Minister Gugile Nkwinti: Economic Sectors, Employment and Infrastructure Development cluster media briefing

Ministers and Deputy Ministers                  
Directors-General
Members of the Media
Ladies and gentlemen

Good morning and welcome to the Economic Sectors, Employment and Infrastructure Development (ESEID) Cluster media briefing.

South Africa adopted the National Development Plan (NDP) and Vision 2030 to create a better life for all its citizens in an inclusive society. We are over a year into the implementation of the NDP; on a path to accelerate economic growth and resolve the triple challenge of unemployment, poverty and inequality.

You will recall that President Jacob Zuma announced the Nine-Point Plan to ignite growth and create jobs in his State of the Nation Address (SoNA) on 11 February 2015. President Zuma further provided a progress report on the Nine-Point Plan in his Mid-Year SoNA implementation update to the media on 11 August 2015.

The Nine-Point Plan, whose priority interventions are the main concern of the Economic Cluster, has been designed to accelerate economic growth and create jobs by, among other things, transforming the economy and increasing investments. The three types of interventions – job drivers, enablers and cost-cutting interventions – have been designed to work in collaboration to grow the economy.

A key cross-cutting priority of the Nine-Point Plan is to build stronger and enduring partnerships with the private sector.

This media briefing expands on the President’s progress report by providing more detailed information and providing an opportunity for engagement on the implementation of the nine priority interventions.

Economic context

The global economy continues to face significant headwinds. The global economy grew by 3.4% in 2014. South Africa’s main trading partners have experienced divergent economic growth. The European Union grew by just 0.9% while Japan shrunk by 0.1%. However, Sub-Saharan Africa grew by 5% and the United States grew by a robust 2.4%. China’s economy continues to slow down with growth moderating to a still impressive 7.4%. Commodity prices of iron-ore, coal, platinum and oil are still well below their 2008 highs. The substantial drop in the international oil price has brought benefits for South Africa but will reduce growth in oil-producing African countries which are key destinations for South Africa’s manufactured exports.

Overall, global outlook is still very uncertain with gross domestic product projections being revised downwards by the International Monitory Fund. South Africa cannot depend on global growth alone to catalyse domestic growth. The uncertain global economic outlook has depressed business and consumer confidence in the domestic economy.

South Africa continues to face macroeconomic constraints. However, government is cautiously optimistic that the economy will return to growth largely on the back of a significantly improved electricity supply outlook and intense efforts by government to grow investment levels.

Government is also pleased to note the World Economic Forum’s Global Competitiveness Report, which indicates that South Africa has risen seven places to rank 49th out of 140 countries in the Global Competitiveness Index.

In August 2015, President Zuma received the Status of Women in the South African Economy report. The report identified the need for an explicit intervention to enhance the economic empowerment of women across the country, starting with the Nine-Point Plan and Operation Phakisa initiatives.

The report serves as a baseline to promote socio-economic empowerment of women and gender equality, and to advance their human rights.

Government has prioritised leveraging private-sector investment in the infrastructure build programme, the manufacturing sector and the Ocean Economy under the auspices of Operation Phakisa.

Operation Phakisa is an innovative and pioneering approach to translate detailed plans into concrete results through dedicated delivery and collaboration. Through Operation Phakisa, government aims to implement priority programmes better, faster and more effectively.

Update on progress on implementation of the Nine-Point Plan

Government is working towards a reliable energy supply to ensure energy security for now and the future; an enabler for economic growth.

