The Portfolio Committee having considered Budget Vote 35: Trade and Industry, reports as follows:
1. Introduction
The 2010/11 Budget was informed by the decision to arrest the decline of industry, accelerate the creation of decent employment opportunities and eradicate poverty through the implementation of the revised Industrial Policy Action Plan (IPAP2), which will drive the country’s trade policy strategies.
Since 1994, the Department of Trade and Industry (DTI) had adopted broadly liberal trade practices in its pursuit of what it interpreted as the requirement of a World Trade Organisation agenda. Meanwhile it did not actively consider support mechanisms for local industries. Consequently, the country underwent an accelerating decline in the industrial base. This trend developed within a structurally distorted economy that deepened already high unemployment levels.
The recent impact of the global economic crisis has exacerbated the decline in its economic growth. The number of factory and manufacturing plant closures has increased resulting in increased unemployment levels, reduced export earnings and a rising current account deficit. This combined effect led to a downward pressure on Government revenue which required reprioritisation in resource allocations to meet the objectives of a developmental state.
1.1. Relationship of the State of the Nation Address to the Department of Trade and Industry’s objectives
In his 2010 State of the Nation Address, (SONA) President J Zuma identified IPAP2 as a flagship intervention that would address the serious structural weaknesses and imbalances in the economy. The 2010 SONA highlighted the following strategic priorities that are relevant to the DTI’s mandate:[1]
· Industrial Development and Job Creation: There was a focus on building new industries such as the green industry and strengthening existing industries, with a particular focus on more labour-absorbing industries. Furthermore, the President emphasised the need to create decent employment opportunities, particularly for the youth.
· Support to distressed companies: R6 billion has been set aside by the Industrial Development Corporation to help companies in distress.
· Corruption and fraud: The eradication of corruption and fraud within public procurement and tender processes was addressed.
· International Trade Relations: The President mentioned that the interests of South Africa, including economic interests) will be intensively promoted globally.
· Strategic African Relations: The political and economic integration of the Southern African Development Community (SADC) will be supported and sped up, and intra-regional trade and investment will be promoted. Furthermore, the revitalisation of the New Partnership for Africa’s Development (NEPAD), as a strategy for economic development on the continent, would be a focus area for the country.
1.2. Constitutional Mandates and Roles of the Executive and Parliament
Portfolio Committees exercise oversight over their respective departments and agencies in line with their Constitutional mandate set out in section 55(2) of the Constitution (No. 108 of 1996) and section 27 (4) of the Public Finance Management Act (No. 1 of 1999). In addition, the Constitution empowers the President, as the executive authority of the country, to co-ordinate the functions of state departments and administrations in section 85(2)(c). The Committee acknowledges the Constitutional rights of the Executive to determine the number of departments it wishes to establish. The Economic Development Department (EDD) was established through the enactment of the new Budget Votes within the Adjustments Appropriation Act in 2009. The establishment of the EDD resulted in the reconfiguration of the Department of Trade and Industry with certain entities and their resources being transferred to the EDD in the 2010/11 financial year. These were the:
§ Industrial Development Corporation,
§ Khula Enterprise Finance Limited,
§ South African Micro-Finance Apex Fund,
§ Competition Commission and
§ Competition Tribunal.
The Minister, Dr Rob Davies, clarified that despite the transfer of these entities, the DTI would have walk in rights on the entities where their roles overlap with the responsibilities of the DTI. This model would allow for deepening of co-operative governance between the two departments.
The International Trade Administration Commission would also be transferred but the DTI and the EDD would be jointly responsible for the entity. The EDD would be responsible for strategic engagement regarding tariffs and trade remedies, while the DTI remains responsible for the signing off of tariff submissions and ITAC’s role in the Southern African Customs Union (SACU). Acknowledging the Executive’s right to co-ordinate the functions of departments, the Committee wishes to establish and understand the rationale of the transfer of certain entities, given their importance to the implementation of IPAP2.
The following matters were focused upon in the consideration of the 2010/11 Budget Vote 35: Trade and Industry:
§ The introduction and implementation of IPAP2.
§ The trade policy and Strategy Framework for South Africa.
§ The impact of “tenderpreneurs”[2] on local manufacturers’ productive capacity, employment creation and domestic and international competitiveness.
§ The Government’s commitment to facilitate the reversal of the adverse effects, including job losses and exacerbated deindustrialisation, on the economy.
