newly appointed Minister of Trade and Industry one of the first things that I came to realise was that the dti is a huge organisation with a very wide mandate, and that I was responsible not only for leading the department but also for leading these nineteen agencies. My confidence in committing these agencies to our vision of growth, employment, and equity is testimony to the work the dti has done over the past five years to bring these agencies together to form a strategically focused group - the dti Group. These agencies include development finance institutions such as the Industrial Development Corporation, Khula Enterprise Finance (Pty) Ltd, and the National Empowerment Fund. Regulatory agencies include the Competition Commission and Competition Tribunal, the National Gambling Board and the National Lotteries Board, the Micro Finance Regulatory Council, the Companies and Intellectual Property Registration Office, the Estate Agency Affairs Board and the International Trade Administration Commission. Specialised service delivery agencies include small enterprises support agencies such as Ntsika and Namac, and technology support agencies including the Council for Scientific and Industrial Research, Technology for Women in Business, and the South African Bureau of Standards. Madam Speaker, I would like to formally congratulate Martin Kuscus, a former MEC in the Northern Cape, on his recent appointment by Cabinet as the new Chief Executive Officer of the South African Bureau of Standards.
Many of you might wonder why am I placing so much emphasis and importance on these agencies. The reason is that every year we transfer more than R1 billion, more than one-third of the dti budget, to these agencies. Thus it is extremely important that these agencies deliver on their mandates. If the agencies do not deliver then the dti will not be able to deliver.
Our response to these challenges - charting the dti's way forward over the next 5 years
Madam Speaker, the dti is committed to ensuring a higher level of economic growth, more jobs, less poverty, and more equity, by 2014. These are the department's ten-year goals. Honourable members may ask us how we intend to achieve these goals? In response, I can answer that the dti will achieve these goals by ensuring that in the next three years we work to increase the contribution that small enterprises make to the economy and significantly progress broad-based black economic empowerment. We will work to increase the level of investment in the economy overall and in priority sectors as well as to expand market access opportunities for our goods and services and raise export levels. As the dti we will contribute towards building skills, technology and infrastructure platforms that enterprises can benefit from and seek to reposition the economy in higher value-added manufacturing and services activities. We will also take steps to provide economic citizens in our country with greater access to redress.
These are the dti's seven strategic objectives for the next three years. These objectives address the need to encourage the growth and development of the first economy, increasing its propensity to create jobs, while also addressing the challenges of the second economy.
In addition, we will also focus on African economic development and coordinating South Africa's contribution to NEPAD. The dti will continue its work to unlock the potential of priority sectors. These priority sectors include clothing and textiles, agro-processing, metals and minerals, chemicals, and the automotive sector, as well as tourism, cultural industries like music, film and crafts, and the information and communications technology sector. We are also investigating the job creation potential of various sub-sectors of the services sector, including an oil and gas service hub, as well as the growth potential of the paper and pulp sector and the aerospace industry.
We will continue to provide the day-to-day services that keep the economy functioning including the registration of companies and close corporations, issuing import and export permits, issuing the general system of preferences, or GSP, certificates to companies that are exporting, adjudicating on mergers between companies; investigating and resolving consumer complaints; and issuing technical standards to ensure product safety and quality. We will strive to perform these routine, but nonetheless essential, activities as efficiently and economically as possible.
We will measure our progress in meeting these objectives on an annual basis through a new monitoring and evaluation system, and next year I will report back to this house on the results of this evaluation.
I would now like to talk about what the dti will be doing in each of these areas:
INCREASING THE CONTRIBUTION OF SMALL ENTERPRISES TO THE ECONOMY
The creation of new enterprises and the development of existing enterprises are crucial. We have a solid foundation to work from in this area: each year on average approximately R1bn is given to South African enterprises by the dti - this R1bn takes the form of grants to mostly small- and medium-sized enterprises, not loans. In other words, this is money that does not need to be repaid to government. In addition, loans, equity financing and loan guarantees are provided to small enterprises through Khula, the IDC and, starting from 1 June 2004, the National Empowerment Fund. Last year, Khula provided more than 600 loan guarantees to the value of R180m, disbursed loans worth R100m, and disbursed R20m through its equity fund. Khula also set up three new retail finance institutions last year.