• On 30 August 2015, President Zuma officially opened one of six generating units at the Medupi Power Station in Lephalale in Limpopo, which contributes about 800 megawatts (MW) to the grid.
• Medupi Power Station will add 4 764 MW to Eskom’s grid once completed and will be the world’s largest coal-fired power station. This is also the fourth dry-cooled, baseload station to be built in 20 years by Eskom, after Kendal, Majuba and Matimba power stations.
• The R2 billion Kouga project that has been established will provide renewable energy that can power as many as 50 000 houses, adding to the large new energy capacity that solar and wind energy has brought to the grid. Electricity supplied by 37 approved Renewable Energy Independent Power Producers Programme (REIPPP) projects also continued to increase and supply just over 1 500 MW to the grid. In an effort to influence the increase in local content of Concentrated Solar Power (CSP) plants under the REIPPP – as a first step towards this – the Department of Science and Technology (DST) has established a 100 kilowatt (kW) concentrated solar energy pilot facility with a unique design that uses smaller, smarter and modular heliostats (solar collectors) to overcome cost challenges.
• More recently, we completed work on the process to select the preferred bidders for the Small Projects Independent Power Producers Programme (1 – 5 MW), which aims to assist small developers to gain experience in project development and raise the necessary funding for similar projects.
• Recently, 21 284 households were connected to grid electricity and 2 761 connected to off-grid technology.
• The DST is finalising the bio-energy atlas that indicates the potential energy that may be generated using agricultural/forestry/sawmill residues and organic waste across the country. This policy and investment decision support tool seeks to improve energy security and increase levels of energy access, and will be launched before the end of the financial year. The atlas provides a sense of the proximity of bio-energy resources to energy infrastructure and areas that have limited energy access. It also gives an indication of employment-creation potentials in harvesting and converting biomass to energy.  
• Construction of the two Integrated Energy Centres (IECs) in Bushbuckridge and Nkomazi in Mpumalanga are at a planning stage and will be completed in March 2016.
• On average, an IEC can employ up to 30 permanent staff members, complemented with temporary capacity. Temporary and permanent people employed during the building period will all have the opportunity to acquire training that makes them employable in the greater job market.

Progress has been made in revitalising agriculture, the agro-processing value chain and land reform

• The Agricultural Policy Action Plan has been reviewed to ensure that it becomes a job driver and promotes growth, employment, rural incomes, investment, output, export and African regional development.
• Work is continuing in the development of 44 Agri-Parks across the nine provinces. One Agri-Park is ready to be launched in North West. Production plans have been developed and are being implemented across the country to ensure increased production in the areas supporting the Agri-Parks. The DST is busy with a feasibility study on agro-innovation hubs that will support the development and dissemination of appropriate technologies to be implemented in Agri-Parks.
• A total of 12 221 smallholder producers were supported through advisory services, training, technical support and infrastructure from April to June 2015. In addition, 36 additional farms are being supported under the Recapitalisation and Development Programme.
• The DST is in the process of establishing a wheat-breeding platform to support the development and commercialisation of new breeding technologies for emerging and commercial farmers. Five new cultivars will be produced by 2020 to support increased productivity and food security. The DST also supports the Eucalyptus Genome Project, a local platform for tree genomics research in South Africa. This project focuses on the identification of desirable traits which speed up and allow for more accurate breeding. The project has the potential to increase industry competitiveness based on improved physical and chemical properties of wood and improved disease resistance to support the forest, pulp and paper industry, thus grow the economy and create employment opportunities.
• The Recommissioning Strategy for the Western Cape forestry exit areas has been approved to put about 22 000 hectares (ha) of state forestry land back into commercial forestry operation. The resultant benefits range from job creation, local economic development and future improvement in timber supply.
• According to the LHA study that was commissioned by the Department of Agriculture, Forestry and Fisheries and the Independent Development Corporation, the recommissioning of Western Cape plantations will employ 350 full-time workers for the five-year period. This number will increase to 1 500 when the plantations are in full production.
• In an effort to enhance the competitiveness of the agricultural sector through research, development and innovation, government – together with the private sector – have invested R104 058 468.78 million to implement innovation programmes for the fresh produce, aquaculture, wine, citrus and forestry sectors. 
• To increase the amount of land under irrigation, a total of 74.6 ha were revitalised during the first quarter of the current financial year and five water-use authorisation licences were issued to previously disadvantaged individuals, amounting to 3.79 million m3 volume of water that will be used for irrigation. Some 15 resource-poor farmers were supported to access water for production.
• As at 30 June 2015 the Commission on Restitution of Land Rights had settled over 78 138 land claims, which benefitted more than 1,9 million individuals from 385 691 families have benefitted from an award of 3 231 787 hectares of land acquired at the cost of R18.7 billion.  Some beneficiaries opt for financial compensation, to date the Commission has paid over R9.1 billion. An additional R4.1 billion has been awarded to beneficiaries that have opted for land as development assistance.

South Africa is advancing beneficiation and adding value to our mineral wealth; a job driver in the economy.

• Operation Phakisa in the mining industry is designed to unlock investment, enhance the nation’s productive capacity and encourage participation in key mineral value chains.
• Plans are in place to save jobs and to find alternatives to the threat of job losses in the mining sector. All key stakeholders signed a declaration on 31 August 2015 to save jobs and alleviate the impact of job losses in the industry.

