The BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON ECONOMIC DEVELOPMENT ON THE PERFORMANCE OF THE ECONOMIC DEVELOPMENT DEPARTMENT FOR THE 2011/2012 FINANCIAL YEAR, DATED 23 OCTOBER 2012

The Portfolio Committee on Economic Development having assessed the performance of the Economic Development Department for the 2011/12 financial year reports as follows:

1. INTRODUCTION

The Budget Review and Recommendation Report (the report) process cycle, requires all Portfolio Committees to increase their oversight responsibility and roles throughout the year with an aim of producing an assessment of activities reports related to their portfolios before the presentation of the Medium Term Budget Policy Statement (MTBPS) by the Minister of Finance at the end of October each year.

The challenge committees experience is the lack of enough time allocated for this purpose. As a result, committees find it difficult to make well informed and well focused reports. This however does not mean the committees should compromise on the quality of the reports’ output.

This report of the Portfolio Committee on Economic Development (the Committee) focuses on the period 2011/2012 financial year including the first quarter performance of the 2012/2013 financial year of the Economic Development Department referred to as EDD.

Of worth noting is the fact that the Committee will not include the annual performance report of the public entities in this report due to time constraints, but will however do so in its next report which will be solely on the Public Entities’ performance for the same period before the December recess of 2012.

1.1 The Committees’ roles and responsibilities

Chapter 4 of the Constitution of South Africa, Act 108 of 1996 sets out in detail the powers, functions and procedures of Parliament. Parliament through Committees, such as the Portfolio Committee on Economic Development, is tasked with the following functions;

· Making laws;

· Maintaining oversight over national executive authority and any organ of state;

· Facilitating public involvement in the legislative and other processes of the Assembly and its committees

· Participating in, promoting and overseeing co-operative government; and

· Engaging and participate in international participation (participate in regional, continental and international bodies).

Section 5 of the Money Bills Amendment Procedure and Related Matters Act No. 9 of 2009, empowers the National Assembly, through its committees, to annually assess the performance of each national Department in order to compile and submit an annual Budgetary Review and Recommendations Reports (BRRR) for each National Department that falls under its oversight responsibility. Such reports must be tabled in the National Assembly.

In terms of making laws, the Committee is still awaiting the introduction of the following amendments:

· Competition Amendment Bill;

· International Trade and Administration Amendment Bill; and

· Green Paper on New Growth Path as promised by the Department.

1.1.1 Process/method followed in preparing the report

For the purposes of this report, the Committee looked at the following to inform its report:

· 2011/12 EDD strategic plan

· EDD Annual Performance Plan

· EDD 2011/12 Annual Report;

· EDD 2011/2012 Financial Statements;

· EDD 2012/2013 quarterly report

· Briefing by the Auditor-General; and

· Briefings by the Finance and Fiscal Commission on the economic overview of the country and the Millennium Development Goals

· The New Growth Path

· The Industrial Policy Action Plan II

· 2011/12 Estimates of the National Expenditure

· Adopted NEDLAC processed Accords

· The State Of the Nation Address

· The Constitution

1.2 The Economic Development Department

The Economic Development Department (the Department) aims to promote economic development through participatory, coherent and coordinated economic policy and planning for the benefit of all South Africans. In order to achieve its mandate, the Department ensures that it;

· Co-ordinates the economic development contributions of government Departments, state entities and civil society;

· Supports efforts that ensure coherence between the economic policies and plans of the State and State entities on the one hand, and Government’s political and economic objectives and mandate on the other; and

· Promotes government’s ability to achieve its goals of advancing economic development with descent work opportunities.

2. DEPARTMENT’S STRATEGIC PRIORITIES

The department identified these three key strategic objectives to inform their work:

· Co-ordinating the economic development contributions of government Departments, state entities and civil society;

· Supporting efforts that ensure coherence between the economic policies and plans of the State and State entities on the one hand, and Government’s political and economic objectives and mandate on the other; and

· Promoting government’s ability to achieve its goals of advancing economic development with descent work opportunities.

