Budget Vote 2006/07 delivered by MEC S.W. Lubisi
02 June 2006
Honourable Speaker, Mrs. Y.N. Phosa
The Premier, Mr. Thabang Makwetla
Colleagues in the Executive Council
Honourable Members of the Legislature
Mayors and Speakers of Municipalities
Traditional Leaders
Representatives of organised Labour and Business
Distinguished Guests
Ladies and Gentlemen
National Economic Growth Perspective
Political commentators around the globe called the change of government in
South Africa, a miracle of modern day political landscape, notwithstanding the
sacrifices that were made by our people, understandably so because such a
peaceful transition was unprecedented in Africa and elsewhere where the people
were subjected to such injustices. Everything pre-democracy pointed to bloody
war before South Africa could have in place a legitimate government for its
people. The rest, as they say, Madame Speaker is history, fantastic history, I
might add, that proved all the Jeremiahs wrong. Not only has South Africa
experienced this relatively peaceful transition, but it has also experienced a
phenomenal 88 months of a virtually unprecedented economic upswing which has
made the world stop and notice. Notwithstanding the fact that we inherited an
economy which was on a negative growth path in 1994, we have had a 5% year on
year growth for over five years and we have experienced low budget deficits and
corresponding low inflation rates. This fabulous bullishness is a result of a
booming performance in the commodities sector, buoyant real estate performance,
high vehicle sales, foreign investment to mention but a few factors. Key to
this success has been the good track record of the ANC Government in managing
the economy. We celebrate with caution, Madame Speaker, for we are aware that
the growth we have seen and continue to enjoy partly owes its being to âpaper
and cyberâ investment in the Johannesburg Securities Exchange. We are aware how
fickle such investment is. Overnight we could see a flight of the investment
that could set back the economy quite severely. Stock Exchange investment,
unlike, fixed investment does not result in job creation and labour absorbing
fixed projects.
Madame Speaker, studies by research institutes show that South Africa is
creating jobs but it would appear at a pace that does not satisfy the demand
for work by new entrants into the job market. The queue for jobs is very long
and we are producing potential entrants into the job market by the thousands
per year. This phenomenon, among others, has prompted the President to make an
observation that our country has two economies, the first and the second. The
first is an advanced, sophisticated economy, based on skilled labour, which is
becoming more globally competitive. The second is a mainly informal,
marginalised, unskilled economy, populated by the unemployed and those
unemployable in the formal sector. While the countryâs macro-economic strategy
has performed wonders in enforcing orthodox prudent economic discourse which
ensured fiscal and monetary stability it has not succeeded in bringing in the
partners, we so much needed to invest in our programmes to ensure success,
particularly in job creation. Realising this anomaly the national government
has expanded social welfare initiatives through social grants for child support
and old age/ disability pensions. These are relief measures, Madame Speaker and
we need to search for lasting and more sustainable measures.
Upswing of the rand
The rand has been going strong in the past few years. The strength has been
good for the import market because it gives buyers more buying power in
comparison with a weaker currency; however, the strength of the rand has
adversely affected the export market. The industries that enjoy large overseas
market-share are
earning less than they did when the exchange rate grossly favoured the US
Dollar. This reversal has caused significant shedding of jobs in among other
sectors, the mining, agriculture and clothing and textiles.
Barriers to growth of sectors
Import parity pricing
Madame Speaker, Mpumalanga province counts among its strong resource base a
stainless steel belt which contributes significantly to the economy of this
Province. However, there are huge barriers for downstream beneficiation and
achievement of the broader ideals of government of increasing new entrants,
particularly, from the sections of our economy who were barred by the laws of
the past from any meaningful participation. It, simply, is not tenable for
small firms to do downstream beneficiation due to prohibitively high prices
caused in the main by Import Parity Pricing.
Government, however, is beginning to address this problem through the
Competition Commission. Import Parity Pricing means that products manufactured
in South Africa have to absorb price levels of other countries which include
notional costs for transport, import duty and insurance costs. What this means
is that when an emerging manufacturing firm in South Africa uses steel as input
in the production of goods, they have to buy it at prices that are inclusive of
shipment costs from the USA, import duty costs which is around 5% and insurance
tariffs. Input costs for diversification and value addition become impossible
to absorb particularly where the cost of production, such as labour,
electricity, rental, etc are still to be considered.
This results in hampering of expansion programmes into job creation by small
and medium firms. Similarly, the same Import Parity Pricing is the worm that is
nibbling at other important sectors that make up the provincial economic
structure. The chemical sector, plastics, forestry and timber and fertilisers
are some of the commodities whose growth and downstream opportunities are
squeezed by the Import Parity Pricing. This pricing system is, particular,
damaging to South Africa because of the greater distances between us and our
international markets, the shipment costs and insurance cover are increasing
geometrically when compared with transactions that take place within a cluster
of countries within Europe for instance.
Accelerated Shared Growth Initiative of South Africa
A new growth path is now being defined in South Africa, Madame Speaker; it
comes via the Accelerated Shared Growth Initiative for South Africa (AsgiSA).
As said earlier in my speech, the country has experienced strong commodity
prices and capital inflow, especially from Platinum, Gold and Coal activities.
