FREE DAILY EMAIL

Date : 15/06/2004
Source: Department of Trade and Industry
Title: M Mpahlwa: Trade and Industry Dept Budget Vote debate, NCOP


VOTE 32, THE DTI'S BUDGET VOTE IN THE NATIONAL COUNCIL OF PROVINCES BY MINISTER MANDISI MPAHLWA, 15 June 2004

Madam Chairperson
Members of the Executive Councils of Provinces
Honourable Members
Ladies and gentlemen

Madam Chairperson, allow me to start my speech this afternoon by congratulating all of you on your election to the National Council of Provinces. In particular I would like to congratulate the MECs for economic development who have been appointed, and in some cases reappointed, in each province.

This afternoon, this council deliberates upon the budget of the Department of Trade and Industry - the dti. We should not see this budget vote today as a routine matter of business to be discharged as quickly as possible. Budget votes are an opportunity for Honourable Members to scrutinise the work of departments and to ensure that this work will deliver on the mandate that the people of this country have given us: a mandate to create work, to eradicate poverty, to reduce inequalities, and to expand economic opportunities for all. Within the National Council of Provinces this scrutiny takes on an additional dimension. As representatives of South Africa's nine provinces, members of this council are particularly concerned about how the work of the department will improve the economy of their province and region. Madam Chairperson, it is my intention to set out this afternoon the dti's plans for the next five years to achieve an objective that I believe we all share: this objective is to unlock the economic potential of all our towns, villages and communities, our different regions and provinces, so that the geographic spread of economic growth and development is more equitable.

Honourable members, today is the first time that I stand before you as Minister of Trade and Industry and it is my wish that we can develop a good relationship between the National Council of Provinces and the dti. I believe that a firm foundation for this has been set at the level of officials and I trust that over the next five years we will have many fruitful interactions on those matters important to those who have elected us.

Our constitution enshrines the principle of cooperative governance and compels the three spheres of government - national, provincial and local - to work together in a cooperative spirit to provide a better life for all South Africans. In the first ten years of our democracy we have sometimes struggled to give this important constitutional principle practical meaning. We sometimes struggled to define the roles of the different spheres of government especially where the constitution assigned concurrent responsibilities to national and provincial government. Matters including gambling, liquor, small enterprise promotion, consumer protection, and trade, are both national and provincial responsibilities. Problems over jurisdiction have arisen sometimes resulting in service delivery gaps and even legal disputes. There have been instances where responsibilities were assigned to provincial or local government before the required capacities and resources were in place. Government's ten-year review asks two critical questions about cooperative governance as we move into the second decade of our democracy. Firstly, how do we balance the need to put into practice our common national vision while respecting the constitutional autonomy of each sphere of government in critical areas of delivery? Secondly, and more perhaps controversially, could we conceive of an asymmetric allocation of powers and functions in those cases where the capacity to perform those powers and functions is weak.

Often, we have competed within one another to land large investment projects rather than working together for the benefit of South Africa. We have duplicated activities, setting up more than a hundred economic development agencies across the three spheres of government. Almost every province, city and municipality has its own investment promotion agency, its own economic development agency, tourism agency and so forth. Some have even opened up offices in foreign cities - a very expensive undertaking! We have created confusion in the minds of investors and in the minds of economic citizens as they are faced with a myriad of possible organisations to approach when they require support. Does an enterprise wanting to invest in the Coega Industrial Development Zone deal with the dti, or with the Coega Development Corporation, or with the Eastern Cape Development Corporation, or with the Eastern Cape Department of Economic Affairs? Investors, exporters, small enterprises, consumers, cooperatives, black businesses and entrepreneurs are not interested in the different roles and functions of the various entities that make up government. They are interested in getting assistance as quickly and simply as possible.

Honourable members, this is a challenge that we must address over the next few years. We must work towards the goal of providing economic citizens with a 'one-stop shop' to economic development support wherever they may be in the country. We should consider, as a short-term goal, introducing a single call-centre number that links all our economic departments and agencies. We also need to develop a better understanding of the specific products and services offered to economic citizens by the different spheres of government and their agencies. Our first task in this regard should be to compile a catalogue of all of the products and services that we collectively offer to economic citizens.

