Remarks by Mr Jeff Radebe, Minister in the Presidency for Planning Monitoring and Evaluation and Chairperson of the National Planning Commission
Chairperson of the Foreign Correspondents Association, Mr Andrew Meldrum,
Representatives of various foreign media houses,
Senior Government officials and Ladies and gentlemen,
Good morning,
Thank you for the opportunity to address you this morning and to brief you on the work of the Ministry in the Presidency responsible for Planning, Monitoring and Evaluation.
Before I start by giving a context that has shaped the focus of our work in the recent while, let me first acknowledge Moody's global ratings agency's decision to retain the country's investment grade last week.
There had been genuine fears that we could fall into junk status - those fears still exist even now despite having safely crossed the Moody's bridge.
Moody's decision represents victory for us as government as we continue to put in work to fix our economy which has drastically slowed down.
Our economy which is currently at its slowest growth path since the 2008 world economic crisis, can and will be fixed. We all however need to continue pulling in the same direction to weather the storm.
While we welcome Moody’s decision, and we also remain positive that Standard & Poor’s and Fitch Global Ratings will also not lower the nation’s rating to a non-investment grade at the end of this year. The S&P and Fitch global ratings is another important bridge that we will have to cross as a country later in the year. Will we, once again, safely cross to the other side? I believe we will.
Even though most analysts predict the negative, losing our investment grade status is something that government will do its best to avert as this, would, among others, see a rise in the interest that the government will pay on its debt.
Despite the tough times that we've been facing recently as a country, we as government, together with labour and business have shown that we can jointly pull together in helping the country get out of this challenging situation which has seen us struggle to reduce our budget deficit.
If we continue to work together as it's been the case in recent times, we will avert any looming credit downgrade and bring our economy back on its two feet. Working with our counterparts in the private sector, government is providing leadership and rallying everyone, mainly ordinary citizens, to join in and pull in one direction with us.
Moody’s, the second-largest ratings agency in the world, despite having commented negatively, has however shown confidence that South Africa is on the right track and that our turning point is near. We will get to that turning point and show the world that South Africans are resilient. We've done it in the past and we are still capable of bouncing back stronger.
Context
The past 9 years have been very challenging for the global economy. What started as a sub-prime lending crisis in the United States of America soon became a full-blown economic crisis at a global scale that would shake the foundations of the global economy. The effects have lingered on for nearly a decade, leaving behind it untold destruction and misery.
The immediate impact of the global economic crisis in South Africa was a loss of nearly 1 million jobs, economic contraction for 3 quarters in 2009 (recession) and a protracted slowdown in growth for close to a decade now. Revenues were reduced which required greater prudency in the use of fiscal resources.
Commodity prices remain depressed and unemployment has increased in many parts of the world. Growth is considerably lower in our economy largely as a consequence of the global slowdown, but it also reflects structural weaknesses in our economy.
Government’s response
Government has been implementing various measures to respond to these challenges for all of the fourth administration which commenced in 2009 until 2014. In 2012, Government adopted the National Development Plan which is our roadmap towards 2030. The NDP also sets out proposals aimed at assisting the country navigate the economic difficulties by undertaking a number of reforms.
I. Medium Term Strategic framework
In 2014, the NDP was translated into the Medium Term Strategic Framework for the period 2014 – 2019 which coincides with the term of the current administration.
Government has adopted 14 outcomes which form the core of the MTSF. All of government’s attention is focusing on ensuring the achievement of these outcomes. For each outcome, there is a coordinating minister who is held accountable for its achievement.
The President has signed performance agreements with all ministers that set out what each minister is expected to deliver. This is in addition to the established practice of entering into performance agreements with directors-general and other senior managers in the public service.
The President also meets with ministers periodically to review performance against the signed performance agreements. On a quarterly basis a progress report on each outcome is presented to Cabinet. Department of Planning, Monitoring and Evaluation (DPME) plays a central role in the monitoring of the implementation of the MTSF and all other government commitments.
II. Nine-Point Plan
Government has developed and implemented a nine-point plan to respond to the economic slowdown and improve the performance of the South African economy.
As part of the nine-point plan government has introduced initiatives to support greater industrialisation which include (a) revising and strengthening industrial financing to boost employment and growth, (b) introducing the Black Industrialist programme to transform the manufacturing sector, and (c) promoting localisation through product designation.
