Presentation on the 2015 Appropriation Bill to the Standing Committee on Appropriations

1. Presentation on the 2015 Appropriation Billto the Standing Committee on Appropriations Date: 27 May 2015 Director-General Lionel October

2. CONTENTS • Overview • the dti’sVision • Background • The Industrial Policy Action Plan • Strategic Goals of the dti • Core Programme and clusters of the department • Programmes of the department • Linking to NDP, MTSF and SONA • Co-ordination of outcome 4 and 11 • Strategic priorities for 2015 - 2020 • 2015 Appropriations • Break down of dti’sbudget • dti’s readiness to implement the budget • Cost containment measures • Additional measures for cost containment • Any other measures to the assist committee

3. VISION A dynamic industrial, globally competitive South African economy, characterised by inclusive growth and development, decent employment and equity, built on the full potential of all citizens

4. BACKGROUND • The mandate of the Department of Trade and Industry (the dti) is to steer the development of South Africa’s economy so as to achieve sustainable, inclusive growth thereby alleviating poverty and inequality. As the National Development Plan (NDP) recognises, government and stakeholders must partner to grow the industrial engine of the South African economy, primarily the manufacturing sector. • The strategic objectives and programmes of the dti are closely aligned to the goals set in the NDP • Decent employment through inclusive growth • Create a better South Africa and a better world • The goals of the NDP filter into the MTSF, APP and ENE of the dti to ensure alignment and integration into the work of the dti.

5. PRIORITIES IN THE 9-POINT PLAN ARE ADDRESSED IN THE INDUSTRIAL POLICY ACTION PLAN • Resolving the energy challenge; • Revitalising the Agriculture and the agro-processing value chain; • Advancing beneficiation and adding value to our mineral wealth; • More effective implementation of a higher-impact Industrial Policy Action Plan; • Encouraging private sector investment; • Moderating workplace conflict; • Unlocking the potential of SMMEs, Co-ops, Township and Rural enterprises; • State reform, including boosting the role of state owned companies in broadband, water, sanitation and transport infrastructure; and, • Growing the Ocean Economy and Tourism

6. STRATEGIC GOALS

7. CORE PROGRAMMES AND CLUSTERS • Industrial Development – the development of policies and strategies that promote sector competitiveness, growth, job creation and efficient administration of support measures. • Trade, Investment and Exports – the strengthening trade and investment links with key economies and fostering African development, including through regional and continental integration and development co-operation in line with the New Partnership for African’s Development (NEPAD). • Broadening Participation –the development of interventions and strategies that promote enterprise growth, empowerment and equity • Regulation – the development and implementation of coherent, predictable and transparent regulatory solutions that facilitate easy access to redress and efficient regulatory services for economic citizens. • Administration – effective co-ordination of departmental programmes and provision of necessary support for efficient implementation.

8. PROGRAMMES OF THE DTI • Programme 1: Administration • Programme 2: International Trade and Economic Development • Programme 3: Special Economic Zones and Economic Transformation • Programme 4: Industrial Development • Programme 5: Consumer and Corporate Regulation • Programme 6: Incentive Development and Administration • Programme 7: Trade and Investment South Africa

9. Link to NDP, MTSF, SONA Impact The Presidency (SONA) 9-point plan NDP 5-year MSTF Outcomes Outcomes ESEI & ICTS Clusters of Cabinet IPAP MTEF (3-year) SP (5-year) 21 priorities the dti Outputs APP (3-year) ENE (1-year) Activities Inputs

10. THE IMPLEMENTATION OF OUTCOME 4 (DECENT EMPLOYMENT THROUGH INCLUSIVE GROWTH) • the dti is tasked with coordinating outcome 4 • the dti therefore leads the Executive Implementation Forum (EIF) for outcome 4 which is made up of National Treasury, Economic Development Department and Department of Public Enterprises. This forum reports to the Economic Sectors, Employment and Infrastructure Development Cluster. • the dti convenes the EIF once a year to develop the annual programme of action (PoA). This sets out annual and quarterly targets to achieve the 2019 MTSF targets. • The budgeting for this process is done within each departments own MTEF processes

11. THE IMPLEMENTATION OF OUTCOME 4 (DECENT EMPLOYMENT THROUGH INCLUSIVE GROWTH) • This process also serves to align various activities within the allocated budgets to ensure there are no overlapping responsibilities. • the dti also coordinates quarterly reporting against the PoA. • Some of the key achievements in the implementation of the PoA include a general shift in procurement towards procuring locally manufactured products. Examples of these are • 61.4% of the R14 billion ARV tender for 2015/18 was allocated to local manufactures; • most buses procured for the Bus Rapit Transit (BRT) system across the country will be manufactured locally and; • most of the locomotives procured by TRANSNET and coaches by PRASA will be manufactured locally

12. STRATEGIC PRIORITIES FOR 2015 - 2020 MTSF Outcome 4: Decent employment through inclusive growth the dti Strategic Goal Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation Priorities Proclaim three Special Economic Zones (SEZs) All IPAP (Industrial Policy Action Plan) interventions implemented – 250 projects implemented Industrial Development Cooperation (IDC) to fund two higher level beneficiation projects Develop Mineral Beneficiation Action Plan (MBAP) and incorporate into IPAP Increase use of local metals in South African manufacturing Increase localisation target to 75% Develop options for stable and competitive exchange rate

13. THE IMPLEMENTATION OF OUTCOME 11 (CREATE A BETTER SOUTH AFRICA AND A BETTER WORLD) • The coordinating departments for outcome 11 are the Department of Telecommunications and Postal Services (DTPS) and Department of Defence . • the dtiis responsible for the coordination of its relevant inputs into the implementation of Cluster priorities. • On a quarterly basis the dtireports to the Cluster Secretariat on the status of implementation of these priorities. • These activities are budgeted for within the business plans of the relevant Business units.

