Theme: Changing challenges into opportunities
Madam Speaker; Honourable P Nkonyeni
Deputy Speaker; Honourable, M Mthimkhulu
Honourable Premier of the province of KwaZulu-Natal; Dr ZL Mkhize
Fellow Members of this House
Distinguished guests
Members of the Media present
Friends, ladies and gentlemen
I rise to table Budget Vote four of the Department of Economic Development and Tourism in my capacity as the Executing Authority of the department.
Chairperson, we want to start by thanking the premier of the province of KwaZulu-Natal, Dr Zweli Mkhize for bestowing on us the responsibility to lead a department which is not only critical for turning the economic fortunes of this province, but which is the engine that should drive prosperity in this province. This is a challenge which is not only daunting but humbling and fulfilling.
However, we have no doubt that with the support of every member of this august House, it is a responsibility that we will carry with the necessary zeal and fortitude for we understand that the future of our province rests on how well we contribute as a department.
We also want to thank the premier of KwaZulu-Natal Dr Zweli Mkhize for the solid foundation he has laid in the past five years of his stewardship of this department. Indeed Khabazela, the foundation you have cemented has made our entry into this portfolio a relatively easy one as the building blocks were already in place.
Chairperson, at a time when the nations of the world are faced with a spectre of doom, we need to hold our own, and truly believe that no challenge is beyond conquer. We need leaders whose depth of vision is endless. We need the collective wisdom of a nation that can distinguish between ordinary times and extraordinary times. We need intellectuals and scholars that are steeped in the know how of what works from that which cannot work. We need the business community that can see far beyond the confines of ever increasing profit dividends at a time when the greater good of the nation is at stake.
We need a labour movement that understands that the future of its members is dependant on the choices and sacrifices that they make today and not some other time, to build that brighter future for their members as well as for society at large. We need the nations that know what transcends their boundaries for the common cause of humanity. The depth of our vision should be the one that propels us to see far ahead and to model our responses to the current challenges, on the basis of a collective sustainable growth.
In this policy speech, we call upon our nation to immerse itself in hope rather than despair. As we do so we are very mindful of the fact that we are not advocating for masochism, but rather, we are calling for the depth of wisdom that is rarely seen when the nation is facing serious turbulence in its evolution. We therefore say to all our social partners, that where others may see the severe drought in front of them, we need to see the opportunities that are waiting to be tapped. Where others may see a disaster that is befalling them, we need to see an ocean of opportunities that need to be converted to build a new prosperous nation.
Ours is, therefore, "to build an economy that creates opportunities for all and to make tourism to work for us all." Chairperson, one of the fundamental truths of our existence is that the challenges that bring their fair share of hardship and difficulties also empower us with lessons that serve as our guiding light for the future. Since the evolution of human beings, our ability to change a negative into a positive has remained a tribute to the resilience of the human spirit. The current global economic contraction and its attendant repercussions, is a perfect example of a situation that calls to the fore our creativity and resilience to negotiate ourselves out of spots of bother.
Indeed, the test before us reminds me of the words of American author: Emily Dickinson, who once said: We'd never know how high we are till we are called to rise; and then, if we are true to plan, our statures touch the sky. Paraphrased, this excerpt from Dickinson's writings means that people, as a general rule, tend to underestimate their prowess and abilities until they encounter situations that demand of them to dig deep into their reserves and deal with a particular situation which, if left unchecked, may work to hamper their well-being.
The current global economic contraction is such a situation for it threatens life as we know it. Trusting in the resilience and resourcefulness of the people of our province, we have no doubt, as this provincial government, that our collective statures will more than rise to the occasion but will indeed touch the sky.
Chairperson, it is a known fact that KwaZulu-Natal has been hardest hit by this economic crisis after it lost 117 000 jobs in the first quarter of 2009. The general increase in unemployment in South Africa is also observed at provincial level where KwaZulu-Natal registered an increase of 1,8%, from 20,8% in the fourth quarter of 2008 to 22,6% in the first quarter of 2009. Significant job losses were recorded in the agriculture, manufacturing, trade and construction sectors.
In the first quarter of 2009, the KwaZulu-Natal regional economy contracted by -6,7%, compared to a decline of 6,4% in the national economy. Thus, in line with domestic conditions prevailing in South Africa, KwaZulu-Natal also slipped into recession in the first quarter of 2009. The sectors that sharply contributed to the negative growth in the first quarter of 2009 were the manufacturing and mining sectors, which contracted by 23,1% and 49,3% respectively against the backdrop of subdued domestic demand conditions. Attached to this trend is the 5,9% contraction in the electricity, water and gas sector, while the wholesale and retail trade contracted by 2,8%.
The only sectors that registered positive growth were construction; general government services and personal services. CPI inflation improved marginally in May 2009, declining to 8,0% year-on-year. Prices of food and non-alcoholic beverages climbed by 12,3 % year-on-year in May 2009. The South African Reserve Bank reduced the repurchase rate (repo rate) to 8,5% per annum.
The impact of these statistics on the province is that attention must be given to the saving of jobs and practicing good fiscal management. We need to ensure that with the limited resources we are able to enshrine the principles of value for money with the reduction of goods and services budgets of 7,5% this year. Our attention will also be limited to those sectors showing long term growth with emphasis on technology to enhance the global competitiveness of our industries.
It is against this challenging backdrop that we assume the responsibility to lead this department. While there is no denying the depth and the extent of the crisis facing all of us, we are encouraged by the fact that the citizens of this province do not throw their hands up in the air in despondency in the face of a challenge, instead stare head-on the challenges were are facing. We are encouraged by the fact that the people from all walks of life, from employees to CEOs to owners of the businesses of this province represented in all the sectors, have expressed their willingness to work together with the government to extricate the province from this economic morass.
