Minister Gugile Nkwinti: Post-SONA Economic Sectors, Employment and Infrastructure Development Cluster media briefing

28 Feb 2017

Ministers
Deputy Ministers
Directors-General
Senior managers
Members of the media
Ladies and gentlemen.

Today’s Economic Sectors, Employment and Infrastructure Development (ESEID) Cluster briefing builds on the commitments made by President Jacob Zuma in his State of the Nation Address (SoNA) on 9 February 2017. The cluster’s work is central to help realise the radical transformation of South Africa’s economy and society.

Through the implementation of the country’s Nine-Point Plan we have begun to lay the ground work to accelerate the pace of transformation in the economy. Since the President announced the plan in his 2015 SoNA, we have put in place initiatives to boost economic growth, create much-needed jobs and draw more South Africans into the productive sectors of the economy.

There has been improved policy coordination, infrastructure development and skills development. Advances have also been made into the lucrative economic sectors of the oceans economy and tourism, industrialisation and unlocking the potential of small businesses.

The cluster is confident that the Nine-Point Plan is diligently setting in place conditions to meet our National Development Plan’s goals of poverty reduction, economic growth and job creation.

Revitalising Agriculture and the Agro-Processing Value Chain

The Nine-Point Plan has committed the cluster to transform the agricultural sector through the roll-out of Agri-parks in 44 districts, fast-track the implementation of the Strengthening Relative Rights of People Working the Land (50/50) Policy at 10 pilot sites and create jobs through the production of key commodities.

The cluster is proud to announce that many of the initiatives planned in 2015 are at an advanced stage of implementation. In this regard the following has been achieved over the last two years:

  • The construction of 11 Agri-hubs and 12 Farmer Production Support units is underway. The Ncora, Springbokpan and Westonaria Agri-hubs are now operational.
  • Of the 66 proposals received under the 50/50 policy framework, 13 of them amounting to 90 191 hectares (ha) worth R631 million, have been finalised. These will benefit 921 households. A total of 43 additional proposals are being processed.
  • The One Household, One Hectare Programme approved 154 sites which will benefit 6 000 households. 
  • R1 billion has been invested to recapitalise 611 farms, thus cultivating
    526 452 ha of land that would be lying fallow.
  • Ninety black commercial farmers will be supported through the Commercialisation Support Programme, which targets 450 black smallholder farmers by 2022.

The revitalisation of the agricultural sector is expected to gather pace with the recent launch by President Zuma of Operation Phakisa for Agriculture, Land Reform and Rural Development focusing on:

  • Changing the model of, and fast tracking producer support and development finance by providing targeted support to smallholder and large-scale commercial producers. Key commodities will include livestock, grains and horticulture;
  • Implementing the improvement plan for smallholder producers with market focus;
  • Accelerating land delivery and beneficiary support services;
  • Improving access to water and water-use efficiency for high value, labour-intensive commodities by revitalizing or developing 5 000 ha of irrigation systems annually;
  • Addressing the regulatory burden of business in agriculture and rural spaces. This includes trade and market requirements.
  • Crowding in private-sector investment using the lever of the conditional grants.

Implementing a Higher-Impact Industrial Policy Action Plan

The target of the cluster detailed in the Nine-Point Plan is to scale up industrialisation by reviving industrial parks, establishing black industrialists, expanding industries supplying the infrastructure build programme, investing in manufacturing sectors and setting up Special Economic Zones.

The following milestones have been recorded in driving the country’s industrialisation in line with the Nine-Point Plan:

  • The Black Industrialists Programme supported 27 entrepreneurs, leveraged R2,5 billion in private sector investment and created 5 235 direct jobs.
  • In 2016 the automotive sector for the first time exported R150 billion and received the country’s largest investment of R11 billion from the Beijing Automobile International Corporation. Construction on this project in underway and production is expected to commence in 2018.
  • More than R20 billion in industrial finance was approved last year, creating
    27 000 direct new jobs and approximately 108 000 indirect new jobs.
    • More than R180 million was committed to upgrade six industrial parks across five provinces. In April 2017, the first phase of the revitalisation of Babelegi (Hammanskraal) and Vulindlela (Mthatha) industrial parks will be launched.
  • Twenty-one (21) products have been designated for local production, including rail rolling stock, bus bodies, electrical transformers and transmission lines, fire trucks, boats, solar photovoltaic components and electricity meters.

