Minister Ebrahim Patel: Economic Development Dept Budget Vote 2017/18

25 May 2017

Budget Vote Speech Minister of Economic Development, Ebrahim Patel, 25 May 2017, National Assembly.

House Chairperson
Honourable Members
Judge Presidents of the Competition Appeal and Labour Appeal Courts
Workers, entrepreneurs and economic students in the public gallery
Fellow South Africans at home

It is my pleasure with Deputy Minister Masuku to table the Budget for Economic Development on Africa Day today.

The global and domestic economic context shapes the work of the Department and agencies that make up the economic development portfolio.

In its latest World Economic Outlook, the IMF projects global growth at 3,5% for this year and it devotes a detailed discussion on the decline in worker’s share of national incomes across the world.

Political economy is taking centre-stage, with the rise of economic populism in parts of the developed world, the backlash against globalisation, the continued rise of China and the impact of the 4th industrial revolution, all which very directly affect the South African economy and jobs. We need a coherent strategy to deal with them.

Our economy is trade exposed, with exports accounting for almost R1 in every R3 of the wealth we create annually.

Technological innovation, dubbed the Fourth Industrial Revolution, is reshaping the future of work, industrial production and social interaction.  The rise of robotics and artificial intelligence will have a profound impact on South Africa too.

At a domestic level, our rate of economic growth and job creation need to be enhanced.

Last year the economy grew by 0,3% and is projected to grow by 1% this year. The total income produced by the economy every year is now R 4,3 trillion. Net foreign direct investment worth R33bn flowed into South Africa, a growth of 50%.

But employment grew by only 51 000 over the past 12 months.

These modest gains are well below what South Africa needs to address the challenges of poverty, inequality and unemployment. But they were gains, made at a difficult time, when we faced a significant drought, weak economic performance in the rest of the continent, recessions in Nigeria, Russia and Brazil and sharply slower growth on the African continent. During 2016 we worked hard with business and labour to avoid a recession, and we succeeded.

Taking the long view, since the adoption of the New Growth Path in October 2010, the economy has created 2,4 million new jobs and total employment rose from 13,7 million to 16,1 million people.

I am pleased to note that the labour-intensity of growth improved: jobs grew faster than the economy as a whole, with employment growth of 1,5% for each 1% of GDP growth.

We need to build on this to deepen a jobs-rich growth path.

However, prospects in the year ahead for GDP growth and jobs are uncertain as a result of the recent ratings down-grade and slower growth on the rest of the continent.

The ratings downgrade is bad news for the economy and jobs.

It makes our borrowing more expensive and will impact on:

  • The poor
  • Workers
  • The urban middle-class.

Owners of capital will expect a higher return to compensate for the perceived higher risk. It will cost the economy many billions of rands in additional costs and lost investment opportunities.

It is crucial that we stave off any further downgrades and regain our investment-grade as a country.

We are vulnerable because we must continue to rely on global capital markets to fund some of the difference between our income and spending. In the long run we must address this by improving our domestic savings rate.

The roadmap back to investment grade and crucially, to address the needs of our people requires that we develop a new “national deal”that includes the following:

  • One, develop a credible growth story, that places emphasis on sectors and market-opportunities with high growth and job-creation potential, attracts investment and ensures effective implementation of the nine-point plan.
  • Two, transform the economy to make it more inclusive, bringing black South Africans, young people, the rural poor and the urban unemployed into the economy with speeded-up actions against high levels of economic concentration, inequality, social exclusion and joblessness
  • Three, ensure integrity in governance and decision-making, manage our fiscal policies responsibly and sustainably, to inspire confidence among our people
  • Four, deepen partnerships, with greater efforts to pursue a social compact between government, business and labour.

These actions will increase overall confidence in the economy and are the key to improving investment and demand and growth and inclusivity.

Honourable members, before elaborating on aspects of this roadmap, I want to highlight a few areas of progress made in the economic development portfolio.