Ten years later the legacy of apartheid is still evident in the distribution of productive and sustainable economic activities throughout South Africa. Eighty percent of South Africa's manufacturing output is produced in six metropolitan areas. The unequal access to economic opportunities that continues to mark the South African landscape has contributed to massive migration to the urban centres over the last decade. According to the census, more than twenty percent of the people living in metropolitan areas, as well as in some of the regional centres and small towns, are new migrants from rural areas. As a result, severe pressure is being placed on infrastructure and service delivery in these urban areas. This trend has contributed to the unemployment problem, as many African women from rural areas have upon moving to urban centres sought formal employment opportunities thus expanding the size of South Africa's economically active population faster than new jobs are being created. The mainly rural provinces of Limpopo, as well as the Eastern and Northern Capes, are experiencing a fairly rapid loss of, often young and skilled people, hampering their ability to take advantage of economic opportunities. The two economies challenge is, in many ways, a challenge of overcoming the continued skewed pattern of economic development.

In our sector work, we have seen that certain economic sectors are concentrated in certain parts of South Africa. The automotive sector is concentrated in three provinces: Gauteng, Eastern Cape and KwaZulu-Natal, whereas the chemical industry is located in every province, except for the Limpopo province. The greater Johannesburg region is home to most of the bigger call centres in South Africa, followed by Cape Town and Durban; while two-thirds of the boat-building, ship-building and repair sector is located in the Western Cape. Fifty percent of the clothing and textile sector is also based in the Western Cape, with some clothing and textile manufacturing also taking place in Gauteng, Eastern Cape, Free State and KwaZulu-Natal.

These patterns are not static and there are trends that show that potential does exist for new investment to take place in other parts of the country. For example, the agro-processing sector has until recently been mainly located in the traditional manufacturing centres of Gauteng, Western Cape, and KwaZulu-Natal, to be close to the larger domestic markets as well as being near to the main ports for exports. However, with consumers demanding fresher produce there is a trend to locate agro-processing plants closer to the site of agricultural production. Subsequently there has been an increase in agro-processing facilities established in Free State, Eastern Cape, and North West. However, this trend is being hindered by the absence of appropriate infrastructure and an under-supply of skilled workers.

Not every sector can be equally represented in every province. Certain types of manufacturing need to be located close to natural resources, mines and farms, or close to ports and other logistics infrastructure, close to major markets. Nevertheless, the potential does exist for certain sectors to develop more of a presence outside of the big three provinces of Gauteng, Western Cape and KwaZulu-Natal. The agro-processing sector is a good example of this.

Government is implementing several programmes to address this continued distortion in the development of our economy including the urban renewal programme and the integrated sustainable rural development programme. Provinces are implementing provincial growth and development strategies while every municipality has an integrated development plan. Unfortunately, there are too many examples where these various plans and programmes do not link together in coherent manner, where we are failing to leverage synergies from working together in a more coordinated way. Also, the programmes and plans tend to lack economic content. Focus is correctly placed on service delivery, infrastructure needs, and social development. However, insufficient attention is given to understanding the economic potential that exists in every municipality and in the twenty-one urban and rural nodes, and how this potential can be unlocked. Do the Integrated Development Plans of municipalities in Limpopo and Mpumalanga provinces take into account the trend evident in the agro-processing sector and include steps to address the infrastructure and skills constraints? The role of local governments in providing an environment that is conducive to productive economic activity needs to be emphasised and reflected in the Integrated Development Plans including the zoning of land for industrial and commercial purposes, rates and service charges, and the delivery of basic utilities.

In strengthening the role of local government in economic development, we need to think about how we strengthen the role of the local business community and chambers, as well as trade union and other community structures, to partner with municipalities. The emergence of a unified business movement in South Africa with last year's launch of Business Unity South Africa, Busa, and the Chambers of Commerce and Industry of South Africa, Chamsa, is to be welcomed. Strong and effective partnerships for delivery require strong, unified and capacitated partners. In recognition of this, the dti will be assisting BUSA and Chamsa financially in the short-term. We are also supporting the trade union movement and have seconded a senior official to the South African Clothing and Textile Workers Union for three years to work on projects aimed at the development of our clothing sector. The dti, through its community-public-private partnership programme has developed an excellent model for forming partnership with communities for the purposes of economic development and employment creation. This successful programme brings together communities, traditional leaders, provincial governments, local authorities and the dti, in initiating and managing various projects in the eco-tourism, mariculture, and cut flowers sectors, as well as small-scale mining, and agro-processing. More than 8500 new jobs have been created, mostly in rural areas, through this programme.

It is absolutely essential that we in this National Council of Provinces, as policy- and lawmakers, understand where economic activity is taking place in our country and how these activities can be expanded. To assist in this work, the dti is prioritising the compilation of a comprehensive economic map of South Africa. A map that indicates where economic activity is taking place: where the power stations and dams are located; through which towns and communities the railway lines and major roads run; where the mines, farms and factories are situated; what land is available for agriculture, for mining, for manufacturing and commercial use; and cities and large towns have universities and further education and training colleges, fresh produce markets, and airports? This is critical information for us to use in our economic planning.