Despite the huge growth, there are still imbalances epitomised in high
unemployment rates and generally unacceptable levels of underdevelopment and
poverty. The strengthening of the Rand has undermined the countryâs export rate
with devastating consequences to the manufacturing sector while it favours
resource based export. One third of our people are not benefiting from the
mercurial rise of the growth of the countryâs economy. AsgiSA is meant to
create less dependence on social grants and pensions over time. In order for
the country
to level the imbalances, inequities and inequalities of the economic landscape
we have to grow our economy by 6 to 8 percent (%) year on year. This initiative
is a programme designed to increase spending in public works, particularly in
infrastructure to help grow the economy to 6% per annum by 2010. It is a bold
initiative which is aimed at boosting chances of halving unemployment and
poverty levels by 2014.The tenets of ASGIA at a macro-economic level are
amongst others:
* improving budgeting and resource management in government
* monitoring implementation of decisions to spend, especially on Capital
Expenditure (CAPEX)
AsgiSAâs key infrastructure elements include the following:
* co-opting provincial flagship projects into national priorities
* creating development opportunities that result in high employment, enterprise
development and broad-based black economic empowerment
On sector development strategies:
* focus on sectors with high potential for growth, employment and enterprise
development,
* focus on business process outsourcing,
* a focus on tourism,
* focus on agro-processing and chemicals including plastics,
On education and skills
* Improvement of the quality of general education, with specific emphasis on
initiatives, such as kidsup and dinaledi,
* Strengthening of Further Education and Training (FET) systems (A budget of
R1,9 billion has been put aside over the MTEF period)
* Strengthening of the Adult Basic Education and Training (ABET)
programme,
* A focus on national skills development,
* A focus on the Joint Initiative of Priority Skills Acquisition (JIPSA).
Second Economy intervention
* The Expanded Public Works Programme (EPWP) focus bigger on road projects
and maintenance thereof,
* setting up of micro-finance,
* women and youth empowerment in construction, Improving regulatory framework
for Small Medium and Micro Enterprises( SMMEs) Taking stock of assets of the
poor people (e.g. Land and title-deeds).
Mpumalanga economy as at end of may 2006
Demographics outlook
According to StatsSA in the Mid Year estimates (2005), the province of
Mpumalanga has moved from being the eighth to the seventh in size by population
in South Africa (3.2 million excluding Bushbuckbridge). A major factor that
will have a bearing on the overall socio-economic make-up of the province will
be the incorporation of Bushbuckridge into the Province, and the transfer of
part of the Sekhukhune district into the province of Limpopo. Bushbuckridge is
an area that historically lacks economic infrastructure and will need strong
attention in order to realise its potential, particularly in the tourism and
agro processing sectors.
The spatial distribution of these rural settlements is in an area which is
far from most of the areas of industry. GDP-R (Regional Gross Domestic Product)
outlook Madame Speaker, a number of aspects relating to the economic outlook of
the province has been highlighted in the budget speech by the MEC for the
Provincial Treasury. One will make additions and updates for emphasis.
According to RICON (March 2006) Mpumalanga Province is the fifth largest
contributor towards the national Gross Domestic Product (GDP) with an estimated
regional gross domestic product of R72.3 billion for 2005. The Adjusted figures
show that Mpumalanga is projected to grow by 4.1% for the year 2005, compared
to 4.2% in 2004.There is a sign of hope in that initial figures indicate that
for the first time since 1997, all the broad sectors of the economy are
expected to post a positive growth for the year 2005.
The construction industry, although down from its growth of 10% in the year
2004, leads the pack with an expected growth of 6.1%.The manufacturing and
transport sectors show steady recovery growth for the past three years and the
agriculture sector is expected to post a positive growth of 4.7% in contrast to
the declines experienced in the preceding two years. The manufacturing sector
is still the main contributor to the provincial economy at an estimated 25% for
2005. Mining and energy remain relatively unchanged within the province.
According to South African Tourism (2005) the tourism industry contributed an
estimated R5.5 billion towards the provincial GDP. Tourism has shown marginal
decline in the first half of 2005 in comparison with the same period in 2004.
There is evidence to suggest that the good positive growth of our neighbours in
Mozambique is eroding the need for them to go across the border in search of
items to purchase as these items become more readily available in their own
country. There is therefore a need to develop innovative approaches to
recapture this core market of our tourism industry.
We, however, Madame Speaker, have moved up from eighth to seventh position
in the domestic tourism market and have retained our fourth position status in
the international tourism market within South Africa. Social Statistics
outlook
According to the National Treasury, the Human Development Index (HDI) has
remained largely unchanged over the past five years and has shown a trend
similar to that of national. This has also been the case in the percentage of
people living in poverty over the past four years and is indicative of an
economy that is growing, the challenge, however, continues to be how we
translate this growth to benefit but not targeting the growth towards the
poorest within our communities. (56.1% in 2001 to 56.3% in 2004).
Tax
The abolition of transfer duties on properties that are less than R500 000
will present an opportunity for tax relief for middle income earners or first
time buyers.
Inflation
According to Econometrix, (May 2006) the Year on Year (Y-o-y) growth in
household debt has been following a sharp upward trend since 2004. This factor,
coupled with low savings, is a source for concern. National CPIX inflation
(i.e. headline inflation excluding mortgage rates) however, fell sharply to
3.8% in March (from 4.5% in February). The provincial CPIX was slightly higher
at 4.3% fuelled by the relatively higher inflation rates experienced in our
urban centres of Nelspruit and Witbank. These areas experienced an inflation
rate of 4.6%.Despite the steep increases in oil and fuel prices, the rand has
remained stable and gold as well as platinum have posted significant gains. The
reserve bank has been warning on inflationary pressures being brought to bear
on our economy and is fearful that a robust domestic economy, driven partly by
high levels of borrowing will generate all sorts of strains on the human
resource and infrastructural capacity of the economy. Inflation is however
expected to remain within the target range of 3 to 6%.
Employment outlook
According to the StatsSA Labour Force Survey (September, 2005), Nationally,
the share of employment created by the informal sector continues to grow but
the formal sector is also beginning to create more jobs. The number of domestic
workers however, is on the decline, and they account for 7% of the national
workforce. This calls into focus the status of our women with regard to
employment. Although the total unemployment rate for the Province (according to
the official definition from statistics South Africa) was 26.9% in September
2005, unemployed women were at 33.9% as compared to unemployed men at 21.3%. We
can take heart from the fact that there was a 1.8% increase in employment
numbers between March and September 2005 but much more still needs to happen to
accelerate this growth. Up to 12 000 people participated in government job
creation programmes in the six months prior to September 2005. According to
Statistics South Africaâs September 2005 Labour force survey, wholesale and
retail trade together with community, social and personal services accounted
for 36.6% of the provinceâs formal employment.
