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PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY. 2008/09 ANNUAL REPORT. 13 NOVEMBER 2009. Presentation Content. 2008/09 ANNUAL REPORT. Economic Context Strategic Objectives Achievements, Progress and Challenges Industrial Development Trade, Investment & Exports
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PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY 2008/09 ANNUAL REPORT 13 NOVEMBER 2009
Presentation Content 2008/09 ANNUAL REPORT • Economic Context • Strategic Objectives • Achievements, Progress and Challenges • Industrial Development • Trade, Investment & Exports • Broadening Participation • Regulation • Administration & Co-ordination • Implications of MTBPS • Conclusion
Economic Context 2008/09 ANNUAL REPORT • In the past 15 years, the domestic economy experienced an annual growth rate of above 3% due to positive global & domestic economic environment & government policies. • However, the beginning of 2008 saw a decline in global economic activity • The collapse of the financial markets further precipitated the contraction in real economy activities. • The global economic situation had a negative knock-on effect on the domestic economy. • The annual growth rate for 2008 was significantly lower at 3,1% as compared to the last three years when the economy grew by above 5 percent on average • Economic activity declined by 6.4% in Q1 of 2009, plunging the economy into recession for the first time in 17 years. The Q2 contraction was lower at 3%
Economic Context 2008/09 ANNUAL REPORT • Manufacturing performance • In the last three quarters of 2008, the manufacturing sector displayed significant vulnerability to the deepening global recession. • Manufacturing production & capacity utilization experienced significant contraction as a result of the decline in both domestic and export demand • Key industrial sectors such as automotives, capital equipment, clothing & textile, metals & metal products were significantly affected. • The Manufacturing sector continued to contract in Q1 and Q2 of 2009 by 22.1 % and 10.9% respectively. The most prominent declines were in the manufacturing of chemicals, an wood and paper products • Trade performance • Between January and February 2009, exports declined by over 6%. • The decline further exacerbated the pressure on the balance of payments. • The deficit for the first two months of the year was R18b, compared to R16.5b for the first two months of 2008.
Economic Context 2008/09 ANNUAL REPORT • Employment • While the economy created around 500 000 jobs annually between 2005 and 2007, a total of 208 000 jobs were lost between the last quarter of 2008 & the first quarter of 2009. • The unemployment rate increased from 21.9% in the fourth quarter of 2008 to 23.5% in Q1 of 2009, which reflected the shedding of jobs in the key sectors of the economy, particularly basic metal products, automotives, clothing and textiles & mining. • Employment contracted further in Q3 of 2009 by 3.6 %, translating into a loss of 484 000 jobs. Of these, 283 000 were in the formal sector with manufacturing and wholesale industries recording the highest losses • The CAPEX programme & the 2010 World Cup infrastructure development have provided a much-needed demand pull for sectors such as metals & capital equipment • The industrial policy opportunities that results from this cannot be under played
Economic Context 2008/09 ANNUAL REPORT 3.0% decline recorded in Q2 of ‘09 Source : South African Reserve Bank “2009 Figure is the growth rate for the first quarter of 2009”
Economic Context 2008/09 ANNUAL REPORT 10.9% decline recorded in Q2’09 Source: Statistics South Africa
Economic Context 2008/09 ANNUAL REPORT 11.4% decline recorded in Sept’09 compared to Sept ‘08 Source: Mar 2009 Stats SA Manufacturing Production data
Economic Context 2008/09 ANNUAL REPORT Maintained at 24.8% Q1 and Q2 of ‘09 due to the Govt. Built programme Source : South African Reserve Bank
Strategic Objectives 2008/09 ANNUAL REPORT • Promoting the coordinated implementation of government’s economic vision and priorities; • Promoting direct investment and growth in the industrial and services economy, with particular focus on employment creation; • Raising the level of exports and promoting equitable global trade; • Promoting broader participation, equity and redress in the economy; and • Contributing to Africa's development and regional integration within the NEPAD framework
the dtiWork Programme 2008/09 ANNUAL REPORT The seven programmes of the dti are thematically organised as follows:- • Industrial development; • Trade, Investment and Exports; • Broadening participation; • Regulation, and • Administration and co-ordination