It is against this backdrop that the Premier and the Minister of Economic Development and Tourism will, next month, from the 6 to 7 August 2009, bring all the stakeholders together under one roof in a Summit to discuss strategies to mitigate the impact of what has been described as the biggest economic crisis of our age. As a pioneering province, our aim is to ensure that this Summit should emerge with a road map that will help the province to weather this economic storm. The roadmap which will emerge from this Summit should provide a guide on how all the sectors, business and labour, should work together to safeguard the current jobs while creating new ones through renewed economic activities. We will comment in detail later on our approach to the summit and the work done thus far in preparing for the summit.
However, we have no doubt that if all stakeholders contribute meaningfully to this Summit, we will indeed transform our current challenges into future successes.
Chairperson, before we reflect on our programme of action for the next five years, we feel it is proper to report on the progress made during the 2008/09 financial year. However, we will not delve into too much detail as this would be covered in both Departmental and Public Entities' Annual Reports during the course of the year. The department will continue to implement some of our familiar programmes which include the Local Economic Development, Enterprise Development, Sector Development, enforcement of Broad Based Black Economic Empowerment and many more. In the same vein, the statutory bodies that serve as strategic implementation vehicles for Vote Four had played a vital role in the past five years and we are grateful to their contribution.
Skills Development
Substantial focus was given to the issue of developing appropriate skills in the economy to ensure that not only the first economy is able to absorb much needed capacity but that the second economy participants are appropriately equipped to not only become sustainable but to begin to compete with established businesses. Research was undertaken to assess the areas where there was a scarcity of skills and which simultaneously would impact detrimentally on the economy. A critical shortage of skills is in the Maths and Science fraternity. To this end, we launched the Moses Kotane Institution which has been supported with an initial R34 million. Named after the ANC struggle icon who was the champion of education and skills training of cadres, Mr Moses Kotane, institute will accept learners who would be exposed to various disciplines such as science, technology, engineering and mathematics, information technology and software design which are essential to achieve economic prosperity.
We have also expanded our partnership in the process of promoting skills and business to include some of the world renowned organisations in the field of ICT. Amongst them is the National Institute for Information Technology (NIIT) and the Confederation of Indian Industry, all based in India. They are involved in the training of 10 000 KwaZulu-Natal students and this is a five year initiative featuring an internship programme in India for candidates to gain practical industry experience. Around 1700 students would have been recruited by 2012 – with at least 800 of them being prospective science and engineering graduates.
Enterprise Development – changing the strategy
In a bid to help co-operatives grow their businesses, attention was paid to skills development, as well as the alignment and matching of co-operatives development with sectors that present more business opportunities than others. This meant streamlining co-operatives, including other emerging enterprises towards sector specific as per market demand for their products and services. In this regard sector specific co-operatives have been and continue to be formed. This will ensure that interventions are focused to the needs of the members of the co-operatives.
We have begun to create linkages with potential clients amongst established companies to urge them to procure oods and services from co-operatives as part of their subscription to empowerment practices. Our attention has been in the Agricultural, Clothing and Textile and Arts and Crafts Sectors. The establishment of a provincial co-operatives college and bank will be amongst the instruments to entrench this economic concept while infusing our objectives with the lessons from nations that adopted this activity to grow their economies for the suppression of poverty and generation of jobs. Our actions will also integrate the resolutions taken during the first International Co-operatives
Conference held in this province in February of this year. The month of July also saw the national celebration of the International Co-operatives Day being hosted in this province – an acknowledgement that this province takes co-operatives enterprises seriously.
Trading Centres
New funding was provided last year for the revival of village and township economies through the promotion of trading centres, in which local entrepreneurs will be able to undertake their businesses - offering a wide range of products and services within the township areas. The funding was allocated to conduct feasibility studies and construction where municipalities already had business plans. An amount of R150 million was made available over the MTEF. As with new initiatives there was a significant amount of preparatory work required to ensure firstly that the projects were conceptualised appropriately and that all municipalities were consulted.
In terms of capital infrastructure, four trading centres are expected to be constructed in the Okhahlamba, eMnambithi and uMlalazi municipalities while one in Newcastle will be expanded to respond to growing demand for their services.
Broad Based Black Economic Empowerment (BBBEE).
Chairperson, in the past term we announced the appointment of an Ombudsman to deal with BBBEE matters in the province. Unfortunately this was beset by challenges, some of which we had not foreseen. Since no other province had such an appointee, there was no benchmark or best practice to draw from. It was discovered that without supporting legislation, the role of the Ombudsman would be limited to that of an investigator without much clout.
However, it was agreed that legal action could be referred to respective agencies dependant on the nature of the outcome, and therefore it was agreed that the office would be established and would simultaneously begin with the establishment of suitable legislation. The Office of the Premier is being consulted in line with the Premier's announcement of the establishment of the Ombudsman dealing with public sector complaints to ensure alignment as it is envisaged that this position should reside within the Office of the Premier. In line with this, the nominations of the BBBEE Advisory Board have been received and will be presented to Cabinet for consideration and the Premier will appoint the board.
We want to re-iterate that our government will leave no stone unturned in exposing acts of fronting under the pretext of BBBEE. Not only is fronting morally reprehensible but it makes a mockery of the whole concept of empowerment. Our monitoring mechanism will be tightened further to ensure that there are no weaknesses in the system and that the pace of empowerment of youth, women, people with disabilities and rural communities is accelerated. But in order to achieve this, the private sector and other social partners must join hands with the government.