The manufacturing sector accounted for 13.6% followed by agriculture at
11.5% of the provinceâs formal employment. Employment within agriculture grew
by close to 1% between March 2004 and March 2005 and we hope that this reversal
in the trend of shedding jobs in this industry will continue. It is estimated
that the tourism industry accounted for up to 50 000 employment opportunities
in the province. It can be seen that the manufacturing sector is a leading
sector in terms of both contribution to the provincial GDP as well as
employment. According to RICON (March 2006) we also have a comparative
advantage in relation to the country in this sector as our location quotient is
positive at 1.5 in 2004. What is of concern is the fact that our Province has
the second highest HIV prevalence rate in the country, second only to KwaZulu
Natal. This will have a negative impact on the future of our labour force and
ultimately on our economy.
Trade outlook
Madame Speaker, RICON (March 2006) also states that imports rose by 30% from
R1.4 billion in 2003 to R1.8 billion in 2004. The share of exports as a
percentage of provincial GDP also grew from 5% to 5.6%. The total international
trade as a percentage of provincial GDP rose a percentage point from 6.7% to
7.7%.
Regional Share of national imports and exports as well as total
international trade share has remained largely unchanged from 2003 to 2004. The
Province still contributes less than 2% of the national total percentage in
both these categories. However, we must be mindful of the fact that although
actual physical trade might take place from within the province, the
transactions for such trade activities are recorded at the organisationâs head
offices, which might not be in Mpumalanga The European Union (EU), Mpumalangaâs
single largest trading partner accounted for about 43% of total provincial
export earnings and 41% of imports in the year 2004. Imports from Southern
African Development Community (SADC) countries grew by 8% from R48billion in
2003 to R52billion in 2004 whilst exports grew by a massive 54% over the same
period.
Departmental perspective
Madame Speaker, our Department has been undergoing heavy transformation in
the last year. It all started during the inaugural State of the Province
Address when the Honourable Premier expanded the mandate of the Department to
include the planning function and was also heightened when the Premier
announced the desire to merge certain of our parastatals. This started a
year-long journey of repositioning the Department and its public enterprises.
Madame Speaker, we had to think long and hard about the approach to the
momentous task that the Premier had given to our Department. Finally we settled
for a simple strategy of starting from the outside to the core. Like the rings
of the onion, we peeled the outer layers which are symbolized in the form of
Mpumalanga Economic Empowerment Corporation (MEEC) Mpumalanga Investment
Initiative (MII) on the one hand and the Mpumalanga Tourism Authority (MTA) and
Mpumalanga Parks Board (MPB) on the other.
Our approach, Madame Speaker was based on the obvious fact that we did not
know enough of the dynamics that were going to emerge through the merging
processes, ladies and gentlemen we did not know how those processes were going
to affect the central core, which is the Department. In fact ladies and
gentlemen, we were not even sure, until late in the process, that MTPA would be
accountable to my Department or the Department of Agriculture and Land
Administration (DALA). The merger process made us walk stealthily on
appointment of staff, the organizational structure development and other
associated matters within the Department. We chose to err on the side of
caution than to be blasé and go forward as if we knew what the final product
and the implications of the restructuring process would be. by and large,
Madame Speaker, we were operating on half mast as a Department. At some point
we had 39% of our staff complement which later improved to the current 53%. We
are at 53% due to the fact that the current organogram has a plethora of low
positions at salary levels 4 and 5 that increase the volume of vacant
positions, when in fact even if they were filled, they would not address the
current demands of skills and competencies within the Department.
Madame Speaker, I have peeled the rings of the onions, now I am getting to
the core, which is the central Department because I believe we need a
responsive Department to make our agencies perform optimally. Within the next 3
months, I will personally, together with my Head of Department, finalise and
implement an organizational structure that is in line with the new mandate of
the Department and one that has capacities to co-ordinate all our parastatals
and the new agencies. Over and above, we intend to create a bank of expertise
and capacities that would interact with strategic apex leaders of both
government and big industry. The calculated delays in finalizing our structure,
has put us in a position of strength, because now we have all the variables of
the equation on the table and as we recruit, we do so with the comfort of
knowing that we are creating a knowledge repository that will be responding to
the new mandate of the Department and that of the Province at large.
Madame Speaker, I am happy that I have been proven right in my resolve not
to concretise our personnel complement and the organizational structure,
because it would have been very difficult now to respond to the changes that
have emerged. Madame Speaker I want to thank my colleagues at the Executive
Council (EXCO), the Heads of Department and all senior managers that have made
a contribution towards the shaping of our department and its substructures
through Makgotla and other forums that were held over the past year. My
Department is in the process of signing up shareholders compact with all our
parastatals and Mr. Premier, we have listened to the contributions that were
made through Makgotla of consolidating all the small projects we have been
engaged with in the past and work towards coming up with mega and flagship
projects. To this end, Madame Speaker, my Department will focus on legislation,
policy making and regulatory frameworks, with a view to set realistic targets,
monitoring and evaluation of impact of the implementation strategies of our
implementing agencies.
My Department would be focusing on research and development projects that
seek to link vertically and horizontally with the national and local government
priorities. Economic Development and Planning as a Department will no longer be
all over the place trying to implement a myriad of minor projects which have no
impact in the upliftment of the larger majority of our people.