2.1 Programme 1: Administration

The purpose of this programme is to co-ordinate and render an effective, efficient, strategic support and administrative service to the Minister, Deputy Minister, Director-General, the Department and its agencies.

The objectives and measures of this programme for the period under review were to:

· Provide strategic support and administrative service to the Minister and the Deputy Minister;

· Provide strategic support and administrative service to the Director-General; and

· Provide operational and administrative support to the Department.

2.2 Programme 2: Economic Policy Development

The main purpose of this Programme is to strengthen the economic development policy capacity of government. The objectives and measures for this programme were to:

• Monitor implementation of the NGP and produce quarterly reports;

• Issue policy papers;

• Convene policy platforms;

• Provide analytical data on the real economy;

• Establish an economic development index;

• Develop BBBEE policy frameworks;

• Establish Economic Development Institute; and

• Develop, implement, monitor and evaluate strategies for youth employment, gender and the Second Economy

2.3 Programme 3: Economic Planning and Coordination

The main purpose of this programme is to develop economic planning proposals for consideration by Cabinet and for submission to the National Planning Commission to be incorporated in the wider national plan through:

• Submitting proposals to the National Planning Commission, Cabinet and the Provinces;

• Coordinating and developing sector plans for key sectors;

• Developing proposals for harmonising national, provincial and local economic development plans;

• Developing spatial economic development action plans;

• Exercising policy, strategy and budgetary oversight over Development Finance Institutions (DFIs) and Economic Regulatory Bodies (ERBs);

• Developing a strategy to enhance investment for economic development;

• Developing papers on leveraging procurement and expenditure to enhance government’s developmental priorities;

• Promoting South Africa’s international relations strategy and economic development by engaging with regional and international agencies and multilateral institutions;

• Growing the Green Economy through coordinating government and private sector players, including by establishing a dedicated fund; and

• Growing the Agro-processing Sector by coordinating government and private sector players, including establishing a dedicated fund to support enhanced competitiveness.

2.4 Programme 4: Economic Development and Dialogue

The main purpose of this programme is to promote social dialogue to foster economic development and build capacity among social partners, as well as, implement strategic frameworks. Through this programme, the Department envisaged to:

• Convene national social dialogue forums;

• Facilitate social pacts at the national level in the workplace and within sectors;

• Facilitate, monitor and report on the implementation of framework agreements and social pacts;

• Host learning events for economic development learning networks;

• Host an annual Economic Development Conference (with Policy Branch); and

• Convene the Economic Advisory Panel.

3. ANALYSIS OF THE PREVAILING STRATEGIC AND OPERATIONAL PLAN’S ATTAINMENT

The Department has managed to attain some of its strategic priorities as outlined in the operational plan. It reported that the main success indicators of its performance for the period under review were the 300 000 jobs that had been created, but it was concerned that the jobs were disproportionately generated from within the public sector and that workplace inequalities had not satisfactorily decreased in general.

The Department is three years old and is moving from policy development towards implementation. In this regard, it was refocusing the Industrial Development Corporation (IDC), developing Social Accords, supporting the development and implementation of the National Infrastructure Plan (NIP) and reforming its small business entities.

The challenge it faced was the slow growth in the South African economy, the threat of an economic downturn in Europe and potentially the United States of America and China. The downturn put pressure on the South African economy via exports and financing on the infrastructure plan.

Other challenges were the persistent inequalities experienced in the workplace and the shortage of high level skilled staff. The Department had mitigation strategies for these challenges and was establishing its own new systems.

The Department supported the Secretariat of the Presidential Infrastructure Coordinating Commission (PICC) in the development, coordination and implementation of the National Infrastructure Plan. The Industrial Development Corporation’s (IDC) activities had been aligned with the New Growth Path (NGP) to fund this development.

The South African Micro finance Apex Fund (SAMAF), IDC Small Business Unit and Khula had been merged into the Small Enterprise Finance Agency (SEFA) which was launched in April 2012.

The Department participated in the Walmart/Massmart merger case and was pleased with the recent court judgement on the matter. Four Social Accords were signed with the social partners, and these are the National Skills Accord, the Basic Education Accord, the Local Procurement Accord and the Green Economy Accord.