2. Process
The Portfolio Committee on Trade and Industry met on 19 March 2010 to consider the DTI’s Medium Term Strategic Framework 2010 – 2013. The Minister and Deputy Minister, Ms Maria Ntuli, provided the context within which the Medium Term Strategic Framework has been developed for the DTI. The Strategic Plan for the DTI was presented by the Director-General of the DTI, Mr Tshediso Matona. The position of the Committee after its deliberations is captured in this report.
3. Policy context
South Africa is a developing country with aspects of a developed country in terms of certain sectors such as its financial sector. The country is rich in resources, which is needed by other countries. However, trade is disadvantaged due to the country’s location in respect of its major non-African export markets. Despite positive but narrow economic growth since 1994, the benefits of this growth have not translated into broad economic opportunities. One of the challenges to addressing inequalities is that the economy is characterised by a small number of big enterprises, which limit economic growth as they create high barriers to entry by smaller firms.
Acknowledging that industrialisation is a key instrument to promote economic development, the country has shifted from an export led growth path and is now focusing on developing domestic industrial sectors through IPAP2. The policies being developed emphasise labour-absorption priorities and support for vulnerable industries. However, there is a need to develop a beneficiation policy to broaden local value-adding activities of the country’s vast resources. Furthermore, a focus on small scale manufacturing is lacking within IPAP2 and must be addressed to ensure that economic participation is broadened. In this regard, there must be a link with the Department of Rural Development and Land Reform to promote the agro-industry value chain from a trade and industry angle. Coordination at the Executive level, particularly in the Economic Cluster, is crucial to ensure the success of IPAP2 but also of other economic policies.
Another key constraint to future economic development is the availability of affordable development finance. In this regard, the policy for the capitalisation of development finance institutions must be reviewed to increase the availability of capital finance. Furthermore, the self-financing model that has been adopted previously has led to a divergence from a developmental approach to financing with development finance institutions operating similar to commercial banks. The refocusing of these institutions through recapitalisation should enhance their ability to absorb the risk of providing affordable financing to entrepreneurs.
The trade policy and strategy that is in its final stages of development has taken a more dynamic approach from a pure trade liberalisation stance to being a tool of industrial policy. This strategic approach to adjusting tariffs and imports are based on evidence-based case-by case requirements to avoid a negative impact on local agro-processing and manufacturing. This developmental approach should stimulate industries within the economy by strategically adjusting tariffs to enhance the competitiveness of industries both locally and internationally.
In terms of trade in agricultural goods, there have been calls for support, as primary and processed agricultural goods are exposed to competition locally and abroad from countries that heavily subsidise their agricultural sector. This is leading to a situation where net imports of processed agricultural goods are increasing. As the agro-industry is a key sector in job creation and the eradication of poverty, particularly in rural areas, it is imperative that they are supported to meet the Government’s objectives.
The country is pursuing regional economic integration within Africa. Internationally, South Africa is still treated as a developed country at the World Trade Organisation level, despite its efforts to be reclassified as a developing country. This has severe implications on South Africa’s ability to renegotiate its rate of tariff liberalisation, which places strain on its economy as well as the member countries of the Southern African Customs Union (SACU).
Implicit in the context of a developmental state and industrial development driving trade strategies is the greater prioritisation of consumer protection which requires a stronger regime. In this regard, the Consumer Protection Act (No. 68 of 2008), which will come into force on 24 October 2010, establishes the new Consumer Protection Commission, strengthens consumer rights and empowers the consumer voice. The enforcement of this Act will also place the onus on business, both local manufacturers and local importers, to provide better quality goods and services that are competitive and could stimulate a demand driven environment for consumer goods and services. The Deputy Minister, Ms Ntuli, is playing a critical role in the promotion of consumer protection issues, particularly in rural areas.
4. Department of Trade and Industry’s Strategic Plan and Budget
The Director-General’s briefing outlined the strategic objectives and key interventions as outlined in the Medium Term Expenditure Framework (MTEF) for 2010 – 2013. The five intervention areas have been identified as:
· Industrial Development,
· Trade, Investment and Exports,
· Broadening Participation,
· Regulation, and
· Administration and Coordination.