Sector development strategies and programmes
In response to the Accelerated and Shared Growth Initiative for South
Africa, my Department has embarked on a very ambitious programme of developing
Mpumalanga-specific economic sector strategies. We have identified, for
starters, key economic contributors among the sectors Tourism, stainless steel,
petro-chemicals, agro-processing, manufacturing, energy, construction and
mining and quarrying. Madame Speaker, after the Growth and Development Summit
in Badplaas, the Department has been penetrating the private sector through
constant sector meetings, workshops, seminars and conferences to establish
entrenched networks aimed at achieving cooperative governance. The espirit
dâcorps existing between my Department and major private sector and labour
organisations is a platform from which we are launching the involved sector
analysis programme. Among other issues that we would be investigating in the
formulation of the sector studies are the following:
1. An in-depth analysis of all big firms spend â we aim to find out how much
each of the big firms spend on procurement through their supply chain systems.
We want to know where they source their input material, goods and services. In
short ladies and gentlemen we would be seeking to understand where big
companies in Mpumalanga spend their budget. It only make sense for us as a
government to expect companies that do business in the Province to spend a
large share of their budget within the province. However, if we have not probed
the supply and demand within these large firms we will not be in a position to
harvest on the economic energies that they generate.
2. Madame Speaker, the sector strategies programme, also aims to investigate
and analyse the sources of labour from which these big companies recruit. We
aim to create a profile of the skills that these companies require. It is only
after we have such knowledge that we can design strategies and accelerated
programmes to equip our people with the requisite skills needed by these big
sector industries. In our engagement with the big industries, we are looking at
establishing a Provincial Chapter of the Joint Initiative Programme on Skills
Acquisition to help us raise the kind of skills that would make our own people
be employable to the big industries that are doing business within our
boundaries.
3. Madame Speaker, the Sector Development Strategies study is also designed to
investigate future plans of industries as it relates to capital expenditure
(CAPEX). Part of the problem of high unemployment rates is that the Province is
not spending enough on capital projects which have a bias towards labour
intensive approaches. As Government, through the Sector Development Project, we
plan to embrace the private sector and labour for future growth plans and
partner with them in designing an economic and social environment that is
beneficial to all parties. Ladies and Gentlemen, Provinces are the building
blocks of the national economy. While we have a unitary state, provinces are
competing for the same market-share. It is therefore imperative that we develop
and attract high calibre skills, expertise and competencies. It is important
that we harness resources that are in the command of Government, social
partners and the private sector on a common purpose to advance the cause of the
Province. It is equally important also to be competitive within the local,
provincial, national and global playing fields.
Madame Speaker, the Sector Development Strategies and Programmes are an
attempt at achieving these lofty ideals.
The programme also aims to investigate barriers to growth of each sector. I
have already mentioned the effect of Import Parity Pricing as a serial killer
to downstream beneficiation of the resources we are so well endowed with as a
province. We plan to take each sector apart along the value chain matrices of
the core businesses existing in the different industries, we want to see the
potential for growth of each sector and be able to design specific strategies
to unlock positive energies. Lastly, Madame Speaker, we plan to harvest high
impact projects from the sector analyses programme.
Local economic development
This project is a joint venture between the Department of Local Government
and Housing and Economic Development and Planning. It is funded by the
Development Bank of Southern Africa (DBSA). We have appointed a service
provider called Econologist, to assist in the development of a Local Economic
Development strategy. A first draft of the local economic profile has been
produced. The department has been participating in the National drive
coordinated by the Presidency of streamlining all Municipal Integrated
Development Planning (IDP). The participation has given the light on general
flaws of the approaches that Municipalities have made in their IDPâs and
subsequently, their Local Economic Development (LED) strategies. Currently, the
Department is working on processes with the GTZ to strengthen the capacity of
the research work that the Econologist are carrying out on the LED Strategy.
The department is linking up with all LED Units in all the Municipalities to
re-establish the coordinating structure of the LED Strategy development. Many
municipalities, however, do not have functional LED Units. The Provincial LED
Strategy will be complete in the forth quarter of this financial year. Madame
Speaker, for the Economic Policy and Planning programmes we have allocated
R14million.
Mpumalanga Economic Growth Agency (MEGA)
The Mpumalanga Economic Growth Agency, born out of the merger between the
former MEEC and MII, is designed to be a responsive, efficient organ of change.
A very strong board under the Chairpersonship of Mr Phillip Dexter has been
established. Its mandate is to drive economic transformation, stimulate trade
and investment, ensure growth, development, equity and empowerment and promote
prosperity. It has three main areas of competency:
* property development and management
* enterprise development, including finance and non finance support to
enterprises
* trade and Investment promotion.
MEGA commands a budget of R133million of which R56 million is a grant from my
department and R77million comes from the Agencyâs own revenue. The MEGA is
charged with the responsibility of establishing and managing the Mpumalanga
Growth Fund. It has a target to raise enough funds to drive the flagship and
strategic projects of the province. It is an organ that should play a leading
role in the provincial dream of creating a strong middle class in our
communities and create more sustainable jobs.
It is the organ, Madame Speaker, which will drive the ideals of creating new
firms and attracting investment from within and outside of the country. MEGA
has, in the current financial year concluded transactions to the value of R50
million, including that of facilitating a 26% BEE shareholding in High-end
Fruit Packers that will also create the opportunity for ten new Black farmers
in the apple industry. MEGA has concluded partnership agreements with, among
others the IDC, NAFCOC and CHAMSA and is finalizing agreements with SEDA and
other Agencies. These will expand the Agencyâs capacity in all its key
functional areas and improve the services it delivers to the people.
Mpumalanga growth fund for CAPEX
Local investment begets foreign investment. Madame Speaker I have been
studying the evolution of many places that have become the investment
destinations of note. There is one common denominator to almost all of them and
that is government investment into infrastructure and other capital projects.