The Department worked with the Department of Rural Development and Land Reform (DRDLR) to develop a coherent, integrated, spatial approach to socio-economic development. 262 000 solar water heaters had been installed and the IDC had created 45 900 jobs through its investments.

Regarding the implementation of the Annual Performance Plan, the main challenges were that the targets did not adequately reflect the new tasks that arose in the course of the year, in particular the work on the PICC. 17 Strategic Infrastructure Projects (SIPs) were identified and a Monitoring and Evaluation Framework was developed to track the SIPs progress. The Department provided brief assessment on the progress of the NGP which had led to the establishment of the PICC.

The Department had established a business hub at the South African Institute for Chartered Accountants (SAICA) for Small Medium and Micro Enterprises (SMME). IDC’s disbursements had increased by R2 billion to R8.5 billion, with transfers to SAMAF and Khula totalling to R225 million, and it had raised a jobs fund of R2 billion.

The Department provided support for the Tripartite Summit to establish a Tripartite Free Trade Agreement amongst the regional economies of the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). The Department also participated in the development of infrastructure within the North - South Corridor and it had made presentations at the International Labour Organisation (ILO) Jobs Pact Workshop in December 2011.

The Department held workshops in seven provinces on the NGP, on the Social Accords and on capacity building workshops for labour. All corporate governance requirements were met. The overall vacancy rate was 13.2 per cent.

While employment creation was on track, new risks had emerged locally and internationally. The Department would be accelerating its responses to the global crises and to inequalities in the workplace. The Department however promised to continue its shift from policy development to policy implementation.

4. ANALYSIS OF THE EXPENDITURE REPORT

The Department was allocated a final appropriation of about R598.3 million (See Table 1 below). Out of this amount, the Department spent R577.6 million (See Table 2) and the variance or under expenditure makes up 3 per cent of the final appropriation.

Table 1: Annual Appropriation

Programme	Final Appropriation ('000)	Actual Expenditure ('000)	Variance ('000)	Variance as a % of Final Appropriation
Administration	57,646	50,822	6,824	11%
Economic Policy	16,160	12,498	3,662	23%
Economic Planning and Coordination	503,277	501,013	2,264	0%
Economic Development and Dialogue	21,276	13,269	8,007	38%
Total	598,359	577,602	20,757	3%

Adopted from 2011/12 Annual Report

The Department reported that its expenditure was up by 44 per cent, compared to the previous financial year. The total adjusted budget for the 2011/12 financial year was R 598.4 million, an increase of 33 per cent compared to the previous financial year. Expenditure for the 2011/12 financial year was R 577.6 million or 97 per cent of the adjusted appropriation, compared to R400.6 million or 89 per cent in the 2010/11 financial year. Excluding transfers, expenditure was R 89.6 million or 81 per cent of adjusted appropriation of R 110.4 million, compared to R 44.2 million or 48 per cent in the 2010/11 financial year.

The Department further reported that the 2011/12 financial year was the Department’s second full year of operation as a separate vote and that there were still challenges experienced in recruiting suitably qualified and experienced staff. The Department saw compensation of employees as a major cost driver which accounted for lower expenditure.

4.1 Programme Analysis

Programme 1: Administration

Actual spending for Programme 1 at 31 March 2012 was R 50.8 million or 88 per cent of budget, compared to R 35 million or 78 per cent in the 2010/11 financial year. Expenditure increased by 46 per cent. Under-spending was reported as mainly due to slow spending on capital assets.

Programme 2

Actual expenditure for Programme 2 amounted to R 12.5 million or 77 per cent of the budget, compared to R 6.6 million or 39 per cent in the 2010/11 financial year. Expenditure increased by 89 per cent. Slow spending on this programme was due to slow rate of filling posts due to difficulty in employing appropriately skilled staff.

Programme 3

Financial year expenditure for Programme 3 was R501 million or 100 per cent of the budget, compared to R 359 million or 95 per cent in the 2010/11 financial year. Expenditure increased by 40 per cent. R 479.9 million was transferred to the Department’s Public Entities.

