Development Prov Budget speech 2006/07, Provincial Legislature
18 May 2006
"The finest cause in the world is the struggle for freedom and a full
satisfying life for all of our people" Ray Alexander-Simons
Mr Speaker
In 2005 the South African Gross Domestic Product (GDP) grew to five percent
from an average of 3.4% in the period between 1999 and 2004. In the same period
household consumption increased from 3.7% to 6.9%, fixed investment grew from
3.5% to 8%, gross domestic expenditure grew from 3.8% to 5.9% and exports grew
from 2.4% to 6.7%.
The Western Cape economy also continued to grow strongly during this period
with the GDPR growing from 4.3% in the period between 1999 and 2004 to 5% in
2005. According to our Provincial Economic Review and Outlook (PERO) 2006, the
Western Cape economic performance is expected to keep up with that of national
performance over the short term and may continue to outperform the national
economy on average.
Clearly this confirms the assertion made by our President in his State of
the Nation Address earlier this year "that our people are firmly convinced that
our country has entered its Age of Hope. They are convinced that we have
created the conditions to achieve more rapid progress towards the realisation
of their dreams. They are certain that we are indeed a winning nationâ. It also
confirms the assertion made by our Premier in his State of the Province Address
that the Province is indeed on the "threshold of prosperity".
The President further asserted in the same address that "The years of
freedom have been very good for business". This is evidenced by the forecasted
continuing real sector growth in GDPR in the Western Cape from the period
1999-2004 to 2005-2006 according to the Bureau for Economic Research.
Agriculture, forestry and fishing to grow from 1.7% to 7.4%
Manufacturing growing from 2.1% to 3.5%
Construction 6.5% to 8.8%
Electricity, gas and water 5.1% to 6.1%
Wholesale and retail stabilising around 7.2%
Transport and Communications stabilising at 6.2%
Therefore, to rephrase the President, we can certainly say that freedom is
indeed very good for economic growth. However, we have to pose the
countervailing question "has economic growth been good for freedom?â. Dr
Vandana Shiva, in her book Earth Democracy asserts "Freedom from want - from
hunger and homelessness and the denial of basic needs is the most fundamental
freedom, without which there can be no other freedoms."
If we believe that:
where there is Poverty there can be no real freedom
where there is income inequality there can be no real freedom
where there are high levels of unemployment there can be no real freedom
where there is no access to cheap finance, to markets, to land, to appropriate
learning, to infrastructure there can be no real freedom
Then let us look at what the evidence suggests.
According to the PERO 2006 research:
* The trend in the increase in unemployment which is currently at 26.2% shows
that older people are barely retaining jobs and younger people are not getting
jobs.
* An emerging trend was found in 2000 that a 1% increase in economic growth has
only lead to a 1.83 decline in poverty indicating that the current rate of
growth will not close the poverty gap over the long term.
* We are experiencing a trend of an increasing gini co-efficient (the gap
between rich and poor) having moved from 0.584 in 1995 to 0.616 in 2000
* The poorest 30% of our communities grew by disposable income of 6.7%, which
was lower than the average mean rate of the rest of the 70% which is 8.98%
across population groups.
* The growth component reduced overall poverty levels by 9,4% but the
redistribution component increased poverty by 14,6%.
So clearly while our economy has shown nominal growth of 5,3%, the
indicators point out is that the growth we have experienced has not been a
pro-poor and shared growth.
Of interest is that this trend manifests itself across our Continent as
highlighted at the recent African Summit on Job creation as reported on in the
Business Day on Tuesday. The conference acknowledged that economic growth in
sub-Saharan Africa has crept from 3% to 5% but has made little impression on
widespread poverty. Donald Kaberuka, African Development Bank President is
quoted as saying "Economic growth does matter but it must be broadly shared and
it must create employment".
With this evidence before us and having an understanding of our reality and
the challenges we face, how are we responding?
B: Responding to our current economic contradictions/dilemmas
Our national government has responded by introducing the Accelerated and
Shared Growth Initiative-South Africa (AsgiSA), led by our Deputy President.