We will endeavour to revive and activate the structures that had been established and agreements reached with social partners in an attempt to create workable action plans to enforce all virtues of black economic empowerment.
We are also pleased to report that three BBBEE Verification Agencies have been approved by the national government and this will contribute significantly to the enforcement of compliance and monitoring of the province's performance in the implementation of empowerment programmes. We have planned for the assessment of all government departments and our entities in terms of a scorecard, which would form the benchmark against which future progress would be monitored.
Following the assessment we would expect each department to provide a comprehensive plan on dealing with their deficiencies in order to meet predefined targets.
Trade and industry development
As the Department of Economic Development and Tourism, we have set our selves the target of not only putting the province on a growth pedestal, but of also being globally competitive. Clothing and textiles, arts and craft, information and communication technology, agribusiness, wood and woods as well as business processing outsourcing are amongst the target industries the Department had prioritised in the past five years.
Clothing and textiles
This sector has been hit hardest by the trade liberalisation which has resulted in cheap products flooding the market. As a result, thousands of jobs have been shed over the past few years. The current global economic situation has not helped matters. But the government believes that we could still rescue this sector which is labour intensive. A comprehensive strategy for the revitalisation of the provincial clothing and textiles sector has been developed by the department. The strategy looks at amongst other things access to markets, skills development, establishment of an integrated hub that will service sector stakeholders and the development of a funding model that will assist small, medium and micro enterprises (SMMEs) in the purchase of raw materials and machinery. An amount of R30 million has been budgeted to roll out the clothing and textiles revitalisation strategy this year. This budget will cover several activities to resuscitate the industry through the rolling out of the revitalisation strategy which would be backed by an injection of over R40 million during the next two years.
Arts and craft
Chairperson, it is a fact that this province is awash with artistic creativity which is indicative of our diverse cultural heritage and this could be seen in the wide range of craft artefacts and musical genres produced by our people.
However, it is our belief that our people should be benefiting from their talents through the sale of their products which are often scooped by unscrupulous collectors that sell them at high price – an act that robs the primary producers the opportunities to reap the benefits of their creativity.
Over the past years, this department, in partnership with the Department of Trade and Industry has been working on the formalisation of craft products as viable business undertakings for both domestic and export markets.
This resulted in the agreement for the establishment of the provincial integrated craft hub to benefit about 500 craft makers from this initiative as they would be able to show-case their products for diverse market to earn a decent living as compared to selling for pittance on the side of the road. The one village, one product concept would further strengthen the credibility and marketability of craft products since products would be identified with their location where potential buyers would easily access traders. Our ultimate aim is to build the second biggest global emporium.
Creative Industries
Chairperson, KwaZulu-Natal is well known around the world for being the cradle of exceptional artistic talent. Unfortunately lack of facilities and resources to manufacture and market our music products has resulted in most music artists trekking to Gauteng to seek opportunities. This is depriving KwaZulu-Natal of the opportunity to attract global attention and the benefit that is attendant to that. In an effort to reverse this, we have amongst other things invested R24 million towards the establishment of a music studio at the former Documentation Centre in Durban.
Agribusiness
With the Dube Trade Port project getting closer to completion, this facility would have extensive spin-offs for the province beyond its contribution to the transportation of football fans during the 2010 FIFA World Cup and becoming a tourism interface for the province and the rest of the world. It will be a reliable conduit for fresh produce for export market and the department is currently positioning the producers of highly sought after perishables to produce and package their products for foreign markets.
One of the department's projects which drew attention last year was the BEE Foundation, which encountered some challenges. We are pleased to announce that while we are undertaking the lengthy legal processes to recover as much of the misappropriated public funds as possible, we have made tremendous progress on the ground. The implementation of the KwaTembe Honey pilot project is currently underway. A fully equipped processing facility owned by the co-operative will be established in Kwa-Tembe to process and market branded honey. The first harvest is envisaged for November, if nature is on our side. The project will be expanded to 200 beekeepers in 2010/11 and 300 in 2011/12. The ultimate goal is to fully exploit the honey production potential in Kwa-Tembe, uMkhanyakude and the whole of KwaZulu-Natal. We will also assist them with a fully equipped processing facility, branding and marketing.
Tourism
Tourism has earned itself the accolade of being one of the fastest growing sectors in the country and it has also an added advantage of being labour intensive and therefore it is an employment multiplier. In the year 2008/2009, it is estimated that the province generated over R18,3 billion in direct contribution to the economy and more than R26 billion in indirect contributions to the economy. At least 83 000 direct jobs and 167 400 indirect employment opportunities were created in the tourism sector during the year under review.
Transformation in Tourism
The government and the industry have already agreed on the need for transformation through the development of BEE Charter and scorecard as well as Codes of Good Practice. However, the process of transformation within the industry seems to be moving very slow hence there is a need to come up with appropriate interventions which include among others the following:
- Growing the transformation partnerships between the government and the private sector which has already been done through development of the Charter and BEE Scorecard. The challenge presently is the implementation. The province has established Tourism Business Forum which brings together the government and the Private sector and it will play a crucial role in driving transformation within the industry.
- Supporting BEE and transformation at enterprise level.
- Promotion of black ownership/ investment in identified growth areas of the industry coupled with the transformation of the current ownership patterns across the sector especially on areas of ownership and management control.
Business regulation and governance
The current financial situation is likely to contribute to increased dubious business practices as traders and consumers feel the pinch. While our mandate is to provide legislative guidelines and necessary interventions with regard to the protection and education of consumers as well as the regulation of liquor industry, we are also expected to ensure good governance which is the hallmark for the attraction of investment to the province.