In response to the call to the dti to address the gap that exists in the market for small loans to micro-enterprises, the dti will launch the Apex Fund later this year as the President indicated in his State of the Nation Address a few weeks ago.
Ntsika and Namac provide technical and non-financial support to small enterprises. In the last financial year, these two organisations have trained and mentored more than 15 000 enterprises, and trained more than 280 service providers who help small businesses. More than 2000 small manufacturing firms were also supported creating more than 1700 new jobs and saving nearly 15 000 existing jobs. In recognition of the success of these two organisations, we have decided to merge them into a single enterprise development agency to provide a more streamlined and accessible service to entrepreneurs. The new organisation, to be up and running later this year will combine the best that Ntiska and Namac currently offer.
SIGNIFICANTLY PROGRESSING BROAD-BASED BLACK ECONOMIC EMPOWERMENT
Earlier this year, President Mbeki signed the Broad-Based Black Economic Empowerment Act into law. Our focus now is to ensure that this important piece of legislation is implemented. We have set ourselves six key tasks for this financial year. The first task is to appoint the members of the advisory council on black economic empowerment. We are currently discussing potential nominees to the council with the Presidency. The second task is to gazette the code of good practice referred to in the legislation to provide more direction on the obligations of enterprises. Working to align the broad-based black economic empowerment strategy with National Treasury's preferential procurement legislation and regulation is the third task we must complete this year. We will continue to be involved in the negotiation of charters in strategic sectors of our economy. Progress has been made in several sectors, including the maritime transport sector, mining, financial services, petroleum, agriculture and tourism. The fifth task we set ourselves has already been completed: the National Empowerment Fund was re-launched at the end of May and several new products that provide financial support to black enterprises, including collectively owned enterprises and cooperatives, are now available. R2bn has been made available to capitalize the NEF for this purpose. An education campaign on the strategy and legislation will also be launched in the next few months.
As the champion of broad-based black economic empowerment, the dti must lead the way for the rest of government in terms of procuring goods and services from black and women-owned enterprises. Thus, I am also committing the dti to procuring not less than fifty percent of required goods and services from black and women-owned enterprises.
RAISING THE LEVELS OF INVESTMENT IN THE ECONOMY
The dti is currently conducting an extensive survey of the investment climate in South Africa. This survey will provide us with a better understanding of the specific constraints faced by firms that may act as impediments to investment. The results of the survey will be presented to Cabinet in January.
More than R500m in investment incentives will be allocated to enterprises in this financial year. In addition, R32m will be allocated to the development of sector strategies. Two new investment incentives will be launched in the next three months promoting labour-intensive activities in our economy: an incentive for the film industry, and an incentive for the call-centre and back-office-processing industry. R72m will be spent on investment promotion and facilitation activities including the hosting of the 7th meeting of the President's International Investment Council this coming weekend. As was mentioned in the President's opening address to Parliament, more than twenty investment road shows will be undertaken to market the investment opportunities available in priority sectors this year.
In the post-Enron world, corporate governance of companies is a very important factor influencing investor confidence. A review of South Africa's corporate law has been conducted and a policy paper will be published in due course outlining government's plans to modernise and reform the Companies Act.
EXPANDING MARKETS FOR SOUTH AFRICAN GOODS AND SERVICES
South Africa is a relatively small economy and if we are to expand production we need to export our goods and services to the rest of the world. Many enterprises have in the last year questioned the wisdom of pursuing export markets as the Rand appreciated against the US Dollar and as demand dampened in the global economy. However, those exporters that took a longer-term perspective have successfully weathered this difficult period, have identified ways to improve their competitiveness and in partnership with the dti. As global economic conditions have improved, we have since seen a return to form in our manufacturing output statistics.
The dti is focusing on expanding markets for South African goods and services through negotiating preferential trade agreements with key markets such as the United States. These particular negotiations are at an advanced stage. We are also negotiating with EFTA - a group of European countries that are not members of the European Union, as well as with the South American trading bloc, Mercosur. Market access opportunities are indeed expanding, and the accession of ten additional members to the European Union recently, and to the free trade agreement South Africa has with the EU, is a significant development that our exporters must take advantage of in the longer run. Our firm-negotiating stance as part of the Group Twenty at the World Trade Organisation on the question of agricultural subsidies has been produced concessions by the European Union. However, we still have a long way to go in the negotiations we will continue to play an active and leading role at the WTO to advance the interests of developing nations.
