Z Mkhize: Breakfast meeting with media

31 July 2007

Thank you and good morning everyone. To the members of the media, let me
extend a special welcome to you. I'd like to spend a few minutes this morning
providing a perspective on what we've achieved since we unveiled the provincial
budget on 1 March 2007 and Budget Votes for Provincial Treasury and Economic
Development on 19 April 2007.

Support extended to small, medium and micro enterprises (SMMEs)

The fifth South African Employment report released in April this year
estimates that there are only 600 000 formal businesses compared to the
estimated 2,1 million self-employed people in the country. Clearly, this figure
is a clear indication that SMMEs and co-operatives are playing an important
role in terms of contributing towards job creation and the development of our
economy.

The lack of access to relevant and understandable information and advice are
some of the challenges which are being faced by SMMEs. The provision of
infrastructure for SMMEs remains our top priority as the department. Because we
value their contribution, the department has identified suitable premises for
the provision of Service Delivery Networks in the form of One-Stop-Shops. Areas
identified include Sisonke (Ixopo), iLembe (Stanger), uThukela (Ladysmith),
Zululand (Vryheid) and eThekwini (Durban).

These centres will provide information and business support to emerging
entrepreneurs. This, amongst other things, includes information on how to start
new businesses, expand existing operations, accessing various financial schemes
and marketing opportunities locally and internationally. On 20 July we launched
the first One-Stop-Shop in Durban, Alice Street. This launch was as a result of
a partnership with ABSA. The valuable experience that we have gained over the
past 13-years has made all of us realise that government's target of halving
unemployment by 2014 and the province's ambitious aim of achieving an economic
growth rate of eight percent by 2010 is dependent on a partnership with the
private sector.

Not in a distant future we will see this sector making a tremendous
contribution to the province's economy. Last year, the department in
collaboration with an Indian company, National Small Industry Corporation
Limited, conducted an SMME Feasibility Study. This study recommended the
establishment of the Technology Demonstration Cum Training Centres. Nine
Technology Development and Transfer Centres (TDTCs) and two Business Incubation
Centres will be established to fast-track and broaden skills base and economic
participation in the province.

This will also include the training of more than 370 emerging entrepreneurs
and assistance of 100 to access market a move that is expected to generate 1250
job opportunities. A collaborative agreement has been signed between
Directorate Entrepreneurial Development (DED) and National Sport Information
Centre (NSIC) regarding the establishment of Technology Development and
Transfer Centre (TDTCs) in KwaZulu-Natal.

During the first quarter:
* about 73 SMMEs have been assisted to access markets.
* ten SMMEs were assisted by the department to attend and exhibit their
products and services at the Royal Show 2007 and the regional Small Business
Fairs at eThekwini.

Commitment to sustain co-operatives

The co-operatives initiative was started in 2005 with an initial investment
of R110 million and allows members of the community to come together to help
themselves in producing or offering services to other members of the community
and other markets. Co-operative form of enterprise lends itself well to our
African values of ubuntu. Experience has shown that when a development model is
in harmony with a people's dominant cultural value system it stands a very good
chance of succeeding. We then have reason to be optimistic as we embark on the
co-operative revolution.

The department has been involved in the establishment of secondary
co-operatives in all district municipalities with the exception of Sisonke
District Municipality. The purpose of establishing co-operatives is to create
an agent that could serve as a service delivery arm of the department to ensure
continuous and sustainable support to primary co-operatives. We have moved a
step further by establishing a KwaZulu-Natal Tertiary Co-operative. This
co-operative has a mandate to acquire facilities for co-operatives to ensure
that they meet market demands.

During the first quarter:

* about 57 co-operatives received funding with 480 jobs created
* 53 co-operatives received training
* the department has developed and approved a Provincial Co-operatives
Development strategy
* a task team has been established to review training programme for the
co-operatives.
* terms of reference have been established to appoint service providers for
incubation and mentorship of primary co-operatives.

