Energy: Economic Cluster II: Parliamentary Media Briefing
10 February 2006
Introduction
Members of the press
Ladies and gentlemen
Throughout the week you have been hearing about Accelerated and Shared
Growth Initiative for South Africa (ASGI-SA) and the projects identified to
achieve its objectives, set to drive the economy to a higher growth rate that
will optimise broad-based impact. Todayâs briefing will be no different, but
will give clarity around specific areas in the Sector Investment Strategies
Cluster comprising of the Departments of Minerals and Energy, Environment and
Tourism, Arts and Culture.
I will be firstly addressing the cluster issues as they relate to the
Department of Minerals and Energy (DME) and then I will briefly report on the
tourism issues. My colleague, the Minister of Arts and Culture will then speak
to the cluster issues as they affect his Department.
Growing the bio-fuels industry and targeting job creation
The establishment and growth of the bio-fuels industry is one possible
solution to addressing both the economic and social challenges and is an
important contributor to ASGI-SA, led by the Deputy President. South Africa
imports about 60% of its crude oil requirements, which has economic
implications in terms of balance of payments as well as vulnerability to rising
crude oil prices. Increasing the volumes of ethanol in petrol and increasing
the use of bio-diesel would therefore have macro economic benefits for the
country. In addition, converting sustenance farmers into cash crop producers to
supply the crops or inputs into bio-fuel will start to address the high level
of unemployment in the country, particularly in rural areas.
In short we are looking at creating a value chain for bio-diesel and
bio-ethanol that would result in significant job creation opportunities
throughout the value chain. Most of these jobs could be realised in the second
economy, which would assist government in meeting its objective of bridging the
gap between the first and the second economies and halving unemployment by
2014.
In December 2005, Cabinet approved the establishment of a task team to
develop the appropriate strategy by the fourth quarter of 2006. The task team,
which is DME led comprises representatives from Department of Water Affairs and
Forestry (DWAF), Department of Science and Technology (DST), Department of
Trade and Industry (DTI), National Department of Transport (NDOT), Department
of Agriculture (DoA), Department of Land Affairs (DLA), National Treasury (NT)
and Presidency.
The key activities to be undertaken by the task team would include:
a. Identification of resource requirements (land, crops, incentives, human
capital, etc)
b. Feasibility studies for plant construction (where required)
c. Long term feedstock supply contract aspects and farmer outreach
activities
d. Cost benefit analyses, to determine optimal use of land, water, etc
e. How to move farmers from subsistence farming to commercial crop farming,
including what support they might need such as in agricultural extension
services and advanced farming methods.
f. Dealing with issues such as land tenure, reform and usage
g. Protecting vulnerable participants, such as farmers, from food price
volatility, oil price drops and currency fluctuation
To ensure success in our bio-fuels strategy we will also need to consider
the cost of the technologies, human resource development and appropriate
regulatory changes.
Consultative forums will be established to support the task team and will be
made up of Science Councils, higher education institutions, and industry
specialists on the technical side and on the commercial side we will have our
state-owned-enterprises (SOEs), industry players and business associations in
particular Grain South Africa and the South African Petroleum Industry
Association (SAPIA).
A project team will be established within the DME to maintain momentum over
the coming few years. This team will be co-operating with international players
in Brazil and the United States of America (USA) who are active in this
area.
In addition to the benefits that bio-fuels will bring to farmers, new job
opportunities will be created in the refining, blending and distribution of the
bio-fuels products.
Formulating an Industrial Policy Framework (Beneficiation)
The second contribution of our department to the cluster programme is in the
area of beneficiation.
The DTI, DME and DPE, together with other government Departments, have been
working closely together on related strategies to promote downstream
beneficiation of mineral resources. The focus of these efforts is on the
development of the metals, machinery, plastics and jewellery sectors in
particular. There are three major elements to these combined efforts.
Firstly, the lowering of input costs to the metals, machinery and plastics
sectors in particular, through measures to deal with import parity pricing. A
number of measures have been approved by Cabinet and are to be communicated by
the Minister of Trade and Industry in due course. Success in removing this
discriminatory pricing model of Import Parity Pricing would result in greater
expansion by downstream processing operations, as well as create business
opportunities for smaller enterprises.
