Economic, Investment and Employment Cluster media briefing by the Honourable Minister of Public Enterprises, Alec Erwin

Introduction

This is the first report of the Economic Cluster since Cabinet's approval of the cluster's programme of action in February. The report focuses on progress in the implementation of the Programme of Action (POA), including those Apex of priorities that fall within the ambit of the economic cluster.

The cluster's POA is being implemented over three years and has three overarching elements viz.,
* increasing economic efficiencies,
* promoting dynamic sectors,
* integrated support for small and micro-enterprises.

The cluster is making steady progress in implementing its POA and is stepping up pace and effectiveness in regard to a number of key areas such as energy, water, the undersea cable and the second economy initiatives. These areas are being addressed at more regular meetings of the Accelerated and Shared Growth Initiative for South Africa (AsgiSA) inter-ministerial committee chaired by the Deputy President, and are ensuring progress and alignment between the various role players. In regard to energy, a special coordinating structure a special coordinating structure, the National Electricity Response Team, has been established and a summit will be held on 16 May 2008.

The cluster believes that effective implementation of its POA will help to sustain the economy's momentum in order to achieve accelerated and shared growth. This is based on the recent impressive performance of the economy which saw:
* overall growth of 5,4 % in 2006 and at 5.1% in 2007
* private investment growth at 14,8% and investment by public enterprises grew by 32,6% in 2007
* real income per capita (average income per person) rose from R20 600 in 2001 to R25 840 in 2007. Real income per capita has been rising at around 4% per person annually since 2004.
* the rate of unemployment fell from 31,2% in March 2003 to 23% in September 2007. This was due to an increase of approximately 1,8 million jobs

Increasing economic efficiencies

The Cluster's work in this area is focused on improving efficiencies and supply in key network industries and the provision of priority skills for the economy.

In regard to the electricity emergency, meetings are being held regularly with all stakeholders. We believe that if reductions in energy usage can be made, there will be no need for load shedding. Therefore due to energy savings achieved by municipalities and industry Eskom will not initiate pre-emptive/scheduled load shedding although emergency load shedding may be carried out in the event of the system becoming strained, or as a result of any unplanned outages.

In addition to the ongoing implementation of the Public Transport Strategy, work is being undertaken in regard to transport preparations for the 2010 Soccer World Cup with R19.2 billion allocated for public transport infrastructure development. Capex projects for 2010, some of which are currently under implementation, include:
* Intelligent transport systems
* New and improved bus and taxi infrastructure
* New intermodal interchanges and facilities
* Non- Motorised Transport Infrastructure

In the area of water, the Department of Water Affairs and Forestry (DWAF) is working closely with large water users in the energy and industrial sector to ensure that current power plants and coal-to-liquid industries have sufficient water supplies. The Economic Cluster is well aware that water is one of this country's scarce resources and therefore our efforts to ensure its efficient use is a key objective. In addition the work that the Cluster is doing in the development of an integrated infrastructure plan will factor in the supply and demand of water.

To ensure that legislative and policy changes are fully aligned to the objectives of government and have gone through a process to ensure that unintended consequences are limited, the work on Regulatory Impact Assessment is underway and training has begun in the relevant departments to facilitate the roll-out of pilots. It is envisaged that the pilots will inform the roll-out of Regulatory Impact Assessment as a pre-requisite to legislation amendments.

With regard to the work being undertaken in the information and communications technology (ICT) sector good progress is being made. Since the allocation of funds to Sentech for the roll-out of wireless broadband, the Department of Communications has collected topographic data aimed at planning connectivity for the 233 most-needy Dinaledi "maths and science" schools identified by the Department of Education and the provinces.

Government recently issued a statement indicating that it would give priority to the establishment of the African West Coast Cable (AWCC) with immediate effect.

The AWCC is a 3 840 Gigabit super cable which will stretch from the Western Cape to the United Kingdom with capacity terminating in London. At a design length of 13 000 km, it will have branching units to at least 10 countries along the West Coast of Africa. The cable will also support South Africa's science super-projects such as the Square Kilometre Array Telescope for which the country is currently competing against Australia.

The government reiterates its commitment to continue working with other governments on the continent and interested partners in the Africa-wide UHURUnet New Partnership for Africa's Development (Nepad) led initiative. This initiative will also play a major role in reducing the cost of communications and increase connectivity in Africa.

A media statement covering this area was released on 7 May 2008.

The process to collate data on comparator countries in respect of cost, availability, access and usage of telecommunications infrastructure and services is in motion and the June 2008 target remains. The country's chosen for the comparisons are South Korea, Malaysia, India, Brazil and Chile.

An important component of the work on infrastructure is the maintenance of public investment. In this regard the Cluster seeks to ensure that maintenance is linked to opportunities to maximize employment potential. To this end, the Department of Public Works is planning the implementation of the National Infrastructure Maintenance Strategy which is to be processed through the Cluster shortly. The department will present a draft of their strategic review of Expanded Public Works Programme (EPWP) to the Cluster this month.

