Speaker
Honourable Premier
Members of the Executive Council
Honourable Members of the Provincial Legislature
Heads of Departments
Distinguished guests
Ladies and gentlemen
.
Honourable MEC Sakhumzi Somyo Policy Statement 2014-2015 Department of Economic Development, Environmental Affairs and Tourism
1. Introduction
I am pleased to present the Eastern Cape Department of Economic Development, Environmental Affairs and Tourism’s (DEDEAT) budget policy statement for 2014/15.
DEDEAT is the lead department in driving the Eastern Cape’s vision of achieving sustainable economic growth and job creation, while at the same time ensuring the conservation of our natural environment.
We believe Honourable Speaker that we are on the right path towards achieving this vision.
Before moving into outlining the priorities of the department for the 2014/15 financial year, it seems proper, Honourable Members, to highlight some of the successes that the department was able to achieve in the last term of government, which we believe, set a cornerstone for the plans ahead.
2. Reflection on the last term
During the period, the mandate of the Department remained the same but the scope of functions have increased. Since 2010 a number of policies and programmes have been developed such as the Eastern Cape Industrial development Plan, the Jobs Strategy, Tourism Development Plan, Sustainable Energy Strategy, SMME and Cooperatives Strategies and the Climate Response Strategy.
All these, Honourable Speaker, were developed within the context of new policy, legislative and programmatic drives such as the New Growth Path, the National Development Plan, National Outcomes, the Special Economic Zones Bill, Industrial Policy Action Plan (IPAP3) and Strategic Infrastructure Projects (SIPs). The development and ground work have been done, and now we can focus on the implementation.
The effects of the global economic crisis were hampering the growth prospects of the country and indeed the province, which was still battling de-industrialisation, endemic poverty, dwindling resources and massive unemployment.
In light of these, the government set a number of policy responses and the Department increased its efforts towards the realisation of sustainable economic development. Efforts on major projects started to bear fruit as the benefits of strong partnerships that had been cultivated in the last five years were implemented.
We are proud, Honourable Members, to report that:
The Eastern Cape Development Corporation (ECDC) and Industrial Development Zones (IDZs) continued to be the main contributors of investment and job creation in the Province. Over R600 million was invested by the Province into the two IDZs between 2009 and 2013. In the last term these three entities were able to attract over 80 investors in the Province with an investment value of over R9 billion and created in excess of 60,000 job opportunities.
Approximately R650 million was disbursed by the ECDC to SMMEs over the past five years with over 1,000 SMMEs benefitting from the SMME financing and support programmes. Between 2009 and 2013 over 520 co-operatives were supported.
Twelve Eastern Cape companies have secured contracts under the national Department of Energy’s Independent Power Producer Programme. These contracts have an investment potential of over R20 billion.
The ELIDZ Science and Technology Park (STP) has successfully established the first ever global open innovation platform in the Eastern Cape, which is aptly termed “Connect and Solve”. This platform allows innovators in the Eastern Cape to access global market and innovation opportunities, essentially reducing barriers to entering the global market.
Through lobbying national government and state owned companies, we have attracted investment in various infrastructure development projects. These projects, involving port expansion, electrification, roads and ICT, amongst others, account for over R30 billion in public sector investment in the Province over the next 10 to 20 years.
Despite the poaching incidences recorded on the C.I.T.E.S. in the country and the province, The department, in its conservation areas, has not experienced any incident for the third year in a row. This is a phenomenal achievement if the limited human and financial resources available are taken into account and is a fitting salute to the men and women who guard and protect our heritage and environmental assets.
The department, through the Eastern Cape Parks and Tourism Agency (ECPTA), remains an implementing partner of the National Department of Environment Affairs’ social responsibility and EPWP programmes. More than 1,000 jobs have been created in the past year and over 3,000 since the inception of the programme.
The conservation estate in the province was enhanced with the addition of protected areas in Bavianskloof and the Kwelera Botanical Garden. A total of 46 000 hectares were added to the provincial land under conservation.
The department has performed well on the processing of Environmental Impact Assessments with no backlogs recorded. The Department is a country leader in turnaround times being less than those required by legislation. This dedication helped to unlock many infrastructure and other economic development projects.