Programme 4

Spending for programme 4 was R 13.3 million or 62 per cent of the budget, compared to R 456 000 or 4 per cent in the 2010/11 financial year. Expenditure increased more than 20 fold. Slow spending on this programme was due to slow rate of filling posts due to difficulty in employing appropriately skilled staff.

4.2 Receipts

The Department reported as follows:-

· Revenue collection for the 2011/12 financial year totaled R 592.9 million or 243 per cent, compared to R 547 million or 238 per cent in the 2010/11 financial year.

· Main revenue generator for the Department is fines and penalties from the Competition Commission and Dividends from the IDC.

· Revenue is promptly surrendered to the National Revenue Fund (fiscal envelope).

· The Department’s contingent liabilities were R646.8 million, representing an improvement from the previous year’s R739.9 million. The liability was partly a guarantee for the Industrial Development Corporation Loans; and an unconfirmed balance for intergovernmental payable of R344 000 for the Department of International Relations. The amount was more in 2011, at R431 000.

· The Department explains, under prepayments and advances, that, “other payments are made of advances to DIRCO for the Department foreign travel.”

· Local and foreign travel expenses for the year under review were R11.9 million. About R9.2 million was for local travel and about R2.7 million was for foreign travel.

· The Department spent R1.1 million on leased cellular phones and photocopy machines. The amount paid to consultants, contractors and agency/outsourced services increased from about R1 million in the previous financial year to R10.9 million in the year under review. Of this amount R4 million went to legal costs. The Department reported that the costs are inclusive of the merger costs and the Walmart/ Massmart legal costs.

5. ANALYSIS OF THE DEPARTMENT’S ANNUAL REPORT AND THE REPORT OF THE AUDITOR-GENERAL

5.1 Analysis of non-financial performance

The NGP identifies key ‘jobs drivers’, with high employment creation potential and the implementation of supporting policies to take advantage of this potential. The key ‘jobs drivers’ include agriculture and agro-processing, mining and beneficiation, manufacturing, the ‘green economy as well as tourism. The NGP sets a target of five million new jobs by 2020, which requires employment to increase at an estimated 3.4 per cent per year, on average, over the next ten years.

In terms of Outcome 4 of the Service Delivery Agreement, some of the important indicators for outcomes for the Economic Development as mentioned earlier are:

· Number of jobs created / reducing unemployment;

· GDP growth;

· Employment ratio or absorption rate; and

· Distribution of earned income.

Hereunder, are graphs and tables that illustrate progress made on the four indicators over the June 2009 to June 2012 period

Table 2: Unemployment absorption rate Table 3:

Adapted from Quarterly Labour Force Surveys Adapted from Statistics South Africa (2012).

Table 5: Employment Absorption Rate

Table 4: Employment absorption rate

Adapted from Quarterly Labour Force Surveys

Regarding income distribution, the Gini Coefficient per capita income was at 0.64 in 1995, without grants it was at 0.66. In 1995, the income gap increased to 0.72 per capita income and without grants it was at 0.77 without the grants. These figures were weighted according to Census 1996 and 2001. The country is waiting for the Census 2011 figures.

5.1.1 Human Resource Report

The Annual Report footnotes that at the end of March 2012, there were 107 staff members at the Department (See Table 6 below). This is a significant improvement because the vacancy rate decreased from about 39.5 per cent in the 2010/11financial year to about 13.7 per cent in the 2011/12 financial year. Of concern is that, between 31 March 2011 and 31 March 2012 the number of terminations and transfers nearly doubled in number from 13 to 25 but the total number of filled posts has not doubled. The Department states that out of 25 people, only 13 resigned. Five people were transferred to other Public Service Departments, one person passed away and six people’s contracts expired.

There was only one employee who was a person living with a disability, thus representing only one per cent of the staff compliment.

5.1.2 Departmental Challenges

The accounting officer reports that the Department is facing the following challenges;

· Shortage of appropriate personnel capacity.

· Lack of sufficient office accommodation.