Ithala

Ithala Development Finance Corporation Limited, the province's leading
development finance agency exists to create sustainable economic growth, with a
mission "to drive economic development and empowerment, whilst remaining
financially sustainable." In achieving its mission, Ithala engages in a number
of activities across the development spectrum, including, funding of business
enterprises, emerging contractor development and entrepreneurial development
which has significantly contributed to the economic development and growth of
KwaZulu-Natal.

SMME development achievements between April and June 30 this year include,
total loan advances of R12,077,007 million with 46 enterprises being assisted.
Co-operative development achievements for the same period, include, total
approved funding of R7, 084,859 million with 57 co-operatives being assisted in
all 11 of KwaZulu-Natal's municipal districts. These activities have resulted
in the creation of 697 jobs and 229 hectares of agricultural land being
distributed over the past three months.

Various initiatives have also seen Ithala significantly broaden the black
economic empowerment (BEE) base via access to finance and skills development.
This includes the appointment of 22 employees across all 11 of the province's
municipal districts in a bid to "push" access and service delivery as far
forward into the province's regions as possible.

In striving to promote entrepreneurship and facilitate successful
transformation, skills development remains a key focus. In partnership with the
Industrial Development Corporation (IDC), SMME skills training programmes are
assisting newly-emerging entrepreneurs with the provision of easily accessible
training. In this regard, 211 emerging entrepreneurs have been assisted over
the past three month across various provincial regions.

Ithala supports government to deliver infrastructure in areas of health and
education, the focus in terms of service by Ithala is project management and
expanded public works support through emerging entrepreneur development.
Through this programme Ithala awarded contracts to the value of R35, 2 million
to emerging entrepreneurs over the past three months. Further to this,
contracts have been awarded under Ithala's internal BEE procurement policy to
priority population groups (PPGs) amounting to R17,8 million. Ithala advanced
R68 million in home loans, with 215 homeowners being assisted. In addition, 33
735 new savings accounts were opened and savings deposits increased from R1 372
billion to R1 432 billion.

Local economic development taking shape

The Gijima KwaZulu-Natal (KZN) programme, funded by the European Union is
now in its second year of operation. More than R78,4 million of the R138
million grant funds have been allocated to local economic projects in
KwaZulu-Natal. In April 2007 we launched our Memorandum of Understanding (MoU)
with Absa Bank that cemented a commitment to co-fund LED projects assessed by
Gijima KZN. During the launch, we toured the first project that was co-funded
in UGU District Municipality, the Sezela Cane Project.

The MoU concluded with Absa, being the second one signed with a large
financial institution, once again demonstrates the confidence that private
sector has in government's initiatives in developing a pipeline of financially
viable projects to stimulate the local economies of the province.

These grants, used to fund the Business Enabling, Local Competitiveness
Action - and Implementation Plans, have significantly contributed towards
alleviating poverty in KwaZulu-Natal.

As at 30 June 2007, under the Gijima KZN grant scheme:

* Fourteen projects were completed and closed out in the quarter including
three Business Enabling Fund (BEF) projects and 11 Local Competitiveness Fund
Competitiveness Actions Plans (LCFCAP).
* A total of 45 grant contracts were concluded in the quarter. These projects
are now in implementation.
* Expenditure for the quarter across all grants was +R5,3 million.
* Phase five, two calls for proposals (BEF and LCFCAP) closed on 27 June 2007.
We received just under 150 applications for Grant Support. These applications
have been evaluated and are with the European Union (EU) for approval.
* In the project pipeline and with regard to projects awaiting EU
approval:
* LCF: R33 million
* LCFCAP: R8 million
* BEF: R3,5 million

Next month, we will invite the media to the launch of the Gijima KZN Local
Economic Development (LED) Support Programme's Funding Awareness Campaign. This
launch is intended to announce the series of funded awareness workshops that
will be conducted in Ugu, Uthukela, Amajuba and Umkhanyakude municipalities.
Delegates attending the LED Conference in 2006 raised their concerns about what
they called a lack of information and service offerings at local level. This
funding awareness campaign will involve the Department of Local Government and
Traditional Affairs and Government Communication and Information System.