3. Context
Honourable Members, it is well known that expectations of economic performance in the Eastern Cape are grounded in the national and global economic context.
A review of global economic growth performance shows an uneven pattern of growth. The economies of the USA, Mexico, Indonesia and Thailand have been growing strongly in 2013. Although northern Europe and Asia have started to accelerate, many European countries are still struggling to arrest a prolonged period of economic deceleration and contraction.
This is particularly pertinent for the Eastern Cape which has relied on the European Union as our major global trading partner. The Eastern Cape’s total export value deteriorated from R34.2 billion in 2011 to R29.5 billion in 2012. This was alongside an increase in total imports, resulting in a provincial trade deficit.
As the economic performance remains sluggish, demand for government goods and services has increased. The period ahead is critical. There is no doubt that pressures for delivery will increase. In a number of areas where the department is performing, there are increased demands for infrastructure Development, loan financing, non-financial business support and policy responses among others.
Although the global economic environment is still conservative, as the world economies bounce back from a period of comparatively low growth, there have been improvements in some sectors such as construction, which have seen better performance compared to the rest of the country. Although the investment climate is subdued, production of new vehicles has accelerated investments in the automotive sector by original equipment manufacturers (OEM) in the province.
Honourable Speaker, sustainable growth cannot be achieved if we do not have the required skills to take up the job opportunities that are created. The 2011 census revealed that the province continues to haemorrhage young people who leave for greener pastures mainly to Gauteng and the Western Cape. It is therefore pertinent that key programmes be developed and implemented to retain talent that leaves the province.
Climate change poses a serious threat to biodiversity and ecosystem integrity with potential enormous economic and social consequences as evident by the unusual weather patterns.
The State of the Environment Report indicates that natural resources (fauna and flora) throughout the country are being exploited in an unsustainable manner. Nationally, 34% of terrestrial ecosystems and 82% of river systems are under threat, while less that 6% of land is under formal protection.
There are seven different biomes and three centres of endemism in the province. Over 300 of the plant species in the Eastern Cape are threatened. The province is home to four endemic freshwater fish species, eight threatened marine fish species, six threatened frog species (four of these are endemic), and 19 threatened reptile species (18 of these are endemic).
Honourable Speaker, protected areas are the cornerstone of the province’s effort to protect and manage biodiversity for current and future generations. Enhancing and expanding the protected area network is seen as an effective strategy for reducing threats to biodiversity and assisting the adaptation of the province’s endemic biodiversity to climate change. Although much has been achieved, much still needs to be done.
With socio-economic pressures come environmental crimes. Currently, the world is experiencing high incidences of rhino poaching. In South Africa, about 333, 588 and 1,000 rhinos were poached in 2011, 2012 and 2013 respectively. Given fiscal constraints, the Department cannot solely stem this calamity.
4. Plans
“The future depends on what you do today.” - Mahatma Gandhi. Therefore, Honourable Speaker, the Province of the future depends on what we do in the present. I would like to now turn to our plans for the 2014/15 year.
Trade, sector and enterprise development
Reflecting on the past term, it can be seen Honourable Speaker, that a solid foundation was laid that now creates opportunities for the department to continue its focus on areas of success, as well as seeking areas with potential.
In the next term Honourable Speaker, the government has prioritised support to SMMEs. This sector has grown significantly since 1996 and SMMEs have come to play an increasingly important role in South Africa’s economy and development. With the creation of a National Department for SMMEs, DEDEAT will review the EC Provincial Strategy for Promotion of Entrepreneurship and Small Enterprises and seek to play a major role in the further development and growth of the sector both nationally and provincially.
While the department will continue to support SMMEs and cooperatives through the ECDC and other partners such as the Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA), it will work together with these agencies and the national department to ensure an integrated and comprehensive approach to financial and non-financial support for SMMEs. It is planned, Honourable Members, that over 820 SMMEs and 230 cooperatives will be supported in the province over the MTEF.
Linked to the development of SMMEs, the department will continue to work with other stakeholders to ensure localisation of manufacturing and trade through the Buy Eastern Cape campaign. All business chambers in the province as well as key departments are on board in the rollout of the programme.