ACHIEVEMENTS, PROGRESS & CHALLENGES 2008/09 ANNUAL REPORT
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Sector Interventions Various initiatives launched to address key constraints and challenges in the following four lead sectors identified in the IPAP as part of implementing the NIPF. • Automotives and components • The Automotive Production & Development Programme (APDP) was launched in Sept 2008 to replace the current Motor Industry Development Programme (MIDP) with the aim of increasing annual vehicle production to 1.2 million units by 2020. • Capital and transport equipment and metal fabrication • National Tooling initiative launched in support of the capital goods sector. Six regional cluster hubs set up in Gauteng, WC, EC, KZN, Limpopo & Mpumalanga – Intsimbi established as national governance structure • Developed projects to recapitalise 4 of 6 FET college institutions as Tooling Centres of Excellence
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Sector Interventions Capital and transport equipment and metal fabrication • The National Foundry Technology Network (NFTN) coordinating office established at the CSIR. • Provincial road shows (Gauteng, CT, PE & Durban) held to promote the NFTN • MOUs negotiated with the two major industry associations (South African Institute of Foundrymen & the Aluminium Federation of Southern Africa). • The high pressure die-casting industry was benchmarked (11 companies) in collaboration with CAST from Australia. • Five sand casting foundries also benchmarked as a pilot project & this questionnaire will now be rolled out to the rest of the sand casting foundries. • These benchmarking projects are aligned to the UNIDO supplier development project.
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Sector Interventions Plastics fabrication and pharmaceuticals • the dti intervention resulted in local manufacturers winning 84% of a multi billion Rand tender for the supply of antiretrovirals (pharmaceuticals) • Investment by a local company manufacturing plastic automotive components using polypropylene created 130 direct jobs. • Expert Advisory Committee established to implement the Chemical Sector Summit Agreement & the Chemicals Sector Development Strategy • Environmental Impact Assessment on hydrofluoric acid & aluminium trifluoride has been shelved due to the land claim. Investor cannot sign until land claim settled. • Study on Projects Mafutha and Mthombo completed & the task team working on policy options & recommendations for Minister’s consideration.
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Sector Interventions Forestry, pulp and paper and furniture • Draft strategy document on furniture finalised & issued for public comments. Workshop to be conducted with relevant stakeholders before finalising strategy • A furniture incubator has been launched in the Eastern Cape Stabilise Clothing & Textiles to preserve capability & employment • Work done to expedite the implementation of the Clothing & Textile CSP including the design of the Clothing & Textile Competitiveness Programme & a review of duties on fabrics not produced in SA. • Illegal Imports Task Team established in December 2008. • Involved in the Skills Development as part of the dti's Clothing & Textiles Competitiveness Programme. 10 Bursaries awarded to Textile Polymers Students at Stellenbosch University to increase capability of the sector.
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Sector Interventions Business Processing Outsourcing & Offshoring (BPO) • 17 BPO applications approved which will create 18 000 jobs & result in R1,2b investment
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Industrial Financing in support of NIPF & IPAP Enterprise Investment Programme (Revised SMEDP) • The EIP was launched in July 2008 & has two customised sub-programmes, the Manufacturing Investment Programme and the Tourism Support Programme. An internet system implemented to receive applications & provide feedback. • By financial year end, the EIP programme had approved 21 greenfield and expansion projects in the manufacturing and tourism sectors with a total projected investment of R906m & 1 070 projected jobs. Critical Infrastructure Programme (CIP): Five private sector projects approved with a projected investment value of R12b and the creation of approximately 14 706 jobs. Film & TV production: Revised Film Incentive Scheme implemented. Since inception, 50 SA productions & 22 foreign productions approved. Expected SA expenditure for local productions is R931m & foreign productions R1.1b.
