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Economy
Introduction
South Africa's economy has been growing at almost 5 % a year for the past several years - 32 consecutive quarters of positive growth. Following the global economic recession, this figure was expected to drop in 2008/09, but will accelerate moderately in 2010 and beyond.
Accelerated and Shared Growth
Initiative for South Africa (AsgiSA)
AsgiSA was launched in February 2006. Government and stakeholders identified six “binding constraints on growth” that needed
to be addressed to achieve its target of halving
unemployment and poverty between 2004 and
2014.
These binding constraints were:
- deficiencies in government’s capacity
- the volatility of the currency
- low levels of investment infrastructure and
infrastructure services
- shortages of suitably skilled graduates, technicians
and artisans
- insufficient competitive industrial and service
sectors and weak sector strategies
- inequality and marginalisation, resulting in
many economically marginalised people
being unable to contribute to and/or share in
the benefits of growth and development (the
Second Economy).
AsgiSA has also identified particular sectors of the
economy for accelerated growth, such as:
- chemicals
- metals beneficiation, including the capital-goods sector
- creative industries (crafts, film, content and
music)
- clothing and textiles
- durable consumer goods
- wood, pulp and paper.
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Joint Initiative for Priority
Skills Acquisition (Jipsa)
Jipsa, the skills-empowerment arm of AsgiSA, was launched in 2006.
Jipsa is a specific initiative within government’s wider AsgiSA strategy, aimed at
addressing the skills shortage and achieving a
6% growth rate, which is seen as key to halving
poverty and unemployment by 2014. Jipsa is
a joint initiative by social partners, including
government, business, labour, and key
role-players, such as the higher and further education
and training sectors. Jipsa is not an implementing
agency and as such does not directly
train people.
- Based on the priorities of AsgiSA, Jipsa’s identified
work areas are:
- high-level world-class engineering and planning
skills for the network industries, and the transport, communications and energy sectors
- city, urban and regional planning and engineering
skills desperately needed by South African
municipalities
- artisan and technical skills, with those needed
for infrastructure development enjoying priority.
In 2008, Department of Labour figures reflected
an increase in the number of artisans in training.
The 2007/08 service-level agreements (SLAs)
signed between the various sector education and
training authorities (Setas) and the Department of
Labour reflected a total of 18 879 artisans to be
registered.
By mid-2008, provisional Seta SLAs indicated
that an additional 20 000 learners were registered
for 2008/09. The Department of Education forecasted that the number of engineers graduating
from universities would increase from about
1 500 per year to 2 000 per year by 2010.
Various initiatives to increase access of young
people to high-quality education and skills
acquisition are in place, such as teacher training
for Mathematics, Science, information and
communications technology (ICT) and language
competence. One of the key initiatives is the transformation of Further Education and Training (FET)
colleges, by making them centres of the skills
revolution offering outcome-based training. The
participation of youth in urban, rural and farm
areas is enhanced by the bursary scheme of
R600 million over a three-year period to enable
young people to access training opportunities at
FET colleges.
Skills relevant to the local economic development
needs of municipalities, especially
developmental economists are also addressed.
The Government works with several provinces
in recruiting for Jipsa placement
opportunities. Provinces such as the Eastern
Cape, Western Cape, Gauteng and KwaZulu-Natal
have formed Jipsa offices that place unemployed
graduates within government. KPMG employed
80 accounting trainees between 2006 and 2008,
and half of them were rural unemployed graduates.
Another important Jipsa project that is
creating opportunities for rural communities is
130
Siyenza Manje, implemented by the Development
Bank of Southern Africa (DBSA). By mid-2008, the project saw 118 professionals placed at 101
municipalities. The project includes the Young
Professionals Development programme, which has
seen 50 young graduates recruited and deployed
in municipalities.
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Economic indicators
Domestic output
South Africa’s real Gross Domestic Product (GDP)
rebounded in the second quarter of 2008 and
expanded at an annualised rate of 4,9%, following
sluggish growth at a rate of only 2,1% in the
first quarter.
This improvement in growth in the second
quarter of 2008 reflected strong increases in the
real value added by the primary and secondary sectors, which comfortably offset a further
moderation in real output growth of the tertiary
sector over the period.
The quarter-to-quarter change in the real
value added by the primary sector rebounded
from an annualised rate of decline of 13,9%
in the first quarter of 2008 to a rate of increase
of 16,9% in the second quarter. Real output
of the mining sector, in particular, recovered in
the second quarter of 2008, following a sharp
contraction in the preceding quarter.
Real output growth in the agricultural sector
edged higher from the first to the second
quarter of 2008. Favourable weather conditions
for field-crop production, combined with
a marked increase in the acreage planted, resulted in higher output volumes over the
period.
The size of the commercial maize crop was
expected to increase from 7,1 million tons (Mt) in
the 2006/07 production season to 11,6 Mt in the
2007/08 season.
The real value added by the mining sector
recovered some of its earlier losses in the second
quarter of 2008 and rose at an annualised rate of
15,6%, following a contraction of 25,1% in the
first quarter. On a year-on-year basis, however, real output of the mining sector still contracted in
the second quarter. Production of gold, diamonds, coal and platinum increased in the second
quarter of 2008, notwithstanding the fact that
the mines had to operate at power levels fluctuating
between 90% and 95% of their earlier electricity
requirements.
The more stable supply of electricity and
favourable commodity prices more than offset the
loss of production due to continuing, but fewer, safety-related shutdowns over the period.
Having increased at an annualised rate of only
1% in the first quarter of 2008, the real value
added by the secondary sector expanded at a rate
of 12,3% in the second quarter, primarily due to
the improved performance of the manufacturing
sector.
Subsequent to a decline of 1,0% in the first
quarter of 2008, output in the manufacturing
sector expanded at an annualised rate of 14,5%
in the second quarter. The improved performance
of the sector could partly be attributed to base
effects, following the subdued level of production
in the preceding quarter. The increase in production
was especially pronounced in the subsectors
for food and beverages, and petroleum and
petroleum-related products.
While production in the manufacturing sector
recovered in the second quarter of 2008, it
coincided with a further drop in business confidence
levels. The utilisation of production capacity
in the manufacturing sector receded from 85,4%
in the first quarter of 2008 to 85,1% in the second
quarter – slightly below the recent peak of 86,5%
registered in the second quarter of 2007.
The real value added by the sector supplying
electricity, gas and water contracted marginally to
a negative rate of 1,3% in the second quarter of
2008, compared with a strong decline at an annualised
rate of 6,2% in the preceding quarter.
Exports of electricity to neighbouring countries
were lower in the second quarter of 2008
than during the first quarter, while the volume of
imported electricity increased during this period.
Even though the average coal stockpiles at
power stations still fell short of the targeted 20
days of supply, the supply of coal to Eskom and
the availability of electricity improved considerably. However, a mild winter contributed to lower
electricity demand in the second quarter.
Activity in the construction sector remained
extremely buoyant considering that the real value
added by the sector increased at an annualised
rate of 10,6% in the second quarter of 2008, lower
than the rate of 14,9% recorded in the first quarter. This moderation in growth reflected deteriorating
conditions in the residential and non-residential
building sectors, as developers increasingly felt
the strain of higher interest rates and mounting
inflationary pressures. The activity of the civil
construction sector held up well in both quarters.
The pace of growth in the real value added by
the tertiary sector slowed from 4,2% in the first
quarter of 2008 to 1,4% in the second quarter, mainly reflecting notably slower growth registered
in the trade sector.
The real value added by the trade sector, which
increased at an annualised rate of 3,6% in the
first quarter of 2008, declined at a rate of 2,2%
in the second quarter – the first contraction since
the third quarter of 2001. Slower output growth
in the retail and motor trade subsectors was the
main contributor to the weaker growth. Tighter
credit conditions and inflationary pressures negatively
affected consumer spending and consumer
confidence levels in the second quarter of 2008.
Real output growth in the transport, storage
and communications sector increased from an
annualised rate of 3,5% in the first quarter of 2008
to 4,1% in the second quarter. Increased activity in
both the transport and communications subsectors
boosted performance in the sector.
Growth in the real value added by the finance, insurance, real-estate and business services
sector decelerated from 4,9% in the first quarter
of 2008 to 2,3% in the second quarter, following
weaker growth in the subsector for finance. Likewise, activity in the real-estate sector tapered
off somewhat.
The real value added by the general government
sector decelerated noticeably from growth
at an annualised rate of 4,6% in the first quarter of
2008 to 1,1% in the second quarter.
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Domestic expenditure
In contrast to the rebound in growth in real
domestic production in the second quarter of
2008, aggregate real gross domestic expenditure
contracted at a rate of 4,2% over the same
period.
This reversal in growth was brought about by
substantially slower growth in all components of
domestic final demand. In addition, real inventories
were depleted over the period.
Growth in final consumption expenditure by
households continued on a downward trend from
its quarter-to-quarter peak registered in the first
quarter of 2007. Having increased at an annualised
rate of 3,3% in the first quarter of 2008, growth in household spending slowed to 1,2% in
the second quarter, led by a sharp decline in the
demand for durable goods.
In addition, real outlays on semi-durable and
non-durable goods abated over the period.
A contraction in demand for personal
transport equipment – mainly new motor vehicles – restricted growth in total spending on durable
goods in the second quarter of 2008.
Spending on furniture, household appliances
and on medical equipment also lost considerable
momentum over the period. This moderation
in spending was, however, partly countered by an
increase in spending on durable recreational and
entertainment goods. As a result, real expenditure
on durable goods contracted at a rate of 14,9%
in the second quarter of 2008, compared with a
decline of 8,1% in the preceding quarter.
The declining demand for new motor
vehicles reflected the confluence of overall slower
economic activity, reduced income growth, high
household debt levels, tighter credit conditions
and rising fuel prices.
A contraction in spending on motor-car
tyres, parts and accessories, together with
subdued demand for clothing and footwear, resulted in slower growth in real expenditure on
semi-durable goods in the second quarter of
2008. Real spending on the other subcategories of
semi-durable goods also either slowed or
contracted, causing growth in overall household
expenditure on semi-durable goods to slow to a
rate of 2,4% in the second quarter, compared with
an increase of 10,5% in the first quarter of 2008.
Growth in real expenditure on non-durable goods slowed from an annualised rate of 3,0% in the first quarter of 2008 to less than half a percent in the second quarter. Private consumer demand for household fuel and power, medical and
pharmaceutical products, and petroleum products contracted over the period. In addition, demand for all other categories of non-durable goods decreased. Increased prices of most of these components were particularly responsible for declining trends in real outlays on these items.
Quarter-to-quarter growth in real household expenditure on services increased from an annualised rate of 4,3% in the first quarter of 2008 to 6,5% in the second quarter. Spending on household services and transport and communications services more than offset decreased spending in the other categories over the period.
Growth in real disposable income of households eased from 2,6% in the first quarter of 2008 to an annualised rate of 2,0% in the second quarter. This moderation in growth was reflected in sustained growth in compensation of employees and slower growth in net income from property. Consistent with the slower pace of growth in consumer spending and the prevailing tighter credit
conditions, growth in credit extended to households lost momentum in the second quarter
of 2008.
As the pace of debt accumulation by households tapered off in the second quarter of 2008, the ratio of household debt to disposable income slowed notably to 76,7% during the second quarter of 2008 from 78,2% in the first quarter. However, the ratio of debt-service cost to disposable income of households rose from 11,3% in the first quarter of 2008 to 11,6% in the second quarter.
After increasing at a buoyant rate of 12,8% in the first quarter of 2008, real final consumption expenditure by general government turned around and declined at a rate of 1,4% in the second quarter. This contraction partly reflected the
statistical effect of the high base set in the first quarter, when growth was boosted by the
acquisition of a submarine in terms of government’s Defence Procurement Programme.
Real gross fixed capital formation remained buoyant, although the pace of growth slowed from an annualised rate of 16,9% in the first quarter of 2008 to 9,1% in the second quarter. Capital investment by all institutional sectors moderated over the period.
Having increased at an annualised rate of 11,2% in the first quarter of 2008, growth in real fixed capital outlays by private business enterprises slowed to 9,9% in the second quarter. With the exception of the construction and commerce sectors, capital investment moderated in all other subsectors of the private sector over the period.