· Inadequate alignment of personnel with the evolving direction and mandate of the Department.

In the previous financial year, the accounting officer raised the shortage of staff as the source of many problems in the Department. Seemingly the matter became worse in the 2011/12 financial year because the Department reports an additional challenge of a mismatch between personnel capacity and the mandate of the Department. Furthermore, the accounting officer reports that regarding the Presidential Infrastructure Coordinating Commission (PICC) projects, secondments were brought into the Department from Transnet, Eskom, IDC and the Port Authority to help the Department meet its objectives. This occurred despite the fact that the PICC is under the Presidency. The accounting officer states that the work of the PICC is accounted for and approved in the organisational arrangement. But, there is little or no detail provided on budget and other capacity, planning and performance requirements for oversight purposes.

The Department reports that no suitable candidates were found for the Deputy Directors-General posts for the Economic Planning and Coordination and Economic Development and Dialogue Programme. The Department, however, succeeded in employing Chief Directors for Economic Planning, Economic Regulatory Bodies and National Social Dialogue.

In the period under review, the accounting officer’s report stated that it was the second financial year in which the Department functioned independently. In the previous financial year however, the accounting officer reported that the Department was still fully dependant on the Department of Trade and Industry (DTI) for Information Technology (IT) services and facilities management. There is therefore, a need to establish the extent of independence in this regard as the Department’s 2011/12 Strategic Plan indicates that the DTI-IT services arrangement exposes the Department’s assets to a risk of theft and loss. In the Strategic Plan the Department also stated that it mitigated the risk by establishing systems and procedures in the shortest possible time.

For the previous financial year, the Department reported that it was reliant on the DTI for accommodation despite the fact that it was a fully fledged stand-alone Department. The Department and its entities’ offices are located in the DTI campus buildings. In its 2011/12 Strategic Plan the Department mentioned that the Companies Intellectual Property Commission (CIPC) was going to relocate off campus and a block was going to be available for the Department’s use by May 2011. However, when the Portfolio Committee visited the Department in August 2011, the Department’s offices and entities were spread across different blocks on the campus and they had not settled in the identified block. The accounting officer’s report then, also noted that the DTI and its entities were also expanding and therefore required more space. The situation between the two Departments was clearly unsustainable as they were both competing for the availability of limited space.

5.1.3 Additional Matters

The Department was awarded R39 million for the PhytoEnergy project to carry out engineering and environmental impact assessment studies for the project’s development phase until it reaches a bankable status. The funds were obtained from the Employment Creation Fund (ECF) and a Memorandum of Understanding (MOU) was signed by PhytoEnergy, the Department and ECF. The Department reports that in the MOU it committed itself to provide the R39 million funding in 4 tranches. There is no further detail provided on the other parties’ commitments.

Furthermore, PhytoEnergy has established an emerging farmer programme to help emerging canola farmers provide feedstock to its refinery. However, no further information has been provided on the mentorship project, the profile of the emerging farmers or the number of jobs that will be created or saved in this regard.

In the previous financial year, the Department reported that the IDC Board and management had revised its funding strategy and focus and was committed to make R102 billion available over the next five years for projects and priorities in the NGP. For the period under review the accounting officer has reported on this matter again. This is repetition and new developments or information is required.

The Department reports that the Competition Commission dealt with 472 cases and the Competition Tribunal granted orders worth R345 million and heard 63 merger cases. The Department is implicitly dissatisfied with the country’s competition legislation because it does not “subscribe to a trickle down approach.” This remark could imply that the Department wants a change that could lead to an amendment of the Competition Act or policies. This is however not stated clearly in the Annual Report.

5.2 Auditor-General’s report

The Auditor General (the AG) reported that the Department received an unqualified report for three consecutive years. However, a compliance issue that the AG noted is discussed below. In addition, this section also looks at issues raised by the AG in the previous financial year.