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Further Industrial Financing in support of NIPF & IPAP National Industrial Participation Programme: To date, under the NIPP, more than 16 500 direct jobs have been created or retained, in line with the original target & 216 projects implemented. Tax incentive Package: New Tax incentive developed with National Treasury. Regulations for Tax Incentive released for comments & consultations with industry. Competitiveness Incentive: Competitiveness Fund draft proposal and guidelines designed, consultations & presentations with industry held. Not yet approved as impact study only completed in fourth quarter IDC to upscale and align support to IPAP priorities: MoA signed with IDC to facilitate implementation of Industrial Policy.
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Other Important Initiatives • A comprehensive trade policy is being developed to ensure alignment with the NIPF • The ongoing review of import duties on key industrial inputs into the manufacturing sector, of which aluminium, upstream chemicals & textiles were finalised • To assist firms to meet quality standards for accessing increasingly demanding foreign markets & ensuring that low-quality imports do not undercut the productive base of the manufacturing sector, the President assented to two new Acts, namely the Standards Act, No 8 of 2008, & the National Regulator for Compulsory Specifications Act, No 5 of 2008. • Craft hubs were established in Gauteng & Western Cape & business plans completed for hubs in Eastern Cape & KwaZulu Natal • Draft Competitiveness Supplier Development Programme have been developed for Transnet & Eskom
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Other Important Initiatives • The National Cleaner Production Centre continued to promote water and energy efficiency in business & industry. Since 2005 the centre has audited 102 firms and about 25% have implemented its recommendations • Played a key role in addressing the electricity crisis
Industrial Development 2008/09 ANNUAL REPORT • National Industrial Policy Framework (NIPF) and Action Plans (IPAP) Industrial Development Zones • Consultation with National Treasury (NT) on the policy framework and funding mechanisms for the IDZs completed. • Coega IDZ: Four new investors with a total estimated investment value of R108m located in the Coega IDZ during the 2008/09 financial year. A total of 7 223 construction jobs created due to the IDZ construction activities & provincial infrastructure projects facilitated by the Coega • East London IDZ: Seven investors with a combined investment value of R239m announced during the period under review. Of these, three were in the automotive industry, one in agro-processing, one in mariculture & one in manufacturing. This brings to 21 the total number of confirmed investors for the East London IDZ (ELIDZ) with a combined investment value of over R1 billion.
Industrial Development 2008/09 ANNUAL REPORT • Technology & Innovation • According to the latest figures, the Support Programme for Industrial Innovation (SPII) recorded total sales of R309m, of which R150m represented export sales of new products. • The Technology & Human Resources for Industry Programme (THRIP) leveraged R163m from the private sector for new technology development, and supported 264 SMMEs. • Centurion Aerospace Village (CAV): The CAV launched & as an aero-mechanical cluster is the first in Africa. It brings together aerospace companies, both big and small, to manufacture, share resources and costs, benefit from economies of scale & become more competitive. • The Small Enterprise Development Agency Technology Programme created 126 new SMMEs and supported 34 technology transfers to SMMEs to the value of R12m
Performance of NIPP - Defence OTHER MATTERS
Performance of NIPP – Non Defence OTHER MATTERS
Performance of NIPP – Non Defence OTHER MATTERS
Performance of NIPP – Non Defence OTHER MATTERS • Awarded total credits Value US$18bn • Discharged obligations Thales, Agusta Westland, Denel, Boeing, Ford, MBSA, Eurocopter, Damen Shipyard & Alcom Systems • Job Creation 16 500 direct jobs & 216 projects implemented (at Jan ’09)
Performance of NIPP Geographic Spread of Projects OTHER MATTERS