The upgrading of freeway networks provided further impetus to investment by contractors. Consumer demand, although subdued, continued to provide an incentive for the further expansion of retail space and, accordingly, gave rise to further growth in real fixed outlays by the commerce sector. In the agricultural sector, the acquisition of agricultural machinery proceeded briskly against the background of favourable product prices, increased production volumes and late
summer rains.
Real fixed capital expenditure by public corporations remained quite strong and increased to an annualised rate of 9,9% in the second quarter of 2008. While investment expenditure in the sector supplying electricity, gas and water maintained its upward momentum to address electricity-supply constraints, the transport sector also advanced real capital investment in the second quarter of 2008. The refurbishment of coaches to improve rail services in particular contributed to increased investment in rail infrastructure.
Growth in gross fixed capital formation by general government decelerated in the second quarter of 2008. This slowdown in investment spending was evident among all three tiers of government. Provincial governments have broadly maintained their capital investment in addressing provincial infrastructural backlogs. Although real capital spending on transport equipment tapered off in the second quarter of 2008, the demand for trucks was supported by various infrastructural projects.
Real inventory investment reversed from an accumulation of R9,8 billion in the first quarter of 2008 to an inventory depletion of R6,8 billion in the second quarter. In part, the slower pace of
inventory accumulation could be attributed to a
reduction in inventories in the mining and manufacturing
sectors. Since the maize-harvesting
season started, the delivery of maize to silos has
been giving rise to real inventory accumulation
in the trade sector by increasing the agricultural
stocks-in-trade. Real inventory investment
subtracted 4,7 percentage points from growth
in real gross domestic expenditure in the second
quarter of 2008, compared with a positive contribution
of 5,8 percentage points in the first quarter.
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Price inflation
The steps taken by the Reserve Bank to bring
down inflation are working. Inflation was projected
to fall within the target range by the end of 2008
and to average 4,9% in 2009.
Overall consumer price inflation increased to 4,7% in 2006 and 7,1% in 2007.
Year-on-year CPIX inflation (consumer price
index less mortgage interest rate) rose from 6,3%
in April 2007 to 8,9% in January 2008 and 10,1%
in March 2008.
The annual rate of increase in CPIX food prices
stood at 13,6% in January 2008 compared to 8,3%
in January 2007. During the course of 2007, food
prices increased by more than 10%. The prices of
basic foodstuffs such as maize, wheat, soyabeans
and rice increased as a result of changing climatic
conditions and rising demand.
Year-on-year headline inflation or the CPI stood
at 10,6% in March 2008. Statistics South Africa
ascribed the higher rate partly to a rise in the
year-on-year CPI for food from 7,7% in March
2007 to 15,3% in March 2008.
CPIX inflation breached the upper band of the
inflation target range between April 2007 and
March 2008, for 12 consecutive months.
However, some factors were still of concern, necessitating continued vigilance in the application
of anti-inflationary policy. These included:
- high and volatile international crude oil prices
- high grain prices due to adverse weather conditions,
low inventories of agricultural goods and
higher food prices
- uncertainty concerning exchange-rate developments
- salary and wage settlements being significantly
in excess of the inflation target range
- possible second-round effects of the abovementioned
factors
- fairly high rates of money supply and private
credit-extension growth alongside continued
buoyancy in domestic demand conditions
- increases in certain administered prices in
excess of the inflation target range.
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Exchange rates
After declining notably during the first quarter of
2008, the nominal effective exchange rate of the
Rand recovered some of its losses during the
second quarter. On balance, the weighted average
exchange rate of the Rand increased by 3,6% from
the end of March 2008 to the end of June 2008.
The strengthening of the domestic currency
mainly occurred during April and May and was
probably supported by the further tightening of the
country’s monetary policy. In addition, the continuation of the international credit-market turmoil
during the second quarter probably helped to
attract investors’ excess funds to South Africa’s
financial markets in search of higher yields.
During June 2008, the exchange value of the
Rand declined in response to a lower-than-anticipated interest rate increase by the Monetary
Policy Committe (MPC) and the announcement of a
larger-than-expected current-account deficit in
the first quarter of 2008.
The depreciation of the nominal effective
exchange rate of the Rand in June 2008 was
further aggravated by a ratings agency’s decision
to change the outlook for South Africa’s long-term
issuer default rating from positive to stable. Despite
lower international prices of certain commodities, and partly supported by the rebound in domestic
output during the second quarter 2008, the
exchange rate of the Rand strengthened by 7,8% from June 2008 to August.
Following a decline of 15,4% during the first quarter of 2008, the real effective exchange rate of the Rand increased by 7,5% in the second quarter. On balance, the inflation-adjusted effective exchange rate of the Rand declined by 9% in the first half of 2008.
The net average daily turnover in the domestic market for foreign exchange declined from US$17,3 billion in the first quarter of 2008 to US$17,1 billion in the second quarter. Non-resident
investor participation in the spot market decreased gradually over the period.
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Foreign trade and payments
The deterioration in the current-account deficit was mainly attributed to continued strong import demand, which coincided with relatively weak growth of merchandise exports. The trade deficit consequently widened from R26,7 billion in the fourth quarter of 2007 to R61,4 billion or 2,8% of GDP in the first quarter of 2008. Net service, income and current transfer payments to the rest of the world continued to grow in the first quarter of 2008.
Having increased by 4,8% in the fourth quarter of 2007, the volume of merchandise exports shrank by 7,2% in the first quarter of 2008. Despite the general slowdown in the global economic activity, the international demand for South African mining products such as coal, platinum, base metals and gold remained strong.
The volume of manufactured exports advanced further in the first quarter of 2008, mainly due to the exportation of motor vehicles made possible by ongoing investment spending in the motor manufacturing industry.
Notable increases in the international prices of certain South African export commodities, alongside the depreciation of the Rand, raised rand prices of merchandise exports by 16% from the fourth quarter of 2007 to the first quarter of 2008. The turmoil in global financial markets and lower production volumes led to an increase of almost 20% in international commodity prices. The value of merchandise exports consequently advanced by 7,7% in the first quarter of 2008, following an increase of 6,8% in the final quarter of 2007.
The export proceeds of South African gold producers edged higher by 2,2% in the first quarter of 2008, primarily due to a 32,6% increase in the average realised Rand price of gold, which more than offset a contraction of almost 23% in the physical quantity of net gold exports over the period.
On the London market, the fixing price of gold rose by 17,5% from US$789 per fine ounce in the fourth quarter of 2007 to US$927 per fine ounce in the first quarter of 2008. In mid-March 2008, the gold price momentarily rose above US$1 000 per fine ounce before receding to marginally below US$900 per fine ounce by the end of May 2008. The gold price was buoyed by United States (US) dollar weakness and rising energy prices. Vibrant domestic demand continued to support growth in import volumes.
The physical quantity of imported goods advanced by 3,4% in the first quarter of 2008, after virtually no growth in the preceding quarter. Despite the higher growth, the country’s import penetration ratio, which had fluctuated around 27,5% in the final three quarters of 2007, remained unchanged in the first quarter of 2008.
Alongside the depreciation of the Rand, the average price level of imported goods rose by 9% in the first quarter of 2008. The outcome of the rise in import prices and import volumes culminated in a relatively sharp increase of 12,7% in the value of merchandise imports in the first quarter of 2008.
The negative imbalance on the service, income and current transfer account with the rest of the world widened in the first quarter of 2008, albeit at a slower pace, to record a deficit of
R133,2 billion.
Interest and dividend payments in 2007 and the first quarter of 2008 accounted for more than 40% of total service, income and current transfer payments compared with an average ratio of 34% during the period 2004 to 2006.
South Africa’s terms of trade improved
considerably in the first quarter of 2008 after deteriorating somewhat in the previous quarter. Although the depreciation in the exchange value of the Rand inflated the Rand price of merchandise imports, the renewed increase in international commodity prices caused export prices to accelerate at a considerably faster pace.
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Department of Trade and Industry
The aim of the Department of Trade and Industry is to lead and facilitate access to sustainable
economic activity and employment for all South
Africans.
The department also aims to catalyse
economic transformation and development, and to
provide a predictable, competitive, equitable
and socially responsible environment for
investment, enterprise and trade for economic
citizens. In this way, the department contributes
to achieving government’s vision of an adaptive
and restructured economy, characterised
by accelerated economic growth, employment
creation and greater equity by 2014.
To contribute to greater shared growth in the
country, the department is pursuing the goals of:
- significantly progressing Broad-Based Black
Economic Empowerment (BBBEE)
- increasing the contribution of small enterprises
to the economy
- contributing towards providing accessible, transparent and efficient access to redress
- contributing towards building skills, technology
and infrastructure platforms from which enterprises
can benefit
- increasing market-access opportunities for, and
export of, South African goods and services
- increasing the overall level of direct
investment, as well as investment in priority
sectors
- repositioning the economy in higher value-added segments of value matrices in knowledge-driven manufacturing and services
- contributing towards the economic growth and
development of the African continent within
the New Partnership for Africa’s Development (Nepad) framework
- building an efficient, effective and accessible
organisation to achieve these outcomes.
These strategic objectives are achieved through
the collective effort of the department’s divisions
and agencies that generate public value for
economic citizens, and deliver products and services for clients and stakeholders.
These products and services include policy, legislation and regulation, finance and incentives, information and advice, and partnerships.
The department also achieves these objectives
by pursuing a more targeted investment strategy, improved competitiveness of the economy, broadening the economic participation of historically
disadvantaged individuals (HDIs) in the mainstream
economy and ensuring policy coherence.
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Broadening economic participation
Several of the department’s programmes aim to
bridge the economic divide and broaden economic
participation by historically
disadvantaged individuals (HDIs).
The Enterprise Business Unit is responsible
for creating an enabling environment for small, micro, medium-sized and co-operative enterprises
to contribute to the country’s GDP and
unemployment.
This responsibility entails the development
of a legislative framework, policies, strategies
and programmes aimed at lowering the
barriers to entry and stimulating the participation
of these enterprises in all sectors of the
economy.
The unit implements its mandate through
a range of institutions directly funded by the
Department of Trade and Industry, and is
responsible for evaluating and monitoring the
performance of such institutions.
These institutions include:
- The South African Micro-Finance Apex
Fund (Samaf) provides micro-finance to
small and medium-sized enterprises
(SMEs) through a network of financial intermediaries
across South Africa. Samaf
provides a framework for development
micro-finance industry norms and standards,
including sustainable lending methods. By May 2008, Samaf had distributed about
R8,2 billion, benefiting about 9 000 savers and
1 700 SMEs.
- Khula Enterprise Finance is a key agency
representing the interests of SMEs for access
to lending through a network of both the public
and private-sector partners.
- The Small Enterprise Development Agency (Seda) provides small enterprises around
South Africa with a one-stop non-financial
support service. It is supporting 26 incubators
through the Seda Technology Programme.
- The Black Business Supplier Development
Programme (BBSDP) disbursed over R86 million
in the past four years
- The Isivande Supplier Fund was launched in
March 2008. The fund aims to provide affordable
enterprise loans, ranging from R30 000 to
R5 million.
Other programmes include:
- implementing new policy and legislation to
promote the development of co-operative enterprises
- implementing the BBBEE Strategy, focusing
on the codes of good practice, the sector
136
charters and the establishment of the BEE Advisory Council
- introducing a specific strategy to empower women
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Targeted investment strategy
The Investment Promotion and Facilitation business unit within Trade and Investment South Africa (Tisa) is mandated to develop and implement a targeted investment promotion and facilitation strategy. The strategy covers a range of issues that are important to fulfilling the Department of Trade and Industry’s mandate of increasing the value of inward foreign direct investment (FDI), and is designed to target and focus interventions in this arena. The strategy is also explicitly aligned with the National Industrial Policy Framework (NIPF) [PDF]. It focuses on identifying and promoting specific investment opportunities in particular sectors, regions and products, rather than taking the generic approach of marketing South Africa as an attractive investment destination.
This will require a more co-ordinated approach to investment promotion by national, provincial and local government. Achieving this will be a priority in the first year of the Medium Term Expenditure Framework (MTEF) period.
