M Mpahlwa: Parliamentary Media Briefing, February 2006

6 February 2006

Introduction

The Cabinet Lekgotla met in January 2006 at a time when there is broad
agreement that the economy continues to improve its performance in key areas.
The macro-economic fundamentals are in place and the Accelerated and Shared
Growth Initiative for South Africa (ASGI-SA) is set to drive the economy to a
higher rate of growth that will optimise broad-based impact. ASGI-SA will seek,
at the very least, to halve unemployment and poverty by 2014.

In short, ASGI-SA is a programme of targeted interventions that will
stimulate ‘business unusual’. To this end, the Economic and Investment Cluster
utilised ASGI-SA as a framework for identifying priorities that it will focus
its attention on in 2006. This has resulted in the identification of strategic
interventions, currently numbering twenty-seven projects. These interventions
will have a high impact on economic development and will be achieved though
intensive coordination across the Cluster Departments.

The identification of projects was also informed by other Government
policies achieving alignment with the MERS, the MTSF and the MTEF. The previous
year’s programme of action was also taken into account when formulating the
Cluster’s approach, with incomplete projects being absorbed into the 2006
programme or into Department’s programmes.

The emphasis of the cluster’s approach is on improved coordination,
strengthened implementation, better monitoring, sharper planning and greater
accountability. It is believed that this approach will ensure that the cluster
fulfils its role in the delivery of targeted growth.

The cluster has introduced dedicated Focus Groups to ensure strengthened
implementation of the programme of action. The twenty-seven projects are
distributed across five Focus Groups, each co-chaired by two cluster
departments.

The Focus Groups are:

* Macro-Economic Focus Group (Treasury and Presidency)
* Industrial Strategy Focus Group (Department of Trade and Industry and
Department of Science and Technology)
* Public Investment Focus Group (Department of Transport and Department of
Water Affairs and Forestry)
* Equity and Development Focus Group (Department of Public Enterprises and
Department of Provincial and Local Government)
* Skills Focus Group (Department of Education and Department of Labour)

Although each of the projects within the Focus Groups will have lead
Departments, they will also include inter-Departmental task teams. The task
teams will enable a division of labour within projects, a broadening of
accountability and ensure effective implementation co-ordination.

The focus of this briefing will be on the Macro-Economy, Industrial Policy,
and Public Investment. The cluster also devised interventions aimed at Skills,
the Second Economy, and Sector Investment Strategies, much of which will be
covered in other briefings later this week.

2006 Cluster Projects

The cluster projects will be addressed by each of focus group themes.

Macro economy and Sector Investment Strategies

Within modelling and scenario planning National Treasury will be engaging in
modelling the impact of interventions across the economy with the objective of
highlighting gaps and necessary interventions.
IS

The dti will be finalising the National Industrial Policy Framework that
will include a Regional Development Strategy and focus on strengthening
competition regulation. The Policy will focus on unlocking South African
industrial development in a sustainable manner through identifying strategic
industrial interventions.

The Department of Communications will be leading a project to bring down the
costs of information and communications technology (ICT). This project will
dovetail with Sentech’s infrastructure project. The project will focus on
creating an enabling policy and regulatory environment and remove Telkom’s
Monopoly in the fixed line network. This will have the effect of reducing
telecommunication prices to internationally competitive levels and assist in
the achievement of universal service.

One of the Sector Investment Strategies that is perceived as having massive
potential for job creation is Business Process Outsourcing and Offshoring (BPO
& O) sector. This project, led by the dti, will hinge on the development of
customised incentives, a marketing strategy and skills development programme
that together will stimulate growth of the industry. The BPO & O project
will include a specific focus on creating job opportunities in five poor rural
nodes.

Department of Environmental Affairs and Tourism (DEAT) and the Department of
Trade and Industry (dti) will together lead a programme to accelerate the
growth of tourism. This strategy, aimed at job creation and earning more
foreign exchange will be based on an improved marketing strategy, an airlift
strategy, customised incentives, improved data collection, improved tourist
safety and security, enhanced product offering, business development aimed at
small, medium and micro enterprises (SMMEs) and improved tourist public
transport. The effect of this strategy will be the removal of constraints to
growth of this labour intensive sector.

Public Investment

In terms of public investment, which includes expenditure of R370 billion
over the MTEF period, the Cluster has chosen three major infrastructures spend
projects to champion with three supporting initiatives.

The three infrastructure spend projects include the development of Olifants
River System with the construction of the De Hoop Dam. Led by Department of
Water Affairs and Forestry (DWAF), this year will see the completion of site
preparations and dam construction with the diversion of the Steelport River.
The impact of the project will be to supply water for mining development and
social needs in Sekhukhuni area.