Liquor Administration
During the year under review, the Provincial Liquor Board dealt with a range of issues that stretched from its general adjudication on applications for trade permits to the facilitation of interactive sessions and media campaigns to educate members of the public, about processes associated with liquor licensing and potential dangers of alcohol abuses. Despite some challenges, about 4 198 applications were processed and the board managed to adjudicate over 3 487 licenses while 16 educational campaigns were conducted.
Consumer Protection
We are mindful of potential abuses the consumers could find themselves in, especially during these trying economic times. We have therefore upped the stakes to keep consumers vigilant and knowledgeable about their rights and obligations. But we also believe that not all business people are prone to illegal practices. The partnership we established a few years ago with members of the business fraternity to collectively prevent all unsavoury business acts against consumers, through the signing of Business Pledge, remains strong.
Through advocacy initiatives, we reached more that 1,65 million citizens using different forms of communication that included interactive work shops and media efforts. About 7 437 consumer complaints were received and investigated accordingly and with the intention of establishing a provincial consumer consultative forum during the course of this year, we can only improve on the protection of consumers and therefore strengthening the investor-confidence in this province.
Corporate Governance
In line with the ethos of acceptable business practices, the province is currently establishing itself as a reliable source of reference in dealing with malpractices in business. In spite that this function is still at its early stages, some ground work has already been started with eThekwini Municipality to help bring some form of stability and acceptable business shape within the informal trade for instance. Several bilateral steps were undertaken and these included the holding of public gatherings to address informal traders on government plans to empower them whilst educating them on the importance of by laws in regulating economic activities in towns and cities.
In recent weeks, a Cabinet Task Team has had to intervene in fostering a win-win solution between the eThekwini Municipality and Early Morning Traders allegedly caused by mooted development around the Warwick Precinct. Our co-operation in finding a collective solution is based on the belief that the interests of the informal traders had to be accommodated while balancing with long term government economic priorities to bring about tangible socioeconomic advancement. We have no doubt that there is ample room for the two parties to find one another and collectively come up with a lasting solution to the impasse. In ensuring that those in the informal traders sector graduate to better echelons of business, we commit ourselves to develop a clear Provincial Informal Trade Policy as part of our broader strategy to promote positive governance and business compliance in the economy.
Economic planning
Although the Department is supposed to act as the archival centre of economic data, it has not been able to fully perform this task. However, the growing demand for up to date information on economic issues is compelling us to work on the requisite competencies to collect, analyse, review, package and distribute economic data that could assist potential investors make strategic decisions about the accurate status of our provincial economy. A team of economists and professional economic policy formulators and analysts has been appointed to work on this.
As a result, a quarterly report on the province's performance Ezomnotho which is distributed amongst various role players in the province's economy is now being produced.
Public entities
A substantial portion of the department's budget is transferred to six of its Entities and therefore the achievements thereof are critical to report against. The public entities are strategic instruments to help facilitate practical implementation of the Department's strategic programmes. As we all know they differ in their respective spheres of focus but are all working towards an integrated goal that is in line with the department's statutory mandate of accelerating economic growth in the province to ensure visible socio-economic transformation.
During the past five years these bodies have contributed significantly to the province's economic advancement in spite of many challenges associated mainly with the current economic uncertainties and we are confident that they will continue with the good work.
Trade and Investment KwaZulu-Natal
When we established Trade and Investment KwaZulu-Natal in 2001, we were encouraged by the vision of changing this province into one of the most attractive investment destinations the world over. Over the past five years TIKZN has facilitated an interface between potential foreign investors and the province as well as exposing our own traders to the world market. Chairperson we are pleased to announce that TIKZN has clinched R981 million worth of committed investments creating about 835 job opportunities.
KwaZulu-Natal Tourism
Our province continues to outstrip other provinces when it comes to the tourism industry. The KwaZulu-Natal Tourism entity has notched a number of achievements in ensuring that this sector of our economy grows from strength to strength. Rural tourism is also one of our focal points because it is a physical expression of our government's transformation agenda. It is in pursuit of this objective that TKZN will also focus on assisting rural communities in either sustaining their existing products or for them to enter the tourism sector. In line with this goal, we have facilitated the completion of the Bhambatha lodge in May 2009 at Ngome.
We are now in the process of finalising the operational and management plan for the lodge to ensure that it is sustainable well into the future. We are also engaged with the final negotiations with the communities' private sector partners with regard to the implementation of the other two phases of this development. The model and the learning's from this process will be applied to the many other community tourism projects inherited or acquired through the land claim process within the province.
This will be done in partnership with the Department of Land Affairs and KZN Ezemvelo Wildlife and any other stakeholder identified as been important in the process. We are also diversifying our tourism products in order to meet the ever increasing demands of our clients which are also accentuated by our competitors. As a result, cruise tourism has been identified as an important tourism offering for the province. Hence a cruise tourism strategy was formulated and TKZN joined the membership of the Cruise Indian Ocean Association, comprising Kenya, Tanzania, Sudan, etc. TKZN has now been elected as the secretariat for this Association. The Cruise Indian Ocean Association was officially launched in South Africa during Indaba in May 2009. TKZN is currently driving the strategy for growing cruise tourism within the association's member countries through the creation of dedicated Indian Ocean cruise itineraries and global cruise liner repositioning.