The unit is dedicated to promoting investment opportunities, marketing investment projects, providing guidance with plant/site locations,
especially in the industrial development zones (IDZs), and inputting into policy formulation by providing investment information.
The facilitation of investments involves arranging investment missions, including travel
itineraries; improving the platform for the
introduction of investors to key stakeholders in private and public sectors; introducing investors
to potential joint-venture partners and black economic partnerships; providing advice and guidance on the prevailing regulatory environment; offering assistance with work-permit applications; providing logistical support for relocation; and a
dedicated aftercare service.
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South Africa’s global positioning and integration
International Trade and Economic Development (ITED)
The International Trade and Economic Development (ITED) division of the Department of Trade and Industry aims to provide trade-policy leadership to contribute to South Africa’s economic development. The ITED programme aims to strengthen trade and investment links with key economies, promote a strong and equitable multilateral trading system and foster African economic integration and development in line with Nepad.
The policy and programme developments in international trade development include:
- implementing the Southern African Customs Union (Sacu)-European Free Trade Area (EFTA) free trade agreement (FTA)
- concluding trade negotiations with Mercosur, a trading bloc consisting of Argentina, Brazil, Paraguay and Uruguay
- initiating preferential trade negotiations with India
- administrating various binational commissions (BNCs) with other governments
- advancing trade and economic development
integration in the Southern African
Development Community (SADC)
- ongoing participation in the Doha Round of trade multilateral negotiations in the World Trade Organisation (WTO)
- ongoing analysis of trade threats and opportunities
- offering policy oversight of the International Trade Administration.
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African economic development
ITED has a strong developmental focus in its engagement with Africa. Partnerships with key countries on the continent are of strategic importance. South Africa’s economy is inextricably connected to the southern African region, and the region’s economic prospects are linked to the economic recovery of the continent. Nepad is the internationally agreed framework for the
socio-economic development of the continent.
At a continental level, South African investment and trade with African countries has increased dramatically since 1994. Africa is now South
Africa’s fourth-largest export destination. South African investments in southern Africa alone totalled R14,8 billion in 2001. Trade with the rest of Africa totalled about R50 billion in 2007 and increased to R108 billion in 2007 with exports amounting to R68 billion and imports to about
R40 billion. In the same year, South Africa’s trade in the SADC region totalled some R68 billion with exports reaching R44 billion and imports
R24 billion.
The following areas have been prioritised:
- infrastructure and logistics (roads, ports, etc.)
- energy
- information and communications technology
(ICT)
- water and waste management
- transport
- construction
- oil and gas infrastructure
- agribusiness
- mining
- human-resource development (HRD).
During meetings of the World Economic Forum (WEF) for southern Africa, the formation of a business
forum for southern Africa was announced to
take advantage of investment opportunities in
the region.
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New Partnership for Africa’s Development (Nepad)
The Department of Trade and Industry is among
the key departments identified in South Africa
to facilitate and implement the aims and objectives
of Nepad. The department therefore acts
as a catalyst for trade and economic development
on the continent to alleviate poverty. Nepad
recognises the need for infrastructure, industrial
and skills development, and its impact on the
continent’s ability to become fully integrated into
the global economy.
The department contributes to the Nepad
agenda by mobilising the necessary support from
relevant stakeholders internally and externally, and providing leadership and strategic guidance
on trade and economic issues. The South African
Government assists African countries in export
diversification by promoting investment in infrastructure
and industrial projects.
The Department of Trade and Industry, through
its engagement with continental structures such
as the African Union Commission (AUC) and the
Nepad Secretariat, strongly advocates for finding
African solutions to African problems and identifying
partners to contribute to the continental
development agenda.
One such programme is the African Peer
Review Mechanism, which is a voluntary self-assessment tool that aims to encourage countries
to adopt policies to promote good governance,
democracy and high economic growth. It also
encourages countries to share experiences in
terms of best practice.
The department also supports the AUC and the
Nepad Secretariat in the area of regional economic
integration, which is a vehicle to ensure economies
of scale, effective allocation of resources and
larger markets in the region and on the continent.
The framework for regional economic integration
is contained in the Abuja Treaty.
The Abuja Treaty calls for the establishment of
an African Economic Community to take place over
a period of 34 years. Member states of the African
Union (AU) should work towards eliminating
overlapping memberships of regional economic
communities; harmonising business laws, and
industrial and tax policies; and establishing
common standards and customs procedures.
Other important vehicles through which the
continental developmental agenda is advanced
are through South-South co-operation initiatives
such as the China-Africa Forum and the New Asian
African Strategic Partnership.
The acceleration of South-South trade and
investment is one of the most significant features
of recent developments in the global economy. South-South co-operation is premised on the
concept that developing countries can capitalise
on each other’s strengths because of the
alignment of their development goals.
This, however, does not preclude North-South
co-operation, where developed and developing
countries work in partnership to address Africa’s
developmental needs.
These include discussions and initiatives
from the G8 and the European Union (EU)-Africa
partnership.
[Top]
Southern African Development
Community
The Southern African Development
Community (SADC) comprises Angola, Botswana, the Democratic Republic of Congo (DRC), Lesotho, Malawi, Madagascar, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and
Zimbabwe.
South Africa took over the chair of the SADC
in August 2008. During the SADC Summit, the
FTA was launched.
The theme of the SADC FTA is: “SADC FTA for
Growth and Wealth Creation”.
The FTA provides preferential space towards
regional business and its citizens by opening up
opportunities for investment by reducing market
risk and transaction costs, and creating a network
of regional businesses interconnection.
The FTA is a vital stepping stone towards a
SADC Common Market, where the movement of
people would be unrestricted and free.
Freeing trade in the region will create a larger
market, releasing the potential for trade, economic
growth and employment creation.
South Africa supports the establishment of a dedicated focal point within the Trade, Industry, Finance and Investment Directorate at the SADC Secretariat to co-ordinate the customs union programme and to ensure coherence between the activities of the Technical Working Group and other SADC structures.
[Top]
Southern African Customs Union
The Southern African Customs Union (Sacu) consists of Botswana, Lesotho, Namibia, South Africa and Swaziland. The Sacu Secretariat is located in Windhoek, Namibia.
Sacu was established in 1910, making it the world’s oldest customs union. It was administered by South Africa through the 1910 and 1969 agreements. The customs union collected duties on local production and customs duties on members’ imports from outside Sacu. The resulting revenue was allocated to member
countries in quarterly instalments using a
revenue-sharing formula.
Negotiations to reform the 1969 agreement started in 1994, and a new agreement was signed in 2002. The new arrangement was ratified by Sacu heads of state.
The economic structure of the union links the member states by a single tariff and no customs duties between them. The member states form a single customs territory in which tariffs and other barriers are reduced substantially on all the trade between the member states for
products originating in these countries. There is a common external tariff that applies to
non-members of Sacu.
The landmark FTA between Sacu and the EFTA, comprising Iceland, Liechtenstein, Norway and Switzerland, became operational on
1 May 2008.
Sacu signed a Trade, Investment and Development Co-operation Agreement with the USA in April 2008 and a Preferential Trade Agreement with Mercosur was concluded in June 2008.
The agreement manages and facilitates trade in industrial products, fish and other marine
products, and processed agricultural products. Trade in basic agricultural products is governed
by bilateral agreements with each of the EFTA states, the latter of which are party to the FTA. Most industrial goods, including fish and other
marine products, now benefit from duty-free access to the EFTA states. The importation of
products into Sacu will benefit greatly from the steady elimination of customs duties over a transitional period.
[Top]
Trade with Europe
Trade relations with Europe, particularly with the European Union (EU), are pivotal to South Africa’s economic development. The Trade, Development and Co-operation Agreement (TDCA) with the EU forms a substantial element of South Africa’s reconstruction and development.
By August 2008, the United Kingdom (UK), Germany, Netherlands, Spain and Belgium were among South Africa’s top 10 export destinations. Germany, the UK, Italy and France are among the top 10 countries from which South Africa’s imports originate.
Since 2001, Germany has been South Africa’s largest source of imports, showing annual growth of 18,5% between 2007 and 2008. In 2008, South Africa’s biggest trade partner was
The Netherlands.
[Top]
European Union
The Trade, Development and Co-operation Agreement (TDCA), which was provisionally implemented on 1 January 2000 and came into force on 1 May 2004, provides for the establishment of an FTA between South Africa and the EU. The
TDCA commits South Africa to grant duty-free access to 86% of EU imports over a period
of 12 years, while the EU will liberalise
95% of South Africa’s imports over a 10-year period.
This agreement is expected to contribute towards the restructuring of the South African economy and its long-term economic growth. It covers trade and trade-related issues, development and economic co-operation, and political dialogue.
It also provides a legal framework for ongoing EU financial assistance on grants and loans for development co-operation, amounting to
R900 million per year. Statistics compiled by the South African Revenue Service (SARS) show that the tariff preferences in the agreement are being used increasingly.
The historic South Africa-EU Summit, which took place within the context of South Africa-EU strategic relations was held in Bordeaux, France, in July 2008.
The EU is the world’s largest trading bloc and generates about 30% of global GDP and 20% of global trade flows. It is the world’s biggest aid
donor to poor countries, contributing about half of
global aid.
Implementation of the TDCA’s trade provisions
has been underway since 2000 with the aim of
establishing a FTA between South Africa and the
EU by 2012.
Total trade increased over five-fold, from
R56,5 billion in 1994 to R313 billion in 2007.
In 2007, South Africa’s exports to the EU-15
amounted to R137 billion. The EU ranked as
South Africa’s number one exporting region in
2007. South Africa’s total imports from the EU-15
amounted to R176 billion in 2007, also ranking
number one.
Europe remains the principal source of FDI in
South Africa, accounting for around 80% of total
FDI in 2005. Additionally, the EU accounted for
about 66% of net foreign investment in South
Africa in 2003 and 2004, and in 2005 the EU’s
share of the total assets held by foreigners in
South Africa amounted to about 60%.
The EU is South Africa’s largest development
partner, representing about 70% of all overseas
development assistance, with South Africa
earmarked to receive 980 million euro between
2007 to 2013. The European Investment Bank has
also approved a loan mandate of 900 million euro
for South Africa.
The South Africa-EU TDCA continues to
serve as the foundation of interaction between
South Africa and the EU. The EU had proposed
that South Africa enters into a strategic
partnership, which it also has with countries such
as Russia, India, Brazil. This partnership provides
for the focus on broadening the political dialogue
between South Africa and the EU, apart from the
existing sound and good bilateral relations and the
focus on trade and economic issues.
[Top]
The Americas
North America
The USA is one of South Africa’s leading trading
partners. The country ranks second after Japan
as a destination of South African exports and is
third – after Germany and China – as a source of
imports.
The trade balance with the USA changed
from a deficit of R0,7 billion to a surplus of
R1,1 billion in June 2008. Exports increased from
R5,5 billion to R7,7 billion and imports increased
from R6,2 billion to R6,6 billion. South Africa is a
beneficiary of the USA’s generalised system
of preferences (GSP), which grants duty-free
treatment to over 4 650 products. At the same
time, South Africa is one of 38 beneficiaries of the
Africa Growth and Opportunity Act (AGOA), which
was promulgated in May 2000. In terms of the
AGOA, 1 783 more products were added to the
existing GSP products for duty-free treatment.
Although the AGOA was initially due to lapse
in 2008, the US Government consented to
requests by African countries, and extended the
measure to 2015 under what is called the AGOA III
amendments. Along with other member states
of Sacu, South Africa has begun negotiations
with the USA to enter into a trade investment
development co-operation agreement, intended
to provide a framework for deepening Sacu’s
trade and investment relations with that country.
[Top]
Canada
Another significant trading partner in the
Americas is Canada. Since the lifting of sanctions
in 1994, bilateral trade between South Africa
and Canada increased from R904 million in
1993 to R6,6 billion in 2006. South Africa is
a beneficiary of Canada’s General Preferential
Tariff (GPT). GPT rates range from duty-free to
reductions in the most favoured nation (MFN)
rates.