The Industrial Development Corporation, Africa’s largest industrial bank showed strong performance in tough market conditions.

It facilitated R47 billion of fresh investment, of which R15,3 billion is from its own funds and the rest from private investor partners. This is the largest yet in its history.

IDC approvals to 77 Black industrialists totalled R4,7 billion, a growth of 60% on the previous year.

Black-empowered companies approvals totalled R10,8* billion for the year.

Funding for youth has almost doubled, to R2,4 billion.

Funding for women-empowered businesses grew sharply by 178% to R3,2 billion.

IDC investment will create or save 20 877 jobs.

This is solid, practical radical transformation.

Honourable Members

The competition authorities had one of their busiest and most successful years.

Last year, the competition authorities and government worked together on opening up markets and placing development at the top of their agenda.

Through these efforts,

  • some 58 000 workers have been covered by job-protection commitments and 6 500* new jobs will be created through merger proceedings;
  • R4,8 billion has been raised to support small business development and job-creation through competition-linked measures and
  • 120 000 spaza shops and retail outlets will have the freedom to open a part of their sponsored fridge space to products that compete with the near-monopoly large suppliers.

Appletiser now has significant black shareholding and has already been buying more local grapes for their Grapetiser product. 

We are tackling cartels and price-fixing in a number of product markets. Last year the authorities fined Arcellor Mittal R1,5 billion for its abuse of dominance in the steel market.

We are busy with market Inquiries that will help to lift the lid off practices in private healthcare, the grocery retail sector, public transport and the liquid petroleum industry, whose report has been tabled in parliament.

We are developing new models of empowerment. The construction industry, through the seven largest companies, has embarked on a major transformation programme, with four major companies selling a large block of their shares to black South Africans. In all, the deal will place construction turnover of more than R130bn in the hands of black South Africans over the next seven years.

Turning to trade, Africa remains the key to our future progress.

On Africa Day we note that the continent accounts for R320 bn worth of exports of SA-made goods, supporting about 250 000 direct jobs in our economy and about 900 000 jobs in total. We must deepen economic relations with the rest of the continent, in trade, infrastructure development and investment.

Africa’s relationship with China will need to be managed carefully.

China is now Africa’s largest economic partner country. A new research report by McKinsey ranks China as

  • Africa’s largest trade partner [with more than $188 billion in goods trade],
  • the biggest investor in infrastructure [at $21 billion],
  • the fastest growing source of FDI [rising by 25% per annum with FDI stock of $49billion, placing China at number four on the continent}; and
  • the 3rd biggest aid donor [with $6billion in grants].

It estimates there are more than 10 000 Chinese-owned firms on the continent, ranging from small family-owned shops to large multi-national corporations. 

Our job as government is to ensure we protect South Africa’s national interest and sovereignty, that Chinese investment and market access is directed at creating local jobs, ensuring technology transfers and local supply-chains are built and exporting more manufactured goods and value-added products to China and global markets.

In other words, Africa is not only a market; it should be developed into a world-class manufacturing centre. 

One example of our local relationship with China is the agreement to invest R4,3 billion in the setting up of a new car-making plant, involving the Beijing Auto Industrial Corporation and the IDC. We expect construction to start by July.

Infrastructure

Investment in infrastructure has grown in the past year, with R300bn in investment in the National Infrastructure Plan by the public and private sector. This is more than R1 billion per working day spent to improve the foundations of the economy and service-delivery to our people.

The Presidential Infrastructure Coordinating Commission, whose technical work is done by the Department and the IDC, monitored build programmes across the state.

It reported progress for the year including:

  • New energy generation that will add additional energy to the grid equal to the total electricity consumption of a city double the size of Joburg
  • More than a million South Africans getting electricity for the first time last year
  • 13 000 new taxis assembled in SA
  • 90 000 new houses build under the RDP housing programme
  • Accommodation with 3 700 new beds for university students

together with new schools, roads, bus lanes, rail lines, clinics, water pipelines and fibre-optic infrastructure built or refurbished.

