THIS REPORT REPLACES THE REPORT OF THE PORTFOLIO COMMITTEE ON ECONOMIC
DEVELOPMENT PUBLISHED IN THE ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS NO
43 – 2011, P. 1008, ON FRIDAY, 08 APRIL 2011
1. Report of the Portfolio
Committee on Economic Development on the Strategic Plan 2011/12 – 2015/16 and Budget
Vote No. 28 of the Department of Economic Development, dated 08 April 2011
The
Portfolio Committee on Economic Development, having considered Budget Vote 28
and the Strategic Plan for the 2011/12 – 2015/16 period of the Department of
Economic Development, reports as follows:
1. Introduction
The Portfolio Committee on Economic Development is
seized with aligning its oversight mandate with government imperatives of job
creation, the reduction of income inequalities and eradication of poverty. The
New Growth Path is one of the instruments to achieve the stated goals.
The aim of the Department of
Economic Development (EDD) is to promote economic development through
participatory, coherent and coordinated economic policy and planning for the
benefit of all South Africans.
The
report compiled will include the strategic plan and budget vote of the
Department.
2. Strategic Plan 2011/12 – 2015/16 of
the Department of Economic Development
The
Department of Economic Development briefed the Committee on their Strategic
Plan 2011/12 – 2015/16 and their Budget Vote No.28, on 22 March 2011.
2.1. Overview by the Department of
Economic Development
The
Department emphasized that their current Strategic Plan and Budget Vote build on the foundations of the 2010 Strategic
Plan.. The Department further stated that there is a strong attempt to deepen
activities and the work of government. The 2010 Strategic Plan had been a
schematic representation, setting out intent, and with the passage of time much
of the work of the Department has begun to be implemented.
The
Strategic Plan (2011/12) sets a vision of a Department and the focus of the
organogram places an emphasis on high level skills for service delivery.
The
Department indicated that it is working towards greater integration between the
Department and the entities to achieve the national development goals. .
2.2.
Presentation by the Department of Economic Development on their Strategic Plan
2011/12 – 2015/16
The Department provided an analysis of its strategic objectives,
including budgetary tables (per graph) over the MTEF and projected personnel
figures:
Programme 1:
Administration
This purpose of the programme is to coordinate and render an effective,
efficient, strategic support and administrative service to the Department,
deputy the Department, director-general, the Department and its agencies.
Programme 2:
Economic Policy Development
The purpose of the programme is to strengthen the economic development
policy capacity of government; review, develop and propose the alignment of
economic policies; and develops policies aimed at broadening participation in
the economy and creating decent work opportunities.
Programme 3:
Economic Planning and Coordination
The purpose of the programme is to promote economic planning and
coordination through developing economic planning proposals; provide oversight
and policy coordination of identified development finance institutions and
economic regulatory bodies; and contribute to the development of the green
economy.
Programme 4:
Economic Development and dialogue
The purpose of this programme is to promote social dialogue, implement
strategic frameworks; build capacity among social partners; and promote
productivity, entrepreneurship and innovation in the workplace.
The Department highlighted the following regarding the public entities:
The Department indicated that the IDC is restructuring its operations to
effectively support the NGP and IPAP2. It further noted that the Small Business
component of the IDC is envisaged to form part of the consolidated small
business development entity in short to medium term.
Khula and Samaf are also envisaged to form part of a consolidated small
business development entity in the short to medium term. The Khula Direct
(retail lending) will be piloted in 2011/12 financial year.
The Competition Commission will continue to prioritize key sectors to
create an improved competitive environment for economic activity. The Department
further highlighted that the Commission has secured more resources, but noted
that accommodation is a challenge.
2.3. Discussions
2.3.1. Key issues raised:
·
The committee noted the lack
of alignment of plans among the three spheres of government.
·
The lack of collaboration
and coordination between the DFIs at provincial and national level is disconcerting.