Ladies and gentlemen, our province is no different, the aesthesis and potential
economic potentials will remain just that if our government does not knuckle
down and dig deep into its pocket to kick start development by leading the way
in investing in key infrastructural development projects from which other
benefits can be leveraged. This cannot be done through the ordinary equitable
share the province receives from the National Fund. This means that we have to
find ingenious ways of raising our CAPEX capabilities. We are currently
exploring opportunities of establishing a âGROWTH FUNDâ to cater for rapid
deployment of capital projects and accelerate the outlay of economic and
strategic social infrastructure.
Madame Speaker by our conservative estimation the Provincial Growth Fund should
swell to a billion Rand in five years. The Fund will be administered by the
Mpumalanga Economic Growth Agency (MEGA) and will deal with projects that cut
across the line function departmental divide. A similar Fund has been
established in KwaZulu-Natal and I am happy to announce that in our team that
is looking into the establishment of the Fund we have drawn in some expertise
that were used by the architects of the KZN Fund. Through the Provincial Growth
Fund, we are planning to lead the path of increasing Capital Expenditure and we
are seeking the cooperation of big industry in the alignment of our collective
expenditure on capital projects from which we can leverage economic sector
growth, sector competitiveness, and job creation, establishment of export
clusters and equitable distribution of resources. Great ideas need matching
funding astuteness to bring excellent results. The details of the Fund will be
made public as soon as we are satisfied that it is ready to be launched and
rolled out. The importance of this fund, however, cannot be over-emphasized,
ladies and gentlemen, for it will be the ace up the provinceâs sleeve to become
competitive and be able to attract firms to operate from our shores. My
department will, unashamedly, court firms and factories to come and settle in
the province. The department will aggressively work towards the establishment
of new firms and factories to create jobs and wealth for the people of this
province.
Mpumalanga tourism and parks agency (MTPA)
The Mandate of the Mpumalanga Tourism and Parks Agency as contained in the
Mpumalanga Tourism and Parks Agency Act, No 6 of 2005 is âto provide for the
sustainable management and promotion of tourism and nature conservation in the
Province and to ensure the sustainable utilisation of resources.â The
challenges on Tourism and Conservation in the past financial year, Madame
Speaker, related largely to the restructuring processes which included the
Department, MTA and the Parks Board. The restructuring obviously had a bearing
on future discourses of the sector and how it should be managed.
Madame Speaker, the heritage project that the Premier has just concluded has
to be studied carefully because it has a bearing on how we will be packaging
and branding our Tourism and heritage products from now henceforth. Within the
next couple of weeks this process will be finalised and all functions would be
streamlined and a shareholders compact between the Department and the new
agency would be signed. This would apportion clear mandates, roles and
responsibilities, targets, norms and standards to measure performance and
impact of strategies each organ will be implementing. A very strong Board for
the Mpumalanga Tourism and Parks Agency (MTPA), under the Chairpersonship of Mr
Lassy Chiwayo, has been installed. The process of correct placement of staff
and the recruitment of the Chief Executive Officer (CEO) is underway. Once all
due processes have been concluded we will officially launch the new
parastatal.
Madame Speaker, the new demarcation of the Municipal Boundaries is bringing
new dimensions into our planning. Mpumalanga has always experienced a shortage
of accommodation for tourists during bumper seasons, but now that the
Bushbuckridge area brings with it an additional park called Manyeleti Game
Reserve which should increase quite significantly the number of beds. This
change necessitates that we put aside more resources in terms of human and
material to incorporate this new area into our plans. Madam Speaker for this
Agency we have a total of R131 million allocated to this agency during this
financial.
Spatial development initiatives (SDIS)
Madam Speaker, our Department has been studying what constitutes barriers to
our Spatial Development Initiatives, particularly the Maputo Development
Corridor. We have found that one of the main barriers to the growth of the
Corridor is the acute inadequacy in capacities to coordinate the strategies and
activities of the corridor. This has barred the Corridor from playing its role
as a vehicle for economic energy. This undesirable state of affairs has to be
arrested sooner rather than later. Madame Speaker, I will present possible
overarching structures to help the province galvanise the Maputo Corridor back
to what it was meant to be, a corridor of not only hope but of real benefit to
our people.
The Province and Spoornet a key cog in the whole machinery of creation of
export routes- have no common statement of intent. The Province need to
influence the plans of Spoornet, particularly on the parastatalâs CAPEX to
include infrastructure development, especially, on the freight and logistics
sector along the Maputo
Development Corridor. Currently, the East â West cargo route has to be moved by
road which exerts untold pressure on the provincial and national roads and
related resources. Quite recently Spoornet announced they were buying 110
electric locomotives to move 92 Mt of export coal per annum to Richards Bay. We
have engaged extensively with big exporters in the province who decry the fact
that they are limited to road infrastructure to move their export goods. They
are also forced to continue the utilisation of Richards Bay rather than the
more potentially cost effective Maputo Harbour. On the other hand the Rail
network on
the side of Maputo is also not well laid out to support massive cargo
conveyance. The other barriers is the logistical arrangements and capacities of
the Lebombo Border Post to process to and for movement of cargo, particularly
heavy trucks.
Creative industries
Madame Speaker, in order for the Province to grow significantly, we need to
pay special attention to the creative industries. Mpumalanga can become the
melting pot of heritage and cultural activities that could lead to massive job
and small enterprise creation.