The dti will work with provinces, local government, and other national departments in the economic and employment cluster. Madam Chairperson, this work is one of the dti's flagship projects for the 2004/5 financial year. This means that we have prioritised this project and given it a 'non-negotiable' status within the department; we have allocated additional resources to the project and will be closely monitoring implementation.

The dti will continue its work with its provincial and local counterparts on the industrial development zones. R100m will be transferred to provincial and local governments to fund critical infrastructure development around these IDZs. We are also working closely with the Nelson Mandela Metropolitan Council in the Eastern Cape, and a range of stakeholders, to unleash the enormous potential of this part of South Africa. Another project that the dti has worked on that has an important spatial dimension is the construction of the dti's new campus in the Sunnyside area of Tshwane. This world-class development, funded through a public-private partnership, was implemented in such a way that the surrounding area is being upgraded. The private sector is following the dti's lead and developing new retail centres and housing in what was a part of the city that had been 'red-lined' by commercial banks.

Much of South Africa's economic infrastructure was put into place in the 1960s and 1970s and is now inadequate to meet the needs of the modern economy. Government has committed itself to investing R100bn in public infrastructure over the next five years. As the President indicated in his State of the Nation Address a few weeks ago, infrastructure investment plans will be developed by October this year. It is crucial that we find the appropriate institutional mechanism for provinces and local authorities to participate in the development of these plans. Not only do we need to ensure that the infrastructure needs of our different regions are met, but also that the development of this infrastructure uses, as far as possible, labour-based construction methods so as to provide significant employment opportunities for many people.

The President has eloquently set out the two economies paradigm in several addresses to joint sittings of the National Assembly and National Council of Provinces. It is not necessary for me to repeat his words. I would like, Madam Chairperson, to tell the council about some of the important projects that the dti will be implementing this year that are specifically aimed at addressing the needs of economic citizens caught in the second economy. These are the department's 'flagship projects'. I have spoken at length about the dti's work to develop a geographic spread strategy. In addition, the dti will disburse the first loans to micro enterprises from the Apex Fund before the end of this year. Mainly rural, African women will benefit from this fund.

We will merge Ntsika and the Manufacturing Advisory Centres to provide a better service to small enterprises around the country, while also finalising options to provide economic citizens with easier access to the dti and its agencies. Legislation will be introduced into Parliament that will extend the enterprise support, particularly incentives, currently available to manufacturing firms to all sectors of the economy. New incentives to support the film industry as well as the back-of-office processing and call centre sector will be launched in the next few weeks.

Legislation to provide an enabling environment for the development of cooperatives will also be introduced into Parliament this year. Financial support and technical assistance will be made available to cooperative enterprises. A considerable amount of work will be done to implement the Broad-Based Black Economic Empowerment Act including appointing the members of the President's Advisory Council and publishing various codes of good practice. The dti will also be conducting provincial road shows on this subject. The National Empowerment Fund, one of the dti's agencies, introduced new financial products for black-owned enterprises two weeks ago.

Another one of the dti's flagship projects for this year, is reforming South Africa's consumer credit law to provide more protection to consumers when they take out loans or buy goods on hire purchase. A new Consumer Credit Bill will be tabled in Parliament in the first quarter of 2005. Consumer protection is a concurrent responsibility and is an area that has sometimes been neglected. A new consumer protection policy is being finalised by the dti and the policy will be debated with provinces in the next few months.

In all of these areas of work, it is imperative that we clarify the respective roles and responsibilities of national, provincial and local government. I intend to continue to build on the platform that was put into place by my predecessor, Comrade Alec Erwin, in this regard. In the previous five years, the dti embarked on an extensive intergovernmental relations programme and set up a directorate to manage this programme. More regular interaction with the other spheres of government was initiated, including visits by the dti Executive Board to provinces; quarterly meetings with MECs; an annual meeting of MECs, Executive Mayors of Metro Councils, the South African Cities Network and the South African Local Government Association; and an annual lekgotla to forge greater alignment of national and provincial economic development strategies. These arrangements will be continued and we will seek ways to improve upon them. Honourable Members, as you know, I have joined the dti from National Treasury, where the Minister of Finance frequently refers to the group of finance MECs we worked with as 'Team Finance'. Honourable Members and MECs, let us build 'Team Economy' to give concrete meaning to the constitutional principle of cooperative governance and to implement our common vision of an economy that is growing, creating jobs, eradicating poverty and eliminating inequalities; an economy that is built on the full potential of all our people and of all our communities, towns and villages, cities and provinces.

I thank you.

Issued by: Department of Trade and Industry
15 June 2004

SPONSORED BY

Advanced