·
Members noted that the New
Growth Path highlights the central role that government must play in the
economy and acknowledges the importance of the private sector in achieving government’s
objectives.
·
Members sought clarity on how
government intends to change the apartheid spatial development patterns to suit
the current objectives
·
Members enquired about the
Department’s strategy for mitigating against the external economic shocks such
as the increase in oil prices which would in turn have a negative effect on the
job creation targets, economic growth and the income distribution gap.
·
The strategic plan is not
clear what is needed to contribute to its success, for example infrastructure
as enablers for economic development.
·
Members wanted confirmation
whether or not the NGP is the new economic policy of the country.
·
How is government going to step
up the Expanded Public Works Programme, which are linked to infrastructure and
meeting the social needs of people?
·
Members expressed concern
that the 2011/12 Strategic Plan is not speaking to regional integration as
expressed in the NGP
·
Members noted that the
Department is experiencing accommodation challenges.
·
Communication to cooperatives
and small businesses is a challenge, because they are not aware of the services
and incentives provided by government, especially mentorship programmes to
SMMEs
2.3.2. Responses:
Infrastructure
as an enabler for economic development
The NGP identifies several job drivers, of which infrastructure is one,
where major investments have been ploughed into road, rail and electricity
projects (IRP 2). The Department noted
that government is expected to invest about R900 billion over the next fifteen
years on infrastructure development. In building this infrastructure government
also intends creating jobs.
Incentives
to businesses and consumers in the green economy
The new capacity which the IRP 2 will bring, (36%) is focusing on
renewables. There are various incentives to the consumer and business e.g. on
the energy side where lots of work is going on in the solar water (geysers)
side. Installing solar geysers serves as an incentive to consumers, where
consumers will be receiving a rebate and their cost on electricity over time
will be less (on hot water consumption) than if the consumer continued with the
conventional geyser. A challenge is where there is no high uptake, where there
is a shortage of plumbers to do this job. Plumbers do not have the necessary qualifications;
i.e. there is a skills shortage.
Key signals are being given where new sectors can be created in the Green
Economy. The Green Economy Fund by the Industrial Development Corporation focuses
on incentivisation, The Department highlighted that the IDC fund will not be
providing subsidies to consumers, but it is intended to support green
industries.
Economic
plan of the country
The current government economic plan is the New Growth Path (NGP). New
elements are introduced but government intends building on the previous
economic policies.
Incentives
to private sector to create employment
The Deputy Minister stated that there are various initiatives currently
being implemented which were highlighted in the SONA and the Budget Speech,
which begins to provide resources to the principles applied in the NGP. These
initiatives include: the R9b jobs fund over the next three years, R10b
administered by the IDC etc. These are just some of the initiatives which are
going to be used to incentivize the private sector to create jobs.
Addressing
the spatial dimension of the economy
According to the Deputy Minister, the New Growth Path emphasis the
spatial dimension of the economy, where it is not identified as a problem but
as an opportunity for job creation, and as government changes these patterns of
development, those areas will grow simultaneously. The EDD is busy putting
together a set of criteria in distressed areas to ensure that a balance is
found in development.
Successful
implementation of the Strategic Plan
The Department indicated that coordination will be critical for the
department if they are to implement their strategic plan successfully.
Initiatives aimed
at the Expanded Public Works Programme
There are various areas within which the EDD are intervening and
supporting the Expanded Public Works Programme. These include: youth
employment, as well as the Working for Water Programme. The aim is to build a
sustainable programme of economic development flowing out of the Working for
Water programme.
Working
relations with the provincial and local sphere of government
The EDD has undertaken initiatives to consolidate coordination, with the
different spheres of government. One of the key initiatives is to coordinate
activities with the provincial sphere of government. More detail will be
announced concerning this issue in the budget vote speech of the Minister.
The Deputy Minister
further noted that there is a consolidation of co-ordination within government,
horizontally across government departments and now vertically across the three
spheres of government. He said an example of that is the impact of the Medupi
power station on the local economy which is quite impressive.