Film commission
Madame Speaker, creative industries are the most undermined, uncoordinated
and understated sources of empowerment, wealth creation, skills development and
growth. Quite recently my Department and that of Culture, Sport and Recreation
have joined forces in creation of a vibrant Film Industry in the province. The
Departments have held a joint provincial Film and Video Workshop wherein there
was a strong presence of delegates from Swaziland and Mozambique and all Film
and Video structures and practitioners from the districts of the province. The
workshop took a sub-regional view of the Film Industry development. In April
the Province sent a strong film delegation to the AFCI Locations Expo in Los
Angeles (LA), USA. My colleague, MEC Mtsweni and I are delighted to announce
that the delegation that went to LA assisted the country to win the coveted
Grand Prize of the international locations show. South Africa put out a
compelling case to the 3500 delegates from virtually all countries around the
globe as a destination for major film shoots. We are already getting good
returns, ladies and gentlemen. Negotiations will be opening within the next two
weeks between our province and an international film production company to
shoot a high budget film in Barberton. The budget of the Cockney Liz movie is
around R120 million. The challenges that we have in the province is that we do
not as yet have a Film Commission or Office to coordinate the industryâs
affairs. However, plans are afoot to correct that. The Commission will manage
the industryâs provincial strategy for growth, and coordinate all logistical
arrangements for film shoots.
Tourism
Madame Speaker, the past year has been one of the periods in which our
tourism marketing initiatives reached their highest momentum. These efforts
were further recognised at the recent Tourism Indaba in Durban, where our stand
was awarded silver and gold medals by the SA Tourism and the National
Department of Environmental Affairs and Tourism.
Statistics from the South African Tourism (SA TOURISM) also reveal that
Mpumalangaâs Tourism revenue, increased from R6.1 billion to R7.4 billion from
both domestic and international tourism activities. It did not come as a
surprise, Madame Speaker, that the latest SA Tourism rankings places Mpumalanga
Province in an improved position within the domestic tourism stakes within a
period of one year. We believe that our Province deserves even a better ranking
than this latest achievement and I have no doubt that when we gather in this
Chamber again next year, we shall be celebrating, yet another upward movement.
During the year under review, we also launched the Tourism Fun Train. This
initiative is aimed at attracting domestic visitors to the Province by
utilising the most affordable transportation modes such as trains and buses.
Hot on its heels, we also launched an initiative called âDiscover Mpumalangaâ
where we invited small tour operators from around the country to showcase some
of our provinceâs tourism attractions. Before the end of the past financial
year, we also hosted tour operators from Germany in a project called the
Detour, where they were exposed to the tourism attractions of the Province with
a view to encourage them to arrange tours to our Province. Madame Speaker, as
stated in my previous Policy and Budget Speech that we had prioritised
reviewing the Tourism Growth Plan, I am pleased to announce that we have
finalised that process. The final draft was tabled to all tourism stakeholders
for input. The Department will be implementing the Plan to enhance the
transformation of this sector. During this financial year, Madame Speaker, the
Province will be hosting very significant national and international events,
which include:
* the World Tourism Day in August the Province was privileged to be selected to
host the national event of this annual activity.
* Africycle Tour in October this project is an international cycle competition
which is ranked among the world events such as the Tour de France. The tour
will be centred on the Gert Sibande and Ehlanzeni Districts.
* the tourism train this project is aimed at attracting domestic tourists to
our shores by showcasing the provinceâs products. These events, among others,
will give impetus to our goal of achieving our target of attracting 3 million
domestic and international tourists to the Province.
Madame Speaker, in the build up to the 2010 soccer world cup our Department
will be working very closely with all municipalities and Mbombela Municipality
in particular, to assist emerging accommodation establishments to be graded to
ensure that only accredited and graded facilities are used during the event.
The Department is also busy with feasibility studies to determine the hotels
that will be required in the Province for the 2010 World Cup. We have allocated
R12 million to the Tourism Directorate towards for the facilitation of the
growth and transformation of the tourism industry.
Trade and industry development
Ladies and Gentlemen, part of the sector analysis studies will be focusing
on establishment of community export clusters. In collaboration with the
Department of Culture Sports and Recreation we have been piloting a strategy to
help crafters access international markets. We are, however, experiencing
problems where we get big orders, particularly after international exhibitions.
Our crafters are subsistent in nature and at times cannot handle big orders
because their businesses are not designed to produce en masse.
The Department mobilised, formalised and financially assisted a group of
small crafters who have keen interest in exporting into an Export Resource
Network (ERN). 35 emerging exporters participated in national and international
exhibitions. Capacity building programmes were conducted through export
awareness campaigns, basic commercial skills, international commercial terms,
and quality assurance.Wood cluster We have experienced major job losses within
the forestry sector in the last financial year due to changes in the
procurement systems of major suppliers of timber to our manufacturers. This has
had not only a negative effect on the workers employed by saw millers, but it
also had a rippling effect along the value chain matrix, particularly the
downstream activities of timber in the manufacturing sector. Despite this
negative occurrence, the Furniture Technology Centre, which was launched last
year to assist SMMEâs in the Province, is well on course. The Department will
be intensifying our discussion with major players in the forestry sector to
assist SMMEâs to take advantage of the centre to diversify products in the
forestry sector. The centre will assist the Province to increase the number of
SMMEâs in the furniture cluster.
Mining
As stated earlier in my speech Madame Speaker, my Department will be
studying the trends of mining expenditure. We want to know how much the mining
houses spend through their procurement systems per year and where they procure
their goods and services. We want to know where they recruit their personnel
and what kind of skills, expertise and competencies they need most. This
knowledge will assist us as a Province to assist local entrepreneurs to
position themselves as chief suppliers to the entire mining industry within the
Province. It will also assist us Madame Speaker to design educational and
training programmes that are responding to the personnel needs of the mining
sector. It will also assist us as Government to compare notes on CAPEX for
future strategic deployment of relevant economic and social infrastructure from
which we can leverage massive economic and social benefits. The Department with
the Department of Minerals and Energy Affairs has been instrumental in
formalising
groups of informal miners for their safety and also to assist them to
participate meaningfully in the industry. The Mpumalanga Mining and Energy
Preferential Procurement Initiative is due for its Launch and with the initial
roll out of the rest of the Mining Charter Elements in the first quarter of
this year. Two influential information sessions for the mining companies and
their suppliers were held in the Highveld and Lowveld in the past financial
year. MMEPPI intends opening up procurement opportunities for the PDI in the
mining
industry. A strategy to revitalise the dying Mining towns has also been
commissioned. The identified towns include Pilgrims Rest, Rietspruit, and Piet
Retief. The strategy report is expected to reveal the current economic
activities, with a view of identifying development projects to stimulate and
regenerate the local economies of those areas. The Department has commissioned
three studies two of which are Geological surveys of Gold in Steynsdorp and
Coal in the Belfast areas. A feasibility study for granite beneficiation in the
Ehlanzeni area is one of the many studies, the Department is undertaking for
this financial year.
