Issued by the Ministry of Trade and Industry
8 May 2001
1. Acknowledgements
Madam Speaker and honourable colleagues, it is, once again, my pleasure to present you with my department's budget for your consideration.
As is customary, both the Portfolio and Select Committees have had an opportunity to interrogate the department's budget and produced a good report. Furthermore, they have heard presentations by the DTI Group of institutions, i.e. Ntsika, Khula, the Industrial Development Corporation (IDC), the Council for Scientific and Industrial Research (CSIR) and the South African Bureau of Standards (SABS), on the budget as well.
I would like to register my pleasure with the oversight role and continued support of the Committee in the NCOP and its representatives from the Provinces. Last year they visited the department to gain a first-hand appreciation of the work we do and hosted the hearings on the bank's role in small business development. The recommendations they made were invaluable and we will continue to rely on such active support and involvement from the Committee to ensure we effectively deliver on our identified targets.
Colleagues, I will not say much on the detail of the budget. Please cross reference with the Budget Review, page 664.
2. Introduction
The President announced an economic action plan in his state-of-the-nation address to Parliament at the beginning of the year wherein he identified specific programmes to accelerate the growth of our economy. This was an important watershed for several reasons: firstly, it signified a paradigm shift from macro economic stability to micro economic reform; secondly, the level of co-ordination in government to develop this action plan is unprecedented; and thirdly, the plan is action orientated and focuses on concrete deliverables that departments have to report to Cabinet on on a monthly basis.
DTI, through its leadership role in the economic cluster and Cabinet Committee on Investment and Employment, is charged with ensuring that the co-ordination continues with the implementation of this plan. The department has accordingly aligned its own work to the priorities outlined in the action plan.
3. Economic Overview
When I addressed you last year, I stated that transforming our economy is a continuous process. One that is not easy, but one that is necessary in order for us to create the growth required to provide new economic opportunities and jobs for our people. We are making headway in this endeavour.
The South African economy has been growing steadily since we got over the Asian crisis. This year promises the second year of growth higher than 3 percent, and next year is even more promising, according to a wide range of economic forecasts. Consumer confidence is improving, which is not surprising as inflation is under control and interest rates have been very steady. We are expecting fixed investment to improve, both through higher rates of government capital investment and through improved private sector investment. I am pleased that through successful co-operation with National Treasury we have been able to introduce a new product - a strategic investment allowance - that we believe will further serve to attract higher levels of both domestic and foreign direct investment.
Last year we realised inward fixed investments of R6.1 billion in the manufacturing sector as a result of the efforts of our foreign offices, and our outward investment into Africa was about R500 million. We also realised trade growth in sectors prioritised by Trade and Investment South Africa, a division of DTI, of R4 billion.
The basis of the economy's increased performance is the outstanding improvements we continue to have in exports. Manufactured exports have grown rapidly every year with our manufactured exports rising twice as fast in the post-1994 period than the pre-1994 period. This growth in exports is widespread across almost all manufacturing sectors. Chemicals, metal and metal products, machinery, auto and auto components have registered particularly strong growth. That this trend is continuing is shown by the very strong balance of payments surpluses we recorded for the first quarter of 2001, which totalled about R8-billion. This is graphically illustrated in the automotive sector. A few years ago we did not export motorcars at all. Currently we produce the 3-series BMW driven by people in the UK and other parts of the world using right-hand drive vehicles. Exports of motor vehicles were R584 million in 1995 and almost R8 billion last year. Vehicle exports from South Africa are expected to exceed 100 000 units in 2001. Component exports grew from R987 million in 1995 to R2.25 billion in 2000.
4. Globalisation
The transformation of our economy takes place within the context of globalisation. The attempts by the trading economies in the developing world to create a more equitable, rules-based world trading system are gaining momentum and should culminate in a new round of negotiations we hope this year. It is imperative for South Africa to play a leading role in these efforts as we are among the largest trading economies in the developing world and particularly on the African continent.
It is important for the economies of the south to collaboratively foster an equitable world trading system. The current rules and regulations governing international markets perpetuate and polarise existing disparities in the economies of the world. The wealthy, technologically advanced nations continue to benefit from increased access to the markets of the developing countries without there being reciprocal access for the developing economies, particularly in key areas such as agriculture.
We must continue to build strategic trading relations with the trading economies of the developing world because economic growth in the 21st century will occur in the economies of the south. The SADC Free Trade Agreement is a key instrument in this regard and regional economic integration must be strengthened further. Currently we are in an advanced stage of our exploratory phase to develop a free trade agreement between South Africa and Brazil and Mercosur. As part of this process, a Brazilian technical team is visiting South Africa this week to further discussions and movement in this regard. We are also exploring similar arrangements with Nigeria and India.