The Department’s total budget allocation for the 2010/11 financial year in nominal terms is R6.1 billion, about 1.05 per cent higher than the previous year’s allocation of R6.09 billion. However, in real terms[3] this represents a decline of 5.6 per cent. The real decrease from 2009/10 to 2010/11 is attributed to the transfer of functions to the Economic Development Department, as well as savings that were required by the National Treasury on regular expenditure, such as a reduction in the full allocation of wages. The Department’s budget as a percentage of the 2010/11 National allocation by vote is 1.32 per cent. This compares to the 1.48 per cent of the previous financial year. The overall budget allocation depicts a declining budget for the department. The allocation over the MTEF period for the financial year 2010/11 to 2012/13 increases by an average annual rate of 6.1 per cent. The increase in expenditure over the MTEF period reflects the introduction of new incentive schemes by the Department.[4]
The Department of Trade and Industry has eight programmes. These programmes are[5]:
|
Programme |
Purpose |
2010/11 Budget Share (%) |
Nominal Change from 2009/10-2010/11 (%) |
|
Administration |
To provide strategic leadership for the Department and its agencies, and to ensure the successful implementation of the Department’s mandate through sustainable and integrated resource solutions and services that are customer centric. |
7.3 |
-4.1 |
|
International Trade and Economic Development |
To build an equitable global trading system that facilitates development, by strengthening trade and investment links with key economies and by fostering African development, including through regional and continental integration and development cooperation in line with the New Partnership for Africa’s Development. |
2.1 |
0.5 |
|
Empowerment and Enterprise Development |
To lead the development of policies and strategies that create an enabling environment for small, micro and medium enterprises, and enhance the competitiveness of local and provincial economies, to achieve inclusive shared equity, growth and job creation. |
12.7 |
-33.7 |
|
Industrial Development |
To facilitate industrial development supported by government procurement that creates an enabling environment for competitiveness, growth and job creation. |
17.1 |
146.5 |
|
Consumer and Corporate Regulation |
To develop and implement coherent, predictable and transparent regulatory solutions that facilitate easy access to redress and efficient regulation for economic citizens. |
3.1 |
15.7 |
|
The Enterprise Organisation |
To stimulate and facilitate the development of enterprises through providing incentive measures that support investment, job creation and regional economic development, such as through industrial development zones.
|
51.6 |
-5.4 |
|
Trade and Investment South Africa |
To increase export capacity and support direct investment flows through strategies for targeted markets and an effectively managed network of foreign trade offices. |
4.7 |
-0.9 |
|
Communications and Marketing |
To facilitate greater awareness of the Department’s role and increase the uptake of its products and services. |
1.3 |
17.3 |
In terms of allocations to various programmes, the Enterprise Organisation programme receives the largest share of the budget (R3.1 billion) followed by the Industrial Development (R1.0 billion) and lastly the Empowerment and Enterprise Development programme (R777.8 million). These programmes combined constitute 81.3 per cent of the total budget while the remaining five programmes share 18.7 per cent of the total budget. In particular, the budget share allocations to the Enterprise Organisation and the Industrial Development Division reflect the renewed commitment to industrial development, as well as small and medium enterprise development.
This budget share allocation is aligned to the DTI’s key strategic priorities. The changes in budget share allocations also reinforce the shift in focus to industrial policy that leads trade policy directives. The IPAP2 resources are allocated within the DTI as well as other lead Departments, therefore the allocation to this plan should be considered holistically.
In response to a question raised by the Committee that it appears that the budget reflected a decrease in real value, the Minister informed the Committee that the change could be explained in relation to the transferral of functions to the Economic Development Department. He also informed the Committee that major funding for IPAP2, namely for the clothing incentives and the Automotive Production and Development Programme are fully funded, and that each lead department would be financially responsible for their key action programmes in IPAP2.
The Committee raised a number of issues related to industrial development, in terms of IPAP2; the broadening of participation; trade policy; deepening regional integration; leveraging public procurement and the review of legislation regulating estate agencies. These issues are briefly outlined below.
4.1. Industrial Development
The Committee is currently having public hearings on IPAP2. During the public hearings, views were expressed about challenges still remaining in upstream and downstream industries, particularly within the vulnerable manufacturing sectors. The Committee is concerned how Government will ensure that targets and key action programmes in IPAP2 would be achieved. IPAP2 also identifies other departments as lead departments; therefore the DTI was questioned on how it would ensure coordination between departments to achieve the goals of IPAP2.
According to the Minister, IPAP2 represents the flagship intervention by the DTI that would shape and influence all activities within the Department. IPAP2 was launched in February 2010 with a shift in focus from an easy-to-do basis to a need-to-do basis in order to stimulate the recovery and set the country on an industrial path that would be the catalyst for economic growth.