In 2006, TKZN together with its bid partners eThekwini Municipality and Inkosi Albert Luthuli ICC Complex were awarded the hosting of the Tourism Indaba in Durban, KwaZulu-Natal for the period 2007 to 2009 by South African Tourism, the owners of the event. South African Tourism has now informed the parties that this period has now been extended to include Tourism Indaba 2010. This is a very good opportunity for the province to showcase its tourism offerings just weeks before the start of the world's biggest event, the 2010 FIFA Soccer World Cup.
Turning to the 2010 FIFA Soccer World Cup, TKZN developed a provincial tourism plan for this event. During the previous financial year, we worked with MATCH to facilitate the contracting process for the accommodation establishments and hosted a number of workshops within the province. However, at this stage the issue of accommodation remains unresolved as MATCH has not been able to contract enough accommodation to achieve its 50 000 room target.
The national Department of Tourism is currently addressing this matter with all the affected stakeholders with a view to finding a lasting solution in this regard.
KwaZulu-Natal Sharks Board
The KwaZulu-Natal Sharks Board continues to play a meaningful role in ensuring that our province retains its competitive edge as a tourism and water sports destination while fulfilling a critical mandate of opening up our exciting biodiversity to all the people of our province. Approximately 87% of our visitors make use of our beaches during their stay in our province. In 2008, bathing remained open for 97% of the year while in the financial year under review, KZNSB was visited by 37 000 people while its outreach programme touched no less than 73 000 people.
Importantly, the KwaZulu-Natal Sharks Board Act (Act No. 5 of 2008) was promulgated ensuring that the entity is in step with the growth and transformational trajectory of our times. Also notably, the Board appointed its first black CEO, Mr Mthokozisi Radebe, during the 2008/09 financial year. Ithala Development Finance Corporation. Having undergone drastic changes since the dawn of the democratic dispensation in 1994, Ithala Development Finance Corporation continues to be a vital instrument to facilitate socio-economic engineering in this province.
The agency is mandated to strategically lead the pack in terms of providing a combination of business development support services to the poor communities that could be unable to access funding from traditional financial institutions due to perceived risk factor largely attributed to lack of collateral for investment.
A cluster of factors have seen Ithala recording diminishing profits and an unimpressive balance sheet in terms of credit and debt profile threatening its ability to generate its own revenue to sustain its operations without relying on the government's purse. A systematic restructuring process has been affected to reposition the agency's business operations. Attempts have to be made to bring stability at a leadership level by seconding former Head of the Provincial Treasury, Mr Sipho Shabalala to act as an interim Chief Executive Officer following the redeployment of Mr Ike Nxedlane.
However, Mr Shabalala has now been appointed on a fixed term contract for two years to complete the implementation of the turnaround strategy. We have met with the Board of Ithala and clearly outlined what we expect as a minimum from Ithala over the next two years, least of which is much improved financial position and performance. These goals have been incorporated into the CEO's performance agreement and the Board will be expected to report quarterly on progress on these specific issues.
Richards Bay Industrial Development Zone
With regard to Richards Bay Industrial Development Zone which is symbiotically linked to Ithala, a new board has been appointed and additional capacity will be provided to the current team. The review of the business model and strategy to enhance delivery has been completed and accepted by the Department of Trade and Industry.
KwaZulu-Natal Growth Fund
The gradual growth in the province's economy has improved its image as a potential destination for both domestic and foreign investment. This has also heightened confidence amongst empowerment business candidates to scale up their claim for real economic empowerment by venturing into big business undertakings instead of being confined on the periphery. The provincial government has accommodated this demand through the foundation of the KwaZulu-Natal Growth Fund to serve as a reliable source of credit to aspirant entrepreneurs keen to move to bigger businesses requiring more than R30 million financial out lay. The fund has since started attracting strategic co-funders. By late last year it had concluded partnership agreements with the Development Bank of Southern Africa, Standard Bank and Infrastructure Finance Corporation.
The Board of Trustees and Investment Committee have all approved the policy frameworks for investment and loan pricing hence we are delighted to report that the beginning of the new financial year has seen eight projects worth R390 million being submitted for consideration by the Investment Committee. If approved, this investment would stimulate the economy and create around 2 650 jobs across the province as the target sites are spatially balanced between urban and rural areas that include Jozini, Ballito and Amanzimtoti.
The Fund has also developed a project pipeline, estimated at R1,113 billion and this includes initiatives that are at various stages such as R910 million in identification phase, about R1 billion in initial screening stages and approximately R130 million in final approval stage covering various sectors. Following the lack of visible progress in the past year pending approval of financial agreements, the Growth Fund must deliver this year, in particular, as a catalyst for growth and provision of lending where other financial institutions are reluctant to do so.
Dube Trade Port:
With the Moses Mabhida Stadium nearing completion, we are delighted to report that the equally important facility, the Dube Trade Port and King Shaka International Airport is taking shape with approximately 66% of the work having been done. All buildings including the passenger and cargo terminals, ancillary support structures are now under roof. The final layer of asphalt is being put down on the runway as we speak and a total of over R5 billion has been spent on this magnificent project. The province's contribution thus far is in the region of R1 billion.
We are pleased to report that in terms of the BBBEE targets set in the contract, R13,8 million has been spent on enterprise development, R7,1 million has been spent on skills development, R5,6 million on socio-economic projects in surrounding communities and R1,4 billion has been spent on BBBEE firms through sub-contractors.
The project which is on track for full operation by 1st May 2010 is visibly contributing to socio-economic transformation in our province. In response to environmental issues, all obligations in terms of the environmental management plan are being implemented by the contractor under constant monitoring by the Department of Environmental Affairs. Meanwhile, concerns relating to the movement of the barn swallows community and expected flight patterns were monitored through a specially built bird radar system that was developed by NASA. The removal of alien vegetation is taking place and the nursery for rehabilitating the wetland has also been completed together with the Agrizone Master Plan. The municipality and local people are involved in the rezoning of Mount Moreland.
