Issued by: Government Communication Information System
21 May 2002
Madam Speaker Honourable Members CEOs and Chairpersons of the dti family of institutions Ladies and Gentleman
Introduction
The work of the dti covers a very wide range of economic activities. It is not possible to deal with all of these in this Budget address. We have made available supporting information and we hope that this will be of use to all members in their own constituency work.
As our new democracy develops we need to assess whether we are making progress in providing for a better life for our people. We have developed policies and implemented those policies. The effect of this process will be increasingly measurable. As I have stressed in previous budget addresses since 1996 the process we are undergoing is a profound structural change.
Are we advancing?
I believe that we are. Today, I would like to pay tribute to South Africa's entrepreneurs, to those people who take risks to create employment, generate value, and contribute to our economic success. These are the people that are building new economic enterprises and they give us all cause for hope.
Pinkie Luswazi is an entrepreneur from the Eastern Cape. Pinkie started her clothing business after-hours while studying, making school uniforms, matric dance dresses and wedding gowns. Pinkie works with disabled women to equip them with skills that will assist them in gaining employment. Pinkie's entrepreneurial spirit has been given practical support by the dti through training in export orientation and through export marketing assistance enabling her to market her products in France and the USA.
Bell Equipment is an enterprise that has grown from being a small engineering and equipment repair service into a globally competitive equipment designer, manufacturer, and preferred supplier of capital equipment across the world. Bell Equipment has exploited the benefits of participating in the dti's programs.
A South African entrepreneur, whose recent exploits in space have inspired us all, is Mark Shuttleworth. By South Africa becoming part of the global economy an enterprising young man developed his innovative idea and sold it for a huge profit helping to place South Africa on the global IT map and Mark in space. He also sits on the Presidents Advisory Council on Information Technology. In the exhibit next door you will see that South Africa manufactures satellites. One day maybe it will be space stations.
Cobus Cronje, a mechnical engineer from the Cape, has re-engineered the technology of exhaust emissions that reduces fuel bills, breakages and downtimes. Another example of South African ingenuity having global reach as major truck manufacturers around the world adopt this home-grown innovation.
These entrepreneurs and the enterprises they are building, along with thousands of others like them, are the reason why I am so confident about the future success of our economy. The dti, by providing the right products and services, helped make it possible for them to realise their goals and contribute to our national efforts to create a better life for all. The incentives offered by the dti have even added spice to my favourite flame-grilled chicken: Nando's has chosen to locate its new spice factory for worldwide distribution in South Africa. The basic philosophy underlying the restructuring of the dti is to ensure that we can develop the products and the offerings to our citizens that will facilitate the development of people and enterprises. We need confidence in our economy. Scepticism is important in avoiding wild fantasises but too much of it becomes a millstone preventing growth.
Consensus on the Real Economy
Our objective is to make an impact on the lives of ordinary people in the real economy. I would like to pay tribute to the Trade and Industry Portfolio Committee for the support they give us in highlighting the importance of the real economy in the lives of people. Not only do they spend considerable time in assessing this budget they also hold hearings and investigations that are essential in increasing the level of knowledge and understanding of the economy and the challenges we face.
We are now at a point were we can assess changes. Today we release a detailed and frank account of changes in the real economy. I believe that we can use this assessment along with the new Strategy Documents that are now being brought out consensus on economic issues and the path the economy can take.
We have gone through a lot in the last few years. The report shows the extent of the changes and the challenges that remain. What emerges is that we now have a situation in the real economy that is the basis for equitable growth and development within a global economy. The dti budget vote can advance this shared vision for our economy.
Building a consensus on economic policy is not easy. In 1994 the new democratic government inherited an economy in crisis, inherently unstable, and in long-term decline. Government took some tough, but necessary, policy choices to shift the economy onto a more sustainable growth path and to confront the challenge of delivering prosperity to all of our people while also repositioning ourselves as a nation in the global economy. This involved, in part, opening up our economy to the forces of globalisation and this presented us with a new set of challenges. At the same time, the state was undergoing a fundamental transformation. South Africans had expectations about what the new democratic State would deliver in a relatively short period of time. These factors combined to reduce the level of trust between the union movement and government as the former felt that fundamental policies were being changed. In the case of business there was a lack of confidence that the government would do the right thing.