Stainless steel
The stainless steel industry is hard-hit by the impact of Import Parity
Pricing and we cannot wait for the ruling of the Competitions Commission in a
case brought jointly by the DTI and Harmony Goldmines against 20 steel giant
called Mittal. The result of this case will determine whether the Province is
able to expand into aggressive manufacturing, diversification and other
downstream high-value-add activities. Madame Speaker, we will be approaching
Columbus Steel to determine how they can assist the Province to position itself
so that it can capture a majority market share of their annual spend. We will
be looking at their requirements for labour and their future plans for CAPEX so
that we assist our people to harvest in the huge
opportunities presented by this industry.
Other projects that we would be investigating during this financial year,
within the stainless steel sector are the following:
_*Pall Ring manufacturing in the Middelburg Stainless Steel Incubator
(MSI),
* Transportable refillable gas cylinders manufacturing,
* Three series stainless steel plate needed in mining,
* Three series stainless steel for jewellery, kitchen cookery and medals,
* Manufacture of retractable canopies for bakkies,
* Steel for Floor grating, roofing and tubing in the mines,
* Preliminary processing of catalytic converters by manufacturing the blank
steel components at the Middelburg Incubator,
* Steel toilet innovative concept
* the production of a safe âvesto stoveâ Petro-chemical sector
The same strategy of finding out the spend of big industries within this
sector, such as SASOL, skill requirements and capital projects, will be
employed within this sector with the desire for Government to respond to the
needs by making its people ready to tap into the opportunities created within
the sector. Ladies and Gentlemen, allow me to thank SASOLâs management for
their willingness to work and cooperate with Government in this project.
Projects that we will be looking into within this sector for the year 2006/07
include the following:
* Manufacture of corrugated poly-propylene sheets as substitutes for
cardboard,
* Blow-modeling of 2litre bottle containers,
* Manufacture of pallets for tower packaging using poly-styrene,
* Manufacture of poly-styrene film for flower pockets,
* Thermo-therming for disposable cups through the process of extrusion,
* Production of paint and other solvents, such as, tar for sealing leaks,
* Production of synthetic textiles, such as, hair locks,
* Establishment of a water treatment chlor-alkai facility with a potential for
downstream process in production of sodium hydroxide, hydrochloric acid, sodium
hypochloride and poly-alluminium chloride.
Agro-food and non-food sectors
The Department will be working very closely with the Provincial Department
of Agriculture and Land Administration to pursue opportunities for
beneficiation of the agricultural produce for export. In partnership with the
Development Bank of South Africa the Department is busy with the feasibility
study for the establishment of the Food Technology centre for the Province to
ensure greater participation of the Previously Disadvantaged Individuals in the
agricultural sector.
Identified projects for high-value-add and downstream beneficiation for export
markets include: (It must be stressed, ladies and gentlemen that these projects
will be thoroughly investigated and cost benefit analyses will be conducted
before implementation)
* Bio-diesel from Soya beans (MADC),
* Bio-diesel from Jethropha,
* Beekeeping and honey production within the Forestry for Export,
* Nkomazi Poultry Production,
* Value add in Maize Milling,
* Vegetable packing storage and transportation,
* Citrus value add, juice making, dried and processed fruit,
* Essential oils,
* Gladioli flower products,
* Abattoir for poultry processing,
* Skills development for emerging farmers in financial and business
management,
* Processing of spice,
* Glycol produce from sugar cane (Dti, IDC and TSB) Study completed,
* Ethanol production from maize and sugar.
Madam Speaker, we have allocated R8 million to the Directorate Trade and
Industry Development towards the attainment of the above-mentioned goals.
The SMME sector
Madame Speaker, while Government has made considerable efforts to give
business to Previously Disadvantaged people through our procurement systems, it
is at times disheartening to see that PDI companies do not have long and
sustainable plans of growing. We have, amongst our people, entrepreneurs who
are running, what I call, âhit and run companiesâ. A company gets awarded one
tender and it goes out and do an unsatisfactory job and disappear. Many of the
emerging entrepreneurs do not invest in their companies. They want to remain
perpetual emerging companies and this is a killer to the ideals of building
thriving small enterprises in our communities. Statistics, according to the
DTI, show that 80% of own initiative SMMEs collapse within the first two years
of their establishment, while on the other hand it shows that 80% of franchise
businesses are success stories.
Madame Speaker, we are in negotiations with Kagiso Exhibitions and the
Franchise Association of South Africa to look into the franchising system for
ordinary local business ideas. In due course we will be announcing a programme
that is aimed at galvanising local business ideas into national and
international franchises. This project would be looking into issues of patent
laws, copyright laws and intellectual property laws. Ladies and Gentlemen as
you would know, Mpumalanga is well endowed with world-class crafters, but their
craftworks are not patented, which means anybody from any country can buy a
giraffe crafted in Mpumalanga and mass-produce it as an own idea. The review of
the Provincial SMME Development Strategy is on course.