However, we still have many challenges in the economy and I spoke earlier about the need for a roadmap to address these.

As South Africans, working together as investors, workers, communities and their democratic government, we can turn the national mood away from despair to one of hope, optimism and action. This needs a capable, honest state and social partners who each bring important parts of what is needed for a broader deal involving all South African patriots.

The foundation of this is the South African constitution. It is an empowering framework, not a shoddy compromise as some would have it. The constitution is not a constraint to radical and bold actions. In fact, a purposive implementation of the constitutional vision and a bold use of the enormous legal and fiscal toolkit that we have available in the state, can truly drive the transformation of our society.

So what should we do?

First, we must ignite the growth potential of the economy, increase job creation and deepen the impact of industrial funding

In the year ahead, the IDC will target new investments of between R15bn and R18bn and bring in a further R30bn in private sector investment.

Infrastructure spending in the next year is expected to be R330 billion.

A R1,5 billion Steel Competitiveness Fund will be set up, with seed funding of R95 million in the EDD Budget over the next three years, and additional funds by the IDC, to provide support to smaller competitors and downstream players. The Fund will be available to foundries, valve and pump manufacturers, steel fabricators and capital equipment manufacturers including black industrialists, to help the core of our manufacturing industry to survive difficult global economic conditions. 

SCAW Metals will have new private sector equity partners, including foreign investors and black South African investors.

To address obstacles to investment projects, the Department will target 22 investment and infrastructure projects it will help to unblock.

To enforce our trade policies, ITAC will do 1 000 inspections of import and export shipments, sites or documentation.

Honourable Members

The Economist newspaper recently ran a cover story that describes data as the world’s most valuable resource, being ‘to this century what oil was to the last one: a driver of growth and change’.

Yet the growth of this data-driven economy is constrained by high data costs, which affect users of cell-phones and laptops and businesses who require high volumes of data. To promote the new data-driven economy and address high data costs, and following discussion with Minister Cwele, I will request the Competition Commission to conduct a market Inquiry into this sector and to work with other regulators to establish the facts, identify measures to reduce data costs and make recommendations to government.

Our 2nd focus is to make the economy more inclusive and transform it.

Inclusion requires changes to the rate of job-creation, entrepreneurial opportunities for young people and socio-economic transformation that is bold, radical and brings millions of people into ownership and economic inclusion.

It means faster growth, more inclusive growth and jobs-rich growth.

Greater inclusion, like reducing unemployment and addressing poverty, is itself a source of growth, as more citizens enter markets as consumers and savers.

In the year ahead, we will explore better models for broad ownership in the economy.

We must build our own economic ‘co-determination model’ in which workers and investors cooperate in growing the economy, creating more jobs and ensuring that the wealth generated in the economy is more fairly and equitably distributed. Among the models to look at is greater opportunities for workers to participate as shareholders in companies and having worker representatives on company boards.

High levels of economic concentration and racially-skewed ownership profiles stunt economic growth, prevent entry of new players, reduce consumer choice, limit the levels of innovation and dynamism in the economy and feed a growing resentment among black South Africans of the failure to realise the vision of the constitution.

To address this, we will be finalising proposed changes to the Competition Act as announced during SONA.  We released a framework earlier today and will work with a Panel of experts to complete recommendations within six weeks.

To deepen our information base on the extent of transformation, we will work with other departments to quantify the extent of black citizen participation in the economy.

To improve actions against collusion and corrupt corporate practices, the Commission will investigate about 100 cases of cartels behaviour in different sectors of the economy, including food, infrastructure, chemicals, financial services and car-parts.

To improve resources for the competition authorities, we will gazette an adjustment to the filing fees for mergers.