The NGP vis
a viz regional integration
A key feature of the NGP is regional integration and the Department was committed to
it. The department acknowledged that there are
challenges in reaching this objective. The level of development between SA and
other African countries are “miles apart”, where for example there are major
infrastructure differences. However, SA is looking at this as an opportunity to
invest in the region. Government intends to create the environment for
businesses to enter these markets.
Accommodation
as a challenge at the DTI campus
The DG highlighted that the accommodation issue was a political decision
by the two Ministers to have the 2 departments on the campus. This arrangement
was however dependent on other agencies that should have moved (e.g. CIPRO). The
EDD is optimistic that the accommodation issue will be resolved once CIPRO and
possibly other entities under the DTI will be moving.
The MoU between the EDD and DTI relate to all corporate matters. The
major revue of the MoU is currently underway. The MoU will be modified where
the EDD envisage undertaking some of the functions, previously performed by the
DTI.
Successful
implementation of the strategic plan
The Department said that
what is needed to make the plan successful are broader factors in the local and
global economy, state incentives, and building a Department with the necessary skills
capacity to carry out its tasks.
Impact of an
increase in the price of oil on GDP
The EDD acknowledged that job creation cannot come in the absence of
economic growth. However, the EDD noted that if too much emphasis is placed on
growth, history will repeat itself, where there was economic growth (during the
2000’s) which was not “converted” into the creation of employment opportunities.
Initiatives
relating to local procurement
With regard to procurement issues, it is fundamental that local
procurement need to be ramped up, where SMMEs can benefit. An important factor here is
the 30 day payment provision because small and micro businesses could not
sustain themselves even if they can compete.
2.3.3. Recommendations
·
Strengthen the alignment and integration of the plans and
programmes of the national, provincial and local government spheres.
·
Ensure better coordination and collaboration among the DFIs at
national and provincial level and within provinces.
·
Report within six months, on progress made with regard to
changing the country’s spatial dimension.
·
Speed up the process of finding accommodation and report progress
within the next three months.
·
Improve communication with cooperatives and small businesses
through community outreach campaigns.
3.
Presentation on Budget Vote No. 28
The following is Department of Economic Development’s Budget Vote No. 28
to the Committee.
Table 1 (below) shows the Budget of the Department of Economic
Development
Table 1: Budget of the Department of Economic Development
|
Programme |
Audited
outcome |
Audited
outcome |
Audited
outcome |
Adjusted
appropriation |
Revised
estimate |
Medium
term |
Expenditure |
Estimate |
|
R million |
2007/8 |
2008/9 |
2009/10 |
2010/11 |
2010/11 |
2011/12 |
2012/13 |
2013/14 |
|
Administration |
- |
- |
16,7 |
45,1 |
39,8 |
55,0 |
60,5 |
63,7 |
|
Economic
Policy Development |
- |
- |
- |
18,6 |
9,1 |
23,3 |
29.3 |
30,9 |
|
Economic
Planning and Coordination |
245,1 |
220,4 |
298,0 |
374,6 |
333,3 |
499,9 |
556,6 |
599.5 |
|
Economic
Development and Dialogue |
- |
- |
- |
11,5 |
2,3 |
16,3 |
18,3 |
19,3 |
|
Total |
245,1 |
220,4 |
314,6 |
449,8 |
384,5 |
594,5 |
674,7 |
713,3 |
|
Change to
2010 Budget estimate |
|
|
|
31,2 |
(34,1) |
100,1 |
154,4 |
164,5 |
Source: Strategic Plan presentation (22 March 2011) of the Department of
Economic Development
Expenditure is expected to increase from R449.1 million to R713.3 million
(Table 2 above) over the MTEF and the increases is mainly towards transfers and
subsidies
The Department concluded by stating that in less than 2 years, it has
established itself and built its initial capacity. The Department further
highlighted that it has been instrumental in the development the New Growth
Path and the Delivery Agreement Outcome 4: Decent Employment through Inclusive
growth. Currently, the Department is not constrained by budget shortfalls, but
there is inadequate provision in the medium term (personnel, capital
expenditure).