R200m is being allocated to the Export Credit Insurance Corporation and R112m will be made available to exporters through the Export Marketing and Investment Assistance programme. Last year this programme assisted more than 5 500 exporters, most of them small enterprises.
CONTRIBUTING TOWARDS BUILDING PLATFORMS FOR MORE COMPETITIVE ENTERPRISES
All enterprises, whether they are small in size and owned by emerging entrepreneurs, or whether they are huge South African multinationals like SABMiller, will benefit from an economy that has lower cost structure. Lowering the cost structure of our economy is a central aim of government's Microeconomic Reform Strategy. The dti is looking at the role to be played by competition policy in this regard.
Enterprises also need access to skilled workers, new technology, and economic infrastructure like telecommunications, energy and transport at an affordable price. Although these issues fall within the ambit of other government departments, we believe that the dti can make an important contribution. R100m will be disbursed to provinces and local authorities for critical infrastructure projects. R135m is allocated to the development of human resources in technology and science-related fields. This programme, known as THRIP, supported more than 1000 researchers and 2600 students last years. Increasingly the participants in this programme are African women. R83m will be used to support industrial innovation by enterprises and R48m will be allocated to technology incubators that assist small enterprises to adopt and adapt new technologies. R10m is available for a technology venture capital fund and R6m for the Technology for Women in Business programme.
INCREASING VALUE-ADDITION IN SOUTH AFRICAN MANUFACTURING AND SERVICES SECTORS
The dti's Integrated Manufacturing Strategy sets out the department's vision for the development of a strong, sophisticated and competitive manufacturing sector. An updated version of this strategy will be released in the forth quarter of this year. Just last week, we hosted a United Nations Industrial Development Organisation symposium on the question of competitiveness with a particular focus on how competitiveness can be pursued in a manner that benefits all without exacerbating existing inequalities and unemployment levels. Partnerships with business and organised labour are critical for ensuring that the gains of higher rates of productivity are equitably shared. In support of these types of partnerships, we have allocated R7m to the Workplace Challenge, R7m for the Fund for Industrial Development, Growth and Equity at Nedlac, and R13m for the Sector Partnership Fund.
PROVIDING ECONOMIC CITIZENS WITH ACCESS TO REDRESS
Many ordinary South Africans do not know where to turn to for assistance when they have problems that are of a commercial nature: when they are wrongly blacklisted by a credit bureau; when something they bought doesn't work properly; or when their monthly instalment for new furniture is much higher than what the retailer advertised. This year, the dti is focusing on consumer protection, especially in respect to consumer credit issues like indebtedness and reckless lending. New policies and new legislation will be finalised this year. Education and communication campaigns will be run and R23m will be allocated to the enforcement of compliance with existing laws in this area. A consumer protection policy and a new consumer credit policy are being introduced this year. The corporate law reform project will also enable the dti to provide economic citizens with access to redress.
AFRICA
The renewal of the African continent is a priority for this government. The dti does a considerable amount of work in this area. We have a unit dedicated to African economic development with an annual budget of R17, 7m. Last year, twenty trade and investment missions to other African countries took place. Ten investment protection and bilateral cooperation agreements were signed and the groundwork was prepared for the conclusion of several more such agreements during this financial year. We have found that we are spending more time supporting South African enterprises investing on the continent and I am pleased that the conduct of these companies is improving. It is critical that the huge trade surplus South Africa currently enjoys with the rest of the continent is reduced and that the production capacity of other African economies is boosted. South African companies invested in the region are increasingly procuring their supplies locally rather than from South Africa and are integrating themselves into the local economies of these countries. This trend is to be welcomed but needs to be strengthened. This year the dti will focus on the development of a comprehensive approach to this matter that deals with infrastructure, investment by South African companies in other African countries, increasing the levels of trade between African states, supporting private sector development on the continent, and building the governance and institutional capacity of the Southern African Development Community and the Southern African Customs Union. Cabinet has decided that the dti will henceforth be the lead department that will coordinate South Africa's work on NEPAD, especially NEPAD'S economic agenda, in conjunction with the Department of Foreign Affairs. We will thus be considering ways to expand our capacity in this important area of work.