To improve African regional integration, the economic development agencies will explore ways of deepening industrialisation on the continent and we will work with Minister Rob Davies on the trade integration and with Minister Radebe on infrastructure development on the continent.

To strengthen job creation, the IDC will target creating and saving between 24 000 and 30 000 jobs this year.

To bring more black South Africans in the productive economy and contribute to bold and radical socio-economic transformation, the IDC will target R7bn for black industrialists and R2,5bn for women and youth-empowered companies this year.

More than R4 billion will be put into localisation initiatives.

Our 3rd focus is to address the rapid levels of urbanisation

Urbanisation is a potentially transformative development for the economy, an opportunity for growth and a driver for infrastructure investment

Every year, roughly 400 000 new households are added to the nation’s cities. In the short-term, this places enormous pressures on cities and large towns, to improve water, electricity, housing and schools and of course to create jobs to absorb the new entrants to our cities. In the long-run, this can energise the economy and deepen the level of development.

This year, through the PICC, we will focus on a country-response to urbanisation. This brings together work being done in a number of departments and cities. A number of actions will be taken to align planning, infrastructure provision, industrial development and human settlements to the rapid urban population growth. We will bring this presentation to Parliament and keep Members informed on progress with this exciting and important work being undertaken across government.

We are building a new Technical Project Management Unit for the PICC, with the first two engineers appointed and the first dedicated R10 million provided for in this budget.

Our 4th focus must be to ensure a more effective state, improved governance and deeper partnerships

The National Development Plan identified the need for a capable developmental state as a centre-piece to achieve higher economic growth and deeper levels of social equity. We face the growing perception and reality of corruption and attempts to capture public institutions for the benefit of private individuals and families.

Public power in a constitutional democracy can only be effectively exercised for development through deeper levels of trust, collaboration and partnership. 

When there are real and legitimate concerns about corruption and state capture, about the diversion of the people’s money to improperly benefit individuals, our ability to forge a partnership between the state and the rest of society is seriously undermined.

Cabinet recognises that State-owned companies will have to improve governance and economic performance.

One of the institutions responsible to my portfolio is the Industrial Development Corporation. It is responsible for the approval of large sums of money and must always be subject to high levels of probity in its decisions. The IDC has extensive systems of corporate governance in place and its Board and management places a high priority on integrity in decision-making. To further enhance transparency and accountability, the IDC will from June this year, publish details of all the investors to whom it provides industrial funding.

As we build real, deep partnerships in the country, business will need to accept the need to work differently, create more jobs and invest more. Organised labour will be asked to bring resources of union investment companies and the sweat equity of workers. Communities can bring the creative spirit of youth. Government must bring an effective and capable machinery to the compact. In this way we can build confidence in the future of the country. And we can build on the number of successful efforts to forge unity.

Conclusion

Honourable Member

The Economic Development Budget of R797 million can make a major difference in the lives of ordinary people. It unlocks and guides about R20 billion

Many, many thousands of South Africans do in fact benefit from the work of the Economic Development entities. We will release a social and jobs report later this year which provides more information of the South Africans who are empowered, supported and partnered by government.

In the year ahead, we will step up efforts, working with colleagues in the Economic Cluster,  to radically change the lives of our people; to ensure deep and meaningful socio-economic transformation.

I wish to thank the Deputy Minister, heads of agencies and staff for the work done to get South Africa working.

It is now my pleasure to table the Economic Development Budget before this august house.

A note to accompany the Budget Speech

Overview

2016 was a challenging year for economic development globally and domestically but significant progress was also registered in South Africa. The economy avoided going into a recession in part through the collective action of business, labour and communities working with government, though growth remained very modest.

It was a year when rating agencies were focussing on South Africa, with a downgrade in April 2017 – after the end of the financial year.

The Economic Development Department played a major role in ensuring a co-ordinated infrastructure investment programme and in expanding the levels of development finance in the economy, rallying stakeholders around certain policy and programmes that will have major impact on our economy, as well as ensuring that government responds in an informed and more aligned manner across the three spheres to the challenges of the economy.

