2006/07
29 March 2006
Madam Speaker
Cabinet Ministers and Deputy Ministers
Members of the National Assembly
MECs and Heads of Departments (HODs)
Officials of the Department Trade and Industry (dti) and Council of Trade and
Industry Institutions (COTII)
Leaders of organised Business and Labour
Distinguished guests
Ladies and gentlemen
The dtiâs role in driving forward economic growth
Madam Speaker, by all accounts our economic performance is impressive and is
a source of inspiration for our nation and reinforces our belief that we can
achieve our ideals of a better life for all. Gross Domestic Products (GDP)
growth was close to five percent, business and consumer confidence reached new
highs, job creation is starting to pick-up and investment inflows are steadily
increasing.
However, Madam Speaker, to sustain this performance and improve on it we
must pay attention to the conditions and structural changes that are necessary
to support current and future economic growth. The fact is the current growth
is based on the current commodity boom as well as positive consumer sentiment,
both of which can be transitory. We are now at that critical juncture that
requires us to take key decisions to prepare the ground for quality growth that
is sustainable.
The dti has already been active on a number of fronts in regard to this
challenge. The dti supports enterprises; dispenses financial support and
incentives; continually seeks to promote competitiveness of our industries;
promotes empowerment for both black people and women; undertakes supportive
regulatory initiatives such as in respect of consumer protection and corporate
law and seeks to influence the global trading environment for our enterprises
through the work we do at the World Trade Organisation (WTO) as well as through
a range of bilateral trade agreements.
Madam Speaker, we appreciate fully that the activities of the dti will need
to be strengthened, broadened and properly resourced in order to more
effectively fulfil its mandate in realising a better life for all. Indeed
considerable challenges remain, not least continuing unemployment and
underdevelopment. Thus in the year ahead, the focus will be on unlocking the
potential thus far demonstrated by this economy by addressing some of the main
constraints to growth. In this regard the dti has been central in the process
of formulating the Accelerated and Shared Growth Initiative (AsgiSA), which has
been championed by the Deputy President.
As is now well known, AsgiSA is a growth strategy involving targeted
interventions to overcome key constraints in the macro-economic environment, in
infrastructure and logistics provision, in skilled labour availability, in the
competitive environment and cost structure of the economy as well as in the
regulatory environment and in the institutional capacity of government to
deliver.
In the immediate period ahead the dti will work with the rest of government
in overcoming these challenges.
More specifically the dti will focus on those dimensions of AsgiSA that deal
with industrial development, sector strategies, enterprise development as well
as second economy initiatives more broadly. We will also support AsgiSA
initiatives on skills and public investment including through our role as the
co-ordinating Ministry and Department in the Economic and Investment
Cluster.
Our work for 2006/07 will be guided by five integrated, strategic objectives
underpinned by a number of key projects and initiatives.
First, promoting co-ordinated implementation of our commitments to AsgiSA
including the contribution that the dtiâs agencies can make in this regard.
Second, promoting direct investment and growth in the industrial and
services economy.
Thirdly, promoting broader participation, equity and redress in our
economy.
Fourth, raising the level of exports and promoting equitable global
trade.
Finally contributing towards the development and regional integration of
Africa within the New Partnership for Africaâs Development (NEPAD)
framework.
It is clear from these objectives, Madam Speaker, that the mandate of the
dti is very broad indeed and the Department has an important contribution to
make to the work of growing the economy. An industrial policy framework for
accelerated and shared growth
At this point, Madam Speaker I would like to outline what the work of the
dti will be in fulfilment of our mandate, as well as in support of AsgiSA. This
year will see the completion of the process of developing an overarching
Industrial Policy Framework harnessing existing capacity of our industries and
unlocking their potential and covering manufacturing, selected primary and
services sectors. We believe that a robust Industrial Policy is necessary to
fast-track industrial development. In this regard our human and financial
resources will be more focused on a narrower range of high impact sectors.
Increased financing for industrial development including improved incentives
will be part of our focus going forward.
Within this broad industrial policy framework we will also accelerate the
work we have been doing in respect of key priority sectors through the
Customised Sector Programmes (CSPs). These will be strengthened to identify and
act upon the constraints to growth and employment. The process has involved
extensive inputs and consultations over recent months. Deputy Minister Davies
will expand on this theme on his input.
Madam Speaker, included in our work on the industrial policy framework is a
focus on services and regional industrial development. We see services as a
crucial part of our growth and employment creation efforts. Services currently
represent almost 70% of South Africaâs employment and output. Uneven
development of our economy remains a challenge, hence we want to give greater
emphasis to the generation of industrial activity in underdeveloped parts of
our country drawing on the comparative advantages of these regions and working
with provincial governments.
Honourable Members, it is clear that an effective industrial development
strategy will require adequate and appropriate financial resourcing and
therefore work is currently underway to review the package of incentives with a
view to sharpening their focus as well as to securing increased
funding.