3.1. Discussions
3.1.1. Key
issues raised:
·
Members sought
clarity on the transfers to the
·
Members raised
concerns regarding the absence of quantifiable targets or outcomes to measure
performance.
·
Members sought
clarity and more information on the establishment of the Social Partner Fund.
·
Members stated
that the increase in funding for Samaf and Khula over the MTEF is inadequate.
3.1.2 Responses:
Transfer to the
Transfer to
The
transfer to Wits University deals with the provincial capacity building
training programmes, to train staff from provincial offices in local and
regional economic development issues and the alignment of the PGDSs and the
NGP.
Clarity on the Social Partner Fund
The
Department replied that they do not intend establishing the Social Partner Fund
out of voted funds, per se, however, it can for example make a contribution.
The idea is to set up a collaborative capacity building programme with the
unions. The EDD intend piloting and testing this programme with their existing
allocation. What has currently been worked on, with all the federations, is
that within the various sectorial unions that there is a need to improve and
understanding economic policy. The aim is to place specific staff which will
help to build the capacity of particular unions on economic development issues
and trends in particular sectors.
Funding of Samaf and Khula over the MTEF
According
to the Department the Minister will be making an announcement regarding the
merger of the entities during his budget vote speech. The EDD acknowledged that
there is a slow growth in the allocation of Samaf and Khula. There IDC’s small
business loan book will become part of the merger, so there is potential for capitalization
and/or recapitalization.
3.1.3. Recommendations
·
Increase the
amounts transferred to Khula and Samaf in order for them to effectively fulfill
their mandate
4. Presentation by the Department of
Economic Development on their organizational structure
The
Department outlined the regulatory framework governing the organisational
structure of departments. It also explained the processes that were followed in
finalising the Department’s organisational structure. The Strategic Plan was
drafted during May-June 2009, where an organisational structure was developed
which was aligned to the final Strategic Plan in September 2009.
The
Committee was briefed on the organisational structure of the Department. It was
broken down into the different
programmes, i.e. Administration, Economic Policy Development, Economic Planning
and Coordination and Economic Development and Dialogue
The
Department indicated that the Department has funding for 129 posts in the
coming year. The DG noted that the approved structure (265 posts) cannot be
funded during the current MTEF without an increase in the baseline. In filling
posts the Department must consider the ratios of line to administrative staff
and senior management to middle management. The DG assured members that the
recruitment will continue apace, within budgetary constraints.
4.1. Discussions
4.1.1. Key
issues raised:
·
Members
also commended the Department for approaching the Department of Women, Children
and People with Disabilities for a database of people with disabilities.
Members however also encouraged the Department to also approach the national
bodies which might include, DeafSA, the National Council of People with
Physical Disabilities SA etc.
·
Members
raised concern that the activities of the Department might lead to duplication
in relation to the National Treasury, DTI and the Planning Commission. Members
expressed concern that there is no quantitative affect of what the Department
has achieved on for example the GDP, job creation etc. Members noted that the Department
is dependent on what other departments have achieved.
·
Members
expressed concern that departments have vacant funded posts..
·
Members
enquired if the current organisational structure will assist in achieving its
vision.
·
Members
expressed concern that the recruitment process is taking too long. Members
enquired what the turnaround time is of the department in filling posts.
·
Members
enquired about the latest developments in connection with the establishment of
the Economic Development Institute.
·
Members
raised concerns regarding the appointment of contract workers, and enquired about
the mechanisms in place for retaining these workers and converting them to
permanent when appropriate.
·
Members
enquired if there any areas where the department feel that they might fall
short as highlighted by the Auditor-General’s report.