Furthermore, South Africa and Canada have a
Memorandum of Understanding (MoU) relating
to the export of clothing and textile products to
that country. The MoU allows a certain amount of
clothing and textile products from South Africa to
enter the Canadian market at a better-than-MFN
tariff rate.
Additionally, over the past three years, an
annual consultation forum was established to
discuss matters of mutual interest in South Africa’s
relations with Canada. The forum has also
become an important basis for strengthening
trade relations.
[Top]
Latin America
South Africa’s major trading partners in Latin
America are Brazil, Argentina, Chile, Mexico, Colombia and Peru. Most trade is with Brazil and
Argentina, which are members of the Mercusor
trade bloc. A framework agreement committing
South Africa and Mercusor to an FTA was signed
in 2000.
[Top]
Asia
The trade deficit with Asia increased from
R8,3 billion to R9,0 billion in June 2008. Exports to
140
Asia increased by R1,3 billion to R17,9 and imports increased by R1,9 billion to R26,9 billion.
South-east Asia and Australasia
Bilateral trade with south-east Asia, particularly the Association of South-East Asian Nations (Asean) members, increased rapidly from a low base in 1990. Asean presents South Africa with a potential market in excess of 520 million people.
Within the region, key partners for South Africa include Singapore, Thailand, Indonesia, Malaysia, Vietnam and the Philippines.
Between 2007 and 2008, exports grew by 39,8%. Imports grew by 9,1%.
In an effort to further expand engagement with the region, the Department of Trade and Industry is undertaking a number of joint trade committees with key Asean partners to expand trade and investment relations with the region.
Australia has always featured as a well-known partner for South Africa in the region.
[Top]
North-east Asia
In 2008, South Africa and the People’s Republic of China (PRC) celebrated 10 years of
diplomatic relations.
The PRC is a key partner for South Africa in north-east Asia. The PRC’s influence in the global economy has changed significantly in the last few decades as its share of international trade has increased, with China becoming a pillar of global economic growth.
The two countries engage regularly on economic issues through mechanisms such as the Joint Economic and Trade Committee. Research and discussions among key stakeholders domestically and within Sacu are continuing towards assessing the possibility of preferential negotiations
with China.
South Africa is China’s key trade partner in Africa, accounting for 20,8% of the total volume of China-Africa trade in 2007 figures. Total trade between South Africa and the PRC amounted to approximately R88 billion (about US$13 billion if the Rand/Dollar exchange rate for the end of December 2007 is taken into account) for the
year 2007.
According to the abovementioned statistics, total trade between the PRC and South Africa increased from about R60,7 billion in 2006 to R88,3 billion in 2007. This represents an overall increase of about 45% if the total value of trade for the 2006 and 2007 years are compared.
Total trade between South Africa and Hong Kong amounted to about R7,4 billion for 2007, with a trade balance of about R1,8 billion in South
Africa’s favour.
China is the fifth-largest export destination for South Africa and offered the second-largest import market for the 2007 year.
Beyond bilateral and regional initiatives, South Africa and the PRC also co-operate in multilateral forums, including in the WTO, in the G20 and Non-Agricultural Market Access 11
groupings (Nama-11), based on shared
developmental perspectives.
Japan is South Africa’s largest trading partner in Asia and is among South Africa’s top overall trading partners. The South Africa-Japan Partnership Forum is designed to strengthen bilateral ties between the two countries. The forum meets
regularly and explores new initiatives aimed at expanding relations.
[Top]
South Asia
India is a key partner for South Africa in South Asia, and total trade has been increasing rapidly since 1994. In March 2008, India was South Africa’s 10th-biggest trade partner.
South Africa and India enjoy strong historical ties, which have translated into a firm
political commitment. In light of these shared historical links, closer economic ties are being fostered using initiatives such as the Joint
Ministerial Commission and through business engagements.
Developments in building economic relations with India are also expanding to include partners in Sacu, as reflected in the Sacu ministers’
undertaking to pursue preferential trade area negotiations with India.
South Africa and India work closely in the
India-Brazil-South Africa (IBSA) Forum. IBSA
is not solely an economic initiative, but rather
an undertaking by countries with shared
interests in a multilateral system to address
equitably political, social and economic matters.
This trilateral economic co-operation is informed by the reality that trade between the three countries is still relatively low, while further
analysis reveals that there is considerable scope to increase trade volumes and expand the range of traded products between the three markets. In essence a more fundamental aim than the development of a giant trading bloc, the trade and investment undertakings under IBSA seek to cultivate
and unleash the host of missed opportunities
that exist.
South Africa also co-operates with India in the
multilateral arena in areas of common interest in
the WTO, most notably the G20 and Nama-11, as
well as in other forums.
The South Africa-Pakistan Joint Commission
serves as the platform from which trade
and investment initiatives with Pakistan can
be introduced.
[Top]
Multilateral economic relations
The World Trade Organisation (WTO), in partnership with the Bretton-Woods
Institutions, the World Bank and the International Monetary Fund, has been setting the parameters
for and directing the economic development
policies of governments around the world.
This has had serious implications for the content, evolution and trajectory of economic development
strategies being pursued by developing countries, including South Africa.
It is imperative for South Africa to influence and
shape the configurations of the emerging system
of global governance to address the needs and
concerns of the developing world.
This is best done by participating actively and
effectively in all multilateral forums, to ensure
that South Africa’s particular economic interests
and developmental goals and objectives, as
well as those of the African continent, are taken
into account.
[Top]
United Nations Conference on Trade
and Development (Unctad)
Unctad is an important resource organisation for
South Africa and the African continent.
The main
goals of the organisation are to:
- Maximise the trade, investment and development
opportunities of developing countries.
- Help developing countries face challenges
arising from globalisation and integration into
the world economy equitably. Such assistance
is pursued through research and policy analyses,
intergovernmental deliberations, technical
co-operation and interaction with civil society
and the business sector. Unctad focuses on assisting developing countries
to prepare for mandated and possible future negotiations in the WTO.
Unctad holds a conference every four years to
set its priorities and guidelines, and to provide
an opportunity to debate key economic and
development issues.
Member states gathered in São Paulo, Brazil, in
June 2004 for Unctad’s 11th Ministerial Conference,
which closed with the adoption of the
Spirit of São Paulo Declaration and the São Paulo
Consensus. These provide more detail on the role
of Unctad in a globalising world.
The Spirit of São Paulo Declaration recognises
that most developing countries, especially
African and other least developed countries,
have remained on the margins of the globalisation
process, and that there is a need to focus on
the ability of international trade to contribute to
poverty alleviation.
The São Paulo Consensus focuses on:
- development strategies in a globalising world
- building productive capacities and international
competitiveness
- assuring development gains from the international trading system and trade negotiations
- fostering partnerships for development.
[Top]
World Trade Organisation
South Africa regards its membership of the
World Trade Organisation (WTO) as important because of the enhanced
security and certainty in the multilateral trading
system that WTO rules provide.
The country is an active participant and contributor
towards a strengthened multilateral trading
system, whose benefits are equitably distributed
across the world community. South Africa wants to
participate in shaping global governance to ensure beneficial and full integration of its economy, as well as those of other developing nations, into the global trading system.
South Africa’s efforts to build an alliance of developing countries within the WTO, based on a common approach and consensus on key issues, bore fruit late in 2001, when an agreement was reached to launch a new round of trade negotiations, this time with a developmental agenda.
The WTO Doha Development Agenda set the work programme of the WTO in 2003/04. However, the work slowed down considerably after the fifth WTO Ministerial Conference held in Cancun, Mexico, in September 2003, when WTO members failed to reach agreement on key developmental issues due to irreconcilable positions between developed and developing countries.
A positive outcome of the Cancun meeting was the formation of a grouping of developing countries known as the G20, which succeeded in pushing for significant reforms in agricultural trade, which the developed world strongly opposed. The failure to reach agreement in Cancun showed that developing countries are now participating more effectively in the WTO to ensure they also benefit from the rule-based trading system and globalisation. The G20 has become an important player in the Doha Development Agenda to ensure that the needs and concerns of the developing world
are addressed.
After the failure of Cancun to agree on a work programme for continued Doha Development Agenda negotiations, the G20 highlighted agricultural reform as an important development tool. The group was also trying to narrow the differences between developed and developing countries to put the Doha negotiations back on track.
In July 2008, trade ministers from 30 countries gathered in Geneva, Switzerland, in another bid to reach agreement under the Doha Development Agenda. A few weeks later, world leaders met again in New York on Africa’s special development needs and on the millennium development goals.
South Africa continues to favour the speedy conclusion of a developmental outcome to the Doha Round, to advance the interests of developing countries.
The G20 comprises Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa, Tanzania, Thailand, Uruguay, Venezuela and Zimbabwe.
[Top]
World Economic Forum
The World Economic Forum (WEF) is a global investment forum and is held in different parts of the world. The WEF engages global leaders in business, and leaders of various countries in partnerships to shape global, regional and industry agendas. The forum discusses
pertinent international issues, which include promoting Africa’s growth, the impact of China and India’s growth on other emerging
economies, and climate change and its impact.
The 18th annual WEF on Africa was held in June 2008 in Cape Town.
[Top]
Trade and Investment South Africa
A central task of the Department of Trade and Industry is to promote value-added exports and attract investment. The vision is one of a
restructured and adaptive South African economy, characterised by growth, employment and equity (regional, spatial, gender and racial).
Tisa is a division of the Department of Trade and Industry and has a national mandate to develop the South African economy, focusing on facilitating and promoting investment and exports.
Tisa’s mission is to provide strategic vision and direction so as to increase the level of direct
investment flow, and to develop South Africa’s capacity to export into various targeted markets.
[Top]
Export development and promotion
Trade and Investment South Africa (Tisa) is responsible for developing and promoting South African goods and services. It contributes directly towards the objectives of the Department of Trade and Industry by:
- identifying, researching and promoting
market-access opportunities for South African
exporters
- facilitating exports by matching potential
exporters with foreign buyers
- developing and helping South African exporters to promote their products by providing non-financial support.
[Top]
Promoting and facilitating investment
Tisa is responsible for attracting FDI, and developing and promoting investment by domestic and foreign investors. It offers:
- information on investing and the business
environment in South Africa
- detailed sector information
- direct government support in the form of
investment incentives
- investment facilitation and aftercare.
[Top]
Export promotion and development
This area of the economy remains a challenge that
is being addressed by the implementation of the
Export Strategy that was approved in 2006. The
aim of the strategy is to ensure that South African
exports maintain their market share in traditional
markets, and substantially increase their market
share in prioritised, new high-growth markets
through aggressive marketing and a larger
exporter community.
To accomplish this, the focus has been on developing
and expanding the local export community
and culture, while also promoting South African
products abroad through missions, pavilions and
the use of the network of foreign offices.
Tisa’s purpose is to increase South Africa’s
capacity to export by developing and implementing
strategies for targeted markets, increase the
level of direct investment flow and manage the
department’s network of foreign offices.
Objectives and measures are to:
- promote awareness of investment opportunities
in South Africa by conducting three international
investment conferences, 95 investment
presentations, six South African exhibitions
(pavilions) and five ministerial or presidential
missions by March 2009
- improve the capacity of new exporters by
training 200 new small exporters, reaching
2 000 customers and distributing 3 000 publications
by March 2009
- promote South African products in targeted
high-growth markets by conducting six international trade initiatives and 25 pavilions, and
fund 50 trade missions through export councils
and provincial investment-promotion agencies
by March 2009
- facilitate markets for southern African products
and services by promoting and implementing
eight export projects in targeted countries by
March 2009.
[Top]
Enterprise and industry development
The Department of Trade and Industry’s
Enterprise and Industry Development Division’s (EIDD) purpose is to provide leadership in the
development of policies and strategies that create
an enabling environment for competitiveness,
equity and enterprise development.
The EIDD will contribute to realising the
department’s strategic objectives by:
- creating an enabling environment for all
enterprise forums, including co-operatives,
to prosper
- providing a framework to enable participation
of women and black people in the economic
mainstream
- identifying new geographic areas for greater
economic stimulation
- providing a framework for industry norms and
standards, including sustainable production
methods
- influencing policy developments in skills
building, technology and infrastructure
- providing policy direction in emerging sectors
and repositioning the economy in higher-value
segments to achieve competitiveness.