The Province has entered into a Memorandum of Agreement with the Industrial
Development Corporation to address the burden of access to finance by SMMEâs in
the Province. The Province has successfully launched the South African Micro
Enterprise Apex Fund to assist the most vulnerable especially women in rural
areas to access finance. We also opened an office of Nicro Enterprise Finance
in Nelspruit, Witbank and Secunda, in partnership with Umsobomvu Youth Fund to
ensure that Young people participate in the mainstream of the economy. The
Department is in discussion with Umsobomvu Youth Fund to transform all the 3
Nicro Enterprise Finance offices in the Province to be fully fledged Umsobomvu
Youth Fund branches to offer all the products that are offered by
Umsobomvu.
The Province has successfully launched the Provincial Small Enterprise
Development Agency (SEDA) office. For 2006/7 the Department will be
accelerating the establishment of SEDA Branches in all the Districts together
with the SEDA information centres in most of our local municipalities. The
process of finalising the Provincial Co-operative Strategy is on course.
Discussions with the Development Bank of South Africa are at an advanced stage
to assist the Department to finalise the strategy. The National Department of
Trade and Industry is also helping in ensuring a uniform approach for
co-operatives in the country. During this financial year, the Department has
allocated R12 million towards the programmes of the Enterprise Development
Directorate.
Business regulation and consumer services
Madame Speaker, once more, we are going to keep the Legislature busy this
year. Expect no less than three Bills to be tabled for your consideration.
Ladies and Gentlemen I want to thank the Legislature and all its substructures
for the diligence exhibited during the processes of passing the Mpumalanga
Economic Growth Act, No 4 of 2005 and the MTPA Act, No 5 of 2005. The
Honourable Members showed that they can lead by example when they assembled in
December during recess to help the Province pass the two laws. Gambling We are
off to a good start this year. Not only have we appointed a new Board of
Directors under the Chairpersonship of Mr Jerry Vilakazi, but we have already
brought, for consideration by this Legislature, the amendments to the
Mpumalanga Gaming Act, soon to be known as the Mpumalanga Gambling Act. The
proposed amendments include provisions that align, the Act to lawfulness
required by the Constitution. Further to that, the Bill is also amended to
include provisions that comply with the National Gambling Act, with regard
certain definitions and meanings of Gambling operations.
Lastly the Amendment Act will also include legislation that will regulate
the operations of limited payout machines and revenue matters connected
thereto. Liquor Applications and Provincial Legislation. Our Provincial Liquor
Board is still considered by many of its Liquor licensees as the best and most
efficient operational Liquor Board in the country. The Department published the
Mpumalanga Liquor Licensing Bill for general comment on the 24th March 2006.
The closing date for comments was on the 24th April 2006. The Department is
presently addressing public comments with the State Law Advisers and we
envisage the passing of this Bill during the last quarter of the financial
year. Our Provincial Liquor Act will address many shortfalls currently
experienced in the Liquor Industry including major shifts within the paradigm
of licenses to Previously Disadvantaged Individuals. We also foresee a simpler
process in applications for Liquor Licenses and a better regulated framework to
enhance community development and resolve social imbalances and abuse of
substances.
Horse Racing Regulation
The Department terminated the Agency Agreement with the Gauteng Gambling
Board and on the 1st April 2006 has transferred the operations and functions of
the Transvaal Ordinance 24 of 1978 to the Mpumalanga Gambling Board. The
regulation and control of Horse Racing is now within the ambit of the
Mpumalanga Gambling Board the Department has signed a binding Agency Agreement
with the MGB to regulate the operations of the Industry in terms of the
Ordinance. The Department has drafted a Provincial Horse Racing Bill and it is
envisaged that this Bill will become Legislation next year. On the promulgation
of the new Horse Racing Legislation the Ordinance 24 of 1978 will be revoked
and repealed
Consumers Matters
The Department will shortly be appointing the Consumer Protector to the
Consumer Court. The Consumer Protector will be challenged with the
establishment of the office for Unfair Business Practices. This Office will
primarily address consumer prejudices with regard to unfair business practices.
The Department will be oversee the process of the establishment of the Office
and earnestly believes that consumer protection across the province will be
enhanced and respected. The Department will also address Consumer Education
especially in line the promulgation of the National Credit Act, which will be
brought into operation on the 30th June 2006. The Department will ensure that
provincial legislative support is determined to enhance support to the
operations of the National credit Act, which would clearly define all the
ambits on consumer rights and obligations. To date the Department has opened
714 files on Consumer cases and closed 479 of the said cases. Monies claimed on
behalf of consumers during the financial year amounted to R2, 9 million. We
also implemented various consumer awareness programmes in the form of Consumer
Education
Workshops, radio talk shows and advertisements and distribution of consumer
education material throughout the Province. Other projects to be explored in
this sector are:
Feasibility of establishing a fully fledged horse racing track, associated
infrastructure, amenities and
Facilities matters
* The possibility of rolling out the fourth and last Casino license.
* Expanded roll out of the Limited Payout Machines (LPM)
* Roll out of Bingo (lottery game with numbered cards)
Madame Speaker, towards the Programmes of the Business regulation and
Consumer services, we have allocated a budget of R11, 196 million. Before I
present the total budget, Madame Speaker, allow me to state that effective and
efficient execution of all the Programmes I have mentioned in the speech will
result in the creation of a strong middleclass in our communities and the
equitable distribution of wealth in the province. In conclusion, I would like
to thank the Hon. Premier and colleagues in the Executive Council for their
support and guidance. Members of the Legislature, in particular the Portfolio
Committee on Agriculture, Land Administration and Economic Development and
Planning, the HOD and all the staff in the Department, Board members and staff
in our parastatals. Lastly, I would like to thank my family for the unwavering
support even when I have to spend many hours and days away from home.
Madame Speaker I ask this House to approve the budget for the Department of
Economic Development and Planning spread as follows:
Programme 1 administration R 45 362 000
Programme 2 economic development R 140 625 000
Programme 3 economic policy and planning R 14 270 000
Total R 200 257 000
I thank you.
Issued by: Department of Economic Development and Planning, Mpumalanga
Provincial Government
2 June 2006