All outstanding land agreements and shareholder interests between ACSA and the DTP have been concluded and are in the process of being registered before the official transfer of authority takes place. In pursuit of its mandate to serve as a catalyst for aviation-linked economic development, DTP has managed to work with the Tongaat Hullet Group to produce a broader vision and strategy for a sustainable spatial development around a 30 kilometres radius of this project site. This liaison with Tongaat Hullet, we hope, will further allow a long partnership resulting in more land being unleashed for further private investment developments – contributing to the commercial viability of the entire Dube Trade Port initiative.
As we look to the year ahead, the cargo terminal is expected to be the first building to be handed over by the contractor around September 2009 and hence we are likely to announce the official operator of this terminal very soon. At the same time, we should be in a position to announce the successful bidders for the establishment of other allied outlets in this projects precinct such as hotel, office and retail facilities – and moreover, our focus will also be to pursue discussions with other airlines to secure another potential direct airline before the airport facility becomes operational next year.
The 2009/10 financial year presents a mixed bag of opportunities and challenges. We have already outlined the economic context within which we table this financial year's budget policy speech. It is a context that is not of our choosing. At the same time, these objective conditions do not lessen the legitimate expectations that our people have of us.
In the same vein, we expect no less from ourselves but, together with our partners, to, even this financial year, rise such that our statures touch the sky.
Strategic and policy priorities towards 2014
As part of efforts to weather the current economic storm, the Department has committed itself to several specific quantifiable priority interventions that first should assist in mitigating the impact of the present economic conditions and strengthen the province's economy for the benefit of all communities.
Our department has identified ten key priorities which we intend pursuing in partnership with social partners in both organised business and labour and as well as communities. Our multi-faceted statutory mandate is succinctly codified in our vision and mission which are respectively to promote a competitive economy that improves the lives of our people while developing and implementing strategies that encourage participatory and sustainable economic development.
In this current term we therefore pledge t
1. prioritise the stability of key sectors of the first economy sectors and thereafter to stimulate growth through tangible programmes. The critical areas of intervention will be focusing on supportive mechanisms on critical sectors facing economic decline
2. mount targeted interventions to ring-fence sectors in the second economy to ensure their sustainability and contribution to job creation and promotion of the entrepreneurial culture in communities. The process will include providing incentives to small scale enterprises such as co-operatives and small, medium and micro enterprises (SMMEs) that demonstrate passion for growth and migration into big business. This will contribute significantly towards food security and rural development
3. align government strategies designed to promote socio-economic empowerment with all economic priorities to ensure synergies in the process of transformation. The implementation of the Provincial BEE Strategy within the framework of Broad-Based Black Economic Empowerment Codes will serve as the road map to enforce empowerment across all sectors of the province's economy
4. re-affirm the province's diverse economic strengths illustrated in the economic profile of our districts, by packaging and marketing investment opportunities in accordance with Provincial Spatial Economic Development Strategy (PSEDS) focusing on critical growth nodes and corridors thereby ensuring maximum impact not only on the economy but on the people of the economy. Through the investment of public funding into infrastructure this can begin a push-pull strategy wherein private sector is drawn to areas where they may not have been active previously
5. review international relationships which have been formalised through trade agreements with the province. It is our intention to begin to unpack these trade agreements in order to begin to see tangible economic benefits flowing to this province and thereby unleash those which demonstrate for immediate opportunities for growth.
6. strengthen collaboration with social partners to pool resources and strategic interventions that would ensure that the province's economy becomes and remains fully competitive in the global arena while generating more essential jobs
7. maximise investment in the development and marketing of tourism products. Given the strategic importance of the Tourism sector, contributing 10% to the GDP of the province, specific attention will be given to ensuring that the 2010 international platform is fully utilised to truly launch the tourism potential of this province. KwaZulu-Natal will be packaged and aggressively marketed as the destination of choice for investors and tourists. We will also begin the process of developing a Tourism Master Plan which would then provide a strategic direction for future growth and development in this critical sector
8. Maintain constant focus on developments relating to the 2010 FIFA World Cup. In this regard, the province's business communities would have to be positioned to benefit immensely from this sporting spectacle while ensuring long term relations with potential investors and tourists that would be gracing our shores. The department has a comprehensive strategy which it began implementing in 2008/09. This has resulted in the first website in the country on 2010 providing ongoing information to various platforms in addition to various communication modems to increase awareness and hype about 2010. The department is driving the Public Viewing Areas wherein all citizens of the province, particularly those who are in the remotest areas of the province, are able to watch the football matches
9. finalise the Bills essential to help the full functioning of the Department and its entities towards the achievement of our strategic objective of accelerating growth for real economic transformation. These Bills are the Liquor Bill, the Dube Trade Port Bill, the Trade and Investment Bill and the Film Commission Bill
10. establishment of a special purpose vehicle which will co-ordinate government support to land reform beneficiaries in order to ensure that they are able to use this critical resource profitably.
New announcements in economic development
1. Economic Recovery Conference
Chairperson, it is obvious that a mere knee-jerk response to the current economic crisis is not appropriate. There is consensus at all levels of government- national, provincial or local, that the response has to be decisive and should somehow steer the economy and the industries that are its mainstay onto a growth path once more. It is for this reason that the provincial government of KwaZulu-Natal intends to convene the provincial economic recovery summit aimed at developing a strategy to protect, retain, enhance and grow the provincial economy. Titled "Roadmap Towards KZN's Economic Recovery, the conference will formulate the province's "Strategic Response" to the crisis. The focus is on developing an industrial development vision within government and between government and its partners.