Secondly much work has been undertaken with respect to identifying and
promoting downstream linkages from Governmentâs Capital Expenditure Programme,
particularly in relation to the investment to take place in transport and
electricity infrastructure over the coming years.
Thirdly, the development of customised sector programmes is well advanced
and we are looking at downstream beneficiation incentives. A background study
on downstream beneficiation has been completed and the process of development
of downstream beneficiation incentives is to commence over the next month. Here
we look forward to using the excellent capabilities of Mintek amongst others.
There also exist several possible projects in establishing new smelters.
During the last quarter of last year we made significant progress on
promoting beneficiation on the legislative front, with Parliament passing the
Precious Metals and the Diamonds Act.
The Diamonds Act introduces a new era in the regulation of the Diamond trade
in South Africa by combining the diamonds trade with the precious metals trade
through the Diamond and Precious Metals Regulator. This Regulator will in
essence replace the current South African Diamond Board (SADB), which had both
the promotion and the regulating function. These functions are now to be split,
where the Regulator will focus only on the administration of the law and the
newly established State Diamond Trader (SDT) on Promotion.
These two pieces of legislation will go a long way in assisting us achieve
our long term vision of greater value addition taking place in our country.
For diamonds and precious metals, local companies will now be able to access
the raw materials and rough, which up to now has been predominately sold on
international markets. Consequently, we expect to see our country expanding its
capabilities in the cutting and polishing industry, as well as in the jewellery
manufacturing industry, thereby creating jobs.
The DME will during this year put structures in place to enable smooth
implementation of the Act. Training initiatives are a priority to either
sharpen the skills we have or to increase the quantities of people with
jewellery manufacturing skills. We are working with the sector education and
training authority (the Mining Qualification Authority) and we are all set to
send ninety young South Africans from the previously disadvantaged communities
to train in China; in addition we already have people being trained in Antwerp,
Belgium. More such initiatives will be undertaken by the department during the
year.
The changes in our diamonds legislation as well as the shifts taking place
by our neighbouring countries (Botswana and Namibia in particular) are
resulting in a change in how foreign investors are viewing this region. Since
taking office I have met with serious global players in the diamond cutting,
polishing and processing industry all of whom are now investing in Southern
Africa. I hope to be able to make specific announcements on their investments
in due course. In my discussions with them they have indicated they will bring
with them the world class technology and industry knowledge they have
developed.
Accelerate Growth of Tourism to enhance job creation and Foreign Exchange
Earnings
The South African tourism sector has been identified as one of the key
contributors to the intended 6% growth platform. The sector has experienced
impressive growth in recent years. The period of strong growth since 1990 has
fundamentally changed the face of the tourism industry in South Africa. With a
small domestic market and less than 1 million annual foreign arrivals in the
two decades before 1990, we have grown to a destination that welcomed 6.7
million visitors in 2004.
The Tourism Act is aligned to this vision of building a world class tourism
destination that delivers sustainable economic growth, and clearly sets out the
mandate and objectives for tourism. In this regard, the Departmentâs mandate is
to contribute to:
* Sustainable gross domestic product (GDP) growth
* Sustainable job growth
* Redistribution and transformation
This mandate is achieved through focusing on six key objectives,
namely:
* Increasing the number of tourists to the country
* Increasing tourist spend
* Increasing tourist length of stay
* Improving the geographical spread of tourists
* Improving seasonality patterns
* Promoting transformation
The sector has been identified as one of the immediate priority sectors
within ASGISA. In this regard, for tourism to fulfil its role, focused action
is required particularly in respect of the key areas outlined below. The
targets in these areas over the next six months are:
A. Skills: Building skills partnership in tourism:
Skills development work will result in co-operation among and co-ordination
between different stakeholders in government, business, labour and communities.