Sustainable growth requires a continued focus on competitiveness and
competition that are necessary to unlock the potential of the economy. It has
long become clear that downstream value-addition or beneficiation of raw
materials is constrained by high input costs often arising from the
anti-competitive pricing practices of monopolistic enterprises. Similar
constraints exist in services. These factors have prompted, amongst other
initiatives, a review of competition policy and measures to address import
parity pricing and investigations into beneficiation incentives.
As regards import parity pricing I wish to take this opportunity to outline
the decision that Cabinet has taken in respect of this matter. It is
governmentâs wish to see a phasing out of substantive price discrimination
between domestic and export customers in key intermediate input sectors in the
economy.
This will entail a number of changes, namely:
* The Competition Act will be strengthened to better deal with the high
levels of concentration in certain sectors of the economy and attendant
uncompetitive outcomes.
* Any future fiscal support by government or public entities will be dependant
on adoption of non-discriminatory pricing between the domestic and export
markets.
* Import tariff protection on product lines engaged in IPP will be removed and
contingent protection legislation will be amended to ensure that anti-dumping
and countervailing duties are not used as a form of protectionism to inhibit
import competition in such commodities.
* Government will develop a state-owned enterprises (SOEs) pricing and
procurement framework which links the pricing and procurement practices of SOEs
to market behaviour of strategic input industries.
* Government is in the process of developing downstream beneficiation
incentives to help address other constraints and the historical
under-development of key downstream beneficiation sectors, particularly the
metal fabrication, machinery and equipment and plastics sectors.
As outlined above the measures to deal with IPP form part of a broader
strategy of promoting downstream beneficiation. We are confident that the
co-ordinated approach to growing domestic and regional demand will generate
profitable and sustainable growth and employment in both upstream and
downstream beneficiation industries.
With respect to the steel industry there have been ongoing investigations
and discussions that are still underway. Specific discussions with Mittal Steel
are still underway. However, after careful review and in line with our policy
of bringing down the cost of key manufacturing inputs, it has been established
that there is no longer a need for a five percent import tariff on certain
primary carbon and stainless steel products and that this duty is removed with
immediate effect.
Our work on sectors constitutes the greatest contribution of the dti to
advancing AsgiSA. In this regard we will prioritise those sectors that are
labour absorbing and in which South Africa has a comparative advantage,
stimulating investment, employment and our competitive capacity both in the
international and domestic market. These include Business Process Outsourcing
(BPO) and tourism. Further than that we will also focus on chemicals, creative
and cultural industries, metals, agro-processing and textiles and clothing.
Madam Speaker, I would now like to deal with some topical issues in relation
to some of the key sectors that have been reported on in the media. Regarding
the automotive industry, I wish to reiterate governmentâs continued commitment
to supporting this industry which has displayed impressive performance;
creating jobs, attracting investment, growth in exports and integrating the
domestic industry into global manufacturing operations. The current support
programme for the industry, the Motor Industry Development Programme (MIDP) is
undergoing a review with an objective to seek sustainable ways of maintaining
and improving this impressive performance and ensuring that our support is on
par with international norms and standards. The review of the MIDP will be
finalised in a matter of the following few months and any changes will be
communicated to all stakeholders at that time.
Madam speaker, regarding the Clothing and Textile sector, it has always been
our view that the challenges of the sector have to be addressed in a
comprehensive manner focusing on both immediate issues, such as import surges,
as well as long term competitiveness. For this reason we attach great
importance and urgency to the work of finalising a customised sector strategy
for Clothing and Textiles that will seek to secure the long term sustainability
of the sector. This has been a stakeholder driven process and I intend to
shortly convene a meeting of those who have been involved in order to finalise
the strategy. On that occasion I will also unveil the arrangement we are
entering into with the Peopleâs Republic of China in respect of import relief
in the sector.
In terms of immediate support, I am glad to be able to use this opportunity
to announce that the Duty Credit Certificate Scheme will continue for a 24
Month period, retroactive as from 1 April 2005. The current practice on
tradability will be allowed to continue on a Southern African Customs Union
(SACU) wide basis until 31 March 2006. Effective on 1 April 2006, the
tradability of the certificates will be restricted to manufacturers only
(however, will include those retailers who also have manufacturing facilities)
until 31 March 2007.
Honourable members, our work on sectors will also inform our approach to
investment and export promotion efforts. We believe that not only does the
level and rate of investment in the economy need to increase, the type of
investment that takes place needs to be more labour-absorbing if significant
numbers of new jobs are to be created. Similarly greater efforts are required
to boost flagging manufacturing exports and lock into new markets for our
products and services. In both exports and investments we will unveil, during
the course of this year, new plans, drawing on our lessons and expert advice
from a range of sources, including multilateral agencies. This will build on
the work that we have done on the Investment Climate Survey that identified our
investment potential as well as the constraints to be overcome.