We have also made progress with the development of Agri-Parks to stimulate agricultural development in 44 districts throughout the country.
III. Operation Phakisa
To demonstrate seriousness in ensuring that the NDP is implemented, government adopted the Operation Phakisa methodology adapted from the highly successful Big Fast Results implemented by the Malaysian Government.
The methodology entails government engaging in a focused, simultaneous and intense manner with all stakeholders in a sector to craft a vision and mechanisms for resolving blockages to the sector’s potential. Substantial progress has been made through the methodology in regard to South Africa’s oceans. Similarly, the methodology is being implemented in the Health, Education and Mining sectors.
Some of the achievements of Operation Phakisa are as follows:
- Investments amounting to about R17 billion in the Oceans Economy have been unlocked;
- Over 4 500 jobs have been created in the various projects of the Oceans Economy;
- Over R7 billion has been allocated by Transnet National Ports Authority to improve our ports;
- The health sector has been successful in creating 280 Ideal Clinics in 2015/16, within the group of 1 139 clinics identified for this financial year;
- In order to be declared an Ideal Clinic there are standards to be met. The number of clinics scoring over 70% has increased from 139 to 445. The number of clinics scoring less than 40% has decreased from 213 to 90 within the period of one year.
IIII. Infrastructure Investment
The key response by government to the global slowdown has been to maintain spending to support the economy through increased borrowing. A National Infrastructure Plan was adopted in 2012 and spending on infrastructure between 2009 and 2014 exceeded R1 trillion.
Areas that have received attention include energy, transport and water infrastructure, among others. One of the most successful infrastructure programmes is the expansion of the Renewable Energy Independent Power Producer Programme (REIPPP).
Private investment
As a result of government’s effort to create a favourable investment climate, the economy has experienced significant new investments for locomotive production by General Electric with 70% or R35bn of the contract value for the 1 064 locomotives allocated to local manufacturing by Original Equipment Manufacturers (OEM).
The Automotive Production and Development Programme (APDP) has led to new investments by Goodyear (R670 million), Volkswagen (R4.5billion), BMW (R6 billion); and Beijing Auto Works (R12 billion).
The Renewables Programme has unlocked private sector investment in electricity generation, from a zero base to R192 billion in four years.
National Planning Commisison
The work that we started in 2009 to improve government’s planning capacity is now truly entrenched. In September 2015, the President appointed new commissioners to serve on the National Planning Commission for a period of five years following the successful conclusion of the term of office of the first group of commissioners.
The previous commissioners developed the National Development Plan (NDP) that sets out in clear terms where we should be going and how to get there.
The mandate of the new Commission is to:
(a) promote and advance the implementation of the NDP across different sectors of society;
(b) undertake detailed planning in a selected number of sectors;
(c) conduct regular engagements with various sectors of society on all matters pertaining to the long-term development of the country;
(d) facilitate stakeholder engagements aimed at forging a social compact towards more effective implementation of the NDP;
(e) take a cross-cutting view, undertake research into long-term trends, analyse implementation of short- to medium-term plans; and
(f) contribute to the development of international partnerships and networks on national planning.
The commission will focus on the economy and help us formulate more effective ways of responding to the economic challenges. We need to support the recovery of the economy so that it can create more jobs for our people and generate resources to finance our development programmes.
Reduction of unemployment and inequality remain the key priorities which continue to the commission’s attention.
Medium Term Budget Policy Statement 2015
During the Medium Term Budget Policy Statement in 2015, then Minister of Finance, Nhlanhla Nene announced government’s commitment to fiscal consolidation and measures to stabilise debt as a share of GDP.
The central part was an approval by Cabinet of a spending ceiling linked to South Africa’s long-term economic growth projections. What this means is that increase in expenditure would have to be accompanied by corresponding revenue measures. Without economic growth, revenue will not increase. Without revenue growth, expenditure cannot increase.
These commitments were confirmed by the President during the 2016 State of the Nation Address and in the Budget Speech by the Minister of Finance. Government is fully committed to staying the course and implementing the measures it has taken to strengthen public finances. In this regard, Government has gone further to introduce additional measures to curb spending, which were also announced during the Budget Speech earlier this year.