A mid-term review of the New Growth Path jobs drivers was completed for Parliament’s Portfolio Committee on Economic Development, and the latest data shows that more than 2,4 million new jobs had been created in the period since the adoption of the NGP in 2010.

Key highlights in the work of the Ministry included:

  • the innovative and extensive public interest conditions attached to a number of mergers including AB InBev’s takeover of SAB Miller, Coca-Cola and Edcon (Part 1)
  • the actions in the steel industry including the tough competition settlement with Arcelor Mittal and the reparation agreement with the seven largest construction companies (Part 2)
  • the expansion of investment by the Industrial Development Corporation and the agreement to co-invest in a new auto plant in Nelson Mandela Bay  (Part 3) and
  • the increased investment in the National Infrastructure Plan, projected at R987 billion over the next three years (Part 4)

Details of these are found in attached specific short briefing notes.

Economic transformation was a key theme in 2016 and we made significant strides in opening the economy to new black-owned companies and expanding levels of youth entrepreneurship.

The Ministry of Economic Development is responsible for the work of the Economic Development Department (EDD), the Industrial Development Corporation (IDC), the International Trade Administration Commission (ITAC), the Competition Commission, the Competition Tribunal and the work of the Secretariat and Technical Unit of the Presidential Infrastructure Coordinating Commission (PICC). Highlights of the work of the Ministry and its agencies are reported below.

Impact of the work of economic development

87 187 positive jobs impact

A total of 61 250 jobs were covered by job-protection commitments or investments directed at saving jobs and an additional 25 937 jobs (minimum) are expected to be created as a result of the transactions involving the IDC, Competition Commission, ITAC and EDD.

Development funding and fines: R4.8 billion

R4.8 billion was committed by the companies listed below in development spending or penalties (excluding the value of the BEE commitments)

  • Coca-Cola:  R800 million commitment
  • AB Inbev:  R1 billion commitment
  • Construction Cartel:  R1.5 billion payment (excluding the previous fine of R1.4 billion)
  • AMSA: R1.5 billion fine

BEE transaction value facilitated: R19 billion

  • IDC approvals to BEE empowered-companies:  R10.1 billion
  • BEE component of Coca-Cola merger:  R2 billion
  • Construction industry: value of transaction over seven years in ownership equity:  R5 billion
  • AMSA BEE partnership: R1.8 billion

Opening the market

More than 120 000 small spaza shops and taverns will be given the right to stock and display products from competitor brewers and soft-drink bottlers, opening the market for beverages in the boldest way yet in SA retail history

Briefing note on competition interventions and settlements

During 2016, the Ministry of Economic Development concluded settlements with AB InBev, CCBA (Coca-Cola Bottling Africa), Edcon, Clicks, Arcelor Mittal and seven construction companies. These are major transactions that introduced either new public interest obligations on mergers, provided for funding for developmental projects or supported actions by the competition authorities against collusion in specific industries.

In addition, the Ministry facilitated the introduction from 1 May 2016, of new criminalisation provisions against collusion and cartel conduct in the economy, with stiff jail sentences of up to 10 years.

Some of the key transactions and settlements concluded in 2016 included:

AB InBev’s purchase of SAB Miller, which had the following, public interest commitments:

  • R1 billion to promote new employment outside its core operations, including
    • R610 million facility to support small, emerging farmers through which  800 new farmers will be developed, with total employment gain of 2 600 workers
    • Support for entrepreneurship and social programmes in South Africa -  turning SA from a net importer to a net exporter of beer inputs
  • Retention of the current 6 000 jobs of the workforce for at least five years and providing protection against retrenchment
  • Opening up competition by craft brewers through granting them access to 10% of fridge space in taverns
  • Developing low-alcohol and no-alcohol choices for the SA market
  • Committing to the location of the African headquarters in South Africa.