The Department of Environmental Affairs and Tourism (DEAT) will seek to clearly
understand what the needs of the industry are, where the blockages are, what
resources are required to meet our needs and challenges. It will also expand
its foreign language training, develop a tourism volunteer programme and
revitalise the SA Host and Welcome programmes.
A partnership has been developed between DEAT, the Tourism Hospitality and
Education Training Authority and the National Business Initiative to undertake
most of the work mentioned above. A sum of about R10m has been allocated for
the project. The tourism industry through the Tourism Business Council of South
Africa is also involved in the discussions related to the projects above.
The Department has trained 13 tourist guides in Chinese and 161 in French,
more partnerships will be formed with other governments in this regard.
B. Product and Business Development and Investment:
DEAT will also be focusing on developing tourism (SMMEs), enhancing the product
offering and implementing a targeted investment strategy for tourism; which
will require institutionalisation of the Tourism Enterprise Programme (TEP) to
ensure that it remains sustainable after funding from government and the
Business Trust ceases. Expansion of TEPâs work to cover the whole country more
effectively, especially its engagement at the local government level.
The TEP targets for the next six months are:
* Value of transactions: R200 000 000
* Number of transactions: 250
* Number of HDE transactions: 188 and Jobs: 3 362.
By the end of 2006/7 financial year TEP will achieve the following SMME
targets:
* Value of transactions: R450 000 000
* Number of transactions: 500
* Number of HDE transactions: 400
* Jobs: 7275
C. The DEAT second economy interventions
Interventions in the second economy include over R1 billion investment in
social responsibility projects which seek to improve environmental integrity
and unlock local economic development, these projects are implemented using
labour intensive methods, for the period 1 April 2005 till 31 January 2006 the
following has been achieved:
* 11 100 jobs have been created, out of which direct benefit went to 48%women,
30% youth, 1% disabled, all beneficiaries were provided with training in
various skills development areas
D. Enhanced Resourcing of Tourism Marketing Efforts
Tourism marketing is undertaken by South African Tourism, as statutory body of
DEAT. This marketing is guided by the Tourism Growth Strategy (updated in 2005)
and is focused on a set of core markets and markets segments identified on the
basis of their volume and value for South Africa. Tourism growth, as outlined
above, has been achieved through the focused Implementation of the Growth
Strategy.
However, from a broader perspective, the reality is that South Africa has
only just scratched the surface. South African Tourism, in its strategic
research programme over the last three years, has identified bands of consumer
segments (in key markets) who are not only frequent long haul leisure
travellers for whom holidays to faraway places are an essential part of life,
but are also have a positive sentiment towards South Africa and actively
interested in visiting our country.
E. Black Economic Empowerment
The tourism sector has much to gain from broadening economic participation. The
benefits of this broadened economic participation can be geographically spread
across the country, more so than in other sectors. Some of the potential
benefits of tourism sector Black Economic Empowerment (BEE) include: BEE makes
competitive business sense, as it will introduce innovation with new players
entering the industry and bringing their experience to bear. This will lead to
new markets being attracted and associated product development.
Addressing the competitiveness imperative of BEE in the tourism sector the
Minister of Environmental Affairs and Tourism launched the BEE Tourism
Scorecard and Charter in May 2005, after industry engagement. Furthermore, the
DEAT has, in accordance with the legislative framework surrounding national and
sectoral charter councils, as well as the legislative framework surrounding
broad based black economic empowerment (BBEE), committed to establishing a
national BEE Charter Council for the implementation of the BEE Charter. The
Charter Council was appointed in October 2005 and it has now developed a three
strategic plan based on the Tourism Charter.
The goal of the Charter Council will be to ensure, through the provision of
information resources and support services, that the desire of industry to
broaden economic access to all citizens is turned into action. This action must
be well informed so as to benefit all stakeholders and in that way, meet the
desired objectives of BBEE.
4. Conclusion
To conclude it is important to note that each of the initiative outlined skills
development has been prioritised as has co-ordination of efforts across
departments. Government on its own will not succeed in achieving these goals
without the involvement of its social partners (labour and the private
sector).
Issued by: Ministry of Minerals and Energy
10 February 2006
