Mandisi Mpahlwa to the NCOP
18 May 2006
Chairperson
Members of the Executive Councils of Provinces
Honourable Members
Ladies and gentlemen
The economic context
In my recent budget address to the National Assembly I said that South Africaâs
current impressive economic performance is inspiring to us as a Nation. All key
indicators ranging from business confidence to consumer confidence are at all
time highs and the Gross Domestic Product (GDP) growth of close to 5% has not
been achieved in decades. We cautioned however that any modern economy
functions in cycles and that the current challenge is therefore to plan
appropriately to achieve quality and sustained growth for the years ahead. We
then reported on various aspects of our strategy that seek to confront these
challenges.
Honourable Members, I wish to use this opportunity today, to assure you that
in the course of our planning, we have and will remain fully cognizant of the
threats and opportunities that result from regional disparities that are the
legacy of apartheid and its economic distortions. These distortions threaten to
lock many regions in a self-perpetuating process of underdevelopment and
marginalisation with adverse social consequences for the great majority of our
people. It is therefore incumbent on us to deliberately, systematically and
directly address these distortions and seek to achieve balanced economic
development in our country. We must seize the opportunity that this period of
high growth presents to ensure that the potential and capacity of the regions
can be fully harnessed to the benefit of the nation as a whole. This requires
bold action and implementation.
Industrial Strategy and RIDS
Honourable Members, as part of governmentâs overall strategy to grow the
economy in the short, medium and long term, the Department of Trade and
Industry (dti) is finalising an industrial strategy which we intend presenting
at Julyâs Cabinet Lekgotla. We have drafted the strategy on the basis of both
our own experience, as well as that of other developing countries. Our research
indicates that countries that have industrialised most rapidly have implemented
large-scale, robust industrial policies that were closely integrated with
related policies.
The main thrust of our industrial policy is to diversify our economy so that
there is less reliance on commodities. We are well aware of the dangers of
relying on the performance of commodities, which are cyclical in nature, to
determine our future. The industrial policy will focus on strengthening our
high growth sectors such as automobiles, aerospace and BPO. We will also pay
attention to the sectors in distress such as clothing and textiles. I am
actively engaged with manufacturers, unions and retailers in the sector to
finalise a growth strategy in this sector.
As our industrial strategy aims to co-ordinate activity around the
development of industry and services it requires complementary interventions
directed at the very regional economic realities I have spoken of.
In the post-1994 period Government strategies and priorities did not give
sufficiently focused and deep attention to the challenge of regional industrial
development other than through initiatives such as Industrial Development Zones
(IDZs) and Spatial Development Initiatives (SDIs). With the passage of time we
have derived significant learning from these initiatives. Combined with the
imperatives of the National Spatial Development Perspective (NSDP) endorsed by
Cabinet in 2003 our new approach is to draft a specific Regional Industrial
Development Strategy (RIDS), with a view to shaping regional patterns of
economic development and enabling all provinces to share in national economic
growth equitably. MECs present here today, will recall that at the last MinMec
meeting we agreed that each Province will have an opportunity to fully engage
with the Department on the draft plan and we will begin do so tomorrow at our
next meeting.
Chairperson, in brief, our draft regional strategy recognises that deep and
persistent regional disparities act as a constraint on economic development.
The draft strategy therefore focuses on lagging regions and small towns with
limited economic asset bases. In addition, we have focused on areas which have
experienced a significant downturn in their leading sectors, for example,
mining or industrial activity.
Secondly, the strategy focuses on optimising the functioning of local
economies by identifying and addressing key obstacles. A number of
institutional and infrastructure interventions are therefore proposed with the
view of enabling regions to better access markets and resources and to attain
their full economic potential.
In addition is the focus on regional interventions are envisaged, aimed at
strengthening the supply side of the economy by improving skills, promoting
entrepreneurship and enhancing research and development capabilities. In other
words, we are adopting an approach that encourages the building of sustainable
capacity at a local level, skills development, and innovation facilitation.
Industrial Development Zones
Chairperson, in setting out what we will do in future we are necessarily
drawing from lessons learnt from the implementation of current programmes.
One of the pillars of the regional industrial strategy, and an area where we
are ready to effect immediate improvements, is with regard to the management of
Industrial Development Zones. In our view, the IDZ programme is beginning to
bear fruit, as evidenced by the rising investments that are both already
committed and are proposed. The new approach to IDZs will address a number of
areas that are critical to the success of the programme, key amongst which is
establishing a proper framework of co-operation between and within the three
spheres of government. In this regard, clear guidelines are foreseen wherein
the respective roles of the dti and other actors will be clarified and
strengthened.
The policy will also ensure greater alignment between the IDZs and the broad
thrust of our industrial policy. In line with the recommendations from IDZ
stakeholders the dti will play a more active role in the funding and oversight
of existing IDZs. In this regard the dti will also proactively work with
provinces that have identified potential new IDZ locations in order to help
them develop viable business plans necessary for designating new IDZs.
In view of this, I can announce that the existing moratorium on the designation
of new IDZs is lifted. However, I must stress again that, consistent with our
experience of previous initiatives, we will take all necessary precautions to
ensure that sufficient preparatory work has been done in the areas of sectoral
investment focus, funding and governance before an IDZ is designated.