We are now in a better position to assess what has happened. It is a relatively complex story but all signs point to us having a strong economic basis to move forward. What is important is that we use this basis and do not get held back in long arguments about what should have been.
The economy we have today is fundamentally and irreversibly different to that which we inherited in 1994. The economy is stable, growing - albeit slowly, and our manufacturing base has proved to be robust and capable of competing in a global economy. Our restructured economy means that higher rates of growth can be attained. The active role adopted by the state through a set of macroeconomic and microeconomic reforms was instrumental in bringing about this economic restructuring. We started to engage with the global economy through our trade policies and our entry into the international capital markets.
Nedlac has played a significant role in getting us to this moment by keeping the key economic actors talking to one another in a constructive manner throughout the last seven years. There has not always been agreement but there has been contact, consultation, debate and differences have been aired. This is fundamental to a democratic reform process. We need to build on this and consolidate levels of trust and a coherent economic strategy that has the committed support of all social partners. This would be a major instrument in the acceleration of growth and development. This should be our objective for the Growth and Development Summit.
Government has strengthened its institutional capacity and understanding of how our economy works. Our attention must now turn to identifying the practical measures that need to be taken by government, by business, by labour, and by civil society, to achieve our shared vision. Talk is cheap - we now need action!
Government has identified the steps that it will be taking to make our economic vision a reality. The President undertook to intensify the work that was started in 2001 to build economic infrastructure and lower the costs of inputs through the managed liberalisation of transport, telecommunications and energy sectors. These actions are contained in government's Microeconomic Reform Strategy - an integrated approach to removing the impediments to growth, employment and equity that fall within the direct purview of the state. We have provided members with a narrative of the Microeconomic Reform Strategy.
As the dti we have taken the Microeconomic Reform Strategy to the members of the dti group, to provinces, and are working with the Department of Provincial and Local Government to take the strategy to the municipal level.
These government structures are aligning their priorities and actions to the Microeconomic Reform Strategy reflecting the advancement of cooperative governance in our country.
The Economy
The contribution of different sectors to the country's Gross Domestic Product has changed significantly. Primary production like agriculture and mining now contributes much less to the economy than the tertiary or services sector. The tertiary sector now contributes almost two-thirds of our Gross Domestic Product. This is a shift that has occurred in most industrialising nations. This does not mean that agriculture and mining are unimportant. Indeed, we must focus our efforts on how to further exploit our endowments and comparative advantage in these sectors through beneficiation and developing the value matrices. However, it does signify that economic growth and new jobs are likely to come from the tertiary sector and this has implications for human resources development, the provision of telecommunications infrastructure and investment patterns.
A second trend in our economy is the changing skills composition of production. There has been a dramatic shift in the demand for labour. In every sector of our economy, highly skilled labour is in high demand and vacancies cannot be filled. At the same time, the demand for unskilled labour has dropped in every sector. This has given rise to a mismatch between demand and supply conditions in the labour market. It has an impact on the patterns of unemployment and the resultant poverty that will need to be addressed by clear state interventions.
There has been a deepening of technology in our economy. This third trend is manifest in rising capital-to-labour ratios in all sectors despite the relatively high cost of capital. This suggests that cheaper capital may exacerbate the unemployment problem that we face.
In addition, while export performance has been excellent, especially with respect to manufactured exports, South Africa's share of global trade is falling and there is the spectre of rising protectionism following the imposition of tariffs on steel by the US and the truly incomprehensible Farm Bill recently introduced. These signs are nothing less than disastrous for the well being of the global economy.
Aggregate levels of output are not increasing rapidly although South Africa's manufacturing sector weathered the global turndown far better than many of its competitors who experienced large contractions in production.