This Initiative sets a sustained growth target of 6% for the period 2010 to
2014 and addresses a number of critical interventions:
* Infrastructure investment
* sector strategies
* education and skills development
* eliminating the Second Economy
* governance and institutional interventions
* macro-economic issues
Our provincial response is located within this policy framework and the
Western Cape Governmentâs Growth and Development Strategy, iKapa Elihlumayo and
its lead strategies, developed over the past two years, are clearly aligned
with this. The Ikapa lead strategies, Human Capital Formation, the Strategic
Infrastructure Plan, Social Capital Formation, the Micro-Economic Development
Strategy and the Provincial Spatial Development Framework already respond to
the critical interventions highlighted by AsgiSA. The Western Cape has set a
target of 6-8% growth over the medium term.
The Department of Economic Development and Tourism is playing a critical
role in shaping the policy and practical implementation framework responses to
the challenge of ensuring a simultaneous pro-poor and pro-growth
strategy.
The department has identified the following four strategic goals within a
broader growth trajectory for the Western Cape economy:
* promoting and mobilising investment and employment creation
* ensuring Broad-Based Black Economic Empowerment (BBBEE)
* eradicating poverty and addressing inequality
* ensuring the global competitiveness of the provincial economy
To realise these goals the following interventions have framed our response
to ensuring the accelerated and shared growth objectives:
1. Accelerating Growth - Sector strategies
The Micro-Economic Development Strategy (MEDS) Research programme, which has
yielded 42 research papers thus far, covering 13 sectors and five major
cross-cutting themes, has influenced the Province's choices to place the
trajectory of the Western Cape economy on a shared and sustainable growth
path.
In order to achieve maximum impact we have had to make tough choices, we
have had to "pick the winners" and therefore have identified the following key
high value and high impact sectors in the Western Cape for prioritised and
major intervention: Call Centres/BPO, Tourism, the oil and gas supply service
hub and metals and engineering, Information and Communication Technology (ICT),
agriculture and the creative industries.
However, we will continue to support our traditional Western Cape sectors,
clothing and textiles and fishing, through smaller-scale yet catalytic
interventions.
Accelerated Growth indicators for the MEDS implementation will be:
* average GDPR growth of above 6% per annum
* a Gini co-efficient of under 0.55
* per capita GDPR in the top quartile for developing economies
* unemployment under 10%
* high rates of participation in the economy
* ownership patterns that reflect the demographics of the Province
Mr Speaker
Allow me to share some highlights in investments in some of these sectors to
date:
* the MAN Ferrostaal investment of R1,7 bn in the Western Cape oil and gas
services sector in Cape Town and Saldanha harbours
* the Call Centre/BPO sector has invested R1 bn between 2004 to date creating
6000 jobs.
* the film industry will receive a major boost with the approval of the
Dreamworld Studios, bringing in an investment of over R450 million with a
projection of 8 000 job opportunities and providing critical infrastructure for
the industry. Construction is expected to begin within the next six months.
Mr Speaker,
I would like to use this opportunity to welcome and acknowledge in our midst
today my special guests from the film industry. Emma Kay and Steve Markowitz,
the producers of the amazing animated documentary, "Beyond Freedom" (copies of
which honourable members have received as gifts today). This documentary has
been nominated for the Golden Bear Award at the Berlin Film Festival this year.
It was one of only 10 short films worldwide nominated for this prestigious
award. We also have the honour of having in our gallery, Tristram Atkins the
producer of "Ongeriewe" the short film which has recently been nominated for an
award at Cannes.
May I on behalf of this House wish them good luck, we are truly proud of
your achievements. In the wake of other astounding achievements by South
African film-makers, like the Academy award winning "Tsotsi' and the Academy
nominated "Yesterday" things are really looking up for the film industry in
this country and this province. And we are gearing up for this.