In terms of our work on skills and education for the economy, the Cluster seeks to ensure that the skills requirements that are vital to the roll-out of industrial policy are submitted to all Sector Education and Training Authorities (SETAs) to be built into SETA service level agreements for 2009 - 2010. The broader NEDLAC SETA Review recommendations are being discussed at NEDLAC and a draft proposed SETA re-establishment process has been completed by the National Skills Authority for discussion with stakeholders. The Joint Initiative for Priority Skills Acquisition (JIPSA) has been successfully embedded in the drive for skills development critical to achieving accelerated and shared growth. While these efforts demonstrate that the Cluster has made progress on key areas in skills, the fact that the country is experiencing a tight skills availability environment re-emphasing the need not only to develop skills locally but to attract foreign skills, including the fast-tracking of high skills immigration. In this regard, from October 2008 the Department of Home Affairs is expecting a marked improvement in their ability to process applications for work permits from highly skilled applicants.

Finally, in terms of the review of competition law, the Draft Competition Amendment Bill has been submitted to Cabinet for approval to introduce to Parliament and for public comment in the coming months.

Promoting dynamic growth sectors

While continuing to implement specific actions that have already been identified the dti is developing a three-year rolling industrial policy action plan framework that will be submitted to the July Cabinet Lekgotla. We believe that this shift to a three year plan will enable the IPAP to be better aligned to the planning and budget cycle.

Sector agreements in chemicals as well as the metals and engineering sector were launched in April 2008, and involve Labour, Business and Government agreeing on measures that will boost the growth of these sectors.

The development of the new incentive for the motor industry remains on track to be finalised in August 2008.

In BPO, the Monyetla work readiness programme has been implemented and the first 210 of the 1 000 recruits have graduated, with the remainder graduating during May. The absorption rate of graduates into call centres is 83 per cent the dti has approved nine applications for the Government Assistance Scheme and one call centre is being established in a designated area, in Kuruman. The investments that have been supported will result in an estimated 9132 jobs being created.

Other incentives that are being rolled out include a revised incentive for film and TV production was launched in March 2008. The Enterprise Investment Programme, which is a successor to the Small and Medium Enterprise Programme, has been finalised and will be launched during May 2008. The incentive will have a component that supports the tourism sector and will be made available for six years. Finally, the Department of Trade and Industry (dti) is finalising plans on the allocation of tax incentives announced during the State of the Nation Address (SONA) and in the Budget.

Also the work on industrial policy will respond to the energy emergency including the roll out of solar water heating and new electricity generation as part of the National Electricity Response Team.

An important initiative on the environment is the Climate Change Long Term Mitigation Scenarios. Cabinet has considered the scenarios and the Cluster will now begin processing their implications going forward.

The Technology Innovation Agency (TIA) Bill was approved by the National Assembly in March 2008 and Department of Science and Technology (DST) has begun the process of establishing the TIA as a public entity to support technological innovation that will stimulate economic growth and enhance the quality of life of South Africans.

A service provider has been appointed for the call centre component of the investment support facility for large investments of over R100 million. In line with government policy to facilitate the employment of the historically disadvantaged, the call centre is intended to employ people living with disabilities.

The Department of Communications-led work on South Africa's Broadcasting Digital Migration programme is well advanced with the first switch on of the digital broadcast signal by Sentech due in November this year. The strategy to develop a strong local Set Top Box manufacturing industry as part of the industrial policy action plan is on track. Specifications for Set Top Boxes which will include features that enable citizens to access information and services from their homes are ready for submission to the South African Bureau of Standards (SABS). The Digital Migration Awareness Strategy will be launched soon.

Integration of small and micro-enterprises

A key focus of the Cluster has been on strengthening integrated state financial and business development support for small enterprises through strengthened institutional mechanisms and more effective co-ordination. As reported in February, a delivery network integrating both financial and non-financial support for small enterprises is complete and covers the entire country. This network includes seda, SAMAF and Khula as well as our programmes to support co-operatives

In terms of ensuring intergovernmental coordination in the supply of services, the Integrated Service Delivery Model for services to small enterprises has been discussed in the trade and industry MINMEC and is being refined for implementation.

The business case for Khula Direct Lending has been prepared and is being processed for submission to Cabinet at the earliest opportunity.

With regard to the ten products small, medium and micro enterprise (SMME) targeted procurement programme, the dti and National Treasury are engaged in consultations in regard to implementation modalities. The two departments are also working on the alignment between the Broad-based Black Economic Empowerment (B-BBEE) and the Preferential Procurement Policy Framework Act (PPPFA) which is especially important to those companies that wish to participate in State procurement.

In terms of reducing the regulatory burden on small enterprises, a range of regulatory issues are being addressed. This includes work on municipal regulations, labour-market issues, taxation and a process to arrive at a common SMME definition. A manual was developed to assist municipalities to reduce red tape for SMEs. It was also decided that the regulatory impact assessment processes introduced for new legislation will also highlight potential impacts of regulations on SMEs. The process of reviewing the current definition of small businesses in South Africa commenced in September 2007. The draft consultation report is being finalized and a consultative process will begin when the report has been considered internally. In terms of reducing Red Tape, two manuals have been developed; one for developing the capacity of facilitators to implement the process and the other as an awareness training programme. Pilots have been run in selected municipalities in Mpumalanga and the Eastern Cape.

Broadcast of the 16-part radio series on opportunities for the second economy commenced on 10 January 2008 and the associated publication is currently being printed.

Conclusion

Overall, the Economic Cluster is making progress in regard to our Programme of Action and we are gearing ourselves up to step up the pace of implementation in a number of critical areas including Apex priorities.