We have already agreed with our social partners, especially in civil society, which include COSATU and its affiliates in SACTWU and NUMSA that we will collectively attempt, as far as is possible to the minimise the impact of global recession in our province.
2. Alignment and co-ordination of Public Entities
Chairperson, the mandate that we got is to grow the economy of the province for the benefit of everyone. The public entities are critical for this objective to be realised. Because they deal with various interconnected aspects of attaining this objective, therefore it becomes critical that while they maintain their independence in terms of their scope of responsibility there should be a co-ordinated approach to the bigger objective.
As a result, a forum of CEOs of public entities together with the accounting officer of the department will have to meet on a monthly basis to discuss approaches to work and act as a platform to deal with challenges that any of the public entities might be facing before these escalate into huge challenges. This forum of chairpersons of the boards of public entities and their CEOs will meet with the MEC on a quarterly basis to check on progress and map the way forward. This is a way of giving support to entities as opposed to taking over their responsibilities.
3. Sector focused co-operatives
Chairperson, co-operatives remain one of the critical pillars on which our department intends to create linkages between the first and the second economy. While there is a lot of progress that has been made in nurturing co-operatives and using them as a springboard for economic development, we feel that we should change our approach to co-operatives. In this regard, we intend cultivating sector focused co-operatives as opposed to omnibus co-operatives.
In doing this, we will look at the strength of each sector and the analysis of the economic trends at the time. In order to ensure the viability of these co-operatives, we intend tightening our monitoring and support mechanisms so that these critical vehicles for economic development can yield the desired results.
4. Encouraging Business Cohesion
Chairperson, one of the defining features of all successful economies is the resilience of organized business community. The business chambers are one of the oldest forms of business formations. Our observation in this province of KwaZulu-Natal is that, for various reasons, the business chambers have not been occupying centre stage in terms of articulating the business interests and acting as mentors for emerging businesses. We have also noticed that most of the influential CEOs of big industries do not participate in these chambers. As a result, the chambers have been deprived of the expertise and interactions between emerging businesses and established businesses. Our department is going to embark on a drive to help encourage the business unity and restore chambers as fora for exchanging ideas.
5. Promotion of KwaZulu-Natal as the Headquarters for companies
Chairperson, the competition for scarce economic resources owing the global economic situation means that KwaZulu-Natal will have to do more to market itself not only as an investment destination of choice, but as a province that offers the best returns. As part of this drive, our Department has set itself the target of not only upping the ante in getting companies to invest in the province, but of also making a conscious effort to woo companies which conduct more than 80 percent of their business in the province to use KwaZulu-Natal as their headquarters.
We believe that our strategic location of being the only province in the county with the two Africa's busiest ports should translate into companies wanting to base their business operations in the province. This, we believe, will yield added economic spin offs for the province of KwaZulu-Natal.
6. Ministerial Economic Group
Chairperson, the current global economic landscape is such that there should be more interaction and exchange of ideas between the government and all the sectors in society. For the province of KwaZulu-Natal to realise its true economic potential, efforts need to be made to ensure that we tap into the expertise that exists in all the sectors of our communities. For this reason, the Minister will establish an a Ministerial Economic Group of experts in the diverse fields of the economy which will serve as a think-thank and advise the minister on matters of policy and on how to ensure that KwaZulu-Natal is a leader in terms of attracting investment. Once we have finalised the process of appointing the names of the Ministerial Economic Group, we will announce them in due course.
7. Related party policy
Chairperson, for various reasons most of them unfair; Ithala has received negative media publicity, allegedly because of the way it conducts its business affairs. At the centre of this negative publicity, has been the accusation that there are some who have received financial assistance from Ithala under allegedly questionable conditions.
These untested allegations of unfair practice have been bandied about as the gospel truth when no investigation has taken place and concluded that indeed such acts have been in contravention of the code of conduct of the institution. Despite our conviction that there was nothing untoward in extending financial assistance to the said individuals or entities, we nonetheless have resolved to come up with a clear policy that will regulate the lending practices to entities or individuals related to some who are in positions of power and may have direct or indirect influence within the institution.
We are finalising the related party policy with a view to dealing with these allegations once and for all. However, we want to state for the record that it is common practice anywhere in the world that those who might be close to the financial institution be it via their spouses or relatives cannot be denied financial assistance based on the accident of their birth. This would be unfair discrimination against them. In the same vein, we understand that the same financial institution will have to exercise extra-caution in its dealing with related parties. As the province of KwaZulu-Natal we have utmost faith in the integrity of men and women working for Ithala.
8. Special Purpose Vehicle (SPV)
Chairperson, rural development remains one of the critical policy priorities of our government. Since 1994 our government has invested R3,9 billion in commercial farming enterprises and in speeding up land reform. However, due to a number of challenges such as lack of integration of government interventions, there has been a decline in the production in commercial farms and in land that has been given back to our people as part of the land restitution process. In a response to these challenges a strategy has been adopted wherein a One-Stop-Shop through a Special Purpose Vehicle (SPV) is to be created in order to co-ordinate government support to land reform beneficiaries. This strategy also notes the critical role of the agribusiness sector, organized agriculture and non-governmental organisations in the provision of a holistic support programme. The collective pooling of funding (approximately R1 billion for 2009/10) and human resources would result in a comprehensive package to beneficiaries of land reform including equipping the beneficiaries with skills and packaging of projects prior to the delivery of farms. The department has been mandated with the role of the establishment and management of this SPV.