I also want to welcome and congratulate the new CEO, Mr Laurence Mitchell,
of the Cape Film Commission in the House today. I am sure all will agree that
with his vision, passion and energy we will certainly be placing the Western
Cape on the map as a key destination and centre for the Film Industry. We will
be exploring the possibilities of turning the Cape Film Commission into a
One-Stop-Shop to service the domestic and international industry in the
Province.
In an act to defend jobs in the clothing and textiles industry, the provincial
government, under the leadership of the Premier helped save Rex Trueform and
the Novel factory in Atlantis from shutting its doors. We have to thank House
of Monatics for stepping in and rescuing both these factories.
We will be spending R41 million on our sector interventions in this
financial year, with a projected total spend of just over R100 million in the
two outer years.
Increasing participation and broadening ownership in the Western Cape
Economy
In order to achieve the objective of shared growth, my department will focus on
three key areas:
* Broad-Based Black Economic Empowerment (BBBEE)
* local economic development
* enterprise development
Broad-based Black Economic Empowerment
The Department is in the process of finalising the BBBEE strategy and
implementation plan, a critical outcome of the BEE conference held in 2005. The
plan includes the establishment of three separate Advisory Councils for Women,
Youth and People with disabilities.
As part of my Xmas deliverables last year I announced an investment of R1m
to promote BBBEE. I am pleased to announce that we have formed two significant
partnerships in terms of this commitment. The Department has contributed R400
000 towards the Western Cape Business Opportunities Forum (WECBOF) E-commerce
Solution Trade Portal. In terms of the Memorandum of Agreement, WECBOF has
agreed to register 300 BBBEE Small, Medium and Micro-Enterprises (SMMEs) on the
portal. 95 traders have already been registered and a further 45 have received
training via the supplier upliftment programme.
The second important partnership that we have entered into is with Old
Mutual Asset Management (OMAM). OMAM has established a BBBEE Fund to assist
black empowerment equity deals. Our department has contributed R600 000 towards
this project to cover pre- and post due diligence costs. OMAM has set aside
R30m for BBBEE deals in the Western Cape in the first year.
The Department provides support to black owned businesses on a continuous
basis by assisting with unlocking deals and leveraging access to finance. A
budget of R1.5 m has been set aside to promote broad-based economic
participation in this financial year with an increasing projected spend of R5.6
million in the outer years.
Local Economic Development
Mr Speaker
Ministers Brown, Dyanti and I have just returned from an intensive three week
engagement with every single municipality and district in the province in an
assessment of their Integrated Development Plan (IDP), LED and budgets. It was
interesting that the trend of increasing levels of growth together with
continued high levels of unemployment and the increase in the number of
households without income was found to be replicated in every one of these
municipalities.
Local Economic Development is therefore a critical foundation for ensuring
that our accelerated and shared growth objectives are achieved. Municipalities
and districts have uneven levels of capacities and are at various stages
towards finalising their LED strategies, and the alignment and linkages between
National and Provincial strategies need strengthening.
LED strategies are not just a list of projects that require funding but
rather what we require are long term, sustainable strategies, together with
implementation plans that go beyond the terms of office of politicians. These
have to be evidence-based and each municipality will develop ward-based
socio-economic profiles. The spatial translation of our MEDS Sector strategies
will be another critical component to the development of these LEDs.
Our department supports local government through the establishment and
funding of Economic Development Units to provide in-house capacity to
municipalities in delivering their economic responsibilities. To date, all five
District municipalities are in the process of setting these up.
The implementation of the Plek Plan, which aims to deploy fully trained
staff into regions, with full head office support, in order to get high quality
LED strategies and interventions going in all municipal areas. Plek Plan
managers have already been appointed and the others will be re-advertised
shortly.
Over and above these programmes, the Department has also supported the
development and implementation of pioneering pilot projects from pickled jams
in Piketberg, to Khayelitsha cookies and of course to the now famous Beaufort
West herbs. These projects were selected with the aim of establishing new and
viable community-owned enterprises that will have a catalytic impact on
economic and social activity in a local area and ultimately on the Western Cape
economy as a whole.
The budget for these LED programmes is R13,3 million representing a 107%
increase from the previous financial year.