5.2.1 Compliance with legal and regulatory requirements

The Auditor General has drawn attention to the fact that the financial statements that the Department submitted for auditing were not prepared in accordance with the relevant legislation. Misstatements of expenditure were identified in the financial statements. The root cause for this was the lack of adequate review of the Annual Financial Statements (AFS) by the Chief Financial Officer (CFO). Regarding this, the AG made the following recommendations:

· Management should ensure that AFS are prepared regularly (monthly vs Quarterly);

· These AFS should be reviewed by the CFO;

· AFS which are submitted must be the final set approved by the leadership and supported as referred to above; and

· Internal audit and the audit committee to review the annual financial statement statements to review before submission for audit.

The Auditor General reported that the Department’s senior management’s review of the financial statements failed to spot the misstatements before the material was submitted. The misstatements were subsequently corrected leading to an unqualified audit opinion.

In the previous financial year, the Auditor General noted the following:

· There were instances where senior managers did not disclose their business interest to a supplier to the Department’s executive authority as per the requirements of chapter 3(C1) of the Public Service Regulations.

· Sufficient appropriate audit evidence could not be obtained that payments due to creditors were settled within 30 days from receipt of an invoice as per the requirements of section 38(1)(f) of the PFMA and Treasury Regulation 8.2.3.

· Persons in charge at pay points did not certify on date of payment that all employees listed on the payroll report were entitled to the payment as per the requirements of Treasury Regulation 8.3.4.

5.2.1.1 Irregular, fruitless, wasteful and unauthorised expenditure

For the 2011/12 financial year, the AG reported no fruitless and wasteful expenditure in the Department. However, during the 2010/11 financial year, the Department incurred fruitless expenditure amounting to R27 000.

According to the 2011/12 Annual Report, the aforementioned fruitless and wasteful expenditure was “awaiting condonement.” the Department’s Audit Committee has five members. All the members were appointed on 28 February 2011. While others attended all meetings, member Mr M.Vuso attended only one meeting out of four.

The AG however suggested that the Department be free from irregular, fruitless and unauthorised expenditures.

5.2.2 Department’s commitments to the AG’s recommendations

The Department made the following commitments to address the audit outcomes raised by the AG:

· Development of a risk assessment strategy;

· Increased focus on the effectiveness of the internal audit;

· Follow up and resolution of all internal control deficiencies at all the entities;

· Development and implementation of an HR plan with a view to meeting the HR needs. This plan has been developed, implemented and approved by the Minister;

· Improvement of the payment process to ensure that payments are made within 30 days. A mechanism has already been developed to track invoices so as to ensure that they are paid within 30 days; and

· Improvement of processes regarding the declarations of interests. The Department reported that this issue has been resolved already.

6. COMMITTEE OBSERVATIONS

The Committee, having interacted with the Department, on its 2011/12 financial year performance made the following observations:

· The Committee congratulates the Department on progress made in establishing the new Department and for the positive reflection on its financial performance

· The Committee congratulates the Department for obtaining an unqualified audit report for two consecutive years.

· The Committee took note of the fact that the Department had during interactions with the office of the AG and made commitments to improve the internal controls.

· The Committee expressed its concern with the fact that the department does not regularly update its own website nor the information appearing on the Government Communication Information System (GCIS) website and this will have a negative effect on the visibility of the department throughout the country.

· The Committee is concerned about the high staff turnover and vacancy rates in the Department, particularly because job creation is the Department’s key mandate.

· The Committee further expressed its concern with the weakness of the marketing efforts of the Department in promoting its work to the South African public.

· The Committee noted the reduction of expenditure on oversees visits and regards this as a positive development; however this should not be at the expense of the fulfiment of the mandate of the department, nor stifle the opportunity for valuable engagement with counterparts in other countries.

· The noted that the department reported that its current practice for payment of creditors was within 15 days of invoicing and this is to be commended; and further urges that this practice be continued.

· The Committee expressed its concern that the department does not have appropriate office space.

· The Committee noted with concern that the creation of jobs for vulnerable groups (people living with disabilities, women and youth) is not being adequately addressed.

· The Department provides little or no feedback to the Committee on engagements in international and regional fora.