One of the objectives of Gijima KZN, the European Union sponsored programme
is to leverage additional private and public sector funding for projects
approved for implementation.

This objective is being realised through the Funding Forum which was
established in 2005 comprising financial institutions that fund LED projects
such as:

* Ithala
* Absa
* Standard Bank
* Department of Water Affairs
* Development Bank of Southern Africa
* First National Bank
* Industrial Development Corporation
* Kethani Enterprises Finance Ltd
* National Development Agency
* National Empowerment Fund
* South African Micro-Finance Apex Fund

Dube TradePort

The procurement process has been completed with the signing of the contract
between Airports Company of South Africa (ACSA) and the Ilembe Consortium on 6
June 2007. The value of the contract is R6,8 billion. This allows the
contractor to gear up their project management capacity, place orders for
equipment required to move on to site.

The Environmental Impact Assessment has been completed and submitted to the
Department of Environmental Affairs and Tourism on 8 June 2007. A record of
decisions setting out the terms and conditions of how the construction process
may proceed is expected to be received in the month of July 2007. This will
allow the contract to proceed with constructing the new airport and Trade
Port.

The Dube TradePort and the Airports Company of South Africa (ACSA) are now
in the process of finalising their project management and monitoring structures
to oversee the construction phase of the project.

Trade Investment KwaZulu-Natal

The launch of the Trade and Investment Conference and Exhibition on 8 May
generated interest. The conference which is scheduled to take place later in
October is a collaborative effort between Department of Trade and Industry and
the province of KwaZulu-Natal. Whilst that's means that investment is a
national efforts but KZN will also be playing a prominent role.

We have targeted investors coming from a number of countries with very
strong trade and business links with South Africa - in Africa, Europe, America,
the Gulf and the Far East. Our main objective for KwaZulu-Natal is to achieve
an economic growth rate of eight percent by 2010 by increasing the rate of
investment, broadening participation in the economy, skills development and
improving the competitiveness of our economy.

The key sectors to be targeted by Trade and Investment Conference and
Exhibition are:

* mining and minerals
* financial services, automotive sector, biofuels, tourism
* agri-business
* pharmaceuticals
* maritime, transport and logistics
* business process outsourcing or information communications technology
(ict)
* clothing and textiles
* infrastructure development

The focus of the sector specific presentations will be to:

* Present products and services produced in South Africa to buyers.
* Priority or boom sectors and opportunities.

The sector presentations will be agreed beforehand and all marketing
material will require delegates to indicate upfront which sessions they will be
interested to attend. There will be one-on-one bilateral meetings to ensure
that this conference becomes a success.

Economic empowerment

The department is continuously developing strategies to support the growth
of the agri-business and agro-processing sector. This involves identifying and
packaging agri-business and agro processing opportunities. A value chain
analysis for the goat industry project has been successfully completed. The
study is being shared with Department of Agriculture and Environmental Affairs
(DAEA) to develop an integrated provincial strategy to promote the goat
industry.

The Business Plan for Msinga sweet potato processing project has been
successfully completed. Funding for implementation is being leveraged from
department’s co-op unit.

The Terms of Reference for the following projects have been developed:

* feasibility study and Business Plan for Newcastle cold storage and meat
processing facility
* business plan for a commercial quail's enterprise
* facilitation of Umkhanyakude Livestock Forum
* feasibility assessment for honey production and processing
* establishment and empowerment of the KZN essential oils cluster
* establishment and empowerment of the KZN cutflower cluster
* position paper and provincial strategy for biofuels
* community high value subtropical fruit development
* development of a Management structure & operating procedure for the
Ladysmith pecan nut initiative.