Enterprise development
The RED Door Initiative remains the critical programme in the department's
promotion, support and development of enterprises in the Western Cape.
Approximately 18 000 potential and existing entrepreneurs have accessed the RED
Doors throughout the Province between April 2005 and March 2006 and 163
businesses were supported with loan funding through our Ikapa/ABSA
Entrepreneurial Fund. The Mobile Red Door was launched in February this year
and currently operates in Bellville, Gugulethu and Wynberg. Together with the
City of Cape Town we will look at further rolling out these Mobile Red Door
services to other areas. A further two RED Door offices will be opened in
Mossel Bay and Stellenbosch in this financial year.
Over and above our existing programmes we will also be implementing the
following initiatives:
* Small Business Week which will take place from 10 to 12 August. The focus
this year will be on "Women in Business". This is my department's contribution
towards the celebration of Women's Day and the 50th anniversary of the Women's
march to the Union Buildings.
* Enhancing our RED Finance programme by forming a partnership with the South
African Micro Apex Fund to launch the APEX fund in the Western Cape. The fund
will address the loan market ranging between R200 to R10 000 and will focus
heavily on survivalist and micro enterprises.
* Finalising, together with the Department of Trade and Industry (dti) the
Provincial Co-operatives Development Strategy and Implementation Plan.
* A Mega RED Door, in conjunction with the Business Place in the City and in
partnership with Investec and Sekunjalo Investments will be established.
* A RED Campus to be established, which will focus on the provision of skills
development and business training to existing and potential entrepreneurs
linked to the RED Door. Training will satisfy the South African Qualification
Authority (SAQA) standards and will comprise of both a skills and mentorship
component.
Doors will be opened before the end of this year.
The department will spending approximately R30,6 million on the Enterprise
Development programmes in this financial year and a total projected spend of
R64.5 million in the two outer years.
3. Investing in our people - addressing the skills challenge
As part of the Provincial Human Capital Strategy, the department will pay
focused attention on the skills, knowledge and innovation requirements of the
sectors prioritised by MEDS. These are cross-cutting interventions which aim to
maximise the competitiveness of these sectors and address the mismatch of
skills that exists.
The programme involves:
Workforce Development
The key priority will be to overcome the fragmentation of service providers
and develop a more responsive approach by the education and training sector to
the needs of the Western Cape economy. The Centre of Extended Learning (CEL),
the Learning Cape Initiative and the Sector Education and Training Authority
(SETA) Forum were successfully formed to deal with this challenge.
The department will also work in partnership with the Further Education and
Training (FET) colleges and sector bodies to establish assessment and skills
development centres as a short-term pre-employment bridging package of
interventions for generic employability skills customised for specific
sectors.
Calling the Cape, our Call Centre/BPO sector body, supported by the
Department will establish such a Pre-training Centre. The Centre will be
capable of assessing 6000 people per year and give training to 3000 people. The
aim is to provide basic training as a foundation for employment in the call
centre industry. It is believed that 50% of these learners could find work as a
result of such training.
The Knowledge and Innovation Economy
The Knowledge and High Technology Units in the Department have supported and
will continue to support a number of exciting initiatives in the
province.
* The Bandwidth Barn which is the largest shared business development incubator
in South Africa and initiated by the Information Technology (IT) sector body,
the Cape Information Technology Initiative (CITI). It houses 65 Information and
Communication Technology (ICT) small and medium start-up companies.
* A Boat-Building Academy was launched by the Boat-Building sector that should
see this sector moving into a new growth phase
* The Cape Clothing and Textile cluster has achieved further successes with the
announcement of major retail firms joining it. Employment in firms
participating now exceeds 1/3 of the total employment in the sector.
* The pilot phase of the Competitiveness Club for CMTs was successfully
completed. 15 BEE firms participated and after one year created 59 new jobs,
profit margins increased by 37%, a 22% improvement in machinist efficiency and
a 29% reduction in unit costs per machinist.