Locations for three model farm programmes have been established and at least one model farm will be completed in 2017. A programme for supplier development is being established targeting micro-enterprises, small/medium enterprises as well as black industrialists. A dedicated incubation centre will also be established in Bryanston.  The company is also introducing new learnerships and scholarships in engineering and agriculture in order to contribute to sustainable livelihoods in South Africa.

Coca-Cola merged three bottling operations, and after’s EDD’s engagement included commitments to:

  • Retain the current 7 500 jobs for a three year period and provide for protection against retrenchments for specified categories of staff
  • Provide R800 million funding to create new jobs in its value-chains, of which a R400 million facility will support small, emerging farmers as well as packaging companies, and a further R400 million is available to support the opening of new spaza shops and retail outlets
  • Set aside 20% of the equity in Appetizer and 20% equity in Coca-Cola Beverages Africa for black South Africans
  • Open up 10% of the fridge-space in coolers and display cabinets owned or financed by Coca-Cola in 117 000 spaza-shops and small retail outlets, to facilitate access for smaller and rival soft-drink bottlers
  • Deepen localisation of its local supply-chain including commitments to retain the production base of Appetizer in South Africa.

Black Economic Empowerment

Since the merger, 17.5% of Appetizer has been sold to African Pioneer Group (APG) and a black entrepreneur will take up 4% shares to realise a total BEE share of 21.5%.

Localisation

In 2015 Coca-Cola Beverages South Africa (CCBSA) was sourcing all fruit locally except for grape juice concentrate. Through implementing the agreement to further develop and support local farmers in the Upington Region, and partnering with Orange Rive Cellars, CCBSA has increased its local sourcing of grape juice concentrate from 9% to 43%.

CCBSA is in the process of identifying additional local farmers to develop, in order to meet the target of 80% local sourcing by 2020. This is equivalent, in today’s terms, to sourcing approximately 1.8 million litres of Grape Juice Concentrate, which requires 530 ha of planted grapes. Every 2 ha planted has the potential to employ 1 person.

The Edcon Group notified the Competition Commission of a merger, to address amongst others, conversion of debt to equity and a transfer of ownership of the company to its creditors. After Ministry engaged the Edcon Group, the company included commitments to:

  • Support the local clothing, footwear and textile industry
  • Retain 43 630 current jobs in the company subject to market conditions
  • Grow the number of new jobs in its retail and manufacturing operations by 2 000 workers.

EDD has monitored the implementation of commitments. To date Edcon has:

  • Employed an additional 2 226 people (Edgars 800; Jet 1 232 and Speciality 194)
  • Replaced imports with the following locally manufactured items:
    • Footwear - 930 000 units
    • Hosiery - 278 000 units
    • Intimate wear - 109 000 units

Seven construction companies (Murray & Roberts, Aveng, WBHO, Group Five, Steffanutti Stocks, Raubex and Basil Read) committed to promote transformation in the construction sector, when they signed an agreement with government in October 2016. This Settlement Agreement has 3 components:

  • Financial contributions by the companies of R1.5 billion to development projects in addition to a R1,4 billion penalty for past collusion
  • Deep transformation through the sale of equity or providing support for the development of black construction companies that will place many billions of rands in share-value or contracts in the hands of black South Africans
  • Integrity commitments by the company CEOs to take all steps to avoid collusion and corruption in their dealings with the state, their competitors and their customers and to partner with government in exposing all forms of corruption and tender irregularities.

This agreement will help to turn a new page of partnership between major players in the industry found guilty of collusion on the one hand, and government and the society at large on the other. Details of the transformation plans have been publicly announced by all of the companies.

Four of the companies have opted to sell equity to black South Africans and three are in discussion or have concluded agreements with emerging construction partner-companies to increase the turnover of these black-owned companies within seven years.