IPAP2 addresses the structural constraints that have locked the country into a state of jobless growth by identifying activities that would unlock the potential in priority sectors. The lead sectors identified to achieve this goal are Capital and Transport Equipment and Metals; Automotives and Components; Chemicals, Plastic Fabrication and Pharmaceuticals; and Forestry, Pulp and Paper, and Furniture.
The Minister informed the Committee that the DTI has developed implementation guidelines for the Automotive Production and Development Programme, and had developed a new support package for the clothing and textile sector, known as the Clothing and Textile Production Incentive. Through these incentives the DTI hoped to create an environment that would lead to sustainable employment and skills development within the local manufacturing sector.
The Committee expressed their concerns regarding the impact of the clothing incentives as factories were closing down resulting in declining employment within the clothing sector. The Minister responded by informing the Committee that these incentives attempted to reverse the decline in the clothing sector. The DTI has completed the regulations, and the terms and conditions of the financial support programmes which would come into effect on 1 April 2010. He however raised a concern about the failure of the industry to invest in new equipment and technology and to alter their labour processes to become more competitive.
The success of IPAP2 was dependent on the DTI’s effective integration and/or coordination with other lead and supporting departments and/or entities to ensure properly synchronised timeframes for supporting infrastructure and/or other inputs to become available when required. The necessary infrastructure would include efficient and accessible rail infrastructure for freight logistics, affordable electricity, telecommunications, and access to capital. Furthermore, these departments would have to allocate adequate resources to meet their respective key milestones. Government would also need to implement effective lines of accountability among all affected departments and entities per key action programme to ensure delivery.
One of the key impediments to IPAP2 would be the availability of appropriately skilled labour, including artisans. Currently, it appeared that the private sector provided training primarily based on their skills requirements. The 2005 – 2010 National Skills Development Strategy provides a framework for skills development in the country but it was experiencing challenges, particularly with underspending. Despite this strategy and other interventions introduced in South Africa, there is still little understanding of the exact skills gap in terms of numbers required within critical fields that must be filled and whether there are adequate facilities and resources available to meet this demand among the institutions for higher education.
The impact of high input costs from upstream industries, such as the steel industry, was a particular concern on the Committee. These negative impacts mainly affected small-scale local upstream industries, such as the canning industry, that could play a critical role in employment creation and form part of rural development projects. The recent implementation of the Sishen surcharge by ArcelorMittal would also have serious implications for consumers, particularly those reliant on canned produce, and there was a need for Government to protect these consumers.
The Committee welcomes the importance placed in IPAP2 on the importance of the Standards, Quality Assurance, Accreditation and Metrology (SQAM) institutions and practices and its potential contribution to develop new industries and also to resuscitate certain industries. The SQAM institutions also referred to as the technical infrastructure system, will reinforce its support for the development, accreditation and enforcement of standards.
The DTI informed the Committee that with the new automotive investment schemes one would see the development of new mandatory standards over a range of industries as a result of the arrangements in the automotive sector. In March 2011, most new buildings would be required to install solar heating which would assist in stimulating demand for greener industries. With respect to regional integration, the SQAM has been identified as an important element in the harmonization of standards within the SADC region. Broad level agreements within SADC have opened opportunities for standardisation with African countries reaching economies of scale in certain industries. This would also facilitate exports into the region, as similar measurements and standards would be in place.
4.2. Trade Policy
The Committee noted the absence of a Trade Policy but welcomed its development which has been launched with the discussion document on “A South African Trade Policy and Strategy Framework”. This framework reflects a strategic developmental approach to Trade Policy that would support industrial development. The Trade Policy Framework acknowledges the importance of consolidating and developing political and economic relations that support the industrial objectives. The need for a developmental model to Trade Policy was expressed in the 2009 Budget Vote Report of the Committee. The Committee expressed a desire to see a developmental outcome at the Doha Round negotiations of the World Trade Organisation.
The Minister informed the Committee that strengthening South-South trade relations is a strategic objective for the MTEF period as these are viewed as the new centres for global economic growth. Determining new mutually beneficial relations in trade and investment with key countries of the South to support the national industrial development objectives, and consolidating trade and investment relations with the North agreement is of strategic importance to achieve a developmental economic outcome. The conclusion of the Preferential Trade Agreement (PTA) on tariffs with India, and the procurement PTA with China is envisaged for the 2010 – 2011 MTSF period.