In addition, Honourable Members, a specific focus of the localisation effort is the drive for enforcement of local content commitments forming part of the contracts awarded to Independent Power Producers in the province. The wind and solar farms have been required to make commitments in terms of job creation; shareholding by local communities (reaching up to 40% in the most recent round); preferential procurement for qualifying SMMEs, black- and women owned companies; enterprise development and contributions to socio-economic development. These commitments, Honourable Speaker, represent significant opportunities for local SMMEs – not only as Tier 3 suppliers, but also as direct suppliers of services such as security, maintenance, catering accommodation and work-clothing.
The department will:
- Host awareness workshops on local supplier opportunities and associated expectations at the earliest opportunity in the project cycle.
- Develop partnerships between established enterprises and emerging local enterprises to ensure meaningful local participation.
- Develop business skills of relevant local suppliers on an on-going basis.
Honourable Members, as you are aware, renewable energy has been identified as a key sector in supporting economic growth in the province. This sector is quickly becoming a significant player on the renewable energy front having been allocated projects amounting to over R20 billion through the first three phases of the Department of Energy’s Independent Power Producer (IPP) programme. The department will be focusing on facilitating these initiatives over the 2014 MTSF, together with supporting bids in the fourth window of the IPP programme in order to take advantage of renewable energy and other technologies that create jobs and increase opportunities for rural development.
Furthermore, Honourable Speaker, in support of the President’s call for an injection of capital and human resources into the energy sector, the Department will, through the ELIDZ, continue to pilot the Renewable Energy Experts Programme with 20 entrants. This programme culminates in a Solateur qualification (an internationally recognised EU qualification). This strategic initiative not only supports skills development, but also the entrenchment of the Province as a leader in renewable energy.
Investment promotion and industrialisation will continue to be driven through the ELIDZ and Coega. The department is supporting the establishment of two new special economic zones (SEZs), the Wild Coast SEZ and Chris Hani SEZ. The focus of these SEZs will largely be on agro-processing. Over R350 million will be invested into the IDZs in the 2014/15 financial year.
In November 2013, the department hosted the Wild Coast Development Summit in Mthatha. The Wild Coast, Honourable Members, has the potential to transform the Eastern half of the province, provided R30 to R40 billion is invested. Already there are a number of projects lined up for the area including the Mzimvubu Hydro Programme (electricity generation and irrigation projects) and the N2 highway linking Durban and East London.
In his State of the Nation Address, the Honourable President highlighted the construction of the Mzimvubu Dam. The Department will continue to provide support to this and other catalytic programmes in support of the development of the Wild Coast. The Wild Coast Meander project will receive particular attention as the Department will work with the provincial Department of Roads and Public Works and Provincial Treasury to ensure that this project is implemented over the MTEF.
It is regrettable Honourable Members, that while the Eastern Cape has one of the longest coastlines in the country, the marine (oceans) economy is a sector that has not received a lot of focus. In 2013 the National Department of Environmental Affairs released a study that indicated that South Africa’s marine resources could be optimised to realise an additional GDP of R129 to R177 billion and approximately one million jobs by 2033.
Some sectors in the ocean economy will achieve their potential through current policies and plans, however Honourable Speaker, other sectors will require individual strategic and implementation plans to unlock their potential value. For these sectors, the National Cabinet has approved the development of detailed implementation plans with the objective of accelerated growth. The South African government has partnered with the Performance Management and Delivery Unit (PEMANDU) of the Malaysian government to conduct and oversee ‘’LABS’’ in SA. A ‘’LAB” is a methodology used by PEMANDU in Malaysia to achieve Big Fast Results (BFRs) though a structured approach and stringent deadlines.
We are pleased to announce, Honourable Members, that the department has been selected as a partner in the development of these implementation plans to unlock the potential of the Oceans Economy nationally. The department will be committing a full time resource to this initiative.
Marine and aquaculture development are areas that warrant attention as they have the duel benefit of environmental protection and economic development. There has been increased interest in aquaculture farming in the Coega and East London Industrial Zones and market potential is abound.
Aquaculture is but one area for development outlined in the Provincial Industrial Development Strategy. The department will seek to develop this and other identified sectors (e.g. ICT, petro-chemical, agro processing, green energy).