Trade, Investment & Exports 2008/09 ANNUAL REPORT • Entry into force of SACU-EFTA Free Trade Agreement (FTA) in May ‘08 • Raised business awareness of opportunities in SACU-EFTA FTA • Signed SACU-MERCOSUR PTA (April 2009) • Strengthened trade admin coordination (ITED, ITAC, SARS, IDC) • Improved alignment between industrial and trade/tariff policies • Improved coordination of international trade engagements through the Information & Communication Technologies Cluster & stakeholders in NEDLAC • Ongoing support to post-conflict reconstruction and development in countries in Africa • Government-to-government bilateral engagement in Africa to promote trade and investment, cooperative arrangements, bilateral investment agreements, and human and institutional capacity building (6 countries) • In Doha Round, continued pursuit of a developmental outcome, notably industrial tariff negotiations; positions agreed in NEDLAC - a high point in domestic consultative efforts • Positions consulted and developed for agriculture, services, trade remedies, intellectual property, environment, trade facilitation
Trade,Investment & Exports 2008/09 ANNUAL REPORT • Continued engagement in EPA to address concerns and preserve SACU common external tariff • SACU-India PTA (two negotiating sessions – ongoing) • Advanced SA vision for developmental integration in Africa: build productive capabilities, cross border infrastructure, sectoral policy coordination and trade facilitation • In AU/NEPAD, support processes to promote continental integration and economic development • Consolidate SADC FTA by addressing non-tariff barriers, standards harmonisation, trade facilitation and building productive capabilities • Prepare for SADC-EAC-COMESA Tripartite FTA • In SACU, work to develop common policies (industry, agriculture, competition, unfair trade practices), strengthen SACU institutions • Special focus on cross-border infrastructure development in region through Spatial Development Initiatives
Trade,Investment & Exports 2008/09 ANNUAL REPORT • Ongoing work to ensure trade in WMD meet SA’s international non- proliferation treaty obligations and national legislation • Initiate work on Angola, Namibia and SAtrilateral economic cooperation • Lead coordination on trade issues under TDCA midterm review, AGOA, IBSA, and with China under PGD • Lead SA participation in G8+6 on international investment policy • Lead SA legal team in challenge to BEE under Italian BIT • Progress on SA Trade and Investment Policy Reviews
Trade,Investment & Exports 2008/09 ANNUAL REPORT • Export & Investment • A new export strategy was approved & is being implemented. The strategy is based on market penetration, export development in key high growth markets. • In investment promotion & facilitation six themes were pursued: Sectoral Analysis & Project Packaging, Investment Climate & Policy, Invest Marketing, Investor Servicing, Effective Investment Incentives & Effective Institutional Arrangements • Major promotional events were undertaken in China, India, Russia & the Democratic Republic of Congo • Direct support provided to industry through the Export Marketing & Investment Assistance Scheme (EMIA) grew by 5% compared to the last financial year. Funding to the value of R20.9m was committed to assist 490 entities in finding markets & showcasing South African products overseas. • 84 new small exporters were trained in collaboration with SEDA (against a target of 200 due to the prevailing economic conditions)
Trade,Investment & Exports 2008/09 ANNUAL REPORT • Export & Investment • Investors now being managed in a single integrated project team approach. Investors & exporters will in future be serviced through a one-stop facilitation centre, including a support centre staffed by people with disabilities. • Work has begun to strengthen networks with Provincial Investment Promotion agencies & implement coordinated outward trade and investment projects to key priority markets.Coordination meetings held quarterly with key stakeholders such as the IPAs (General Managers & CEO Forums) to ensure a targeted approach • Investment attraction activities moved from a generic to a more targeted approach, resulting in a pipeline of R 46.5b worth of investment projects. Due to the current global financial crisis more effort was spent retaining existing investments & the projected investment target of R206b was not achieved. • The department currently has a network of 45 foreign economic offices to facilitate business on behalf of South African companies