With regard to achieving a developmental outcome at the Doha Round negotiations, the Minister expressed caution in expecting a developmental outcome. Currently, negotiations were at an impasse as industrial tariffs were no closer to a conclusion.
The introduction of Bilateral Investment Treaties is a relatively new phenomenon for South Africa. This type of agreement would protect South African investments abroad and promote foreign fixed investments within South Africa. The Minister outlined that the negotiations or renegotiation of Bilateral Investment Treaties is being delayed pending a review of these to clear any ambiguities within the existing texts.
4.2.1 Southern African Customs Union
The continued engagement of South Africa regarding the Southern African Development Community (SADC) – European Union (EU) Economic Partnership Agreement (EPA) process and its impact on the South African economy and the Southern African Customs Union arrangement is a concern for the Committee. The Committee also feared that if a positive outcome is not achieved, the EPA could potentially derail deeper economic integration within the region. During the Committee’s public hearings on the Trade Policy Framework, divergent views were expressed by stakeholders in relation to SACU, from calls for its disintegration to it being transformed, with the Trade Strategy Group supporting the stance of the DTI against the interim EPAs.
Despite the change in leadership within the European Union, there is a commitment to achieving a mutually beneficial outcome. Negotiations are ongoing and the DTI is commencing another round of negotiations with SADC-EU on the EPAs to resolve outstanding issues. Minimising the damage of the EPAs on SACU remains the objective. The Minister expressed the desire for regional integration in SACU and SADC, as it could provide the platform for integration into the global economy.
4.3. Broadening participation
The Committee expressed concerns that the current process of broadening economic participation would create the establishment of a particular class that would defeat the intended outcome of narrowing inequality. The Committee is also concerned with the phenomena of “tenderpreneurs” and the lack of support for people involved in the productive capacity of the economy.
The Minister acknowledged the existence of “tenderpreneurs” and the risk associated with it. Developing skills beyond the tender process would assist in arresting the emergence of “tenderpreneurs”. Empowerment across the economy remains modest and it is not sufficiently linked to enterprise development.
Broadening the base for black economic empowerment and finalising the alignment of the Preferential Procurement Policy Framework Act to the Broad-based Black Economic Empowerment (B-BBEE) Codes of Good Practice remains a priority for the DTI. The DTI supports increased access of black entrepreneurs through the tender process, but companies should develop the necessary skills in productive activities. Increased participation in the domestic economy of those previously excluded remains a key focus of the DTI. Import fronting where goods were imported at the expense of labour and local production is a major concern.
The Committee welcomes the establishment of the Black Economic Empowerment Advisory Council, as it would be instrumental in ensuring that the unintended consequences of the principal legislation are addressed and to monitor the implementation of the policy. The Committee is of the view that broadening economic empowerment should be aligned to the key intervention strategies of IPAP2. Furthermore, the Committee calls for the financial support of businesses, which have been awarded tenders and are appropriately skilled to deliver but are not able to secure capital to deliver the service or goods.
4.3.1 Small, Medium and Micro Enterprises (SMMEs)
The Committee urged that more support should be given to SMMEs as it could be a vehicle to broaden black economic partnership. Service delivery of agencies supporting SMMEs has been insufficient and the failure of national, provincial and local structures to pay for goods and services within the required 30 day timeframe as prescribed by the Public Finance Management Act contributes to the failure of SMMEs.
One of the challenges is that SMMEs may not be capacitated to meet the invoicing and other requirements that would allow for timely payment. The Committee was of the view that the DTI’s entities should be accessible to provide SMMEs with assistance to address this issue. Therefore, the quality of support to develop adequate business management skills, especially in terms of mentorships, must be addressed. Furthermore, procurement and payment systems must be geared to assist SMMEs and not be unfairly benefitting officials that are competing for tenders. The National Empowerment Fund has developed a product to support SMMEs that have been awarded government tenders until they receive payment; however this type of product is not available from other development finance institutions.
4.3.2 Co-operatives
The Committee viewed cooperatives as an important vehicle in addressing the challenges of job creation and employment. Support for co-operatives, both financial and non-financial, has been inadequate. The Committee is concerned about the inability of development finance institutions to address the funding challenges of SMMEs and cooperatives and whether a developmental funding model should not be considered. In its previous Budget Vote Report, the Committee emphasised the importance of co-operatives as an instrument to contribute to the upliftment of the previously economically marginalised people. There is a need for collaboration between provinces, South African Local Government Association and development finance institutions, as well as insurance companies, to ensure that co-operatives move from being survivalist institutions to instruments of economic development and wealth creation.