The department has also intensified the training of entrepreneurs on
agri-business export. So far:

* fifty farmers (including industry advisors) were trained on a two-day
export readiness workshop.
* successfully assisted six agribusiness SMMEs and co-operatives to participate
in the Import/Export Africa
* trade exhibition held at Gallagher Estate, Midrand. The event successfully
exposed these groups to local and international markets to expand their product
market access
* deals and markets were secured with private investors for the cashew nut
co-operative (eight tons valued at R320 000 per month from Johannesburg).

Fiscal Management

The broader vision and mission of Provincial Treasury and Economic
Development can be summarised as follows: "KZN to be the leader in Economic
Development and be globally competitive thereby ensuring improved quality of
life for our citizens" and "empowering our people through strategic leadership
in areas of financial management and corporate governance."

Internal Audit is among other major drivers of good governance in the
Provincial Administration. To this far, various audit engagements were
undertaken to assist provincial departments improve internal controls within
their business operations. Critical areas subjected to audit reviews were
within the Human Resources and Financial administration and management,
including supply chain management as well as asset management.

Forensic investigations into allegations of fraud, corruption,
maladministration and misrepresentation are also yielding some results. In one
of the recent court proceedings, one member of the syndicate on the criminal
case of Social grant fraud pleaded guilty of 165 counts of fraud committed at
the Provincial Department of Social Welfare and Development.

Subsequent to the forensic investigation it was found during the criminal
investigation that the member of the syndicate kept 208 South African identity
document and 107 SA birth certificates which she used to defraud government.
She was working closely with medical doctors in order to obtain falsified
medical reports with the aim of registering able people for Disability Grant.
She further created "ghost children" which she registered for Child Grant
purposes with the help of Social Welfare officials. The court adjourned the
case to 9 July 2007 for sentencing.

Few other syndicate members and suppliers alleged to have defrauded
government through the Department of Health: Operation Cure will duly appear in
courts for payments made to identify officials of the department. Admissible
evidence to charge these officials and suppliers has now been collated. These
are among the 77 cases investigated since 2006 after the first group of 111
cases were investigated.

The same applies to officials at the Department of Education, who are
alleged to be involved in corruption on Adult Basic Education and Training
(ABET) administration (payroll). The investigation was recently completed and
action will be taken against those officials. Support provided with regard to
the 2007/08 municipal budget process. The challenge that was faced by many
municipalities during the period under review was preparing the budget.

Provincial Treasury rendered assistance and support to both Councillors and
the top management of these municipalities to ensure that a credible budget was
tabled and adopted. Final budgets were approved in June. In some instances,
provincial treasury assisted municipalities that were experiencing an impasse
between the political and the administrative arms of the municipality. We
conducted presentations to the Councillors, highlighting their roles and
responsibilities in the budget process and the ramifications of not approving a
budget before the start of the budget year.

2006/07 provincial close-out summary

Robust revenue performance

R1,420 billion collected, compared to the budget of R1,274 billion (11,5%
over collection)
* transport over-collected by R58,3 million
* the Office of the Premier over-collected by R22 million
* provincial Treasury over-collected by R66,5 million
* education collected R18,2 million more than budget.

Provincial Expenditure, excluding conditional grants

Good performance in expenditure:

* 99,5 percent aggregate expenditure achieved
* 99,8 percent expenditure on infrastructure
* over-expenditure in education infrastructure (R111 million)
* over-expenditure in Housing (Human Settlement Grant = R53 million)

These amounts are negligible when compared to total budgets of both
departments and will be easily financed by savings from other programmes.

Conclusion

Good revenue collection performance. Expenditure improved significantly in
2006/07 compared to previous two financial years. Good progress made by the
province in ensuring good financial management and expenditure monitoring.

Thank you.

Issued by: Department of Finance and Economic Development, KwaZulu-Natal
Provincial Government
31 July 2007