MEC Sihle Zikalala: KwaZulu-Natal Radical Economic Transformation Summit

28 Mar 2019

Address delivered by the MEC for Economic Development Tourism and Environmental Affairs, Mr Sihle Zikalala, on the occasion of the KZN Radical Economic Transformation Summit at the Olive Convention Center, Durban

Our Guest of Honour: Minister of Finance, Honourable, Mr. Tito Mboweni;
The Premier of KwaZulu-Natal, Honourable, Mr. W Mchunu;
The Mayor of eThekwini, Her Worship Cllr Zandile Gumede;        
Member of the Executive Council;
Honourable Mayors;
Captains of Industries;
Chief Executives for Public Entities;
Heads of the Provincial Departments;
Various business formations and Representatives of Labour;
Ladies and Gentlemen; 

Good morning and thank you all for having answered the call to be with us today.

Today’s Radical Economic Transformation Summit is one of several engagements where KwaZulu-Natal is witnessing yet another maturing Provincial catalytic intervention on the Radical Economic Transformation initiative.

We regard Radical Economic Transformation as an important strategic tool to deal with the triple challenges of poverty, unemployment and inequalities.

We are therefore very pleased to be here today, where once again, we have been called - upon by the Executive Council, on behalf of the Citizens of the Province, to assess progress, and challenges encountered in the implementation of Radical Economic Transformation implementation in the Province.

We are elated to be part of the generation that is witnessing this change especially during a time where some have a serious doubt of the Government resolve on Radical Economic Transformation.

We would like to thank all role-players and all the speakers who will be delivering papers in this Summit.  We are also pleased to learn that the presentations from various speakers will be characterized by the desire to convert the Province's scarce resources to finally achieve real economic transformation in the Province.

We appreciate that all stakeholders are here, because we believe that it is important for different participants to accept that the discussion on Radical Economic Transformation must involve everybody including the private sector. We remain optimistic that we will soon witness greater co-operation from all in the implementation of economic transformation across the economic sectors.

We are also delighted to see the presence of women and youth emerging entrepreneurs.

Our primary responsibility as government is to work and ensure an ongoing mentorship and ensuring access to market opportunities of women and youth as well as encouraging banking institutions to make finances available.

For nearly twenty-five years, our Province has travelled a long road in our quest to ensure that the freedom that we attained in 1994 is translated and felt even in the economic arena.

However, we are the first to admit that there are still major challenges in the transformation of the economy in the Province. One of them is the practice by some companies and individuals that dump their black partners once the contract has been secured and not paying them even 30% of sub-contracting which is an important requirement for the PPPFA Regulations.

In the near future, such companies will incur the wrath of the KZN B-BBEE Compliance Unit within EDTEA, a Unit that handles all the malpractices related to Economic Transformation in the Province.

In 2018, we announced the establishment of the Provincial Economic Transformation Monitoring Council which will look at the status of Economic Transformation in the Province.

This structure will also monitor the barriers that are making it hard for the implementation of Economic Transformation, measure B-BBEE trends and advise the Executive Council on measures to be taken to ensure the implementation of Economic Transformation in the Province.

Stakeholders are encouraged to raise any Economic Transformation challenges with the Council so that their concerns can urgently be attended to.

In support of the SMMEs and co-operatives, the Executive Council has approved implementation of 58 commodities, and six have been targeted for implementation in the first phase as part of Operation Vula Strategic Framework.

Operation Vula is centred on strengthening local economies and reorienting them to become effective centres of production, information processing and spatial development.

As part of this initiative we want to prolong money circulation in townships and rural areas by plucking money leakages thus forcing money to exchange more hands before it leaves the community. This will be achieved by increasing the local provision of a variety of services to local community by local enterprises.

It is for this reason that Government will support and promote local economic development and local small scale industries.

Operation Vula is being realised through revitalisation of township and rural economies, Public Procurement, Radical Agrarian Socio-Economic Transformation (RASET) and Black Industrialist programmes. To support local traders, yesterday we successfully launched the Bulk Buying and Warehousing programme at Mandeni.

We have identified the following commodities for implementation in the first phase of Operation Vuma: infrastructure development, agriculture produce i.e. fertilizers, bakery, furniture, and paper & toilet papers. This will be presented in details in the course of this Summit.  

We are still experiencing limitations in the implementation of the Preferential Procurement Policy Framework. This is an area that requires government to tighten up. 

The limitation to awarding contracts to the target group because of the weighting of the 80: 20 or 90: 10 formulas means that many large companies will always undercut emerging companies on price because of their capacity to cut prices and survive on relatively lower margins.

We have found that there is still a serious challenge whereby government procurement spent goes to the established companies that have traditionally done business with government.

We still reiterate the warning that we are tightening our operations to ensure that in future government does not continue to do business with those companies that refuse to comply with such fundamental transformation policies.

This is the reason why, as part of Operation Vula framework, we have developed the KZN Sourcing strategy. This will be presented in details by the Provincial Treasury in this Summit.

Furthermore, the scope for the development of the small business sector and access to market opportunities has not been as positive.

As a developmental state, the pursuit for development and prosperity of Small Enterprises should be characterized by partnerships and collaboration between big business and all spheres of government.

The South African developmental State, whilst learning from the experiences of others, must be built on the solid foundation of South African realities. Whilst engaging private capital strategically, government must be rooted amongst the people and buttressed by a mass-based democratic liberation movement.