Furthermore, the Millennium Africa Recovery Programme (MAP) announced by President Mbeki together with President Obasanjo of Nigeria and President Boutaflika of Algeria opens opportunities for Africa to improve and strengthen continental economic activities. As a continent we need to use MAP as a vehicle to engage the multilateral trading system. Africa needs to be looking at how we can work within the framework provided by MAP to create greater economic activity to allow us to better utilise the trade opportunities we are creating with our major trading partners in the developed world.
South Africa needs to engage the opportunities provided by multilateral institutions and programmes to increase market access to both the developed world and the developing world. Vehicles like the South Africa-European Union Trade, Development and Co-operation Agreement and the US-initiated Africa Growth and Opportunity Act provide us with substantial opportunities to grow our productive capacities and engage new markets in a focussed and effective manner. I have recently returned from a successful trade and investment mission to Japan and Hong Kong aimed at exploiting opportunities for South Africa's automobile industry.
However, we are also facing increasing challenges on how to make our economy more competitive, not just for export growth but because we face increased international competition in the local economy. The nature of competitiveness is changing altogether. In the past it was cheap labour, access to raw materials and privileged market access. Currently competitiveness is characterised by the use of new technologies, the ability to respond to changing customer demands, efficient logistics and supply chains, and continuous innovation. All of these are knowledge intensive activities that require skilled and adaptive workers.
At the end of this month, we will be presenting our framework for addressing the challenges of ensuring the competitiveness of our industrial sector to our social partners in Nedlac and then to Parliament. The scope of our policies will broaden and we will be looking at new policy instruments. We will pay particular attention to the knowledge-intensive activities and sectors that are rapidly increasing in importance in the global economy. Alongside this is our growing co-operation with other government departments to promote competitiveness and spur investment through reducing the costs of doing business in South Africa by improving performance in key input sectors such as energy, transport and telecommunications.
As an investment in our future competitiveness, the department approved 78 applications in the amount of R53,7 million as part of the Support Programme for Industrial Promotion (SPII). 39 projects to the tune of R28 million have been completed. Through the department's programme to provide financial support for researchers and students at tertiary institutions (THRIP), we approved projects to the value of R96,7 million for the development of technology and appropriately skilled people. These projects leveraged at least R97 million from the private sector. 29 percent of women are presently participating in these projects. 43 percent of the students in these projects are black and 50 percent of the participants are SMMEs. Additional programmes to assist firms in their efforts to take up the challenge of competitiveness include the Competitiveness Fund and the Sectoral Partnership Fund-which is also accessed by trade unions.
A major challenge will be to translate enhanced competitiveness into more jobs. Employment will come through increasing investment in both our physical and human resources. Increased export activities will also generate employment. The increase in employment as a result of export growth substantially surpasses any job losses that occurred as a consequence of increased import penetration. Higher value exports will increase income in the domestic market and initiate a domestic growth process.
5. SMME Development
As spelt out in the President's opening of Parliament address, government is taking specific steps to attend to the challenge of promoting small, medium and micro enterprises.
There are many small business development initiatives being undertaken by national government departments, as well as provincial and local government. To be effective, these various activities must be co-ordinated. In future, SMME development activities are going to form an integral part of all industrial development initiatives throughout the department and the DTI Group. In order to ensure that economic citizens get maximum benefits and service delivery from the DTI Group as a whole, we created a new structure in May 2000, the Council of Trade and Industry Institutions or COTII, which I chair. COTII meets quarterly. One of COTII's key areas of work is looking at how the members of COTII can work together to improve the effectiveness of small business delivery. This will ensure that SMME development does not become isolated from mainstream industrial development strategies.
In an effort to clarify the role of various role players in this sector, the department is planning to release a revised policy paper on small business. This will provide an update to the 1995 White Paper on small business development. Legislation to give effect to the policy recommendations will be introduced later this year.
One of the most important recommendations to emerge out of this policy review will be a proposal to reorganise Ntsika into a more focussed support agency for small business. In addition, a National Small Business Advisory Forum will be established during the course of this year. The Advisory Forum will provide a structured opportunity for ongoing interaction between myself and the small business community. It will allow small business to engage government at the highest level.
At a programme level we will begin to focus on the following four areas: the creation of new enterprises in the particular growth sectors identified in the President's state of the nation address; improving access to finance; introducing a company partnership programme to link large corporations to small businesses through procurement; and lastly, concentrating on the creation of new small enterprises in the newly designated industrial development zones (IDZs), SDIs, rural nodes, and urban upgrade areas.
6. Black Economic Empowerment
Black Economic Empowerment is fundamentally a moral and economic imperative. The report published by the BEE Commission represents a milestone in our efforts to more fully understand this pressing challenge. Government will respond soon to the Commission's recommendations. Specifically, government would like to engage the Commission on three key points:
Another significant achievement in this area is the appointment of the Board and staff of the National Empowerment Fund. The capitalisation of the fund has gained momentum with the ongoing restructuring of state owned enterprises.