· The Committee noted that during the height of the global financial and economic crisis during the period 2008-2010, the South African economy shed approximately one million jobs. Progress has been made in reversing this trend and the committee notes the retention/creation of 322000 jobs during the period under review. This trend should be encouraged and accelerated.

· The Committee notes that SEFA is a critical institution for the creation of jobs and is therefore concerned that the progress towards the establishment of this entity has been slow. The establishment of this entity should be accelerated and finalized as a matter of urgency.

· The Committee noted the Department's concern about the disjuncture between strategic planning in the national department and that of the provincial and local governments. These strategies should be aligned at all levels of government in order to function most effectively, and the national department should lead in this regard.

· Noted that the Department and the Department of Rural and Land Reform are working together on a Spatial Development Plan in order to reverse the apartheid legacy of discriminatory spatial planning, and this work should be given more urgent attention.

· The Committee has noted with concern that, despite the fact that its mandate is centred on economic policy co-ordination, the Department is however reporting that it is shifting from policy development to policy implementation

· The Committee noted with concern that the acting Director-General has been acting for more than six months; and that there has been no Parliamentary Liaison Officer in the Department for more than ten months.

· The Committee noted with concern that there were inaccuracies in some of the figures provided on personnel expenditure in the 2011/12 Annual Report.

· The Committee noted with concern the fact that the Department was not very transparent to the Committee about its strengths and weaknesses.

· The slow pace at which the Department is recruiting its staff is negatively affecting the Department’s ability to perform its duties adequately.

7. RECOMMENDATIONS

Based on the observations that have been made having considered the reports of the Department, the Committee therefore, recommends that the Department rectifies and make improvements on every concern raised in section 6 of this report. The Committee further recommends the following:

· The Economic Development Department should play an active role in the co-ordination of the Department’s activities and that of its entities in order to ensure that the vision of job creation and vacancy closure is realised.

· The disjuncture between strategic planning in the National Department and that of the Provincial and Local Governments should be addressed adequately and the Department should report quarterly on progress made in this regard.

· The Economic Development Department should ensure that it effectively communicates and informs the public at large, about its mandate, projects and programmes.

· The Economic Development Department should, with speed, ensure that its website is up and running so that stakeholders and the public at large are kept abreast of the latest development and activities in the Department.

· The Economic Development Department should ensure that the appointment of the Director-General and the Parliamentary Liaison Officer is pursued with urgency and finalised within the next six months.

· The Economic Development Department should speed up the pace at which staff is recruited and vacancies filled in the Department.

· The Economic Development Department should ensure that its staff retention strategy is effective and leads to a significant reduction in the high staff turnover.

· The Economic Development Department should address with urgency the shortage of office space in the Department in order to create a working environment that is conducive to productivity and efficiency. The Economic Development Department should report quarterly on progress made on this matter.

· The Economic Development Department should make improvements to its internal controls within six months.

· The Economic Development Department should update the Committee regularly on regional and international fora issues affecting the Department and economic development in the country.

· The Department of Economic Development should immediately attend to concerns over the lack of a fraud prevention system.

· Risk management arrangements are lacking in the Economic Development Department and the Department should table a report on correcting this with the Committee within six months.

8. CONCLUSION

The Economic Development Department is a relatively new department but it has already produced the country’s economic framework and four Accords, namely, Basic Education, National Skills, Local Procurement and the Green Economy. In terms of Outcome 4 indicators, there has been an improvement in the country’s GDP but the employment absorption rate and the unemployment rate are still lagging behind the June 2009 figures, less than a month before the Department was established. The Department’s vacancy rate is also concerning, particularly because its mandate is rooted in job creation. It would therefore be expected of the Department to have the lowest or no vacancy rate at all. In addition, the Department’s senior management is male dominated, a matter that needs to be addressed with urgency.

The Department met most of the targets it set in its Strategic Plan during the period under review. However, there are some of the targets that were not met. Overall the Department should be commended for fulfilling its mandate and encouraged to improve where there is still room for improvement. Regarding financial matters, the Committee was pleased with the manner in which the Department had reported which resulted in the Auditor General not to have any adverse findings against it.

Report to be considered