4.4. Consumer and Corporate Regulation
4.4.1. Consumer Protection
Consumer protection remains a key focus area of the Committee. The DTI indicated the establishment of new implementing and regulatory institutions created under the Companies Act (No. of 2008) and the Consumer Protection Act (No. 68 of 2008). The Committee welcomed the establishment of the National Consumer Commission, as it would contribute towards the promotion and protection of the economic interest of consumers. The Consumer Protection Act also allowed for the accreditation and support of consumer protection groups by the National Consumer Commission. However, the Committee highlighted that most consumers were not organised or aware of their consumer rights, particularly in rural areas, which may limit the establishment of and involvement in these types of groups. Therefore, Government would still be expected to proactively consider matters related to the protection of consumers from unfair business practices until the average consumer’s voice reached maturity.
4.4.2. Credit Regulation
The recent economic crisis had had a profound impact on South Africa’s overly-indebted population with only 55.1 per cent of credit active consumers being in good standing at the end of September 2009 compared to 63.6 per cent at the end of June 2007[6]. As a result of increasing financial strain, the role of the National Credit Regulator and debt counsellors has become more important in assisting over-indebted consumers. However, it is apparent that consumers lack awareness of their rights and the relevant assistance mechanisms provided by the National Credit Act (No 34 of 2005). There is thus a need to effectively disseminate this information to a wide audience.
4.4.3. Estate Agents
The Committee expressed concerns around the lack of transformation with the Estate Agency sector and wanted an indication of whether a reform process is underway. The DTI informed the Committee that the Estate Agency legislation review has been completed and that a policy framework has been finalised.
4.4.4. Companies and Intellectual Property Registration Office
Companies and Intellectual Property Registration Office’s (CIPRO) is responsible for the registration of businesses and intellectual property rights. Recently, CIPRO has been in the media regarding problems with their website, as well as allegations of an inappropriate tender awarded for their central electronic management system and other fraudulent activity. The allegations of fraud have been under forensic investigation by the Auditor-General as well as a private company, which also covered areas of general management and operational challenges. The Committee is awaiting the outcome of these investigations. The recent disruptions with the website and the online system to register businesses and lodge annual returns and the resulting backlogs for processing requests has had a negative impact on the ability of businesses to continue their operations. Given the existing economic situation, these types of delays could exacerbate problems of deindustrialisation and job losses as businesses are unable to continue certain transactions, for example business banking, without proof of registration.
The Committee welcomed the confirmation by the Minister that whistleblowers in CIPRO have been protected. It also indicated that the Committee would join SCOPA on 18 May 2010 for further clarification on the legal process of the allegations against CIPRO.
Finally, CIPRO is meant to be converted into the Companies and Intellectual Property Commission according to the Companies Act (No. 71 of 2008). However, due to the need for technical corrections in the Act, the Commission can only be established subject to the new Bill being assented to. One of the concerns regarding this conversion is the additional functions that will be required of the Commission as compared to CIPRO’s current mandate and its capacity to fulfil the extension of its mandate given the current operational challenges.
5. Conclusion
The Committee acknowledges the rights of the Executive in respect of the transferral of entities to the EDD but wishes to express its concern with regard to the entities transferred given their importance in the implementation of IPAP2 and the proposed Trade Policy and Strategy Framework. In principle, Parliament should be kept abreast of major developments or shifts in departments’ mandates or functions as well as the rationale for these changes, as it impacts on Parliament’s oversight function.
The success of IPAP2 hinges on effective coordination and accountability within the Economic Cluster and between lead and support departments and entities. In this regard, the Committee is of the view that the DTI establishes a coordination mechanism or framework among the lead departments for IPAP2. This mechanism should also include aspects such as the adequate resource allocation for IPAP2 and the synchronisation of timelines in support of critical infrastructure development. In this regard, the Committee would invite the DTI and the Minister in the Presidency: Performance, Monitoring and Evaluation as well as Administration to brief it on the lines of accountability for all departments and entities involved in the implementation of the key action programmes of IPAP2.
A key concern of the Committee is that the aspects of broadening economic participation are not adequately covered within IPAP2. This may inadvertently lead to the further strengthening of larger businesses without directly benefitting previously disadvantaged groups and SMMEs involved in small scale manufacturing.