The EIDD has three business units, namely:
- Competitiveness and Industrial Development
- Enterprise Development
- Equity and Empowerment.
Incentives include the:
The IDZs have been linked to the major international
airports and to ports. By mid-2008, they
existed at Coega, in East London, Richards Bay in
KwaZulu-Natal and in the IDZ linked to OR Tambo
International Airport in Gauteng.
The IDZs operate by providing particular
infrastructure. The opportunities of concentration
around that infrastructure are orientated
particularly towards export activity. They
offer duty-free entry of input, which is
then used to manufacture products that are
exported in a special customs administration
arrangement.
A range of other incentives have also been
developed in the IDZs. The Department of Trade
and Industry, together with its partners in MinMec, have identified a need f or a significant review of
the operation of IDZs and for a new IDZ Act to
be presented.
Among other things, the IDZ policy needs to deal
with issues of governance, defining more clearly
the roles of national government, of the province, of local government as well as of the authorities
established to run particular IDZs.
There is a need for a clear funding stream
and an incentive programme for IDZs. The Department
of Trade and Industry lifted the moratorium
on new IDZs, and the Mafikeng IDZ business plan
was prepared.
By July 2008, other potential IDZs at the Kruger National Park Airport, at the Dube Trade Port and at the Harrismith Freight and Logistic Hub were being prepared.
The department has developed and discussed with MinMec another model to encourage broader spatial economic development, called special economic zones (SEZs) or regions. A number of candidates for SEZ status were identified,
including the Mzimbuvo Development Zone in the Eastern Cape, the Northern Cape Diamond Hub, the Wadeville Industrial Corridor in Gauteng, the Durban Clothing and Textile SEZ, the agroprocessing SEZ in Mpumalanga, an SEZ for agroprocessing in the Western Cape, and a metal SEZ in KwaZulu-Natal.
The other key measure that has been developed since 1994 to promote more equitable spatial economic development has been the strategic development initiative or corridor programmes.
These are programmes related to particular infrastructure developments such as road or transport links, which package together a series of investment opportunities linked to those infra
structural investments.
[Top]
The Enterprise Organisation (TEO)
The Department of Trade and Industry’s The Enterprise Organisation (TEO) provides incentives to stimulate or catalyse
investment in infrastructure, HRD, integrated manufacturing and related activities, small-business development, specific regions, and
technology and innovation.
A number of incentives are provided to both large and small businesses to improve their competitiveness. These include incentives under the Small Medium Enterprise Development
Programme (SMEDP), the Competitiveness Fund, the
Sector Partnership Fund and the Black Business Supplier
Development Programme (BBSDP).
Several incentive programmes administered
by the Department of Trade and Industry
have made a vital contribution to growing
industrial and services sectors, and SMEs.
The SMEDP has been the leading incentive, with 11 309 projects approved since its inception in 2000, and R12,7 billion in incentive value, of which R2,3 billion has been disbursed. From April 2006 to April 2008, 2 501 projects were approved for a
R2,96-billion incentive value, of which over
R6 000 million was disbursed.
The Enterprise Investment Programme comprises two distinct subprogrammes: the Tourism Support Programme (TSP) and the Manufacturing Investment Programme.
By July 2008, the Critical Infrastructure Programme had 19 projects approved with a qualifying investment value of R32 billion and an infrastructure investment of R9,2 billion. A related programme to support industrial infrastructure, the IDZ programme has also been attracting growing investment, and is valued at over R28 billion.
Workplace Challenge Programme
This supply-side programme of the Department of Trade and Industry (administered by the National Productivity Institute [NPI]) assists enterprises and industries to improve their productivity and competitiveness.
The programme focuses on improving workplace collaboration, adopting world-class manufacturing practices and disseminating best practices.
[Top]
National Industrial Participation Programme (NIPP)
The conclusion of the National Industrial Participation Programme (NIPP) and its endorsement by Cabinet in 2007 was a landmark achievement in the department’s work on industrial development. The NIPP serves as a guide and an integrator of the Department of Trade and Industry’s work in support of AsgiSA goals. It also plays a
significant role in enabling co-ordination of government’s Programme of Action (PoA); and focused
partnerships and co-operation with the private sector, industry and labour, in tackling the
challenges of industrial development.
Capital/transport equipment and metals,
automotives and components, chemicals, plastic fabrication and pharmaceuticals, forestry, pulp and paper and furniture have been identified as four lead sectors in which growth interventions and key actions will be undertaken.
The focus of the work on industrial development will be on sectoral action plans, which will be prioritised and implemented within the framework of government’s PoA for the Economic Cluster. Significant progress has been made in finalising key sector strategies, with some being targeted for implementation during the 2007/08 financial year (e.g. chemicals and pharmaceuticals, automotives, metals and capital equipment, forestry, pulp, paper and furniture, and clothing and textiles).
Implementation of business process outgoing (BPO) and tourism strategies is ongoing. The development and implementation of sector strategy interventions will be a continuous process, with priorities determined for
each period, to ensure the broadest possible
stimulation of growth and employment in the
manufacturing and services sector.
The chemicals and allied industries, and
the metals and engineering sectors summit
agreements were signed in April 2008. These
agreements serve as a framework within which government, business and labour engage in the
pursuit of sustainable solutions to constraints
affecting the sectors.
The NIPP has been a key contributor to industrial
development, and by July 2008 some 150 projects
had been implemented, involving US$7,5 billion
in investments and exports and 12 000 direct
jobs created.
There are two elements to the NIPP in
South Africa, those emanating from non-defence procurements and those from defence
procurement. The Department of Trade and Industry manages the NIPP, which becomes effective
once the foreign content of a procurement,
purchase or lease contract of government departments
and parastatals exceeds US$10 million, in which case an NIPP obligation of 30% on the
foreign content will be attracted.
The NIPP focuses on national objectives, mainly
in the commercial environment. The objectives
of the NIPP include fast-tracking investment,
fostering partnerships in research and
development and creating market opportunities
for locally manufactured goods abroad.
By early 2008, the total value of NIPP obligations being monitored was estimated at
more than US$15 billion. The programme has
benefited South Africans by US$12,6 billion over
the last 10 years as a consequence of the country’s
Strategic Defence Procurement and other
government purchases.
This includes investment credits estimated
at US$3,5 billion, with export and local sales,
technology transfer, BEE and SMME promotion
making up the balance. The benefits cover the
areas of BEE, partnerships between participating
entities and skills development.
NIPP investments have allowed major new injections
of technology and skills transfer into South
Africa. The vision of the department regarding
stimulating innovation and high-growth sectors, and integrating South Africa as a vital part of
high-value global supply chains is being realised.
South Africans have taken raw materials and
moved them up the value chain. Mined gold is
being turned into jewellery and base metals are
used to produce super alloys. The NIPP has opened
entirely new markets, sometimes with unique
new products.
At the same time, the NIPP has become a major
point of leverage for government’s wider vision of
growth with equity, as expressed in AsgiSA.
Concerted efforts have been made to maximise
job creation, involve SMMEs, build BEE-owned
enterprises and spread the benefits wherever
possible to neglected regions and towns. Partnership
projects arising out of the NIPP range from
the manufacture of oil rigs for the international
market to training opportunities in the nuclear and
energy sectors.
[Top]
Industrial Policy Action Plan (IPAP)
Cabinet adopted the National Industrial Policy
Framework (NIPF) as its first action plan in 2007.
In August 2008, progress on sector strategies
included:
- the announcement of the first draft outlining the
new motor-industry support programme
- in the metals and chemicals sectors, the start of
the implementation of National Economic Development
and Labour Council (Nedlac) sector
agreements reached with industry stakeholders
had begun
- the launch of the National Tooling Initiative in
support of the capital goods sector
- the development of the Draft Competitive
Supplier Development Programmes (CSDPs) for Transnet and Eskom
- the prospected finalisation by the end of 2008 of
the tariff review in clothing and textiles, chemicals
and aluminium products
- the development of urgent interventions in
clothing and textiles in consultation with industry
stakeholders
- the achievement of good progress in the implementation of actions in AsgiSA priority sectors, such as the roll-out of the BPO Incentive Scheme and the launch of the TSP
- in forestry, the continuation of work in the Eastern Cape and KwaZulu-Natal and the investigation of new interventions for Mpumalanga and Limpopo.
In the cross-cutting areas identified by the IPAP, progress included a comprehensive review of industrial financing and developing new support programmes, including:
- launching an enterprise investment programme
- launching a film and TV production rebate
- agreement on the structure of tax incentives for industrial policy interventions
- the consideration of the Competition Amendment Bill by Parliament
- the development of a comprehensive trade policy to assure alignment with industrial policy, expected to be completed by the end of 2008
- the establishment of the Technology Innovation Agency.
Cabinet approved the shift to a three-year IPAP that, while retaining annual targets, will be aligned to government planning and budget cycles and allow for a longer time horizon for implementation of industrial policy actions.
[Top]
Manufacturing
South Africa has developed an established and diversified manufacturing base that has
demonstrated resilience and the potential to compete in a global economy. The manufacturing sector provides a locus for stimulating the
growth of other activities, such as services and achieving specific outcomes, such as value addition, employment creation and economic empowerment. This platform of manufacturing presents
an opportunity to significantly accelerate growth and development.
The Department of Trade and Industry’s main functions regarding the manufacturing sector include:
- supporting increased investment in the sector
- enhancing the establishment of new manufacturing entities
- supporting new sustainable and profitable manufacturing entities.
Primary aspects of the Integrated Manufacturing Strategy (IMS) involve:
- improving market access for South African products in key markets
- promoting beneficiation and value addition
- finding ways to harness skills and expertise in South Africa so that they can be sold to
other countries.
The IMS identifies the need to capture local
knowledge, encourages large corporations and companies to make greater use of small businesses, and promotes greater integration between the different sectors of the economy so that they add value to each other.
The IMS also promotes BEE, small-business development, increased use of ICT, job creation, and a more equitable geographic spread of investment and economic activities.
The automotive industry is one of the key growth sectors that has contributed to the overall economic growth of South Africa. It contributed 7,53% to the country’s GDP in 2006.
Growth in this industry can largely be attributed to the Motor Industry Development
Programme (MIDP).
Details of a successor programme to the existing MIDP were announced in September 2008.
The Automotive Industry Programme was developed to stimulate production of automotive vehicles and components in South Africa and to encourage the expansion of
motor-industry investment and employment. It will provide for:
- stable, moderate tariff protection
- a local assembly allowance, which will allow manufacturers with a plant volume of at least 50 000 units per year to import a percentage of components duty-free
- a production incentive that will be based on production value added
- an automotive investment allowance and company-specific support allowances to support approved programmes in such areas as training and skills development, localisation and research and development.
These elements form the core of the programme. Further work will be done to investigate the possible inclusion of certain components for medium and heavy commercial vehicles.
All stakeholders are satisfied that the new programme will form the basis for sustaining growth, employment and exports of the automotive industry until 2020 in line with government’s objectives, in an increasingly competitive global environment.
[Top]
Competition policy
The Competition Act, 1998, (Act 89 of 1998) [PDF], promotes competition in South Africa to:
- enhance the efficiency, adaptability and
development of the economy
- provide consumers with competitive prices and
product choices
- promote employment and advance the social
and economic welfare of South Africans
- expand opportunities for South African
participation in world markets and recognise
the role of foreign competition in the country
- ensure that SMEs have an equitable opportunity
to participate in the economy
- promote a greater spread of ownership, in
particular by increasing the ownership stakes
of HDIs.
The functions of the Competition Commission include investigating anti-competitive conduct in
contravention of the Act, assessing the impact
of mergers and acquisitions on competition and
taking appropriate action, monitoring competition
levels and market transparency in the economy, identifying impediments to competition, and
playing an advocacy role in addressing them.
The Competition Commission is independent
but its decisions may be appealed to the
Competition Tribunal and the Competition
Appeal Court.
In May 2008, the Competition Amendment
Bill [PDF] was approved by Cabinet and introduced to
Parliament.