Crowding in private-sector investment

The intention of the Nine-Point Plan is also to facilitate an investment-friendly environment through the One-Stop shops established in KwaZulu-Natal, Gauteng and the Western Cape. The plan is to roll out these facilities in all provinces. This year we will launch the National Investment One-Stop Shop. Already, we can look forward to a current investment pipeline of over R45 billion for the coming year.

As part of improving the investment climate, government will be working with the World Bank on reforming the ease of business indicators.

Growing the Oceans Economy and Tourism

The Nine-Point Plan set out ambitious targets for the ocean economy, in the development of infrastructure to service the oil and gas industry, ship and boat building and aquaculture.

The cluster is pleased to announce that its steady work in the oceans economy has increased this sector’s contribution to the overall economy. Successes recorded since 2015 include:

  • Infrastructure investment in the country’s ports, which reached R2.76 billion. It includes the commissioning of a new 90-ton boat hoist in the Port of Port Elizabeth and dry-dock in the Port of Durban.
  • The manufacturing and boatbuilding industry unlocked R2.8 billion in private-sector investment. The locally manufactured tugboat the Mvezo was unveiled in Port Elizabeth.
  • The National Skills Fund (NSF) allocated R295 million for the South African International Maritime Institute at the Nelson Mandela University.
  • Coastal universities, Technical and Vocational Education and Training colleges and two new high schools have introduced new qualifications that will support the oceans economy.
  • Aquaculture attracted R444 million in private and public sector investment that has created 1 770 jobs.                                                                                               

Coastal and maritime tourism initiatives and the planning for the development of small harbours has commenced this year with the sourcing of grant funding for the development of three new small harbours in Port Edward, Port St Johns and Port Nolith. This will further grow the country’s tourism offering. The increase in tourist arrivals between January and December 2016 to more than 10 million people highlights the potential of the sector.

Unlocking the potential of small, medium, and micro enterprises (SMMES), cooperatives, township and rural enterprises

Small businesses can make a meaningful contribution in empowering people and drawing new entrants into the economy. It is a focal area of the Nine-Point Plan which targets removing regulatory constraints, assists through 30% of state procurement and the development of a framework to strengthen and regulate the informal business sector.

Good progress has been made over the last 24 months to meet these targets, which include the:

  • amended Preferential Procurement Policy Framework Act regulations, which provide for 30% set-asides for SMMEs and cooperatives, are in place.
  • Black Business Supplier Development Programme, which assists black businesses with their integration into the value chains and supplier databases of large corporations. 
  • National Gazelle’s programme, which targets 40 high-performing SMMEs with financial and non-financial support to accelerate their growth.
  • Department of Small Business Development, which has dedicated 50% of its support to township enterprises and 30% to rural enterprises.
  • pilot Informal Trader Upliftment Programme, which has benefited 1 000 informal traders and the number is projected exceed 4 000 at the end of the 2016/17 financial year.
  • Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency, which have co-located their services in 35 sites to allow a single-point access to services.
  • partnership between the NSF and SEDA to the value of R84 million, of which R35.3 million has been paid to date to develop the capacity of small businesses nationwide.
  • process of consultation to amend the National Small Business Act, 1996 (Act 102 of 1996), which has commenced.

Advancing Beneficiation

The intention of advancing beneficiation is to expand current support measures to attract downstream value-adding manufacturers; increase the levels of local beneficiation of the prioritised minerals, namely iron-ore and steel; platinum group metals; polymers; titanium; upstream mining inputs, and the energy value-chain.

The following was achieved:

  • Significant progress was in the Platinum and Fuel-cell sector with a Platinum Special Economic Zone to be designated and a major investment by a fuel-cell manufacturing investor that will make South Africa home to Africa’s first fuel-cell manufacturing facility.
  • The NSF, in partnership with the Mining Qualifications Authority and the IL Tari Goldsmith and Jewellery Design Academy of Italy, is investing R30 million to benefit 20 South Africans through study opportunities between January 2016 and December 2017.

Science, Technology and Innovation (STI)

The cluster has been working hard to open new growth opportunities through STI that was identified in the Nine-Point Plan as key to advance inclusive socio-economic development and transformation.