SMMEs experience a number of challenges when tendering for public procurement. One of these challenges is unfair competition from government officials with conflicting interests. In light of this, legislation that governs public procurement and the public declaration of government officials’ interests should be reviewed to address these anomalies and facilitate SMME development.
Furthermore, the development of SMMEs and co-operatives is hampered by the lack of access to affordable financing. The Committee is of the opinion that a recapitalisation model should be considered for development finance institutions to enhance their capacity to provide more affordable capital.
The National Consumer Commission will be established during the 2010/11 financial year to protect consumer rights. The Committee recognised that the most vulnerable group of consumers are those within rural areas who often were unaware of their rights. In this regard, the Committee would invite the National Consumer Commission to brief it on how it intends to ensure the dissemination of information regarding consumer rights in general, with specific emphasis on rural areas.
The Committee emphasised that there must be a balanced approach to industrial development and trade, which is informed by the National Industrial Policy Framework.
Given the new developmental approach to trade policy, the Committee has stressed that Parliament’s involvement in international agreements, particularly bilateral and multilateral trade agreements and bilateral investment treaties; should be at an earlier stage of development. In this regard, the Committee is of the view that the Rules of Parliament should be amended to assert the Constitutional power of Parliament in ensuring greater participation during the negotiating phase of trade negotiations relating directly to the amendment of existing agreements and new strategic multilateral and bilateral agreements. Furthermore, a delegation of the Committee accompanies trade negotiators for major trade agreements as observers and that the necessary allocation of resources is ensured for the active participation of Parliament in this process.
6. Acknowledgements
The Committee would like to thank participants from the Ministry of Trade and Industry and the DTI at the meeting. The Committee would also like to thank the Members of the Committee and the Committee staff for their contributions in developing this report.
7. Recommendations
Having considered the 2010 proposed Budget Vote 35: Trade and Industry, the Portfolio Committee on Trade and Industry recommend that the House approves the said Budget Vote in terms of the Money Bills Amendment Procedure and Related Matters Act (no. 9 of 2009) (the Money Bills Act).
The Committee further recommends that:
7.1 The DTI submits a skills audit related to the key action programmes outlined in IPAP2 to determine the availability of skills, particularly technical skills, which may inhibit its implementation within six months of the tabling of this report.
7.2 The Development Finance Institutions submit a report on the availability of capital and the constraints that may exist in providing financial and non-financial support to SMMEs and co-operatives within three months of the tabling of this report.
7.3 The DTI submits a report to the Committee on how it intends to address the negative impact of cartels on consumers and SMME development within three months of the tabling of this report.
7.4 The DTI conducts a study on the impact of insufficient development finance and capital investment on addressing structural unemployment within a year of tabling of this report.
7.5 The DTI should report on its expenditure on a quarterly basis at a sub-programme level and in terms of its economic classification.
7.6 The fourth Parliament should consider reviewing the legislative framework and its rules relating to how it process or deals with international agreements and adequate resources are allocated for involvement in the negotiation process of international agreements.
Report to be considered.
References
Department of Trade and Industry (2010) Medium-Term Strategic Framework 2010 – 2013.
Mackenzie-hoy (2010) Tenderpreneurs frustrating legitimate contractors. Engineering News, 15 March. Available: http://www.engineeringnews.co.za/article/tenderpreneurs-frustrating-legitimate-contractors-2010-03-05 [Accessed: 21 April 2010]
National Credit Regulator (2009) Credit Bureau Monitor Third Quarter. September 2009. Available: http://www.ncr.org.za/publications/Credit_Monitor/CB%20Monitor-%20September.pdf [Accessed: 21 April 2010]
National Treasury (2010a) Budget Review 2010.
National Treasury (2010b) 2010 Estimates of National Expenditure.
Zuma, J. (2010) State of the Nation Address at the Joint Sitting of Parliament. Cape Town, 11.February.
[1] Zuma (2010)
[2] The term “tenderpreneur” refers to a person who has made an extraordinary sum of money from a contract (usually a national government, provincial government or municipal tender) that has been awarded for some sort of service (Mackenzie-hoy 2010).
[3] When taking the GDP (Gross Domestic Product) inflation for the 2010/11 financial year (7.1 per cent) into account (National Treasury 2010a).
[4] National Treasury (2010b)
[5] Department of Trade and Industry (2010) and own calculations based on figures from National Treasury (2010b)
[6] National Credit Regulator (2009)