• The Department of Trade and Industry provided support for a 100kW static fuel cell that runs on platinum and natural gas installed at the Chamber of Mines offices in Johannesburg.
• Engagements are underway with public and private sectors to promote market development, early adoption of the technology and manufacturing plants in South Africa.
• Through public-private partnerships, the DST facilitated the deployment of three 5kW hydrogen fuel cell units at three schools in the Cofimvaba district in the Eastern Cape and another 5kW hydrogen fuel cell unit at a clinic in Windsor East, Johannesburg, Gauteng. Apart from providing energy access in support of the provision of education and health services, the technology lays the foundation for the growth of a new industry based on South Africa’s platinum resource.

We are moving towards more effective implementation of a higher-impact Industrial Policy Action Plan (IPAP)

• The President announced during the Mid-Term SoNA implementation update to the media that progress was being made on implementing the IPAP, which is one of the job drivers in the economy.
• Government continues to create a conductive environment to attract both local and foreign investments. This is achieved through industrial financing that includes offering support to enterprises that can create and sustain jobs.
• Through the Manufacturing Competitiveness Enhancement Programme, government approved 161 enterprises for funding and leveraged investment of R5.8 billion with 28 212 jobs sustained.
• The Automotive Incentive Scheme approved 13 enterprises for funding and leveraged investment of R1.5 billion.
• Government is committed to transforming the economy by ensuring that previously marginalised groups participate meaningfully in the economy. This has led to the drafting of the Black Industrialists Policy Framework, which has been presented to the ESEID Cluster and the Cabinet Committee in July 2015.
• Significant progress is being made in terms of attracting investment into the Industrial Development Zones (IDZs). For example, in Coega IDZ, 12 new investors with an investment value of more than R8 billion were signed, five investors with an investment value of more than R140 million were signed in the East London IDZ and the Richards Bay IDZ signed five new investors with an investment value of more than R2.8 billion.

Government is playing its part in moderating workplace conflict

• You will be aware that Deputy President Cyril Ramaphosa leads the interface between business and labour to normalise labour relations.
• Consensus on a working definition of a National Minimum Wage was reached at the National Economic Development and Labour Council.
• Other mechanisms to reduce workplace conflict include a Code of Conduct for strikes, lockouts and compulsory arbitration by the Commission for Conciliation, Mediation and Arbitration.
• South Africans are generally peace-loving and law-abiding citizens. We must stop all criminal and violent activities during industrial action and labour strikes.
• I would like to emphasise that peaceful negotiations are the best solution to deal with disputes and problems.

Unlocking the potential of small, medium and micro enterprises (SMMEs), cooperatives, township and rural enterprises as job drivers in the economy.

• 620 informal traders were trained in all nine were trained through the National Informal Business Upliftment pilot project in partnership with the Wholesale and Retail Sector Education and Training Authority (W&RSETA). The training focused on entrepreneurship, marketing your business, customer-care, financial management, purchasing skills, regulatory and by-law compliance, hygiene and food safety, merchandising, and point of sale.
• 489 enterprises and cooperatives were supported through the rural development, environment and tourism sectors’ initiatives. A fresh-produce market has been established in uThungulu District Municipality in KwaZulu-Natal.
• To support the development of a vibrant bio-economy industrial sector, the Biomanufacturing Industrial Development Centre that was established at the Council for Scientific and Industrial Research now supports 17 small and medium high-tech enterprises.
• To support the development of a competitive mobile innovation industry, a mobile solutions lab (mLab Southern Africa) was established at The Innovation Hub and now supports 11 small and five medium mobile innovation enterprises.
• As part of facilitating access to finance for SMMEs and cooperatives, the Department of Small Business Development’s Black Business Supplier Development Programme supported 376 enterprises to the tune of over R95 million (R95 821 711.23 million). This has supported 10 399 jobs.
• The Small Enterprise Finance Agency (SEFA) disbursed R344 million to 24 711 SMMEs. It also financed 5 305 youth-owned businesses, 22 296 black-owned,
  21 940 women-owned, 22 620 SMMEs and cooperatives in priority provinces. It is important to note that 43% of the allocations were in the priority sectors – such as construction, information and communications technology (ICT), mining, manufacturing, agriculture and tourism – as defined in the New Growth Path and IPAP.
• It is encouraging that 98% of support is towards informal businesses. This is consistent with the Nine-Point Plan announced by the President during the 2015 SoNA. It is important to note that most of the SEFA’s loans are not supported by any form of collateral.
• The Small Enterprise Development Agency’s network of 48 incubators supports
  2 236 clients. A total of 535 permanent jobs were created by incubated small enterprises, mostly in the agriculture and construction sectors.