[Top]
Small, medium and micro-enterprises
A key focus of the Economic Cluster has been on
strengthening integrated state financial and business
development support for small enterprises
through strengthened institutional mechanisms
and more effective co-ordination.
A delivery network, integrating both financial
and non-financial support for small enterprises, is
complete and covers the entire country.
This network includes Seda, Samaf and Khula as well as departmental programmes to support
co-operatives.
Some of the projects to support small enterprises
include:
- considering improved financial support to small
enterprises, including the Khula direct retail
finance option
- leveraging procurement to increase demand
for goods and services from small enterprises
by aligning the Broad-Based Black Economic Empowerment (BBBEE) Codes of Good Practice and the Preferential Procurement Policy
Framework Act (PPPFA), 2000 (Act 5 of 2000) [PDF]
- rolling out the 10 products for government
procurement from small enterprises, including
support for small enterprises
- setting up the small enterprise procurement call
centre with appropriate dedicated resources and
protocols across all government departments to
ensure 30-day payment to small enterprises
- strengthening the Tourism Enterprise Programme (TEP) to promote tourism development
- giving focus on the status of business-development
interventions critical to respond to the
challenges of rural enterprising.
By August 2008, an integrated framework for SMMEs support had been presented and approved
by the Trade and Industry MinMec and the process
of aligning provincial growth and development
strategies (PGDS) and integrated development
plans (IDPs) had been initiated. This process will
ensure that support for small enterprises is prioritised
in PGDS and IDPs.
The TEP has been institutionalised into the Tourism Enterprise Partnership. The strategy for
enterprise development has been approved and
will focus on delivering sustainable jobs, and enterprises and transformation. Nine areas have been identified as having the
potential to enhance competitiveness of South
Africa as a destination. A decision has been taken
to pilot implementation of enterprise development in the Eastern Cape and KwaZulu-Natal. The focus
will be on developing new products and training
enterprises.
Communication on second-economy initiatives has seen the printing of the economic
opportunities publication and a TV series broadcasted
by the South African Broadcasting Corporation.
[Top]
Institutional support framework
National Small Business Advisory Council (NSBAC)
The NSBAC advises on issues affecting owner managed businesses.
The 15-member council comprises business owners, academics and international entrepreneurial experts.
[Top]
Small Enterprise Development Agency
The Small Enterprise Development Agency (Seda) aims to:
- improve geographic outreach
- achieve the desired impact on small
enterprises
- provide a single access point for small
enterprises
- establish critical partnerships to leverage resources and to enhance its service-delivery model and optimise resource usage
- align government’s strategy of service delivery in a coherent manner.
Through Seda offices, entrepreneurs are able to get services, including the development of business plans, technical advice and marketing, as well as information on export support, tenders and incentives.
Seda offices are operational in all nine provinces and by mid-2008 there were 42 branch offices.
Seda also manages the Seda Technology Programme (STP) with an infrastructure of 26 centres in different industrial sectors countrywide to support SMMEs. Over the last three years, this has led to the creation of 154 SMMEs and extended support to 283 SMMEs.
By way of reaching out to enterprises not located in these incubation centres, the Technology Transfer Programme has over the past two years supported 56 technology-transfer interventions to the value of R29,8 million. All these transfers were to second-economy enterprises of which 39% were women-owned.
[Top]
South African Micro-Finance Apex Fund (Samaf)
The Department of Trade and Industry launched Samaf to provide affordable and sustainable access to financial services for the poor. The goal of the fund is to:
- develop sustainable micro-finance institutions that can reach the very poor
- facilitate training for micro-entrepreneurs and financial co-operative clients
- provide back-office services for financial
intermediary organisations approved as
Samaf financial-services outlets linked through a centralised information technology (IT)
platform
- provide mentoring, monitoring and a framework for industry norms and standards, including sustainable lending methods for the developmental micro-finance industry in South Africa.
Within Samaf’s two-year existence from inception to March 2008, it approved a total sum of
R96 million (R55 million for on-lending and
R41 million for capacity-building). In this period, 40 financial intermediaries across the country provided lending windows for Samaf funds, creating a loan book of
R22,5 million.
By May 2008, Samaf had disbursed about
R8,2 million, benefiting about 9 000 savers and 1 700 SMEs.
[Top]
Khula Enterprise Finance Limited (Ltd)
Khula Enterprise Finance Ltd was established in 1996 as a specialised agency in the Department of Trade and Industry to promote the development of South African SMEs.
It is also registered as an insurer under the Insurance Amendment Act, 2003, (Act 17 of 2003) [PDF], and is governed by the regulations of the Financial Services Board. It is an independent, limited liability company with its own board of directors.
Khula’s primary role is to facilitate small entrepreneurs’ access to finance. It has developed various delivery mechanisms in the public and private sectors. It has strong relationships with commercial banks, the public and corporate sectors through which it delivers a variety of financial products. In addition to facilitating access to finance, Khula provides mentorship services through Khula Institutional Support Services, which provides counselling and practical support to entrepreneurs in establishing and
managing businesses.
Khula’s budget allocations increased from
R34,1 million in 2006/07 to R69 932 million in
2008/09. The Khula Credit Indemnity Scheme has
also been successfully revised with commercial
banks to emphasise developmental imperatives
associated with small business support.
Khula has also launched the first-ever South
African Start-Up Fund, with an initial capital
amount of R150 million, specifically for the benefit
of new black entrepreneurs.
This fund, named the Business Partners-Khula Start-Up Fund, is implemented in partnership with
Business Partners Ltd and has been operational
since 2006.
[Top]
Business Partners Limited
Business Partners Ltd is a specialised risk
financier, providing customised and integrated
funding, technical assistance, mentorship and
property services to SMEs in South Africa, Kenya
and Madagascar.
It is an unlisted public company whose major
shareholders include:
Several specialist funds are owned and
managed by Business Partners Ltd: three
geographical business units, the Business Partners
Empowerment Fund, the Business Partners
Tourism Fund, the Business Partners
Women’s Fund and the Business Partners Youth
Franchise Fund.
The Business Partners-Khula Start-Up Fund is managed by Business Partners Ltd in a joint
venture with government.
Business Partners Ltd is committed to investing
capital, skills and knowledge into viable
entrepreneurial enterprises.
[Top]
Technology for Women in Business (Twib)
Technology for Women in Business (Twib) [PDF] was established in 1998 by the Department of Trade and Industry to support the advancement
of women in business, through the application of
science and technology (S&T).
Twib’s mandate is to accelerate women’s
empowerment and women-owned enterprise
development by facilitating S&T-based
business applications and systems, and to
unlock constraints to enterprise innovation and
growth. The programme is championed by the
department’s Gender and Women’s Empowerment
Unit.
In relation to the strengthening of the South African Women Entrepreneurs’ Network (Sawen), the Department of Trade and Industry wants to provide integrated entrepreneurial services for
women. This includes Twib, which has also been
successfully brought under the full management
of the department. To continue to support
both ICT and IT solutions to grow female enterprises,
Twib focuses on entrepreneurial skills
and capacity-building as well as technology
transfer.
Twib will also assist mainstream women
in the BPO sector and thus grow female
entrepreneurship in South Africa. A very important
aspect of Twib is the “Techno-Girl”
initiative through which, in partnership with Cell
C, it intends to encourage and introduce young
girls into techno-entrepreneurship.
[Top]
South African Women Entrepreneurs Network
The South African Women Entrepreneurs’ Network (Sawen) assists aspiring and existing business
women with their business enterprises.
The network advocates policy changes, builds
capacity and facilitates women’s access to business
resources and information.
Sawen is responsible for:
- organising networking forums at regional, national and international level
- lobbying and advocating for enabling and
supportive policies
- gathering and updating a database of
women-owned enterprises and the services
rendered by these companies
- facilitating access to pertinent business
information
- facilitating capacity-building and training
- providing business mentorship and counselling
- facilitating access to decision-makers.
[Top]
Isivande Women’s Fund (IWF)
The Isivande Women’s Fund (IWF) was launched in March 2008. The fund
aims to produce affordable enterprise loans,
ranging from R30 000 to R5 million.
[Top]
Industrial Development Corporation (IDC)
The Industrial Development Corporation (IDC) is a self-financing, South African state-owned national development-finance institution
that provides finance to promote industrial
and entrepreneurial development. Its primary
objectives are to contribute to balanced
sustainable economic growth in Africa and to
the economic empowerment of the South
African population, thereby promoting the
economic prosperity of all citizens on the African continent.
The IDC identifies and funds projects in partnership with others and focuses on promoting and investing in viable new industries. It differentiates itself through risk-taking and flexibility in structuring, particularly in the promotion of BEE, SMEs, regional investment diversification and job creation.
IDC’s highlights for 2008 include:
- funding approvals amounting to R8,5 billion
- R2,1 billion allocated for developments in the rest of Africa
- funding activities to assist in the creation and retention of more than 33 200 direct new jobs in South Africa (with more than 40% of these in rural areas and 1 900 in the rest of Africa)
- R5,2 billion approved for BEE enterprises (61% of the total)
- significant investment in SMEs (56% of the total number of projects funded)
- doubling Foskor’s operational income to over
R1 billion.
[Top]
Consumer and corporate regulation
The Consumer and Corporate Regulation Division of the Department of Trade and
Industry provides coherent, predictable and
transparent regulatory solutions. This is achieved by developing and reviewing regulatory systems, including policies and legislation in the areas
of competition; consumer, company and intellectual property regulation; as well as public-interest regulation relating to the liquor, credit, national lotteries and gambling sectors.
Corporate and consumer regulation has become a creative endeavour that seeks to serve
the interests of both business and consumers, and to create a modern and globally competitive national economy.
In an endeavour to create a regulatory environment conducive to investment and enterprise, the Companies Bill [PDF] was approved for submission to Parliament in 2008.
The Bill aims at, among other things, promoting the development of entrepreneurship and
enterprise efficiency; creating flexibility and simplicity in the formation and maintenance of companies; encouraging transparency and high standards of corporate governance; and
recognising the broader social role of enterprise.
The Bill proposes the establishment of the Companies and Intellectual Property Commission to administer and enforce the legislation.
A revised Consumer Protection Bill [PDF] was expected to be resubmitted for Cabinet’s approval to introduce it to Parliament during 2007/08.
The Bill aims to build strong consumers,
competitiveness and innovation in the economy.
It also aims to ensure that consumers are
able to make well-informed buying decisions, are able to access a wide range of products
and services based on honest and fair marketing and selling practices, have access to efficient
and effective redress, and are educated about their rights and obligations.
The enforcement of the Bill will be ensured through the proposed National Consumer
Commission.
The Companies and Intellectual Property
Registration Office registers businesses and
intellectual property rights, maintains related registries, and develops information for disclosure to stakeholders.
[Top]
Black Economic Empowerment
Broad-Based Black Economic Empowerment Strategy
BBBEE is a government policy aimed at
redressing past economic imbalances. Moreover, BEE is an important policy instrument aimed at broadening the economic base of the country,
further stimulating economic growth and
creating jobs while eradicating poverty.
The Codes of Good Practice for BBBEE were gazetted on 9 February 2007.
These codes are the culmination of the
development of the BBBEE Strategy. The Codes of Good Practice on BBBEE assist and advise both public and private sectors on their implementation of the objectives of the BBBEE Act, 2003 (Act 53 of 2003) [PDF]. The codes provide definitions,
interpretation and principles of BBBEE;
different categories of BEE entities; and
qualification criteria for preferential
procurement purposes and other economic
activities.
The Codes of Good Practice also provide the weightings, indicators, targets and guidelines for stakeholders in the relevant sectors of the economy to draw up transformation charters for their sectors.
The BBBEE Strategy and its accompanying
Codes of Good Practice are important instruments
to facilitate the massively increasing participation
of black people, thereby promoting the productive
capacity of the economy.
BBBEE activity has shown a sharp rise with
respect to the number and nature of transactions,
involving new enterprises and new consumers. Large companies are forging deals
which reflect the key characteristics of BBBEE.
In this regard, the National Empowerment Fund’s
Asonge share scheme involving MTM shares
and the Sasol Inzalo transactions stand out.