There is bullish sentiment about the future performance of the economy, manufacturing output; exports, investment rates, and employment are all forecast to grow in the short term. We must work quickly to capitalise on this positive sentiment.
The Integrated Manufacturing Strategy provides a coherent framework for our collective actions to convert these positive developments into sustained and high levels of growth and development.
The dti's Actions to Improve Customer Service and Performance
Honourable members, the dti has worked hard over the last two years to better equip it to contribute to the realisation of our shared vision. The basic structural changes in the dti are complete. We have some fine-tuning to do and we have to consolidate new ways of working. We will commence construction of the new dti campus soon and it will provide the new modern facilities that we need to complete our restructuring. The Council of Trade and Industry Institutions (Cotii) is functioning and many of the leaders of these institutions are here today. The presentations of the Cotii organisations to the Portfolio Committee have provided an insight into the operations of these very important institutions in our economy.
The dti has done good work designed to tailor our product offerings to the needs of the changing economy. We are improving our response to the challenges of small business development and black economic empowerment.
These last reviews have taken time, as they are not easy matters yet they are fundamental. Having completed the restructuring of the architecture of the dti and the Integrated Manufacturing Strategy we will shortly complete these two important Strategy Documents.
In line with the objectives of our restructuring the dti is meeting the needs of its customers. Madam Speaker, allow me to share with this house some of the highlights of this work.
The time taken to register a new company or a closed corporation has fallen from 21 day to 3 days - an impressive improvement in efficient service delivery. In the previous financial year, the dti registered over 30 000 new companies and almost 90 000 close corporations.
In the area of trade regulation, approximately 20 000 import and export permits were issues, 3000 import rebate certificates and 2500 rebate permits were also issues. Over 100 tariff investigations were conducted. In a short time, I will have the pleasure of placing before the National Assembly the International Trade Administration Bill. This bill will establish a modern and independent regulator of international trade for the entire Southern African Customs Union (SACU). This will coincide with the conclusion of the SACU negotiations.
Market access opportunities continue to expand for South African enterprises. A significant achievement was the work done to secure an exemption from US tariffs on South Africa's steel products. My particular thanks go to Deputy Minister Lindiwe Hendricks for the hard work she did in this regard. The Wine and Spirits Agreement was concluded with the EU and the dti started to prepare itself for the Doha Round.
Our delivery to small business continues to improve. Since its inception the Khula Enterprise Agency has generated one million jobs. In the previous financial year, Khula issued R141m in credit guarantees. Two-thirds of this went to black-owned enterprises and almost 40% went to women-owned enterprises. Manufacturing Advice Centres have opened in the Western Cape, Gauteng, Limpopo, North West and Mpumulanga. Through the work of the MACs 28 000 jobs were created and 536 small businesses in the manufacturing sector have been assisted. To date, Ntsika has supported 80 000 SMEs and has trained over 100 000 entrepreneurs.
The Brain website has some 300 affiliates and is a key link with small business. In your packs I would recommend that you pay some attention to the Brain brochure.
The Coega Industrial Development Zone has been proclaimed and the operator appointed. Cabinet has also recently approved Industrial Development Zones in East London and Richards Bay. The Strategic Investment Programme is now in place and the adjudicating committee for this programme has started considering applications.
South Africa exported 106000 fully assembled automobiles in 2001 and the auto industry accounts for 5,6% of GDP. Not bad for a new democracy and an African country that has just emerged from a major period of social conflict.
Trade and investment promotion and facilitation activities yielded R4.6bn of foreign direct investment into South Africa and R1.2bn of export orders. The Export Credit Agency is now fully operational.
I must admit, that the dti has not always provided economic citizens with the most efficient or effective service. Last year, in the house, I gave an undertaking to investigate new marketing and distribution channels to improve our service and I am confident that this is happening. Currently, we are reviewing all of our products and services for efficacy, as well as examining innovative ways to improve the delivery of these products and services, based on the findings of the dti's first annual customer survey.
Honourable Members, should you seek information from the dti about its product offerings for any of your constituents then I urge you to remember this number - 0861 the dti - or - 0861 843 384. This is the number of the dti's new customer care centre which I am pleased to announce became operational yesterday.