Local knowledge and innovation is being used to revitalise agriculture through agro-processing technologies linked to the Bio-economy Strategy, and to revitalise mining and mining equipment manufacturing through focused technology development programmes and new industry development through targeted minerals beneficiation. 

Through the Sector Innovation Fund, investments have been made in alternative sanitation technologies and improving access to information through the Broadband for All initiative and mLab.

The Technology Localisation Programme provides technological support to large and small companies so that they are empowered to provide goods and services under government procurement programmes.

Broadband Roll-Out

The broadband roll-out and the lowering of data costs remain a priority to support radical economic transformation. An investment of R1.9 billion over the next three years will be made to roll-out broadband in eight rural districts as part of a first phase. Progressive partnerships are being sought to connect the rest of the country.

The rollout has already began in the OR Tambo district. The King Sabata Dalindyebo and Mhlontlo local municipalities are working with the Universal Service and Access Agency of South Africa to connect 542 schools, 65 clinics and municipal offices by the end of July 2017. Gauteng and the Western Cape have rolled out broadband to 592 and 1 372 government facilities respectively. The national government has worked with six metros to roll out free Wi-Fi in highly populated public facilities over the past year.

Transport Infrastructure

The Passenger Rail Agency of South Africa’s (PRASA) rolling stock renewal programme has made significant progress. The first set of 10 new trains has been delivered from Brazil. The final 10 trains will be delivered by the end of the 2016/17 financial year.

PRASA’s capital spending will reach R33 billion over the 2016/17 to 2019/20 financial years. Some of the new rolling stock will be produced locally. Government has unveiled the construction of the new local manufacturing plant for the new rolling stock in Dunnottar, Ekurhuleni. The plant will be completed and start operating in June 2017.

The Moloto Rail Development Corridor is another strategic transport infrastructure project. The South African National Roads Agency Limited has commenced with the planning phase of the project to upgrade the Moloto road. The project will stimulate the regional economy between Limpopo, Mpumalanga and Gauteng.

The upgrading of the N2 Wild Coast Toll Road, including 410 kilometres of road and construction of nine bridges, is underway. It will serve as a catalyst for regional economic development and link communities to job opportunities in the tourism and agricultural sectors.

Water Security and Water Resource Projects

The drought has had a negative impact on many aspects of the economy, including agriculture. Recent rains have supported the drought relief efforts and the national average dam level is currently at 67.1% to capacity compared to 54% at the same time last year. Despite the good rains that fell across the eastern parts of the country, the water storage remains under stress in the Eastern Cape, western part of the Northern Cape and the Western Cape. Groundwater levels also remain low and this will take several years to recover. The water restrictions in Gauteng have been lifted.

Water-efficiency programmes will continue addressing the unaccounted for water that is estimated at R7 billion a year and the War on Leaks Programme is expected to play a significant role in this regard. This year, the programme will train an additional 5 000 young people as artisans and plumbers.

Resolving the Energy Challenge

A firm commitment was made to South Africans in 2015 to resolve the energy challenges and ensure a reliable long-term supply. Through the Nine-Point Plan, South Africa has a stable and reliable supply of electricity, with an excess capacity over 3 000 megawatts (MW) available.

These advances are the result of a number of investments in energy infrastructure and bringing new capacity on stream. They include among others:

  • New capacity from Medupi Power Station, four units from Ingula Power Station and Sere Wind Farm to the extent of 2 226 MW.
  • The investment of R96.8 billion during the construction of Medupi Power Station, thus creating 15 181 job opportunities of which 7 496 have benefited young people.
  • In addition, R103.9 billion was spent on the construction of Kusile Power Station, thus creating 1 826 jobs.

The energy sector has a significant role to fulfil in the achievement of the country’s radical economic transformation. The Solar Water Heater programme has led to the development of 12 local enterprises manufacturing 50 000 systems each, with a minimum of 70 percent local content. In addition, the installation programme targets local youth and women as plumbers, water reticulation artisans and related trainees. 

Our flagship Renewable Energy Independent Power Producers Procurement Programme (REIPP) has been instrumental in augmenting the capacity of the State to rapidly roll-out generating capacity. We have unlocked R200 billion in investment commitments to create more than 115 000 jobs and invest in communities over the lifespan of the projects. The 54 operational projects produce 2 900 MW of installed capacity. The REIPP is also the base for the first bid window of the Coal Independent Power Producer (IPP), with investment of R40.4 billion.

