The main features of the 2003/4 budget are:

• In 2004 the Department of Trade and Industry has succeeded in almost eliminating underspending, with a budget allocation of R 2 796 350 million, while expenditure is estimated at R 2 659 344 million. Hence, the expenditure for the Dti for 2003/4 was 95% of the final budget. This spending pattern read in the context of the departmental cost drivers, is mainly comprised of transfer payments. Approximately half was paid to public entities, and the remainder to incentive schemes. However, changes in major capital projects such as the infrastructure programme, and exchange rate fluctuations, had a direct impact on the Dti spending trend. The main areas of underspending emanated from the Enterprise Organization, and the Trade and Investment South Africa division.

• The Departments key performance areas against the output targets in the 2003/04 budget are reflected through its organizational structure and divisional programme lay out. These are: Programme 1, Administration; Programme 2, International Trade and Economic Development (ITED); Programme 3, Enterprise and Industrial Development Division (EIDD); Programme 4, Consumer and Corporate Regulation Division (CCRD); Programme 5, The Enterprise Organisation Division (TEO); Programme 6, Trade and Investment South Africa Division (TISA); Programme 7, Marketing.

• Programme 1 incorporates the functions of providing support for the offices of the Minister, Deputy Minister, Director General as well as the function of facilities management, corporate governance, financial management, IT, and human resources management. Its expenditure decreased from R243, 9 million in 2002/03, to 194,7 million in 2003/04, a decrease of 18,5%. This decrease is mainly a result of the upfront payments made in regard of the Public Private Partnership project for the new Dti building, and the marketing strategy that was budgeted for in a separate programme.

• Programme 2 experienced a rise in expenditure, with the budget expended in the 2003/04 financial year being 9,24% more than the previous financial year. During 2003/04 financial year, ITED continued the ongoing implementation of South Africa’s trade policy at the multilateral and bilateral levels.

• Programme 3 seeks to provide leadership in the development of policies and strategies that create an enabling environment for competitiveness, equity, and the enterprise development. This programme has experienced an expenditure increase of 23,30% from 2002/03 to 2003/04, comprising mainly transfer payments to associated Council of Trade and Industry (COTII) institutions.

• Programme 4 experienced a decrease of 16,17% in the expenditure between the 2002/03 and 2003/04 financial years, which is mainly attributable to CIPRO (Companies and Intellectual Regulation Office) moving towards becoming self sustainable. The following law reform projects are currently in progress: (i) Corporate Law Reform, and (ii) Credit Law Reform.

• Programme 5 which is responsible for the stimulation and facilitation of competitive enterprise, through the efficient provision of effective and accessible supply-side incentive measures. The expenditure for the financial 2003/04, as compared to 2002/03, increased by 28, 68%. R106 million of the Critical Infrastructure Programme, and R9 million of the infrastructure Development Programme, have been rolled over to the 2003/04 financial year. Achievements on this programme inter alia include investment of R15,5 billion that has been facilitated by the Critical Infrastructure Programme; 6 000 companies that have been granted assistance to increase their competitiveness under the Black Business Supplier Development Programme; and the introduction of the first targeted BEE Incentive Programme under the Black Business Supplier Development Programme. It was that reported that to date 25 SIP (Strategic Investment Programme) application projects have been approved, with the total value of R6,7 billion. Indications were that 80 000 new job will be created, R3,5 billion is allocated for new infrastructure development, whilst the total investment will amount to R29,7 billion.

• Programme 6 experienced a 19,69% decrease in expenditure between the 2002/03 and 2003/04 reporting periods. Major achievements under this programme include successes with investment projects, for example 126 foreign investors were attracted, which resulted in R4 billion of investments. The Export Marketing and Investment Assistance project rendered assistance to 954 exporters, which resulted in R398 million towards export sales.

• Programme 7 is a new programme established in 2003/04 and responsible among others, to manage the dti brand, and to increase awareness of the services that the department renders. Major achievements of this program include the Business Express advertising campaign that reached 5,2 million customers, and the Exhibition and Events project that reached 31 598 customers.

• Between 2002/03 and 2003/04, the staff complement of the Dti decreased from 784 to 705 (11%), mainly as a result of resignations.

• During the reporting period, the Dti has received donor funding to the value of R151 272 264, 02 from the European Union. Of this amount, R10 286 496, 02 was paid to the Ntsika Enterprise. Promotion Agency for the purpose of trade and investment development, whilst R140 985 768,00 was paid to the Industrial Development Corporation for the purpose of private sector projects.

• Briefly, the Dti spent its budget for 2003/04 financial year as follows:

• Staff costs = 9.9%
• Procurement of goods and services = 12.5%
• Transfers to agencies = 38.5%
• Grants to enterprises = 31%.6%
• Equipment = 0.5%

The Department provided the Committee with a report of highlights of key outputs delivered in the past financial year as well as outputs delivered since 1 April this year. These include:

• The launch of a public-private partnership to finance and construct the new Dti campus.
• The launch of an industry forum for dialogue with various sectors.
• Development of a set of key performance indicators to measure the impact of the Dti’s work on the economy.
• Leading South Africa’s participation in a range of multilateral and bi-lateral trade negotiations.
• Setting up the SPII (Strategic Partnership for Ind ustrial Innovation) project to value of R206 million.
• Establishment of Co-operatives Development Unit.
• R5,8 billion in new investment from 400 foreign investors was generated.
• 23 national pavilions generating R324,8 million in export sales has been set up.
• Nominees to the BEE Advisory Council have been identified and the names will in due course be submitted to Cabinet.
• National Empowerment Fund has been re-launched with new product with R150 million capitalization.
• 1040 exporters have been supported through the Export Marketing and Investment Assistance programme.
• Consumer Credit Bill has been approved by Cabinet.
• Corporate Law Reform discussion paper has been published and followed by an extensive consultation process.