Our work, Honourable Speaker, compels us to collaborate with other organisations such as Transnet which has committed to invest over R 21 billion from 2013-2020 in the province. Key projects include the expansion of the Port of Ngqura as a transhipment hub, relocating both the Tank Farm and Manganese Terminal, expansion of the Port Elizabeth Port to be an automotive export hub, the extension of the Port of East London to include a coal terminal, expanded container terminal and operationalisation of strategic railway branch lines.
We have established a working committee with the Department of Public Enterprises to jointly plan and monitor the work of State Owned Companies in the province. The focus will be on Transnet, Eskom, InfraCo Broadband, SAFCOL and Sentec. The feasibility on Project Mthombo is reaching finality and will be completed by December 2014.
Statistics reflect a slower growth in the number of both foreign and domestic tourists visiting the Eastern Cape. In the light of challenges confronting this tourism sector, Tourism has been elevated to sub-programme level in the department. Efforts will be intensified to promote domestic tourism through tourism infrastructure development and the promotion of heritage tourism particularly capitalising on the huge investment in the Wild Coast. Fundamental to this will be the focus on the development of tourism products, promotion of tourism careers, skills development, transformation and quality assurance.
Furthermore, Honourable Speaker, there will be a deliberate effort to explore emerging core markets and increase the visibility of our destination in the international and domestic marketing platforms. Provincial signature events will be reconceptualised to ensure maximum national and international tourism awareness to stimulate further growth in the tourism sector.
Economic opportunities will be created for entrepreneurs and the broader tourism sector, both within and external to the provincial protected areas, through targeted marketing investment and concession agreements.
Business Regulation and Governance
Several indicators on the World Bank’s “Doing Business Index (2014)” show that South Africa is regressing in areas such as starting a business, registering property and getting business. The business regulation and governance environment is one critical area where the department will pay attention to ensure optimal business operations and support.
The liquor industry is growing into a major force in the provincial economy, providing employment and income to a number of households and making a substantial contribution to government tax revenue. Within a fast growing industry, the Eastern Cape Liquor Board (ECLB) is seized with the enormous task of regulating such a vast market. Over 8,500 liquor licences were issued in the past year alone.
In the 2014/15 financial year, we fill focus on the facilitation of liquor traders’ associations to promote self-monitoring, enhance purchasing power through combined purchasing and assist in the identification of illegal liquor traders, thereby broadening the base of regulation and compliance. This will be coupled with the implementation of a developmental agenda focusing on business skills training, access to finance, institutional capacity building, business linkages and market opportunities as well as cooperative business development, guided by industry market research.
Given the socio-economic challenges in the province, we are mindful of the problem of alcohol abuse. In the coming year, attention will be placed on embarking on targeted social accountability interventions relating to anti-alcohol abuse, focusing on reducing drunken driving, foetal alcohol syndrome disorder, community road shows and school based campaigns. It is projected that at least 20,000 people will be reached through these awareness programmes.
Over the past four years the gambling and betting industry contributed over R400 million in casino taxes to the provincial fiscus, with over R90 million received during 2013/14 alone. In 2014/15 the ECGBB is expecting to advertise and issue an additional seven bingo and seven Type B Licenses, and collect tax revenue of approximately R104 million.
The number of awareness programmes conducted to address irresponsible gambling will increase from six in 2013/14 to ten in 2014/15.
We also have a responsibility to protect consumers in the trading space. In the past three years, the Department was able to resolve over 2,500 consumer complaints. I am pleased to announce, Honourable Members, that the department will be launching a provincial call centre in the second quarter of 2014/15 to offer an enhanced service to the public and ensure access and redress on a broader scale.
Research, Innovation and Incubation
Honourable Speaker, for the Province to take advantage of growth opportunities we need to be innovative, competitive and stay “ahead of the curve”. The Organisation for Economic Cooperation and Development states that “Innovation is the cornerstone of sustained economic growth and prosperity” and that “innovation plays a critical role in the rapid growth of emerging economies, as well as lagging growth when innovation is absent”.
It is for this reason, Honourable Speaker and Honourable Members, that the Department is placing considerable effort behind supporting research, innovation and incubation.
The department has partnered with three universities (University of Fort Hare, Nelson Mandela Metropolitan and Rhodes Universities) to create a strategic advantage in knowledge generation and retention in the Province.