The second Infrastructure spend will be focused on the development of the
Durban – Gauteng Corridor. The corridor will aim to develop an integrated
freight system between Durban (DBN) and Johannesburg (JHB) for all modes of
transport. Led by DOT, the project will, during the course of 2006/7, establish
a stakeholder Committee, complete a logistics plan and feasibility study. The
project will also develop relevant Memorandum of Understandings (MoUs) with
provinces/metros that are to fall within the corridor.

The final infrastructure spend that the Public Investment focus group of the
Cluster will focus on will be the roll-out of the Sentech Wireless Broadband
Network under the auspices of the Department of Communications (DOC). During
2006/7, the cluster is hoping to achieve the complete rollout of a wireless
broadband network. The roll-out will accelerate the delivery of communication
universal access, including providing cost-effective connectivity that supports
government e-health and e-education services.

As a support project to infrastructure spend, DEAT will be undertaking a
review of Environmental Impact Assessment legislation. The aim of the project
is to get Cluster input into the promulgation of new Environmental Assessment
Regulations. This will assist in the development of appropriate environmental
impact management tools.

The Cluster will set up a project to monitor infrastructure implementation
& impact. Led by DPE one of the outputs will be a single capex database for
tracking projects. It is envisaged that this project will lead to increased
transparency, accountability and effective implementation.

Dovetailing with the macro-economic modelling project is a project to model
infrastructure impacts. Led by DPE the project aims to model the impact of the
capex programme on the economy, social equity and natural environment. Through
such impact forecasting, the project will promote capex planning is aligned
with macro-economic and industrial policy targets.

Finally, the DPE will be championing a review of Capital Expenditure
Procurement. This will be done in close consultation with other cluster
departments, especially the dti and National Treasury and will lead to the
development of a policy framework for Government procurement. The intended
impact of the Cluster’s project is to leverage capex to optimise the impact on
local manufacture while remaining both PFMA and WTO compliant.

Equity and Development

The dti will lead a Cluster Project to implement ‘set asides’ for SMMEs.
This will be a list of ten general ‘set aside’ products that will be procured
by the State on a basis that gives preference to SMMEs. This will lead to
increased demand for SMMEs.

Together the dti and Department of Agriculture (DOA) will roll out
implementation of the Apex and MAFISA funds to improve access to finance for
micro-enterprises. This will improve provision of affordable credit for the
poor in a sustainable manner. This project will be complemented by a project
led by the dti that will consolidate existing DFI activities on SMME finance
with a key focus being the addressing of market failure in SMME finance for
loans ranging from R10,000 – R250,000.

The cluster will also work towards ensuring agreement by the banks to abide
by their FSC commitments.

Promoting shared growth

The Economic Cluster has emphasised growth projects and methods that
optimise broad-based impact in this year’s POA. The introduction of focus
groups and task teams and a more project based planning with effective
monitoring and evaluation will ensure the effective implementation of
collaborative projects. In addition the Cluster will set about mobilising
social partners where relevant to internalise, support and accelerate
implementation.

Key to the cluster’s programme will be the leveraging of massive
infrastructural investment to promote SMEs and projects that are of a
labour-intensive nature (e.g. State Owned Enterprise (SOE) procurement and the
Expanded Public Works Programme (EPWP) programme to be discussed on Friday). As
will be seen in later briefings, the Cluster will link capex to the growth of
strategic industries (e.g. capital goods) and focus on labour-absorbing sectors
and services (e.g. BPO and tourism) as immediate priorities.

As will be seen in later briefings the Cluster – along with other clusters -
is also to focus on developing the Second Economy and supporting sustainable
livelihoods. This will include projects such as the roll-out of finance and
support services for small and micro-enterprises (e.g. Apex Fund and Small
Enterprise Development Agency (SEDA)) and an explicit Cluster focus on the
informal economy (e.g. a street trader project that will look at the
development of appropriate local government support for 500,000 street
traders).

The Cluster will deliver an implementation report to July 2006 Lekgotla that
will include progress scorecards.

Conclusion

The Economic Cluster’s 2006 programme focuses on the joint implementation of
27 strategic, high-impact ASGI-SA projects. Through coordinated efforts, the
implementation of these projects will promote the realisation of ASGI-SA’s
objectives.

The Cluster will further scrutinise all the projects with the aim of
strengthening their gender empowerment impact. New projects specifically
focused on gender empowerment are also being developed.

The Cluster will continue to identify and operationalise further projects in
pursuit of accelerated and shared growth.

Finally, as part of ensuring a professional, coordinated and effective
implementation focus, the Cluster will be ensuring that it mobilises the
relevant social partners to contribute to the process in a manner that ensures
optimal results that we, as South Africans, can take pride in.

Issued by: Department of Trade and Industry
6 February 2006