14. STRATEGIC PRIORITIES FOR 2015 - 2020 Outcome 11: Create a better South Africa and a better world MTSF the dti Strategic Goal Build mutually beneficial regional and global relations to advance South Africa’s trade, industrial policy and economic development objectives Priorities Export Council to develop African Export Markets Foreign Direct Investment (FDI) investment pipeline of R50 billion Economic diplomacy and pavilions Seven investments and five trade promotion projects South Africa’s position on Southern African Development Community (SADC) Regional Indicative Strategic Development Plan (RISDP) Southern African Customs Union (SACU) development integration Tripartite-Free Trade Agreement (T-FTA) South Africa’s position on T-FTA and Continental-FTA 26 bilateral cooperation agreements in Africa 59 bi-laterals with countries of the South

15. 2015 APPROPRIATIONS

16. MTEF ALLOCATIONS

17. MTEF ALLOCATIONS

18. BREAKDOWN OF the dti’s BUDGET • the dti’s budget is allocated mainly to transfer and subsidies. Transfers and subsidies comprises 84.3% of the dti budget of which 74.3% is used to fund the dti incentive programmes (transfers to public corporations and private enterprises), 7.9% is transfers to departmental agencies, and 2% is other transfers. • Transfers to public corporations include the following : • Manufacturing Incentive which consist of Enterprise Investment scheme, Manufacturing Competitiveness Enhancement Programme (MCEP) and Automotive Production and Development Programme. • Special Economic Zone (SEZ) • Service Sector Incentive which consist of Film and TV incentives and Business Processes Incentives • Transfer to departmental agencies include transfer payments to the dtientities e.g. NCC, NCR, NCT etc, • Compensation of employees comprise 9.3% of the allocated budget and • Goods and services comprise of 6% of the allocated Budget

19. BREAKDOWN OF the dti’s BUDGET • Compensation of employees comprise 9.3% of the allocated budget • Goods and services comprise of 6% of the allocated budget

20. the dti’s READINESS TO IMPLEMENT • the dtihas already successfully implemented its programmes and has made significant contributions to the economy in term of investments leveraged in the manufacturing and services sector, job creation, industrial development and trade with export markets amongst others. • Below are some of the key stats for 2013/14 in relation to the above: • 22 886 projected number of jobs created • 106 559 jobs retained • R40.6 billion projected investment from approved projects • 83 Film and TV productions supported • R3.4 billion increase in manufactured exports • 2 164 projects approved under various incentive schemes • the dtiwill continue to implement its programmes in accordance with its strategic goals in ensuring that it stimulates growth in the economy by promoting industrial development, job creation, investment in South Africa and building mutually beneficial global relationships to steer the development of South Africa's Economy to achieve sustainable and inclusive growth.

21. TRANSFER TO THE DEPARTMENTAL ENTITIES • The Minister of the dti has 13 entities that fall within its portfolio (see slide below) • These entities are overseen by the Group COO and a dedicated Public Entity Oversight (POE) unit. This unit provides an oversight role in ensuring that funds are spent effectively and efficiently and performance targets are met. • The shareholders compact is updated annually to ensure that the roles and responsibilities of the dti and its entities are clearly are clearly articulated. • In addition the entities report quarterly to the Minister on its performance against its strategic objectives. There is also a dti representative on the audit committees of some entities. • The respective entities also report quarterly to the Portfolio Committee on its performance

22. TRANSFER TO THE DEPARTMENTAL ENTITIES

23. IMPLEMENTATION OF COST CONTAINMENT MEASURES the dtihas fully implemented all areas of the cost containment measures as per NT instruction note 01 of 2013/2014. These include amongst others the following : • Travel and Subsistence • Venues and Facilities • Catering and Events • Consultants • Delegations to events

24. ADDITIONAL MEASURES IMPLEMENTED BY the dti In addition to NT’s instruction note on cost containment, the dtihas also issued a circular with further cost containment measures to be implemented in the following areas: • Newspaper subscriptions • Entertainment • Consumables (printing) • E-training the dtialso continuously reviews its policies to ensure more effective and innovative ways of managing expenditure.

25. OTHER MEASURES TO ASSIST THE COMMITTEE • The Economic Competiveness Support Package (ECSP) was introduced by the then Minister of Finance to support industries during the recession. • ECSP is ending in the 2017/18 financial year. Two of the dti flagship programmes are funded by the ECSP i.e. MCEP and SEZ. • After 2017/18, there will be no funding to support the manufacturing sector which is key to growth and job creation. • the dti will also be engaging National Treasury with a view to provide long term funding for the Black Industrialist programme. • The Portfolio Committee on Trade and Industry has recommended that the Minister in consultation with the Minister of Finance, look at ways in allocating additional finance to continue supporting manufacturers in their competitiveness in the 2017/18 financial year going forward.