This means that while we are acting effectively to promote growth, efficiency and productivity, we must equally be effective in addressing the social conditions of our people so that they can realise economic progress.

 It is on this basis that the Executive Council decided to organise this Radical Economic Transformation Summit to provide an opportunity to present and discuss the:  

  • The Comprehensive KZN Transformation interventions to advance radical economic transformation.
  • Presentation of enabling KZN SCM policy reform for Radical Economic Transformation.
  • Presentation of the specific private sector interventions to accelerate Radical Economic Transformation.
  • Discussion on the role of Finance institution in opening up financial opportunities for economic transformation.
  • Discussion on localisation and opening up of markets opportunities in all areas in the Province
     

This will help to deal with the high level of inequalities, which at times, has led to a lot of frustrations and conflicts across various economic sectors in the Province. We expect this Summit to make recommendations and adopt resolutions on the following broad strategic areas:

  1. Adoption of Operation Vula as a comprehensive Provincial economic transformation implementation plan.
  2. Adoption of the KZN sourcing strategy that will enable implementation of targeted procurement in the Province.
  3. Commitment by all in the implementation of radical economic transformation in the Province.
  4. Commitment by all to submit progress reports on economic transformation to the KZN Monitoring Council
  5. All stakeholders to utilise the KZN Monitoring Council on matters of Economic Transformation, this include resolving conflict relating to economic transformation  
  6. Commitment by all to ensure localisation and transparency in the identification of the beneficiaries for economic transformation opportunities.
     

Ladies and Gentlemen, I am glad that our programme has a session dedicated to industrial conflict and the provincial approach to effective and speedy resolution of disputes.

This is a fundamental and critical discussion that we should approach with the seriousness, maturity, and urgency that it warrants. Ultimately, our success to transform our economy hinges on us rooting out conflict and illegality on all sites where projects are implemented.

This Summit provides a unique opportunity for all of us to listen to one another, to find one another, and to agree that any form of economic sabotage must be viewed as an attack on all South Africans, especially the vulnerable poor.

There is no space for destruction of property, intimidation, and extortion in the South Africa that we are seeking to build.

We appeal for leadership and accountability at all levels.

More than ever in our history, we need a rejuvenated South African patriotism to advance the interest of our nation together.

Recently, the South African Forum of Civil Engineering Contractors of South Africa (SAFCEC), the Association of South African Quantity Surveyors (ASAQS), and the Black Business Council have raised alarm about the delays in the construction sector owing to violent community protests and intimidation by members of business forums who demand stakes in construction projects.

SAFCEC argues that 78 construction projects worth more than R 25.5billion have been disrupted and stopped across the length and breadth of the country. It is said that no less than 110 engineers and technicians have already left our country because of these violent stoppages and for concerns of personal safety.

The latest example of the violent stoppage by men armed to death has been the halting of the R2.4 billion German oil storage investment project that is constructed by WBHO in Saldanha, in the Western Cape, on the 13th of March 2019.

In early February, the Aveng Strabag joint venture terminated its R1.6 billion Mtentu bridge contract in the Eastern Cape because of violent community protests deriving from job and contract demands made against Sanral.

This does not bode well for investor confidence, the attraction of scarce engineering and technical skills, as well as our efforts to create employment.

When announcing the stimulus package last year and during the SONA this year, President Ramaphosa noted that our infrastructure development had slowed down for a number of reasons.

The President announced the establishment of the Infrastructure Fund to reignite economic growth. In the SONA, he remarked that,

“Infrastructure development has been flywheel of the engine of our economy and has yielded tremendous benefits for the country.”

The President announced that, Government has committed to contribute R100 billion into the Infrastructure Fund over a 10 year period and to use this to leverage financing from the private sector and development finance institutions.

The recent Budget Vote by Minister Mboweni was based on the reprioritising of our limited resources towards the President’s Infrastructure Fund.

Minister Mboweni announced that over R30 billion will be allocated to build new schools and maintain schooling infrastructure., and that an additional R2.8 billion will be added to the School Infrastructure Backlogs grant to replace pit latrines at over 2 400 schools.

The threats faced by the construction industry in particular, are threats that harm the development of the working poor and their children.

Last year, we attended the Presidential Investment Summit armed with the KZN Investment Booklet which sought to attract private investors in 25 bankable projects.

Sectors identified include agro-processing, film & media, manufacturing, logistics, medical, property development and tourism (including cruise tourism).

The total investment value of these projects is US$19.1 billion.

We expect to create 800 000 temporary jobs during construction and 410 000 permanent jobs.

The major construction projects  include:

  • Tinley Town Integrated Development (Beach Resort):   R20 billion investment, 9500 permanent jobs and 29 000 construction jobs. 
  • Nonoti Beach Resort – R2.5 billion investment:  1 000 direct jobs and permanent; approximately 2 000 construction jobs will be created.
  • Blythedale Beach Resort – R15 billion investment: 110 000 construction jobs and 15 000 permanent jobs.

To succeed, we need to work together and agree that there is no place for illegality in all the economic sectors in KwaZulu-Natal.

Our people look to all of us here as leaders to end the triple challenges of poverty, unemployment, and inequality.

As we implement these projects, we must all embrace the imperative of economic transformation by ensuring that we bring those who were previously at the margins of economic activity at the centre of the mainstream economy.

Let us Grow South Africa Together.

I thank you.

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