Small, medium and micro enterprise (SMME) Finance
Honourable members you will know that the dti also works on enterprise
development in the provinces and I wish to briefly reflect on this work.
Access to finance by small enterprises has been a thorny issue since the
adoption of the White paper on the development and promotion of small business
in the country. A number of efforts have been made in this area. However, the
non-segmentation of the market to led to very skewed results. Having taken
these challenges into consideration I can report that with regard to black
economic empowerment we have placed emphasis on increased access to finance to
black entrepreneurs. In the National Assembly I reported that the NEF was open
for business and that a new CEO and Board had been appointed. I am pleased to
report that transactions to the value of R491 million has been approved for the
period up until the end of March 2006. Whilst the bulk of the transactions are
still concentrated in Gauteng and Western Cape, transactions to the value of
R298 million were approved for enterprises based in the Eastern Cape, Free
State and Limpopo. This gives me confidence that the path we have chosen will
enable us to reach the objectives we have set in this area, but clearly, a lot
more work needs to be done.
In establishing the Apex Fund, the dti seeks to remove institutional
constraints to successful SMME lending and the mobilisation of community. The
fund distributes loans of up to R10 000, serving the micro-finance market. The
fund has been launched in six provinces and has disbursed R10 million in loans
through micro-credit outlets. Seven additional partner organisations will be
ready to disburse by June 2006 and the fund is set to expand its business
partner portfolio to fifty by the end of the year. This will enable it to
disburse its full allocation of R80 million by year end, however progress will
depend on improving the readiness of partner organisations.
In February 2006 Khula and Business Partners created an instrument for SMME
start-up funding focusing on the provision of loans of R10 000 to R250 000 to
black entrepreneurs is also up and running in three provinces and has disbursed
an amount of R6 million in two months, demonstrating further progress in
filling this critical funding gap. In addition, the Khula Credit Indemnity
Scheme has also been successfully revised with commercial banks. Khula has also
successfully launched the first ever South African Start-Up Fund, with an
initial capital amount of R150 million, specifically for the benefit of new
black entrepreneurs.
IDC
In the National Assembly I reported that the IDC had already allocated R1
billion to the SMME sectors. I am pleased to report that 54 projects to the
value of R315 million has already been approved. There is also a healthy
pipeline of projects (in excess of R500 million) and it is envisaged that the
entire amount of R1 billion will be utilised by 1 December 2006.
DFIs and geographic spread
We are working closely with our Development Finance Institutions (DFIs) to
ensure that there is a greater geographic spread of these investments as only
27% of the IDC SMME financing went outside of Gauteng, KwaZulu- Natal and
Western Cape. There has however been some improvement in the allocation to the
Limpopo and the Eastern Cape provinces. Investments in the Eastern Cape of
R41.1 million resulted in 216 jobs Investments of R31.3 million was made in
Limpopo, creating 1176 jobs.
Black Economic Empowerment
Chairperson, we cannot address the issue of enterprise development in isolation
from the work we are doing on black economic empowerment. Therefore, later this
year I will announce a National Advisory Council which will advise me on the
implementation of broad-based Black Economic Empowerment strategy and
legislation. More than 30 transformation Charters are being negotiated or are
completed throughout the economy. These Charters reflect the high level of
support that BEE receives in both the private and public sectors of our
economy. We look forward to many of these Charters being processed for
gazetting in terms of the Black Economic Empowerment (BEE) Act. We are
confident that broad based BEE, particularly the Codes of Good Practice, will
contribute positively in the economy by adding impetus to our pursuit of
deep-rooted and necessary structural transformation of our economy
We are impressed by the high quality and thoughtfulness of many submissions
received from the private sector. We intend to take on board a number of the
recommendations that we have received as this will ensure that the BEE Codes of
Good Practice are informed by an enjoy the full buy-in and commitment of, both
black and white business. We hope to finalise the BEE codes by the end of
July.
Consumer protection
Finally Chairperson, we should not forget that enterprises depend on those that
buy their products and services and that the dti has a role to play in this
realm as well. This year heralds a new era for consumers in South Africa by
entrenching their rights, establishing new institutions to enforce these rights
and providing consumers with access to redress. It is our view that demanding
and well-informed consumers with access to redress are essential to building an
equitable, socially efficient and competitive economy.
In this regard, the dti has published a Consumer Protection Policy. The
policy was drafted and published for public comment in 2004 and seeks to inform
better consumer legislation and advance from the previously fragmented and
vague consumer protection regime of the past. the dti has also published a
Consumer Credit Bill designed to protect consumers from reckless lending. The
Bill covers all forms of credit provision, including banks as well as retail
credit providers such as furniture and clothing stores. In addition a national
credit regulator is foreseen and is currently being instituted. Through such an
approach we are confident that we shall protect consumers while lowering the
cost of bad debts in the industry. Consultations with key stakeholders,
particularly through National Economic Development and Labour Council (Nedlac),
are currently underway and I am confident they will result in strong consumer
protection.
Chairperson, in conclusion, the role of provinces is critical in ensuring
that our regional strategy is successful. We have indeed made much progress in
the past decade, and we need to take our economic growth and development to a
deeper, more-regionally targeted level. In so doing we will assist millions of
people to share in our growing economy and use their potential to sustain and
accelerate that growth. I commit the Department of Trade and Industry to that
goal.
I thank you.
Issued by: Department of Trade and Industry
18 May 2006