Transactions concluded in 2007 involved
R96 billion across a range of sectors, including
mining, financial services, construction, oil and
gas, telecommunications and food and beverage.
The Department of Trade and Industry
gazetted a manual on 18 July 2008 to
provide a framework for the accreditation and
verification of BBBEE reporting.
The objectives of the manual are to set acceptable
minimum standards of ethical conduct,
underpinning the responsibility of verification
agencies when performing verification and reporting
on the BBBEE Scorecard, and outlining the
procedures to be followed in providing assurance
on whether the requirements of the BBBEE Codes
of Good Practice have been met.
[Top]
Black Business Supplier
Development Programme
The Black Business Supplier
Development Programme (BBSDP) is a 20:80 cost-sharing cash-grant
incentive scheme, offering support to black-owned
enterprises in South Africa.
The scheme provides such enterprises with
access to business development services, assisting
them to improve their core competencies,
upgrade managerial capabilities and restructure to
become more competitive.
It aims to foster links between growing, blackowned enterprises, and corporate and public
sector enterprises.
Any enterprise that is majority black-owned (50
plus one share), has a significant number of black
managers, and a minimum trading history of one
year qualifies for the programme.
Between 2004 and 2008, the BBSDP disbursed
over R86 million.
[Top]
Business process
outsourcing and offshoring (BPO&O)
Business process
outsourcing and offshoring (BPO&O) is a major global trend, with a significant
positive impact on developing countries
possessing the required skills, cost advantage and
infrastructure.
Over the next few years, the global BPO&O
industry is forecast to grow at approximately 50%
per year and, as a result, a window of opportunity
exists for South Africa to realise significant value
by developing this sector.
The sector has been forecast to create 100 000
new indirect jobs in South Africa and contribute up
to R7,95 billion to the national economy in 2009. Since the Department of Trade and Industry started supporting this sector in 2007, a
significant number of direct and indirect jobs
have been created and about R700 million in
investment value realised.
In July 2008, the Department of Trade and Industry hosted the BPO&O National Policy
Conference in Durban.
The conference aimed to:
- review the current BPO&O Policy
- create a networking platform for BPO&O
investors
- create public awareness about the growing
BPO&O industry in South Africa.
By July 2008, nine projects had been approved,
9 132 jobs had been created and R 658 million
worth of investments had been made.
[Top]
Technology support
By providing technology support to industry,
the Department of Trade and Industry contributed to industry competitiveness in
support of the industrial policy. To co-ordinate and
streamline the Department of Trade and Industry’s technology support to SMMEs, the following
was achieved in 2007/08:
- After the successful merging of the Godisa
Incubator Programme and the Technology
Transfer Centre of the Department of Trade
and Industry in 2006 into the Seda Technology Programme (STP), the department
further successfully integrated the South African Quality Institute (SAQI) and the
technology-transfer activities of the Technology for Women in Business (Twib) [PDF] into
the STP, thereby adding quality services to
SMMEs and support for technology transfer to
women-owned businesses.
- Through the Support Programme for Industrial Innovation, the department supported 74
projects at a grant value of R78,3 million and
a total project value of R306 million. Thirty-four
percent of these projects were with BEE enterprises.
- In 2007, the Technology and Human Resources for Industry Programme supported 680
152
researchers and 2 054 students of whom 54% were black and 38% were female. More than 390 enterprises participated in the programme, of which 67% were SMMEs and 22% were
BEE companies.
- Through the South African Intellectual
Property Fund, the Department of Trade and Industry supported five SMMEs by providing venture capital. The department also trained five fund managers as interns for the industry.
- The Department of Trade and Industry contributed to the establishment of the Sisal Resuscitation Project in Limpopo, creating industrial
development opportunities for a co-operative in a rural area.
- The department hosted the first Department of Trade and Industry Technology Awards Event in Nelson Mandela Bay, Eastern Cape, during which top technology achievers in South Africa were acknowledged. Two bursaries were also awarded to two learners from disadvantaged communities.
[Top]
State-owned enterprises (SOEs)
The Department of Public Enterprises is the
shareholder representative for government, with oversight responsibility for the following SOEs:
SOEs have a critical role to play in advancing economic growth, since they are responsible for developing key infrastructure and manufacturing capacity. Infrastructure investments are a core part of the country’s strategy for shared economic growth and development and SOEs are implementing comprehensive investment programmes to ensure that significant and sustained opportunities for investment are created in supplier
industries.
[Top]
Alexkor
The core business of Alexkor is diamond mining. A community claim to the land has recently been resolved, which paves the way for the restructuring of Alexkor. The settlement provides for the
formation of a Pooling and Sharing Joint Venture (PSJV) between Alexkor and the Richtersveld Community.
The PSJV will put in place a mine-development plan and programme to upgrade
sea-diamond resources and develop a business plan for a viable mining venture. Transfer of Alexkor’s
agricultural and mariculture assets to the community will empower them and create a basis for future development and wealth creation, not only for the Richtersveld community, but also for the Northern Cape.
[Top]
Broadband Infraco
Broadband is viewed as a key driver of economic growth and wealth generation, and it is essential for South Africa to gain access to universally
available, reliable and affordable broadband.
Affordable national long-distance and international connectivity will have a favourable impact on pricing and the availability of broadband. Broadband Infraco, which became a stand-alone SOE in January 2008, has succeeded in operationalising and strengthening the national long-distance network, as well as providing
additional capacity. Infraco has increased its footprint by 30% and doubled its capacity. It has provisioned route connectivity services at the core backbone and regional expansion sites. Additional fibre routes were added to close the long-distance ring and provide redundant capacities. The Africa West-Coast Cable will be prioritised by the Government to meet 2010
objectives as well as other short- to medium-term strategic projects.
[Top]
Denel
A restructuring process has been undertaken, focusing on the corporatisation of distinct operating divisions. The introduction of strategic equity partnerships at business unit level is aimed at increasing market access and ensuring the
transference of global skills, technology and manufacturing knowledge to Denel.
[Top]
Eskom and the
Pebble-Bed Modular Reactor
The State’s key objective is to secure long-term, environmentally sustainable electricity for the country. Eskom will roll out an investment programme in excess of R300 billion over the next five years.
An important component of Eskom’s
capacity-generation programme is, among other things, the introduction of independent power producers, who will diversify the revenue sources for the building programme and help ensure security of supply.
Nuclear power, the most viable alternative to
coal as a baseload source of electricity, is also
expected to make a larger contribution to the
energy mix. This will be done through conventional
nuclear technology and the new fourth-generation
high temperature reactors offered by the PBMR.
The Pebble-Bed Modular Reactor (PBMR), a major development project, requires considerable initial investment by
the project partners. By June 2008, the negotiation of the new shareholder’s agreement,
which will create a platform to attract
additional equity partners, was at an advanced
stage.
This project is important for the retention of
skilled professionals within the South African
industry. The success of the project will have a
positive impact on the country’s manufacturing
sector and provide leading technology in the
reduction of green house gas emissions.
[Top]
South African Airways and
South African Express
The Department of Public Enterprise’s portfolio
has recently been expanded through the acquisition
of South African Express (SAX), a domestic airline focused on
secondary routes. The SAX Board of Directors has
approved the introduction of an exclusive cadet
pilot programme, which is aimed at addressing
the current shortage of pilots.
South African Airways (SAA) was transferred from Transnet to the
department on 31 March 2007. At the time, the
airline was financially and operationally challenged
and its continued sustainability was dependent
on the implementation of a fundamental
restructuring programme. The focus of this
programme is to return the airline to profitability, which required cost cutting, route and fleet
rationalisation and the implementation of more
innovative revenue-management practices. SAA won the 2007 Annual Airline
Reliability Performance Awards, which were
presented by Bombardier Aerospace on 16 June
2008 in Canada.
[Top]
South African Forestry Company
The financial performance of the South African Forestry Company (Safcol) has generally
been positive in the recent past and the group
has a strong balance sheet, including a positive
cash position.
By May 2008, a substantial portion of the
land on which Komatiland Forests (KLF), Safcol’s
main forestry plantation subsidiary, operates
was subject to land claims. This could delay the
execution of the transaction to dispose of KLF
during 2008/09.
[Top]
Transnet
The strong growth experienced by the economy
over the past decade, coupled with the rapid
pace of globalisation, has seen the demand for
freight traffic surpasses all previous expectations,
putting ever-increasing pressure on an already
strained freight network.
Transnet has already made some progress
towards addressing this challenge.
It has, over the last three years, achieved financial
stability and has focused on the reorientation
of the group around its core functions of freight
transport within the rail, ports and pipelines
sectors.
Transnet has also been successful in the
continued implementation of a capital-investment
programme aimed at improving the quality and
capacity of its asset base over the last two years
in particular, with a combined spend of some
R27 billion.
Almost 60% of the R84-billion capital
programme will go towards capacity-expansion
projects while just above 40% will be spent on
replacing outdated and unsafe infrastructure.
The R11,2 billion new Multi-Product Pipeline
(MPP) between Durban and Gauteng is a priority
project to ensure security of supply of liquid
fuels to the Reef. The MPP Project, the largest
single project in Transnet’s portfolio, encompasses
the replacement and expansion in
capacity of the Durban to Johannesburg Pipeline
Project. The MPP also addresses the capacity
constraints in the Inland Network, which services
the Alrode, Tarlton, Rustenburg, Witbank, Pretoria,
Kroonstad and Klerksdorp regions, resulting
from the increased demand requirements in
these regions.
Transnet intends to invest about R26 billion in
the next five years between its Port Authority and
Port Terminals divisions, primarily to support
growth in the dry-bulk, liquid bulk, containers,
automotive and break-bulk sectors across
the seven existing commercial ports and the
new Ngqura Port.
[Top]
Public works programmes
The Department of Public Works provides and
manages the accommodation, housing, land
and infrastructure needs of national departments;
co-ordinates the national Expanded
Public Works Programme (EPWP); and optimises growth, employment and transformation in
the construction and property industries.
[Top]
Expanded Public Works Programme
The Expanded
Public Works Programme (EPWP) aims to facilitate and create employment opportunities for the poor and vulnerable through integrated and co-ordinated
labour-intensive approaches to government
infrastructure delivery and service provision.
The EPWP has reached and surpassed its target a full year before the set deadline.
When the programme was launched in May 2004, it aimed to draw significant numbers of the unemployed into productive work with the
objective of creating a million job opportunities by 2009.
By the end of April 2008, the programme had already created 1 077 801 job opportunities, ahead of its scheduled 31 March 2009 time limit.
In 2006/07 alone, the programme created
439 099 work opportunities, going beyond its annual target of creating around 280 000 opportunities. Out of these job opportunities, the EPWP exceeded the 30% target of employing young people by 10%, bringing it to 40% and the 40% target of employing women by 7%
to 47%.
With regard to training, which forms a critical part of the programme, person days set aside for training during 2007/08 totalled 2 082 155, achieving about 54% of the annual target of at least 3 800 000.
[Top]
Construction and Property
Industry Development Programme
Construction industry growth cannot be seen in isolation from the pressing need to transform the industry into one that performs better in terms
of quality, employment, skills safety, health
and the environment.
The Department of Public Works seeks to support and empower women-owned construction enterprises through its existing
contractor-development programmes. Since the inception of the procurement reform process in 1995, the department has been actively involved in conceptualising and implementing programmes to promote emerging contractors in the built
environment. These programmes included
Targeted Procurement and the Emerging Contractor Development Programme (ECDP).
As part of the ECDP, the Contractor Incubator Programme (CIP) was initiated in 2004 by the Department of Public Works following the
findings of the Construction Industry Status Report that was conducted for the Construction Industry Development Board (CIDB) in 2002 and the ECDP Review, conducted in 2004.
The CIP has since been piloted throughout the country and was formally launched by the Department of Public Works in Hoopstad, Free State, in November 2007. The CIP intends to provide support to existing small- to medium-size construction enterprises to enable them to become
sustainable.
The small contractors will also receive much-needed help from the CIDB through its Triple Cs (construction contact centres) that are being set up throughout the country.