Processes towards the realisation of the 9 600 MW Nuclear New Build Programme continue to make significant progress. In November 2016, Cabinet designated Eskom as the owner, operator and procurer for the new nuclear plants, and the South African Nuclear Energy Corporation as the owner, operator and procurer for the nuclear fuel cycle and multipurpose reactor in accordance with the Nuclear Energy Policy of 2008. A new Section 34 determination was gazetted in December 2016 and Eskom has issued the Request for Information (RFI), which will close at the end of April 2017. To date more than 30 companies globally have indicated their interest in the RFI, which will then be followed by the Request for Proposals once all relevant processes have been completed.

As part of energy-saving measures, government through incorporating Energy Efficient Technologies in 7 043 state buildings, saved 220 000 000 kilowatt-hour (kWh) in 2015/16. A target of 300 000 000 kWh has been set for 2017/18.

Moderating Workplace Conflict

The cluster welcomes the agreement on the national minimum wage of R20 per hour, which will benefit an estimated 6.6 million South Africans. It will advance the country’s efforts to address the challenges of wage inequality and labour instability.

In sectors where there could be a negative impact on jobs, such as small business and businesses that can prove they face financial constraints, these businesses would be able to apply for an exemption.

Overall we expect the minimum wage will increase the buying power of 6.6 million South Africans, leading to greater economic activity and help stimulate the economy. It will also help reduce inequality in our society, which is seen as a major obstacle to economic growth.

Youth Employment

Youth represent more than half (54.4%) of the working age population, yet 38.2% of the youth are unemployed. To address this challenge, government plans to expand and upscale the use of labour-intensive methods focusing on the following:

  • Implementation of the Expanded Public Works Programme (EPWP) in different sectors will continue to be optimised to ensure the creation of work opportunities targeting the youth. Linkages between the EPWP and SMME development will be strengthened to promote sustainable livelihoods. The Community Work Programme (CWP) provided 226 213 job opportunities to poor communities. The CWP also facilitates training and 6 525 participants were trained in the current financial year;
  • Broadband will be rolled out in 60 townships, create 10 Information Technology Hubs with focus on maintenance services for personal computers, tablets and cell phones, development of content for educational software and applications, computer literacy training, work-readiness training and job search assistance;
  • The South African National Defence Force (SANDF) will increase the pace of roll-out of mass food procurement from SMMEs and black farmers located close to SANDF bases;
  • The departments of Public Works (NDPW), Labour (Unemployment Insurance Fund) and Higher Education and Training will launch the training and job deployment programme for youth in buildings and components operations and maintenance of state facilities in the second quarter of 2017/18.
  • The Department of Human Settlements will implement 101 mega-catalytic projects and roll out the Youth Brigade Programme to 2 000 unemployed and unskilled workers to receive on the job training for a year.
  • The Department of Environmental Affairs plans to offer 35 000 youth opportunities for employment and entrepreneurship in partnership with the private sector. The target is to offer employment opportunities to 100 000 youth by 2020.
  • Over 74 000 work opportunities are targeted for the employment of youth in road-maintenance programmes as part of the Department of Transport’s S’hamba Sonke Programme.
  • The Department of Communications, in partnership with the NDPW, will recruit 2 780 youth to roll out the Set-Top Box programme.
  • The Municipal Infrastructure Support Agent (MISA) of the Department of Cooperative Governance is contributing to the development of scarce technical skills and employment opportunities for youth through its capacity building programme that involves amongst others the training of apprentices towards becoming qualified artisans, experiential learnership and graduates development programmes in partnership with municipalities. The Artisans Development programme has supported 78 young people to qualify as Artisans since 2014 and currently has 276 apprentices undergoing training.

Concluding statements

In the year ahead the cluster will strengthen the implementation of the Nine-Point Plan with a concerted effort to promote labour-intensive projects that target unemployed youth in particular.

The successful implementation of the Nine-Point Plan will draw more South Africans into the economy and pave the way for a new chapter of radical socio-economic transformation.

The ESEID Cluster will continue to use the economic levers that are available to it to ensure that we achieve the desired inclusive growth. We encourage all South Africans to work with government to help move the economy forward.

I thank you