The department and the University of Fort Hare (together with Rhodes University) have initiated a tracer study of graduates through the national Labour Market Intelligence Partnership (LMIP).
In 2013 the department entered into a R16 million research project with NMMU that will conduct a technical evaluation and socio-economic analysis of shale gas in the Karoo. Conservative to optimistic estimates of the recoverable gas, range between 20 and 485 trillion cubic feet with a potential return of between 1 to 20 trillion Rand as well as undetermined savings in carbon taxes. This study continues in 2014 and will provide advice to the provincial government on a regular basis on scientific and socioeconomic findings and deliver a unique and independent set of cutting-edge data to inform regional and national planning. Shale gas can be a “game changer” for economic development in the province.
The Neil Aggett Labour research unit at Rhodes University will continue to be co-funded by the Department. The unit is responsible for collecting and analysing jobs data, together with hosting seminars and public dialogues.
To date the ELIDZ Science and Technology Park (STP) has successfully established a knowledge sharing collaboration space where innovators can collaborate and fast-track the development of their prototypes. To this effect the STP has successfully produced two prototypes and is in the process of conducting trials on an additional two prototypes which respectively relate to industrial and rural electrification applications.
Over the 2014 Medium Term Strategic Planning period, the STP will:
- facilitate the development of two more prototypes and the incubation of four innovation companies;
- see 35 artisans complete the two year renewable energy training programme;
- issue five global technology challenges through its “Connect and Solve” Open Innovation Platform;
- conclude the pilot phase of establishing a stem cell research capability in the Eastern Cape.
It is envisaged, Honourable Speaker, that as the operations of the ELIDZ STP continue to expand, that it would enhance the technology and innovation capacity of the Provincial Government to accelerate service delivery.
The Information Technology sector is one of the identified priority sectors in the Provincial Industrial Development Strategy. The dti has partnered with the Department, through the ECDC, to co-fund the expansion of ECITI (a non-profit IT and film industry incubator) into Queenstown and Mthatha, with the establishment of two satellite offices. This will allow for the up-scaling of early stage development of ICT and film entrepreneurs by offering numerous business support services and infrastructural sharing services – from mentorship and networking forums, to academic linkages and skills development.
Capacity Building and Youth Empowerment
In addition to the Renewable Energy Experts Programme, the department will, through the Human Capital Development (HCD) programme, continue to contribute towards capacity building in sector development and strategic initiatives, with an emphasis on scarce skills in priority sectors.
Youth and woman have been major benefactors of the programme. This programme is implemented through the ECDC, ELIDZ and CDC. In 2013/14 more than 14,000 people were trained in various sectors of the economy. This is planned to increase to over 16,000 in 2014/15.
Youth-owned SMMEs will receive focus as part of the SMME development and support programme of the ECDC.
Social and Economic Infrastructure
The then Honourable Premier, Ms. Noxolo Kiviet, stated in her 2013 State of the Province Address that “The Provincial Strategic Framework requires us to focus on building social and economic infrastructure, through which we also create jobs”, adding that, “infrastructure is poorly located, under-maintained and insufficient to foster higher growth”.
It was for this reason that the Provincial Cabinet took a decision to create a new programme within the Eastern Cape Development Corporation (ECDC) to focus on the delivery of integrated infrastructure in the Province in a cost effective, quality, and sustainable manner.
Honourable Members, R300 million was allocated to this programme in the 2013/14 adjustment estimate, and approximately R200 million is allocated in 2014/15, growing to a total programme in excess of R1.1 billion over the medium term.
Key projects over that period will include:
- KSD Electricity Master Plan
- Implementation and extension of the Water Conservation and Demand Management project in Joe Gqabi district
- Water supply in Mzimvubu, Makana, Engcobo, Matatiele, Mbizana, Molteno and Hewu Bulk services (Sada Water Reservoir)
- Electricity to over 4,000 households in the Alfred Nzo district Environmental Affairs
Enhancing and expanding the protected area network is seen as an effective strategy for reducing threats to biodiversity and assisting the adaptation of the Province’s endemic biodiversity to climate change. Over the MTEF biodiversity scientific services within the provincial context will be reconceptualised to support the climate change response strategy of the Province.