The department itself needs to more clearly articulate how all of its programmes contribute to the achievement of BEE. The department will look at supply-side issues in particular, including access to finance, markets, skills, and technology. I will be engaging top South African corporates on their role in removing these obstacles to empowerment. This is an extension of the work of the President's Working Groups with Black business and big business.
Finally, these efforts must not be confined to South Africa only. Through MAP we need to work towards the creation of truly African multinational corporations.
7. Co-operative Governance
As an integral part of our activities to create value for our economy, the department has taken a number of initiatives to promote co-operative governance and work more closely with provincial departments. In April 2000, a provincial heads of department committee was established. This committee, which is chaired by the Director-General, meets every six weeks to discuss matters of mutual interest and to promote synergies between the national department and our provincial counterparts.
I have held regular meetings with Provincial MECs on a quarterly basis and for the first time a provincial lekgotla will be held in September this year. To further support these initiatives, a senior DTI representative, at the level of Deputy Director-General or Chief Executive Officer, has been assigned to work directly with a province and to act as the first contact point between the province and the national department.
In March 2001, the DTI initiated a programme of monthly visits to provinces. Each month the DTI's Executive Board convenes its meeting in a province. A meeting is held with provincial stakeholders, including MPLs, local business and local councillors. A meeting is also held with the provincial department to learn about the economy of the province and the strategies they have adopted to develop their local economy. To date, we have held successful visits to the North West and the Western Cape. In an effort to strengthen our co-operation with provinces and deliver a better service to economic citizens, we will be opening DTI offices in all nine provinces.
Coupled with these efforts, a stronger and better co-operation among all levels of government is essential in our efforts to move our economy in the right direction. We have had great improvements in areas of co-operative governance between national, provincial and local government.
8. DTI Efficiencies
Last year I made public my intention to reorganise my department in order for it to deliver on the economic challenges I articulated earlier such as globalisation, growing our economy beyond 3 percent, black economic empowerment, and small business development.
I am pleased to report that the process to transform our department has been implemented successfully and is already beginning to make a positive impact on our service delivery to our economic citizens. The department has restructured itself into six divisions, which are more in line with the operations and services we are responsible for. The department has also achieved its targets set for gender equality in top management. Of the seven new positions created as a result of the new DTI, four are males and three are African woman. Of the 882 officials employed by DTI, 530 are black, 463 are African, and 200 of these are African women. At 56 percent of the total staff composition, women are the majority in the department. Through accelerating the employment of women in senior positions, we intend to fast-track the mainstreaming of gender equality in all the department's programmes.
All of these developments have had a direct impact on the departments functioning and significant milestones have been achieved in respect of service delivery:
These successes in the companies office is testimony to our commitment to reduce the regulatory burden faced by business. As the role of the state is to grapple with developing and managing a highly complex regulatory environment that is stable and predictable, we are far advanced in creating an enabling regulatory environment for business in our country. We established the Competition Commission and amended the Competition Act following our experience in the first year of implementing competition legislation. This year we will transform the Board of Tariffs and Trade (BTT) to establish the Commission for International Trade Administration (CITA). BTT is currently handling 200 tariff investigations, 2, 000 rebate permits, 150 duty credit certificates, 2, 000 import rebate certificates, and 28, 000 import and export control permits. As the BTT serves the Southern African Customs Union, we have held extensive negotiations with our SACU partners to ensure their satisfaction with the new arrangements.
The Bill to establish CITA was approved by Cabinet and will be presented to our social partners in Nedlac soon and should be passed later this year.
Other legislation to be brought before this house in the near future on issues on which we share concurrent responsibility with provinces include consumer protection, gambling, and liquor legislation.
We would like to thank the Committee for its vigilance in raising the sometimes negative social consequences of gambling and I would like to take this opportunity to encourage the Committee to continue its work in protecting the public interest.
After coming under significant public pressure to distribute good cause money in the lottery, I am pleased to say that our cautious and thoughtful approach to this issue was correct. We now confidently know that we have in excess of R350 million to distribute to good causes in this financial year. Having published in all national newspapers, radio and television a call for application for funding, we received a total of approximate 4 500 requests for application forms. We are pleased to report we received applications for funding from some of the remotest areas of our country to fund income generating activities and charitable causes. However I am disappointed that to date we received only 215 applications for funding from charities, 3 for sports and recreation, and 6 for arts, culture and national heritage.
9. Conclusion
It is widely acknowledged that the government of South Africa in the last 5 years has achieved much by way of placing the South African economy on a sustainable growth path. This process has involved considerable adjustment in our economy and has not always been easy. We now face the challenge of strengthening and accelerating the reform process.
I am confident that we as government have put in place through the Presidential economic action plan the ingredients to achieve accelerated growth and development. DTI is integral to the success of this plan.
Colleagues, we stand here because we share a collective commitment to improving the lives of all South Africans. I believe budget vote 31 of the department of trade and industry for 2001 contributes greatly to this cause. I urge you to support it and I thank you.