The companies have paid their first tranche of R117 million in terms of the Settlement Agreement into the National Revenue Fund. These monies will be appropriated each year to a Trust to support bursaries for black students studying engineering, quantity surveying and building science; bursaries for black artisans; maths and science education in public schools; social development projects such as rural bridges and schools; building capacity in the state towards public infrastructure; and enterprise development programmes for small, black owned construction firms.

ArcelorMittal, which was fined R1.5 billion by the Competition Tribunal during 2016, was required to:

  • Commit to fresh capital spending of R4.6 billion to upgrade its plant and equipment in South Africa
  • Curb price increases through limiting its earnings before profit and tax to 10%
  • Limit retrenchments in its operations.

Progress since this agreement: ArcelorMittal reported that R1 billion has been invested in capital upgrades.

Support to the steel sector

During 2016 the Ministry and EDD-agencies focussed on a range of measures to retain steel manufacturing in South Africa.  A Steel Task-team developed a coordinated set of measures to address the impact of the global glut of steel on the local industry, the past collusive practices and the need to have a secure supply of steel. These included trade, competition and investment measures. A Pricing Committee was also set up with representatives across the value-chain to monitor steel pricing and Arcelor Mittal’s adherence to a range of reciprocal commitments it made in relation to tariff support including increased investment, retention of jobs and pricing commitments.

In reality, the sector is quite diverse consisting of a number of sub-sectors such as foundries, fabricators and component manufacturers each with their own sub-industries and market environments. Structural factors such as a lack of fixed investment in modern plant and equipment, under-investment in skills and R&D appear to be common elements in the industry’s decline across sub-sectors. The current cyclical downturn characterised by weak export demand and stiff import competition in a domestic environment of rising costs has only served to accelerate the sector’s troubles.

To address this, EDD has established a Downstream Steel Industry Competitiveness Fund to assist qualifying enterprises in the downstream steel sectors to improve their competitiveness. The Fund will be applied to finance the following initiatives, which directly address competitiveness issues:

  • Modernisation of plant machinery and equipment;
  • Upgrade of plant machinery and equipment to meet quality assurance requirements;
  • Capacity expansion of existing plants;
  • Process improvements for cost efficiencies and productivity and to assist with plant optimisation;
  • Working capital requirements or revolving facility;
  • Assist firms to achieve appropriate industry quality certification and standards including environmental standards;
  • Establishment of start-up enterprises; and
  • Development and testing of prototypes, as well as the testing and certification of new products (for example by SABS or international certification where appropriate).

The IDC will leverage the total R95 million allocation from EDD over 3 years, to create a R1.5 billion Fund, in the form of an interest rate subsidy to normal IDC risk pricing, aimed at improving downstream competitiveness for qualifying firms in the Metals and Engineering sub-sectors.

The Fund will selectively target manufacturing firms in the steel-intensive downstream sectors:

  • Foundry industries;
  • Fabrication sectors (focused on pressure vessels, pipes and pipe fittings sub-sectors; structural steel and any fabrication work in support of steel intensive designated sectors/products);
  • Parts and component manufacturers of steel-intensive products;
  • Valve and pump manufacturers;
  • Machining plants;
  • Capital equipment industries particularly steel intensive rail and rolling stock components; and
  • Any other steel-intensive business.

The Fund will exclude the following upstream steel sub-sectors, as well as sub-sectors where there are already substantial government support / incentive programmes in place:

  • Integrated steel mills
  • Component manufacturers that qualify for other incentives
  • Large multinational OEMs and assemblers and their subsidiaries already benefiting from a government support programme, e.g. APDP.

Industrial development and funding

The Industrial Development Corporation last year approved R15.3 billion in new investment, the largest sum in its 76-year history and 6% higher than the preceding year.

This included R4.7 billion in transactions involving 77 black industrialists, so that we broaden participation in the economy.

A sum of R2.3 billion was approved for youth-empowered enterprises, having at least 25% youth ownership, representing 142% increase from the previous year, as part of implementing the Youth Employment Accord.