Honourable Speaker, the Department, with the Eastern Cape Parks and Tourism Agency, will work with local governments, communities, conservation organisations and other landholders to ensure that the protected area estate is expanded. The idea is to expand protected areas at an average rate of 10% per annum. Given the constraints on the fiscus, the Department cannot achieve this alone and therefore partnerships and resource mobilisation are required.
Management and protection of the natural environment will be better enhanced by the enactment of the Eastern Cape Environmental Act and the implementation of the Provincial Climate Change Mitigation and Adaptation Strategy.
The department will continue striving towards achieving a sustainable balance between economic growth and responsible land use and natural resources through the implementation of “Green Economy” guidelines for the Province as well as provide support for economical beneficial environmental projects at a local level. The waste tyre recycling project is particularly exciting as it offers a sustainable solution to prevent millions of waste tyres being disposed of in refuse sites and has the potential to create hundreds of jobs.
As indicated earlier, in 2013 more than 1,000 rhinos were poached in South Africa. The Department will continue to work with state and non-state stakeholders to combat rhino poaching and other environmental crimes. We will therefore continue to be vigilant and take pro-active steps. Honourable Members, it is a privilege to share with you that the Department is still considered to be a leader in this area and is consistently engaged by other provinces to share methodologies and lessons learnt. The conservation officials, together with their ECPTA counterparts and enforcement partners are to be congratulated.
The department will continue to partner with the National Department of Environmental Affairs in the creation of EPWP work opportunities in the environmental sector. Together with this programme, employment opportunities will be created through green jobs projects for permanent, contract, casual and EPWP appointments by recruiting from communities near the provincial reserves. It is expected that in excess of 900 job opportunities will be created.
Environmental challenges necessitated the need to conduct awareness campaigns throughout the Province. The department will undertake 29 environmental capacity building and 26 environmental awareness campaigns in 2014/15, and will continue to mobilise schools to participate in the Provincial Environmental Awards Programme where they compete and showcase projects that promote environmental protection and sustainable development.
5. Budget allocations
Honourable Speaker, we now briefly summarise our departmental budget proposals.
In these proposed allocations, the Department has ensured that funds are allocated to key service delivery areas aligned to its mandate. When compared to the 2013/14 financial year, the departmental baseline has increased by 17.4%, primarily due to an additional allocation for provincial social infrastructure funding which, as indicated earlier, is being implemented through the ECDC.
The budget distribution across the Department’s three programmes is influenced by the relative location of the six public entities. Accordingly, the budget allocations are as follows:
- Administration: R203,425 million (14.1%)
- Economic Development: R936,035 million (64.8%)
- Environmental Affairs: R304,899 million (21.1%)
The majority of the departmental budget (70.1%) is transferred to the six public entities making up the DEDEAT Group.
The allocations in 2014/15 to the entities are:
- Eastern Cape Liquor Board: R42,736 million
- Eastern Cape Gambling and Betting Board: R42,748 million
- Eastern Cape Development Corporation: R366,535 million
- East London Industrial Development Zone: R113,792 million
- Eastern Cape Parks and Tourism Agency: R207,282 million
- Coega Development Corporation: R250,000 million
Honourable Speaker, the Department expects to collect tax receipts of around R134 million in 2014/15, approximately 78% of which will come from casino taxes.
The Estimates of Provincial Revenue and Expenditure contain detailed budgets.
6. Conclusion
Horace Mann, an American educationalist and politician from the 19th century said, in an opening prayer to the Senate: “Let us not be content to wait and see what will happen, but give us the determination to make the right things happen.”
Honourable Speaker, as we move into the new term of government may this be our mantra. I commit myself and my Department to doing all that we can to ensure that we make the “right things happen” to continue on the path to sustainable development in the Province.
Honourable Members, I am assured that this House and her related oversight bodies will support us in this endeavour.
I would like to extend my thanks to the Head of Department and his team for their continued dedication towards creating an enabling environment for sustainable and shared economic growth and development.
Honourable Speaker, I herewith table the Annual Performance Plans for the Department and the six public entities for which we are responsible, and the Service Delivery Improvement Plan for the department.
Thank you.