* The Cape Ship Repair Initiative was launched
* The Western Cape Tooling Cluster was launched to oversee the recapitalisation
and re-skilling of the critical bedrock of the manufacturing sector
* The Provincial Advanced Manufacturing and Technology Strategy, a joint
initiative between ourselves and national government was launched in December
last year
* The Fabrication Laboratory (FABLAB) will be housed by the Cape Craft and
Design Institute and is the first phase of an innovation centre for craft and
related industries. It will allow users to locally conceptualise, design,
develop, fabricate and test almost any product or idea.
All these interventions and others will continue to be supported by the
department and a budgeted amount of about R15 million has been set aside for
this. He challenges us to see the relationship between collective economic
wealth and individual ability to self-determination.
On this note it is therefore fitting that I highlight the Department's
contribution to the Siyabulela Campaign which will undertake to honour the
women's and youth struggle for freedom, equality and a better life 50 and 30
years ago, respectively.
Our interventions will also validate the ongoing contribution of women and
youth to underpinning a Home for All in the province.
The Department has prioritised delivery to women and youth in its enterprise
delivery interventions through:
* supporting sustainable enterprises - R2 m for 60 youth SMMEs and R4 m for
women's enterprises
* provincial co-ordination of APEX, Mafiso, Umsobomvu and Khula for more
effective support of youth and women entrepreneurs
Conclusion
In conclusion Mr Speaker, we are living in exciting but critical times for
the economy of our country and Province. Economic growth - shared, innovative,
impactful, participatory, integrated, holistic and far reaching -is and will be
the backbone of our social development and prosperity for our province. We are
indeed on the threshold of a potential path for sustainable growth which
requires Chutzpa, smartness, faith, determination and courage from all the
social partners; provincial government, business, labour, civil society and all
policymaking stakeholders.
We believe that AsgiSA and the broad-ranging renewed set of policies
represent this! Our own mix of strategies and approaches underpin this renewed
effort and we believe we have gone a long way in realising our objectives. In
sharpening our joint efforts we can truly achieve a prosperous "Home for All"
in the Western Cape.
Mr Speaker
The total budget of this department for 2006/07 is R188.433 million (this
includes the Tourism allocation) representing an increase of 32% since the last
financial year. The projected growth into the Medium-Term Expenditure Framework
(MTEF) is estimated at R206.709 million in 2007/08 and increasing to R214.749
million in 2008/09.
The budget expenditure ratios and amounts reflect I believe, Mr Speaker, a
balanced frame of interventions on both, direct short-term impact areas and
long-term strategic areas. They reflect a commitment to both 'invest' in and
nurture the first economy while focusing our energies on fast tracking the
second economy's participation and involvement. This is the only way to bring
freedom to the economy. We are making serious advances on this frontier of
struggle.
The economist Jeffrey Sachs said that:
âThe truth about good economic doctoring is to know the general principles and
really know the specifics. To understand the context and also to understand
that an economy may need some tender loving care, not just truths, if it is to
get by.â
As we celebrate the 10th anniversary of adopting the 1first democratic
Constitution, the Department commits itself to striving toward the realisation
of our citizen's basic economic freedoms and hopes for a better quality of life
in a Home for All in the Western Cape.
I would like to end off by sincerely thanking all those who have supported
us in our endeavours as a department.
* the Premier and my Cabinet colleagues
* the Chair of the Standing Committee Mr Garth Strachan and all members
* our partners in the private sector
* Wesgro
* all our sector bodies/SPV's
* our social partners in the Provincial Development Council
* a word of thanks to my special guests from the film industry
I would like to thank all my officials in the Department and a special word
of thanks to the outgoing Head of Department, Mr Brendon Roberts. To my
ministerial staff - a big thank you.
I would like to use this opportunity to say farewell to both Mr Roberts and
Ms Gobodo and wish them well in their future endeavours.
And finally to my terribly neglected yet ever supportive Family - thank
you.
I thank you.
Issued by: Office of the MEC for Environment, Planning and Economic
Development, Western Cape Provincial Government
18 May 2006