Tourism
1. Strategy to increase beds and rental vehicles
Our province is best known for being a tourism Mecca, particularly for domestic tourists. Despite this billing, we are still found wanting in terms of our ability to provide the necessary number of beds as well as rental vehicles for tourists. A cursory study of our ability to match tourist accommodation and transportation demands, say for the recent Vodacom Durban July, exposed a major shortcoming in this regard. As such, our department, working together with our partners, will be formulating a strategy to increase beds and rental vehicles so that our province is ready for 2010 and beyond.
2. Strategy to expand our tourism market
Despite the economic downturn, tourism remains one of the biggest growth sectors in the world. While KwaZulu-Natal has over the years grown its share exponentially of this booming market, we believe that we can still do more. It is for this reason that our department will this year, embark on an aggressive drive to exploit the full potential of our tourism market. In this regard, we want to intensify our efforts of marketing the province particularly, in parts of the world which are not our traditional markets, such as the Far East. We also believe that given our location and the fact that we are in the same time zone with many European countries, we will ensure that this translates into tangible benefits in terms, of tourism spend. In pursuit of this, we need to segment our tourism markets, in order to ensure that we cater for the lower end, to the middle and upper end of the market. Another key market which will be receiving renewed focus is the African continent which is renowned for visiting our shores.
Given the impact of the recession our focus needs to shift on to domestic market and to package products which will attract our domestic visitors. We believe that the 2010 FIFA soccer world cup offers us an opportunity of a life time not only to market the province to an international platform, but to ensure that KwaZulu-Natal becomes a tourist destination of choice through the provision of an experience not to be forgotten.
3. Tourist Buddies
We also aim to introduce the concept of tourism ambassadors (tourist buddies) men and women who work in public areas who will be able to project a welcoming face to all our tourists and provide assistance, including directions, to those visiting our shores. These volunteers will be trained on etiquette, customer service and will utilise their street smarts to ensure that tourists have a pleasant stay while visiting us. These could range from garage attendants, parking attendants up to and including our law enforcement agencies. We believe that this concept will also help us to deal with criminals who tarnish our good reputation by harassing tourists. We will train tourist buddies in major cities over the next year.
4. Attracting direct flights to Durban
It is our pleasure to announce that as from 1 October 2009, the Emirates will start flying directly from Dubai to Durban on a daily basis. This is a major coup for our province and is critical building stone for attracting even more airlines. We will embark on an aggressive campaign to attract even more leading airlines to fly directly into Durban. We are also exploring getting excessive flights that might not necessarily be used by their airlines, to also ferry tourists into the province as part of the international charter market, in particular for the 2010 FIFA Soccer World Cup next year.
Conclusion
Chairperson, the current economic climate has placed a challenge on all of us to be innovative in the way we do things. With investors all over the world being risk averse and inward looking, this means that as the province we need to change tactics ad come up with smart ways to attract investment in order to mitigate the impact of the global recession. We believe that the strategies we have articulated in this budget will not only help us deal with the current global turbulence, but will ensure that there is prosperity post the economic situation.
The current economic turmoil gives us the opportunity to review strategies that have not yielded the required results and to come up with new measures to stimulate the provincial economy, and to maximise the opportunities that are offered by tourism. If there is one lesson that we should all learn from the current economic situation is that we should think out of the box. The resultant shrinkage in the economic resources means that our province cannot afford to do things the normal way as there is increased competition for investment the world over.
This is the challenge that we are armed and willing to take on collectively as the department and our public entities. Chairperson, conditions beyond our control have contrived to bring the best out of us, in spite of the difficult economic conditions we find ourselves in. Indeed, we have been asked to rise and if we are true to our plan our statures will touch the sky.
Having assumed the mantle from my predecessor who is now our Premier, Dr ZL Mkhize, I wish to say with all humility that our times need leadership par excellence in the field of the economy. We need to inculcate it in our minds that our time needs those who can distinguish the most fundamental moment of our democratic transformation from other moments that we experience on a day-to-day basis. We know that good women and men exist in all of us. Now is the time, not any other time in the future, to call these good men and women to come to the fore and to shine.
The theatre of the best festival of ideas is now open. Let us stand together for a good cause, and posterity will record our collective contribution. We will be remembered as those who knew a defining moment of our nation's evolution and the collective wisdom of a nation standing together will forever be remembered by many generations to come.
In conclusion, Chairperson, we wish to thank all those who have contributed to the transformation of our province's economy over the past five years and beyond. Under the stewardship of our present Premier, Dr Mkhize this portfolio has set the tone for the future through the combination of micro and macro economic initiatives.
We also want to thank the Head of Department, Ms Carol Coetzee, her management team and staff that ensured that the department remains on track in spite of budgetary constraints owing to the economic situation. We also want to salute the role played by our partner-organisations, the CEOs and employees of the public entities and private business in sustaining our people's hopes for a better future.
Now I wish to move the budget for vote four, which is the Department of Economic Development and Tourism for the year 2009/10 according to the following programmes:
Programme Budget Allocation (R'000)
1. Administration1: R118,189
2. Integrated Economic Development Services: R558,950
3. Trade and Industry Development: R1,740,755
4. Business Regulation and Governance: R52,538
5. Economic Planning: R17,238
Total: R2,487,690
*note: the budget allocation for the new Ministry will be tabled during the adjustment estimate and therefore is not included in the table above.
I now move the budget of R2,487,690,000 for the 2009/10 financial year.
I thank you.
Source: Department of Economic Development and Tourism, KwaZulu-Natal Provincial Government