Equity and enterprise development
A central pillar of our work will be with respect to enterprise development,
focusing on the small and medium sector, the micro-enterprise sector as well as
cooperatives. This work is informed by our belief that enterprise development
is a key vehicle for broadening economic inclusion and participation, this is
more important in light of the challenges posed by the marginalisation of the
second economy.
Two areas will receive greater emphasis with regards to enterprise
development, namely financial support and non-financial advice. It is worth
noting the speedy turnaround achieved by the National Empowerment Fund which is
now properly established and functioning and is succeeding to increase the
level of disbursements. As at the end of February 2006 the Fund had concluded
48 new deals and 60 disbursed investments to the value of R240 million.
Financial support for small, medium and micro enterprises (SMMEs) is
attracting greater interest in the market as demonstrated by the Industrial
Development Corporation (IDC) making R1 billion available for low interest
loans to SMMEs and the initiative by Khula and Business Partners to create an
instrument for SMME start-up funding focusing on the provision of loans of R10
000 to R250 000 to black entrepreneurs.
The Small Enterprise Development Agency (SEDA) will facilitate dedicated
non-financial support to small businesses in priority sectors including those
identified in AsgiSA. This will include the provision of crucial business
development information to small businesses as well as mentoring and
hand-holding. Progress in this work will depend on the roll out of the SEDA
national network which we are giving the highest level of attention, including
through the dedication of Deputy Minister Thabete to this work.
Madam Speaker, flowing out of AsgiSA, our work on small enterprise
development will also involve two important initiatives. The first is to ensure
that government honours its commitment to pay small business service providers
within 30 days. The second relates to the identification of products and
services that Government will procure from SMMEs alone. The dti has been
assigned the responsibility to lead these initiatives in conjunction with
National Treasury. We will report on this work through the course of this
year.
With regard to micro-finance, the highlight of our work will be the launch
of the APEX fund as a trading entity as from the 1 April 2006. The APEX Fund
will establish 50 provincial offices by March next year, and operate a vastly
expanded lending network.
Madam Speaker, we are encouraged with progress that has been made in respect
of Black Economic Empowerment (BEE) as evidenced by the increase in the number
of deals and the breadth of their coverage, which includes sectors like women
and communities. All of this underscores the urgency which we will attach to
concluding the work on the Codes of Good Practice, which we hope to gazette by
the end of the second quarter of this year. At the same time we hope to ratify
the Charters and launch the BEE Advisory Council.
Madam Speaker, on the regulatory front we are pleased with the profile we
are giving to consumer protection as signified by the Consumer Bill, which will
be introduced into Parliament in the second quarter of this year and the
establishment of the National Credit Regulator.
Because our economy is integrated into the global economy through trade and
investment, it is necessary that we pay engage in global trade negotiations and
other trade arrangements, including continuing the forging of links with
African economies. In this regard we will continue our efforts at ensuring the
conclusion of the Doha Round, in which we have promoted the interests of Africa
and developing countries. This issue will be further elaborated on by Deputy
Minister Rob Davies.
Strengthening institutional capacity
Madam Speaker, what has been outlined is a wide-ranging and daunting agenda.
It begs the question of the institutional, human and financial resources that
will be necessary to ensure its successful implementation. A key requirement in
this regard is a functioning and effective department. In the immediate period
ahead we will pay greater attention to building the capacity of the dti,
including leveraging our partnersâ and stakeholdersâ energies and capacity in
support of this work.
In better resourcing the dti special focus will be given to both the number
and quality of human resources as well as to strengthening the top management
of the department. In this regard, I am pleased to announce that I have
initiated the process of appointing a Director-General, which I will finalise
as a matter of urgency.
In terms of financial resources, the Department is seeking ways to generate
efficiencies both internally and within the Economic Cluster. In addition, we
are working closely with the rest of government to ensure that budgetary
allocations are aligned with agreed strategic objectives.
Conclusion
Finally, Madam Speaker, as we work towards creating sustainable employment
by promoting vibrant manufacturing and services sectors in the economy, we are
abundantly aware of the necessity to act in concert. Therefore, let us work
together to achieve these ambitious and necessary goals.
I would like to thank Members of Parliament and particularly our Portfolio
and Select Committees, for their keen interest and involvement in the workings
of the department. I want to thank the National Economic Development and Labour
Council (NEDLAC) constituencies, noting the improvement in the working
relationship and encouraging participants to continue to build on the gains
made. I also wish to thank my excellent Deputy Ministers, Elizabeth Thabethe
and Rob Davies, my senior management and staff in the department and the
leadership of the various COTI institutions for their hard work and dedication.
I want to thank the Acting Director-General Tshediso Matona for his continued
and tireless devotion to enhancing the impact of the department.
Honourable Members, I ask this House to support the efforts of the dti by
approving its budget of R3.665 billion for this financial year.
I thank you.
Issued by: Ministry of Trade and Industry
29 March 2006