The Budget of the dti
I would like to thank the Portfolio Committee for their usual thorough analysis of our budget. There are no major changes from last year although I believe that our reporting on the outcomes is improving and that this trend will continue.
I am particularly pleased at the massive improvement in the internal reporting that is now available to me on a monthly basis. This allows us to keep track of the most important dimensions of performance. I also believe that we can say with a great deal of pride that we are building a very professional dti that is truly reflective of all our peoples. We have one area to address and that is we are below our target for the employment of disabled persons. We technically have time to achieve this but in all other cases we are above the targets well before time.
I pay tribute to the Director General and his top management team. They are a wonderful team and are for me the embodiment of the new and vital South Africa.
Partnerships For Performance
The priorities for the dti the coming year are to further improve our service delivery of appropriate offerings and to forge strong partnerships for performance. These latter are collective actions that we need to take toward defined objectives. The importance of these partnerships was dealt with in the Integrated Manufacturing Strategy. Partnerships and collective action are the only mechanisms capable of taking us forward in the long term.
However we will have to change some of our old habits. All the social partners face challenges in this new environment. Business has to develop new management practices and strategies to face the challenges of globalisation. They have to form new and mutually beneficial compacts with their workers. Business have to learn to work together for common ends as South African enterprises even though they will still be competing with each other. Our new economic path requires new ways of organising; it requires knowledge networks, the sharing of best practice, and the diffusion of new technologies amongst enterprises. The weakness of organised business is an increasingly serious obstacle to progress. As a result of this our chamber movement is too weak.
It is critical that we understand the fundamental change occurring in production. The enterprise - be it a private company or cooperative - is the basic agent of change in a knowledge driven economy. However, its capacity to change is dependent on the collective success of many enterprises and the leadership given by the state. The success of the interaction between enterprise development and collective endeavour will lie at the centre of our economic success.
It follows from this basic point that the union movement is faced with renewed challenges. If enterprises change it is essential that the plant based and enterprise level organisation of workers must change in response.
The union movement in South Africa must urgently return to its strength of plant-based unionism. This does not mean that industrial unionism must change. It means that industrial unionism based on enterprise level work and local shop steward councils is the only basis of strength and service to members. If our unions don't meet this renewed challenge they may fall into the fatal trap of trying to pressure the state to represent workers.
The recent gains in SACTWU's achievements in collective bargaining are to be welcomed and must now translate into stronger plant based organisation in this priority sector.
We need to reinvigorate programmes like the Workplace Challenge. The dti will also be running a trade-and-industrial-policy training programme on a bi-annual basis for shop stewards to build a greater understanding of our economy. The dti will work to strengthen its partnership with unions. We need and economy based on decent work for all.
We need also to build new enterprise forms. This is essential if we are to ensure more equitable development and to add vitality to economic activities. The dti is working with collective movements to develop cooperatives. These movements must increase their efforts toward this end.
It is a matter of concern that there was an absence of strong voices from social movements in the recent public hearings on industrial strategy. We must strengthen civil society's ability to engage in the economy and to take its rightful place in critical economic debates. We need it to join hands with the dti in customising interventions and delivering the dti's products and services to our communities. As the dti we have a role to play in raising awareness about the workings of our economy. A key initiative in this regard will be the dti entrepreneurial train that will be pulling into a station near you in coming months. The dti entrepreneurial train will provide people in small towns and rural villages with an opportunity to spend time with business mentors, with officials of the dti and the Cotii group.
Conclusions
The South African economy is poised to be a growth leader. It requires our confidence to ensure that this happens. The personnel and top management of the dti will do all in their power to realise our vision of a growing and equitable economy that leads to development for all. My thanks to the Parliamentary Committees, the dti and Deputy Minister Hendricks - who I suspect is watching this on TV and we all wish her a speedy recovery - for the support and hard work. It is a great privilege to be a Minister in such a fine and committed department. We will build a better life for all.