Progress has also been registered in cross-cutting areas to reform, boost and diversify the economy. They were designed to support the other nine priority interventions.

Telecommunications

• The Department of Telecommunications and Postal Services has started the process of providing broadband connection services in eight districts in provinces where the National Health Insurance programme is being piloted, including the appointment of a network service provider to connect the facilities. Furthermore, the development of the connectivity plan of schools in the eight selected districts is underway.
• 380 schools have been connected through Universal Service Obligations imposed by the Independent Communications Authority of South Africa. The process will include classification of schools based on its proximity to existing network infrastructure. A total of 1 938 schools were equipped with facilities and computer rooms, and a further 131 rural communities provided with ICT equipment and services. The roll-out of broadband and ICTs will stimulate local economic development and promote economic opportunities for the youth.

Water and sanitation

• 27 200 households recently gained access to safe drinking water. Two water projects funded through the Regional Bulk Infrastructure Grant were completed in Masilonyana Local Municipality in the Free State, and the construction of 15 bulk infrastructure schemes are at different phases.
• Phase 1 of the Mokolo Crocodile Water Augmentation Project has been completed and has met all short term water requirements in the Waterberg areas. This will contribute in meeting water requirements for the Medupi and Matimba power stations.
• 3 978 households recently gained access to sanitation through the Rural Household Infrastructure Grant and 3 822 buckets in formally established areas have been replaced with proper sanitation services.

Transport, rail and roads

• Transport infrastructure supports all the other nine priority interventions and is an important enabler for economic growth.
• The Passenger Rail Agency of South Africa’s Rolling Stock Fleet Renewal Programme is underway, with one of the trains being manufactured in Brazil ready for delivery on 30 November 2015.  
• In an effort to maintain provincial roads, 19.24km have been surfaced, 62km resealed, 18km gravelled, 821km bladed and 227 628 m² potholes patched. The provincial road network is funded through the Provincial Roads Maintenance Grant (PRMG). A list of these roads is in Table B5 of the Division of Revenue Act: Provincial Roads Infrastructure projects list funded through the PRMG.
• Construction of three bridges is at different stages in Mbombela, Bushbuckridge and Nkomazi in Mpumalanga (reconstruction of flood-damaged bridges).
• The Bus Rapid Transport System continues to be operationalised in various cities of South Africa:
  • In Cape Town, MyCiTi is moving an average of 42 522 people against a target of 50 000 per weekday.
  • Rea Vaya in Johannesburg is moving an average of 33 670 people against a target of 40 000 per weekday.
  • In Pretoria, A Re Yeng is moving an average of 3 000 people against a target of 10 000 per weekday.
  • Go George is moving an average of 7 630 people against a target of 10 000 per weekday in George. The construction has continued to expand the coverage of the system in the different cities in accordance with roll-out requirements and available funding.
• The construction has continued to expand the coverage of the system in the abovementioned and other cities in accordance with roll-out requirements and available funding.
• The South African National Roads Agency Limited has begun preliminary designs and other preparatory work for the upgrade of Moloto Road.
• The feasibility study for the construction of the rail factory in Ekurhuleni has been approved. This factory will produce 580 coaches and generate approximately 33 000 direct and indirect jobs.
• The development of a cabotage policy to support the Oceans Economy programme of Operation Phakisa is nearing completion.
• A draft private sector participation framework for ports and railway sectors has been developed and is due for finalisation.

The Nine-Point Plan interventions were designed to stimulate the economy in a phased manner over the long term. Each priority intervention does not work in isolation but is part of an integrated national effort. It is a national effort towards inclusive economic growth. The economic empowerment of women is critical in order for South Africa to achieve real economic development and growth. The Nine-Point Plan interventions will yield results over different time frames in the immediate, medium and long term.

We are confident that these priority interventions will help to grow South Africa’s economy and address the challenges of unemployment, poverty and inequality if we all work together. The economy is everyone’s responsibility.

Together let’s move the country forward.

I thank you.