The Committee also received a report on output targets for 2004/05. These include a number of detailed targets aimed at increasing the contribution of small enterprises to the economy; advancing broad based Black Economic Empowerment, raising the levels of investment; increasing market access opportunities for South African enterprises; building skills, technology and infrastructure and generally improving the performance and capacity of the Dti in all areas. A feature output this year is the identification of "flagship projects", that need to be delivered on as identified before the end of the financial year. These include:

• Operationalisation of the Apex fund.
• Establishment of a single enterprise development agency.
• Implementation of the BEE strategy.
• Finalise and submit to Parliament an Enterprise Development Bill.
• Development of an intra-African trade strategy.

The Committee deliberated on the annual reports of the four agencies from the COTI group. Highlights of these reports included.

• Its mandate inter alia includes administering compulsory specification on behalf of the Minister of Trade and Industry to protect the health and safety of the consumer.
• The core business units of the SABS are financed by funds received from both Science and Technology and Dti votes.
• Core funding allocated to the SABS via the science vote allocation for the financial year under review amounted to R91, 4 million which represents an increase of 8%.
• This grant has been used to create and strengthen operational and technological core competencies and capacity to support the relevant national initiatives.
• In conjunction with Ntsika Enterprise Development Agency, SABS has identified and supported 22 companies and provided various training programmes to 267 SMME’s.

• The IDC is a self-financing, state owned development financing institution that provides risk capital to a range of industrial projects in South Africa and other countries in Africa. One of the goals of its mission statement is to identify and support "opportunities not yet addressed by the market".
• The IDC reported that it has approved over 3 500 deals amounting to R 51.0 billion from 1994 to 2003/04.
• There has been an increase in the net movement in impairments to R8-3 million and an 11.4 % in the net attributable income to R697 million in 2003.
• Over 80 projects under implementation or consideration in over 20 countries.
• During 2003/04 approximately 20% of funds was injected to the rest of the continent and 3 740 jobs are expected to be created.
• IDC reported that it was committed to play a leading role in facilitating empowerment deals using new and existing financing tools.

• The Board has set up the Central Applications Office to date, in cooperation with the Distribution Agencies, allocated 5 092 grants totaling to R2 220 547 706.00.
• The current cost to disbursement is below 2% as compared to the international benchmark of 11%
• For the period under review R613 million worth of actual disbursement was allocated (out of R500 million budgeted).

• Operational highlights for the period under review include 40% increase in value of disbursements; 11% increase in number of beneficiaries and 4 new retail financial intermediaries were established.
• The guarantee fee income has increased by 6% from the previous financial year, while the number of guarantees taken up has increased considerably to 628.
• Increase in net profit as a result of the property portfolio.
• The level of disbursement has been raised by 4% and the total disbursement level has been raised by 40%.
• The Joint venture fund made four major investment in 2004 financial year which generated R9.7 million worth of investment.
• The MD reported that Khula was committed to focus on a clear defined target market to improve delivery.
• At least 60% of loan and equity facilities will be directed to the underserved provinces for example Eastern Cape, Northern Cape, and Limpopo.
• Khula is committed to secure at least 10 new corporate partnerships for SMME finance.

The Committee is pleased to report continued progress in the management, presentation, and reporting on the DTI’s budget. A Department once known for its significant underspending and large roll overs, is now a Department that spends almost all of the funds allocated to it by Parliament on the activities approved by Parliament. The Department’s Programmes are also now closely aligned to its major activities and financial control and reporting systems seem to be functioning effectively. In addition, the Committee received a comprehensive report indicating that the Department had delivered on a number of key output targets identified in the 2003/4 budget.

The Department reported that it was in the process of finalizing a mechanism to measure the impact of its programmes on the economy – in other words to measure the extent to which its outputs contribute to the achievement of its outcome targets and, the Committee in exercising its oversight role will ensure a continued interaction with Dti’s strategic measurement system.

While the Committee found that in general there was improved delivery in 2003/4 on the output targets identified, a few matters of concern were identified and these include a declining trend on IDC’s approvals and increase in their operational losses.

It is the Committee’s earnest hope that the merger of Ntsika and NAMAC (whose programmes while limited in scope have often been relatively effective) will provide the basis for a more effective diagnostic, mentoring and incubation service for small business.

The Committee notes that Khula’s indicators are positive.

The challenge of responding to the needs of persons operating in the "second economy" by creating new opportunities for higher quality sustainable livelihoods, has been identified by the President and Government as key and important priority. Many of the Dti structures the Committee interacted with reported that many of their existing products and services are being transformed to respond to the challenges of improving conditions in the "second economy". The Committee welcomes the new focuses of the Dti, as well as the commitment to begin to implement the broad based BEE strategy.