EXPANDING OUR OUTREACH TO ECONOMIC CITIZENS
Many of our people are not aware of the support that is available to them from the dti and the dti's agencies. The dti recognised a few years ago that this was an area that required more effort. In 2002, the dti established its own marketing division - an innovative move for a government department. This division is mandated to ensure that our economic citizens know about the dti, know what products and services the dti can offer them, and find it easy to make contact with the dti. Since then the dti successfully introduced a toll-free customer care line that now receives more than 16 000 calls every week from economic citizens around the country. More recently, the dti has implemented a campaign targeted at raising awareness about the department amongst potential entrepreneurs in the second economy - ozo ithola ka njani o hlale ekhoni! R75m is allocated in this financial year to improving the dti's outreach.
UNDERTAKING TO DELIVER ON FLAGSHIPS
Madam Speaker, the dti's strategic plan for 2004 to 2007 has been tabled in this house and this document deals comprehensively with the work of the dti over the next three years. I have touched only on some of the highlights from the strategic plan this afternoon.
From the many activities and tasks that the dti will be performing this year, I would like to draw the attention of Honourable Members to the department's flagship projects - some of which I have briefly mentioned. These are the deliverables that we believe are absolutely critical for addressing the second economy challenge in the short-term. Many of these deliverables were included in the President's State of the Nation Address.
Firstly, we will introduce into Parliament new consumer credit legislation to replace the outdated Usury Act of 1968 and the Credit Agreements Act of 1980, improving the protection of consumers who engage in credit transactions as well as addressing and preventing over-indebtedness of consumers.
Secondly we will implement the broad-based black economic empowerment strategy following the enactment of the BEE Act earlier this year. This will include the appointment of the President's Advisory Council on BEE and the gazetting the Codes of Good Practice, as well as aligning preferential procurement legislation and regulations with the BEE strategy.
Thirdly, the dti will introduce new financial and non-financial support to cooperative enterprises, as well as submit legislation to Parliament to introduce an appropriate regulatory environment to support the development of these forms of enterprise.
Fourthly, the Apex Fund will start providing loans ranging from R20 and R10 000 to micro-enterprises in the second-half of 2004 to address market failures in lending to micro-enterprises.
Fifthly, a new Enterprise Development Bill will be tabled in this house to provide a framework for the development, adjudication and payment of incentives to enterprises in all sectors, not just manufacturing, in a transparent and streamlined way.
Sixthly, a single enterprise development agency will be established to provide more effective and accessible non-financial support to small enterprises around the country through the merger of Ntsika Enterprise Development Agency and the National Manufacturing Advisory Centres.
Seventhly, a comprehensive strategy to increase levels of intra-African trade in support of the objectives of NEPAD will be finalised.
Our eighth flagship project this year is the development of a strategy to promote a more equitable geographic spread of sustainable and productive economic activities throughout all of South Africa.
The dti's ninth flagship project is to identify ways to improve the delivery of the dti's services to the second economy.
CONCLUDING REMARKS
Today the dti's budget for 2004/5 is before this house. I trust that I have been able to give Honourable Members confidence that in voting R2.84bn to the dti the people of South Africa are receiving value for money; that the dti will deliver on its commitments, that it will contribute towards growth, employment and equity.
I would like to take this opportunity to thank Comrade Alec Erwin, my predecessor, for solid foundation that he laid at the dti from which we can indeed build a better life for all.
Thanks must go to my Deputy, Lindiwe Hendricks, who unfortunately cannot be with us today as she is representing South Africa at the United Nations Conference on Trade and Development in Brazil. My next five years at the dti seem less daunting knowing that she will be at my side to share her experience.
DG, Alistair Ruiters, and your team, you have made my transition from National Treasury to the dti a smooth one and I look forward to working closely with you.
I would also like to thank the ad hoc parliamentary committee, chaired ably by Dr Rob Davies, for processing the dti's budget in this short time period. I have not, as yet, had an opportunity to engage with the committee about the department's work but will definitely be doing so in the near future.
Outside this chamber, we are exhibiting our department's products and services. I would like to invite members to view the exhibition upon the conclusion of today's deliberations, to take the information brochures that will be distributed and circulate these within your constituencies.
I thank you.
Issued by: Department of Trade and Industry
14 June 2004
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