Broadening Participation 2008/09 ANNUAL REPORT • Implementing & monitoring of Codes of Good Practice for BBBEE • Sector transformation charters have been gazetted in forestry, tourism, construction and transport. • Engaged National Treasury on the Regulations for the alignment of the BBBEE Act and PPPFA. • A total of 22 BEE Verification Agencies already accredited. • Appointment of the Advisory Council will be finalised in 2009/10 • Gender and Women’s Economic Empowerment. • Work on stabilising South African Women Entrepreneurs’ Network continued and the strategy behind it is being reviewed • Substantial progress made in institutionalising the Isivande Women’s Fund to provide financial & business development support services to women-owned enterprises. Joint contribution of R100m from private and public sectors has been made. • 46 technology transfers approved for women in business • Entrepreneur workshops (KZN & EC) with 22 schools & 10 learners per school
Broadening Participation 2008/09 ANNUAL REPORT BBBEE and women empowerment through key incentive schemes • The Black Business Supplier Development Pogramme (BBSDP), which assists companies to access business development services, has grown by approximately 800% since its inception. In 2008/09, incentives were awarded to 1 625 companies. • the BBSDP programme is being reviewed to include a once-off facility that will enable black SMMEs to access up to 40% of the costs required to raise a loan to buy tools, equipment and machinery, or to enter into a hire purchase agreement. This and other improvements will be implemented in the 2010/11 financial year. • The seda technology programme created 126 new SMMEs and supported 34 technology transfers to SMMEs to the value of R12 million. • Support Programme for Industrial Innovation (SPII) supported 70 projects to the total project value of R116m • Technology and Human Resources for Industry Programme (THRIP) supported 259 projects; 743 researchers; 1 948 students & 349 enterprises
Broadening Participation 2008/09 ANNUAL REPORT BBBEE and women empowerment through key incentive schemes • Under the Sector Specific Assistance Scheme’s (SSAS) project funding for emerging exporters, R13,7m was committed to assist 132 first- time exporters. • Through the Cooperative Incentive Scheme an amount of R14.9m has been committed to support 93 cooperatives in rural provinces in manufacturing (54%), agriculture, (25%), services (18%), arts & crafts (2%) and retail (1%). • Additional support to cooperatives are also provided through seda, Khula & SAMAF • DVD and simplified booklet and pamphlets on cooperatives produced • Hosted South Africa’s International Cooperatives Day & conference • The other incentive programmes such SMEDP & BPO also continued to support the empowerment goals of the department
Broadening Participation 2008/09 ANNUAL REPORT • Communication & Marketing • the dti intensified communication to targeted clients & stakeholders through radio, television and print media • the dti participated in 109 events, exhibitions and izimbizo to promote the uptake of the dti products and dervices. • A total of 21 media briefings were conducted during 2008/09. • 13 radio show episodes on 12 SABC stations, while the dtiBusiness Talk television show aired 26 episodes on SABC 3, reaching 3.4 million viewers.
Regulation 2008/09 ANNUAL REPORT • Four bills were passed by Parliament and signed into law, namely the Companies Bill, the Consumer Protection Bill, Competition Amendment Bill and Interactive Gambling Amendment Act. • The Intellectual Property Amendment Bill was finalised and will be introduced into Parliament. • Regulatory reviews were initiated as regards the Estate Agents & thresholds for merger notifications in order to, inter alia, reduce costs of compliance for businesses and ease regulatory burden • Liquor regulation: An assessment was done of the process of issuing liquor licenses for distributors & manufacturers & identified areas that impede efficiencies & responsiveness. This assisted in clearing all outstanding applications & significantly improved turnaround times • Consumer redress:. During 2008/09 670 complaints were received. Of these 650 were resolved within 15 days, an improvement from 20 days in the previous year. A total of R 901 437 was recovered on behalf of consumers in refunds. This excludes other forms of redress such as replacements & repairs.
Regulation 2008/09 ANNUAL REPORT • Awareness & educational campaigns: Targeted campaigns were conducted to make business & consumers, especially in rural communities, aware of regulations & compliance • Performance of agencies: The regulatory agencies under the dti continued to perform satisfactorily & to increase their effectiveness in ensuring compliance with regulations. In this period of economic slowdown the National Credit Regulator made significant strides in the area of debt restructuring & counseling. Similarly, the Competition Commission made good progress in acting against companies involved in cartel conduct & collusion.