4.1.2. Responses
Quantitative effect of the
EDD
The Department noted that monitoring and evaluation (M&E) is
part of implementation. M&E is action oriented research, where the Department
wants to create (1) accountability and (2) lessons for improvement. The
Department, with the Presidency (M&E) is leading a process where they want
to take a particular system, developed by the International Labour Organisation
(ILO), the Dynamic Social Accounting Matrix System and adapt it to measure the
employment impact of government policies and programmes. This will place the
Department at the centre of M&E on the impact of the various policy
initiatives articulated in the Growth Path and its impact it has on employment
creation, economic growth, competition policy etc. According to the Department,
with this intervention, the department will find its space within the whole
implementation process of micro- and macro-economics policy. The first report
will be produced to Cabinet during August 2011.
Social dialogue programme of
the Department and NEDLAC
The Department highlighted that their social dialogue does not aim
to substitute NEDLAC, but aims to compliment NEDLAC. With the social dialogue
programmes the Department aim to go the sectors and workplaces, unlike NEDLAC which
is a national forum.
The filling of vacant posts
Cabinet
has taken a decision regarding the filling of funded vacant posts in the public
service. This is an area where the Department also features with regard to the Dynamic Social Accounting Matrix. The Performance
Monitoring and Evaluation Department (Presidency), Department of Public Service
and Administration and the Department has a role to play in ensuring that these
posts are filled.
Sufficient staff establishment to
achieve objectives
The
DG indicated that 129 staff for this financial year is the total. In other
words another 31 posts have to be filled. The DG noted that prior to the
tabling of the 2010 Strategic Plan of the Department; a Strategic Plan had to
be developed in order to develop the organogram in order for the Department to
become functional. The Department noted that the Department, in practice, still
needs to prove their effectiveness and then motivate to for increase in the
baseline, which will allow the Department to secure the necessary funding.
Recruitment process in the public service
The
Department indicated that the average time in filling posts in the public
service is 6 months. The Department however noted that the Department will not
be targeting 6 months. There are however regulatory requirements that prolong
the processes. The Department stated that once its Human Resources Section is fully
capacitated it will speed up recruitment processes.
The
Department highlighted that the vetting is a once-off process. However, for the
Senior Managers there is an annual declaration of interests.
Progress with the establishment of the
Economic Development Institution
The
Department indicated that during this financial year (2011/12), it has to
confront the issue on this committed to the establishment of the institution.
Retention strategy of employees appointed on
contract
According
to the Department it is looking at the contract workers as a “talent pool”. The
Department may develop a database of the contract employees to determine
factors such as the length of the contract; their skills etc. and then engage
the Minister and Deputy Minister on how it can retain these skills.
Challenges as highlighted in the Auditor-General’s
Report
According
to the Department the Human Resources area is where challenges have been
highlighted, because the budget needs to be spent, recruitment needs to be
aligned to the budget allocation and that the processes need to comply with all
the requirements. The Department however acknowledged that in some areas it
will be difficult to comply with the requirements.
4.1.3. Recommendations
·
The six month
period of filling vacancies should be reduced to a maximum of three months.
·
Careful
consideration should be given to race and gender when filling senior level
posts.
·
Provide a
progress report on the establishment of the Economic Development Institute by
the end of June 2011.
·
Where appropriate
contract workers should be converted to permanent for the sake of continuity
and retention of skills.
5. Conclusion:
Having
considered the budget vote and strategic plan of the Department of Economic
Development, the Portfolio Committee recommends that the House endorse the 2011/12 Budget Vote 28 of
the Department of Economic Development.
Acknowledgements
For their cooperation and
readiness to lend a hand when there is a need, the Portfolio Committee of
Economic Development wishes to thank the following:
Minister : Mr
Ebrahim Patel
Deputy Minister : Mr
Enoch Godongwane and
Director-General : Prof
Richard Levin
Report
to be considered.