A sum of R3.2 billion was approved for women-owned enterprises, which is an increase of 178% on the previous year, to tap the enterprise of women to help build the economy.

The IDC is driving new investment and commitments to improve the competitiveness of South African companies, with its initiatives in the past financial year saving and creating 20 877 jobs.

In addition to these outcomes, during 2016, the IDC partnered with the Beijing Automotive Industrial Corporation (BAIC) to set up a new R4.3 billion auto-plant in Nelson Mandela Bay that in the first phase will produce up to 50 000 vehicles for the domestic and African market, with planned employment of 2 500 workers during the construction phase and 800 permanent production workers in the plant.

Infrastructure development

The Ministry and Department provided the technical backbone for the work of the PICC during 2016. Some of the highlights of this work include the following:

  • Supporting the expansion of new infrastructure projects and funding, which is expected to rise by more than R1 trillion over the next three years, from R865 billion in the past MTEF to the new R947 billion announced by the Minister of Finance during the National Budget in February 2017
  • Working with National Treasury to develop a financing instrument for all public infrastructure which will require fiscal support
  • Technical work to support the development of a new multi-year budgeting and appropriations framework for infrastructure that would allow for better long-term planning, smoother phasing of construction works in a project, and better value-for-money through infrastructure spending
  • Currently investing more than R1.2 billion per day in  infrastructure which was used for:

Education-build completed in the past year includes:

  • 82 new and refurbished schools
  • 3 693 student beds at universities (excluding private sector)
  • 2 new TVET campuses and 2 new universities under construction

Energy-build completed in the past year includes:

  • 4 562MW completed which includes a further unit of Medupi providing 794MW, by 3 April 2017, resulting in 2 100MW usable energy, enough to supply electricity to a metro, equivalent to twice the size of Joburg which includes Alexandra and Soweto.
  • 585 km of new transmission lines were laid
  • 1 957 solar water heaters were installed by Joburg, bringing the total installed SWH to 504 060
  • 318 898 households connected to the grid.  According to StatsSA’s 2016-Community Survey more than 15 million households now have access to electricity

Transport logistics and related rolling stock, completed in the past year includes:

  • 29 360km of roads across the country were maintenance and 332km of new road capacity was added
  • 46km of new bus way lanes was completed in Johannesburg, eThekwini and  Cape Town to support the Bus Rapid Transport systems
  • 205 new buses were locally manufactured using 80% local content, bringing the total number of buses manufactured to 612 since 2009
  • 13 330 new taxis were locally manufactured, bringing the total number of manufactured taxis to 57 910 since 2011
  • 100 new wagons were locally manufactured, bringing the total number of manufactured wagons to 16 507 since 2009
  • 185 new locomotives were assembled this year bringing the total number of locally assembled locomotives to 770 since 2009
  • 303km of rail was refurbished and we are currently completing 68km of new rail between Ermelo and Majuba power station

Human settlements-build completed in the past year includes:

  • 89 009 new houses were built bringing the total built since 1994 to 2.6 million

Health-build completed in the past year includes:

  • 35 new clinics were built while 13 clinic and 41 hospitals were upgraded and revitalised

Water and sanitation-build completed in the past year includes:

  • 15 km of new water pipelines was completed which can deliver 60 million cubic litres of water per annum
  • 9 700 toilets were built, contributing towards eradicating the bucket system in formal settlements

Communication-build completed in the past year includes:

  • additional “on-air” WiFi spots bringing the total to almost 12 000 across the country
  • Increasing smart phone penetration to about 50%
  • 24 new MeerKAT antennae were completed bringing the total to 45
  • Identifying new sources of funding for infrastructure, including technical work on the approval of the $180 million loan by the BRICS New Development Bank for transmission lines
  • Setting up a new Infrastructure Project Management Technical Unit, with funding secured from 1 April 2017.