Administration &Co-ordination 2008/09 ANNUAL REPORT • Strong emphasis was placed on strengthening the dti’s own institutional capacity during the year under review through training & high-value skills recruitment. • The vacancy rate was reduced from 25% in the previous financial year to just over 18% as at 31 March 2009. Attention is being given to talent management, performance management and human resource development. • Initiatives to develop & retain professional and skilled officials included: • 110 middle and senior managers participated in executive management programme • 741 employees attended training and development initiatives offered internally and 190 attended external training programmes • 33 interns were appointed • 108 bursaries active with 51 awarded in 2008/09 • Planning on the roll out of a comprehensive executive development programme was concluded
Administration &Co-ordination 2008/09 ANNUAL REPORT • In ensuring an environment that promotes diversity and inclusion of those historically disadvantaged, the dti has achieved the following targets: • Blacks represent 82% of the total staff employed • Females represent 59% of the total staff employed • 41% representation of women at senior management level • 1% representation of people with disabilities • 84% of the procurement contracts awarded to SMMEs, with 41% to women empowered suppliers and 3% to enterprises owned by People with Disabilities
Administration &Co-ordination Gender Representivity 2008/09 ANNUAL REPORT
Administration &Co-ordination Race & Gender Representivity 2008/09 ANNUAL REPORT
Administration &Co-ordination 2008/09 ANNUAL REPORT • Strengthening the dti’s corporate governance • The key governance structures, the Executive Committee, Operations Committee, Audit Committee and the Risk Management Committee have been instrumental in ensuring strategic and operational effectiveness by developing policies and strategies as well as managing risk and performance. • Key deliverables for the year under review: • Effective internal audit function • Implementation of the reviewed strategic and operational risk registers • Development of the Risk Management Policy & Fraud Prevention Plan • 100% Disclosure of financial interests by senior managers • 96% of senior managers concluded performance agreements • 2 Ethics awareness workshops • SMS & MMS trained on corporate & enterprise risk management • Finance • Unqualified audit reports by the Auditor-General for five years in a row • Lowest under-spending in the past five years to 1% of budget
Administration & Co-ordination Five year comparison of budget vs expenditure 2008/09 ANNUAL REPORT
Administration &Co-ordination 2008/09 ANNUAL REPORT Analysis of the current MTEF On average, the allocation of the current budget over the MTEF period is as follows: • 78% to transfer payments made up of:- • Agencies - 24% • IDZ’s - 19% • Other - 35% • 54% to incentive payments • 7% to the compensation of employees • 10% for goods and services
Administration &Co-ordination 2008/09 ANNUAL REPORT • the dti also focused on improving the effectiveness of the Economic Cluster into a more coherent mechanism that is better able to facilitate and co-ordinate economic growth and transformation. • the dti engaged with its social partners through NEDLAC, which held bi-annual leadership-level strategic sessions. At these sessions, the parties deliberated and agreed on the implementation of the Growth and Development Summit commitments. • In engaging with industry, the dti hosts regular industry forums.
Implications of MTBPS 2008/09 ANNUAL REPORT • Changing the orientation of industrial incentives to focus on labour-intensive industries • Making greater use of research & development capacity & innovation to support job creation by the private sector • Implementing a coherent rural development programme, including support for access to agricultural markets, training & assistance to small farmers • Increasing levels of productivity & competitiveness to improve export performance • Utilising trade, industrial & competition policy to create jobs through increasing competitiveness, raising productivity & lowering costs for both businesses & households & to promote exports • Accessing growth opportunities in Africa • Modernisation of investment framework to encourage FDI • Rationalising public entities & agencies • Reform of the procurement systems & processes Work on some of the above has already commenced.
Conclusion 2008/09 ANNUAL REPORT • the dti, in general, achieved its targets for the previous reporting period (as reported in the 2008/09 annual report) • Challenges are to enhance the impact of the dti through:- • Ensuring effective programme & project performance; • Stronger strategic & operational management; • Greater integration of work, including that of agencies; • Adequate financial resources for extensive dti programmes; • HR challenge of recruitment, retention and development; and • Improved cluster co-ordination
2008/09 ANNUAL REPORT THANK YOU