Cabinet has mandated the DPME to work with National Treasury to identify underperforming programmes that should be discontinued in order to release resources for implementation of key NDP priorities. This work is underway as we speak and the two departments will report to Cabinet in July.
Evaluation
Government has also introduced the national evaluation system. This initiative is currently evaluating 54 priority policies and programmes covering around R90 billion of government expenditure. For example just two weeks ago Cabinet discussed three evaluations, on the Social Expanded Public Works Programme; on the Urban Settlements Development Grant; and on the Technology and Human Resources for Industry Programme. To illustrate the importance of these:
V. The social sector Expanded Public Works Programme (EPWP)
In phase one the social sector EPWP achieved 175 769 work opportunities and this was expanded to 866 246 work opportunities in phase two, well above the 750 000 target. The importance of the scheme was reinforced by the evaluation but mechanisms to improve coordination and efficiency were proposed.
VI. The Urban Settlements Development Grant (USDG)
This the main grant covering the wider human settlements mandate with about R10 billion funded, and is a core investment to support the upgrading of 750 000 households in informal settlements. The evaluation validated the intent of the grant and suggested ways to strengthen implementation.
VII. The Technology and Human Resources for Industry Programme (THRIP)
This programme is run by the Department of Trade and Industry and supports science, engineering and technology research collaborations focused on the technology needs of participating firms. The estimated total GDP directly and indirectly generated through THRIP is R508 million of which industry provided more than R300 million.
Furthermore, it is estimated that the Programme has supported 2 290 jobs in the economy (through direct and indirect effects) and it has been supporting 1 450 postgraduate students per financial year. The evaluation makes a number of recommendations as to how to strengthen the Programme.
We are aiming to get at least a 10% improvement in all the policies and programmes being evaluated. This would represent a R9 billion return from the evaluation portfolio. The evaluation system is also spreading now to provincial and departmental levels. Seven of 9 provinces now have provincial evaluation plans, and the system is gradually being institutionalised across government.
Working with the private sector
The private sector is a significant sector in our economy, accounting for roughly 80 per cent of economic activity and employment. Government’s response to the economic challenges would be incomplete without the participation of the private sector. A number of measures have been taken to improve collaboration between government and the private sector over time.
From 2013 onwards, the President established a number of Presidential Working Groups one of which is with the private sector. This working group is supported by a number of task teams that are working through various challenges to find solutions.
Earlier this year, following a meeting with almost 100 chief executive officers of large companies in South Africa a task team jointly led by Minister of Finance and Mr Jabu Mabuza of Business Unity South Africa to address specific matters needed to support accelerated recovery was formed. This task team is doing very well and will be reporting back to the President later today.
Government and the private sector are collaborating on specific policy delivery areas such as the National Education Collaboration Trust (NECT) which is a joint initiative of government, business and labour.
The recently announced initiative between Home Affairs and major banks which will enable citizens to apply for smart ID cards and passports online is another example of collaboration to overcome challenges in policy implementation. Negotiations are also at an advanced stage in NEDLAC to agree on the national minimum wage for South Africa.
The working together of various parties is beginning to show results. The IMF indicated last week on concluding its Article IV consultations that “A muted recovery is envisaged from 2017”. Until now, it had become usual to expect a lowering of the South African economy growth forecast by the IMF, but even they are recognising prospects for a recovery next year
So where to from here?
The past few months have indicated that if we work together we can achieve great things. The challenge for all of us as leaders across sectors is to maintain the focus on what matters, address the challenges, one at a time and lift our economy out if its current slump.
We are a couple of months away from a local government election that many of our critics believe may not be too forgiving to my party, the ANC. But on behalf of my ANC-led government, I would like you to know that we, as the ANC, are not quite so negative.
While we do not take the support of our people for granted we believe that as we address the challenges and continue to implement programmes that improve their lives they will once again entrust us with the responsibility of providing governance at local government level.
Conclusion
I hope that this briefing gives you a sense of the measures we have in place to improve how our government works, both for the benefit of our people and our economy. But none of it will be possible without the participation of all our people and collaboration and partnerships across sectors of society.
Our work is about enhancing the capacity of the state to deliver, so that the promise of our constitution becomes a lived reality of all our people.
Thank you.