Triple Cs provide a hub for stakeholder
partnerships to address the challenges of growth. The Contractor Incubator Programme (CIP) will create an enabling environment within which existing contracting enterprises can
develop into sustainable enterprises. In selecting these enterprises, preference is given to black
women and youth-owned contracting enterprises. The enabling environment comprises
steady access to work opportunities and
supply-side support measures for growing
the targeted enterprises. The CIP targets contracting enterprises within categories three to seven on the CIDB grading. This enables
these enterprises to be eligible to tender for contracts between R1,5 million and
R30 million.
By August 2008, a total of 136 contractors
were registered on the CIP, of whom
62 were women-owned contractors.
The department is also using its own expenditure as a way of meeting the challenges and of improving the businesses that are women-owned. The total value of contracts that were awarded to women-owned companies in the 2006/07 financial year amounted to R327 million. Between April 2007 and December 2007, R675 million was spent on women-owned companies, including nonconstruction enterprises.
The established industry has also responded positively to promote transformation and has signed the Construction Charter, which commits the industry to concrete targets in terms of BEE.
Most of the major companies have made progress towards these targets. The Register
of Contractors, established by the CIDB, equips
government and stakeholders with an important
development tool and a clear understanding of the
nature of contracting capacity and empowerment
gaps across the industry.
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Construction Industry Development Board (CIDB)
The Construction Industry Development Board (CIDB) was established by the Construction
Industry Development Act, 2000 (Act 38 of 2000) [PDF], as a statutory body (Schedule 3A public entity)
to provide leadership to stakeholders; stimulate
sustainable growth, reform and improvements in
the construction sector; and improve its role in the
economy. The CIDB is responsible to the Minister of
Public Works, and comprises individuals appointed
from the private and public sector.
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Council for the Built Environment (CBE)
The Council for the Built Environment (CBE) promotes the uniform application of policy
and improves co-ordination between the building
profession and government. It drives the transformation
and improved performance of the building
profession.
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Labour programmes
The Department of Labour aims to reduce unemployment, poverty and inequality through policies
and programmes, developed in consultation with
social partners. These policies and programmes are
aimed at:
- improved economic efficiency and productivity
- skills development and employment creation
- sound labour relations
- eliminating inequality and discrimination in the
workplace
- alleviating poverty in employment
- enhancing occupational health and safety
awareness and compliance in the workplace
- nurturing the culture of acceptance that worker
rights are human rights.
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Employment and skills development
The Employment and Skills Development
Services (ESDS) and HRD Branch of the Department
of Labour are responsible for achieving
the strategic objectives and equity targets of the
National Skills Development Strategy (NSDS) and
contributing to the achievement of the objectives
of the HRD Strategy (HRDS).
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Legislation
The Department of Labour’s Legislation Branch
ensures the implementation of the following laws:
- Skills Development Act, 1998[PDF] (Act 97 of 1998), as amended.
- Manpower Training Act, 1981 [PDF] (Act 56 of 1981), of provisions that are still in force.
- Skills Development Levies Act, 1999[PDF] (Act 9 of
1999), as amended, and the Income Tax Act, 1994[PDF] (Act 21 of 1994). In some aspects, the
ESDS works closely with National Treasury and
the South African Revenue Service (Sars).
- South African Qualifications Authority (Saqa)
Act, 1995 (Act 58 of 1995) [PDF], working closely with
the Department of Education.
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Human Resource Development Strategy
One of the Government’s priorities for 2008 was to
focus on skills development.
The HRD Strategic Framework: Vision 2015 was
launched on 30 May 2008 by the then Minister of
Public Service and Administration, Ms Geraldine
Fraser-Moleketi.
The strategic framework is grounded and aligned
to government priorities as encapsulated in Jipsa, AsgiSA, the NSDS II and the evolving HRDS.
The strategic framework stands on four pillars
of strategic intervention:
- capacity-development initiatives: developing
human capital for high performance and
enhanced service delivery
- organisational support initiatives: enhancing
organisational capacity and support to maximise
the productivity of human capital
- governance and institutional support initiatives: ensuring that the HRD in the Public Service is
effective
- economic growth and development initiatives:
ensuring that the HRD plans, strategies
and activities seek to integrate, promote and
respond to the economic growth and development
initiatives of government.
The strategy puts the individual public
servant at the centre of skills transfer through
capacity-development initiatives in the workplace. The revised HRDS for the period 2009 to 2014
was approved in July 2008. One of the critical
challenges that government has been addressing is to ensure that there is proper alignment between the skills that the education and training system produces and the needs of a developing society and economy.
The aim of this strategy is articulation between the subsystems (public-private and across government) for optimal achievement of systemic outcomes, to facilitate a continuing analysis of HRD and the functioning of the labour market. The intended outcomes will include improvements in the HRD Index and country ranking and in the measure and ranking of economic
competitiveness, a reduction of the Gini coefficient and improvement in social cohesion.
The strategy includes the following commitments:
- accelerating training output in priority areas to achieve accelerated and shared economic growth
- ensuring universal access to high-quality and relevant education
- improving technological and innovation capability in the public and private sectors
- establishing efficient planning capabilities in the relevant departments and entities for the successful implementation of the HRDS for South Africa.
A monitoring and evaluation system was put in place with clear indicators to monitor the implementation of the strategy. A major review based on systematic evaluation studies and impact assessments will be conducted every five years.
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Sector education and training authorities
The Seta Co-ordination Programme aims to:
- implement sector skills plans to develop appropriate skills
- develop and register learning programmes
- provide quality assurance of qualifications and standards of programmes in sectors
- disburse skills development levy funds.
The Seta sector skills plans have been formed on the basis of the first-ever formally published occupationally based national scarce skills list that has been integrated into the Department of Home Affairs’ processes for scarce skills immigration work permits.
Seta sector skills plans have been automatically uploaded through an integrated data-collection process into the employment services system to allow for a more efficient and accurate development of the annual national scarce skills list.
All 2010 targets set for the Seta programmes are expected to be met or exceeded:
- 106 869 unemployed people have already been registered on learning programmes, compared to the target of 125 000
- 87 869 workers were registered on qualifying learning programmes, compared to the target of 125 000
- 4 805 young people were registered on new venture-creation programmes, compared to the target of 10 000.
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National Skills Authority (NSA)
The NSA is an advisory body, established in terms of the Skills Development Act, 1998 [PDF], to advise the Minister of Labour on the NSDS, its implementation and other relevant matters. Its
membership consists of organised business, labour and community organisations, government departments and representatives from the
education- and training-provider community.
Key priorities for 2008/09 include accelerating the rate of disbursement related to the NSDS’ annual targets, and support to the AsgiSA and Jipsa skills-development targets.
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National Skills Fund (NSF)
The NSF, a statutory advisory body to the Minister of Labour on the NSDS, was established in 1999 as legislated by the Skills Development Act, 1998. The Minister of Labour, on advice from the NSA, allocates subsidies from the NSF. The Director-General of Labour is the accounting officer of
the fund.
The NSF is funded by 20% of the skills development levies collected by Sars (of which 2% is paid to Sars as collection fees and 2% is allocated for administrative costs).
By the end of September 2007, the NSF had
disbursed R114 million from a total of R390 million
to six provinces. About 48 268 unemployed people
had undergone training valued at R127 million
related to social-development-initiative projects, including the EPWP. Of those trained, 26% were in
accredited training programmes, and 30 212 were
placed in employment.
In the Adult Basic Education and Training
programme, 16 463 unemployed learners were
trained from a target of 20 000 while 5 590 unemployed
learners were provided with bursaries to
enter areas of scarce and critical skills learning, such as accounting and engineering.
By mid-2008, the legal status of the NSF was
being addressed and proposed amendments had
been incorporated into the Skills Development
Amendment Bill [PDF].
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Unemployment Insurance Fund (UIF)
The main tasks of the UIF are to:
- maintain an employer/employee database
- process claims and pay benefits
- invest excess funds
- reduce opportunities for fraud
- collect contributions.
The Unemployment Insurance Amendment Act, 2003 (Act 32 of 2003) [PDF], deals with the dministration
of the fund and the payment of benefits. It also
provides for the commissioner to maintain a database
to pay benefits to beneficiaries. Sars continues
to administer the Unemployment Insurance
Contributions Act, 2002 (Act 4 of 2002) [PDF].
Sars collects contributions from all employers
whose workers pay employees’ tax. The collection
of contributions from all other employers is
delegated to the Unemployment Insurance
Commissioner.
According to the UIF 2008 Annual Report, it
paid out more than R2 911 billion in 2007/08.
The UIF has more than 1,1 million employees and
7,4 million employees on its database.
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Occupational Health and Safety (OHS)
The OHS legislative framework consists of the
OHS Act, 1993 (Act 85 of 1993), and 20 sets of
regulations. Compliance is achieved by conducting
inspections and investigations and providing
advocacy and statutory services. Responsibility for
OHS and workers’ compensation in South Africa
resides in three government departments.
The Department of Labour is responsible for
workers’ compensation in terms of the Compensation for Occupational Injuries and Diseases Act, 1993 (Act 130 of 1993) [PDF], and for OHS in terms of
the OHS Act, 1993. The Department of Minerals
and Energy is responsible for OHS in mines and
mining areas, in terms of the Mine Health and
Safety Act, 1996, (Act 29 of 1996) [PDF]. The Department
of Health is responsible for compensating mineworkers
in terms of the Occupational Diseases in
Mines and Works Act, 1993 (Act 208 of 1993).
In 2007/08, the department’s inspectors
conducted more than 17 000 inspections.
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Compensation Fund
The Compensation Fund administers the Compensation for Occupational Injuries and Diseases Act, 1993 as amended. The main objective of the Act is
to provide compensation for disablement, illness
and death resulting from occupational injuries and
diseases.
Upgrading of the Compensation Fund’s financial
system began in January 2008. Expenditure
on benefit payments increased from R1,7 billion
in 2004/05 to R2,3 billion in 2007/08 due to the
processing of 73% of backlog claims from 2000
to 2004. Cheque payments were discontinued and
an electronic payment method was implemented
from September 2007.
Achievements for 2006/07 included finalising
84% of the balance of backlog claims
and processing 58% of current claims. In total,
868 076 claims were paid. A successful pilot
project was conducted to decentralise claims
registration and adjudication to labour centres. As a result, benefit payments were increased. All
new claims received are now registered within
24 hours of receipt; and a new document-management system was piloted and implemented, improving the quality of electronic files.
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Directorate: Collective Bargaining
The Directorate: Collective Bargaining has to:
The directorate:
- registers trade unions, employers’ organisations and bargaining and statutory councils
- publishes bargaining council agreements for the extension thereof to non-parties
- promotes and monitors collective bargaining.
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Dispute resolution
The Commission for Conciliation, Mediation and Arbitration (CCMA) is an independent dispute
resolution body created in 1996 in terms of the LRA, 1995. It does not belong to, nor is it controlled by, any political party, trade union or business.
Between November 1996 and 31 January 2007, the CCMA processed 1 069 400 labour disputes. The number of working days lost due to industrial action decreased by 68% since the LRA, 1995 came into operation. Although the CCMA receives about 120 000 referrals a year, it manages to settle an average of 70% of those cases.
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Labour-market policy
The Labour-Market Policy Programme consists of three directorates, namely, Research Policy and Planning (RPP), Labour-Market Information and Statistics (LMIS) and International Relations (IR).
The Directorate: RPP is responsible for:
- analysing labour-market information and conditions
- identifying relevant labour-market interventions
- formulating labour-market policies
- researching, monitoring and evaluating policies affecting the labour market.
The Directorate: LMIS is responsible for:
- creating and maintaining capacity to monitor, analyse and disseminate labour-market information and statistics pertaining to trends in the labour market and the impact of labour-market policies
- creating and maintaining linkages with other producers and users of labour-market information and statistics, with the aim of avoiding duplication and promoting clear use of concepts
- developing the departmental library as an expanded resource centre on labour issues
- assisting other departmental directorates with statistical procedures to develop and monitor departmental activities.
The Directorate: IR is responsible for:
- developing strategies that will consolidate South Africa’s presence in international forums
- monitoring developments in the African region and southern African subregion
- facilitating the department’s participation in bilateral and multilateral organisations in the region
- discharging South Africa’s obligations to international organisations of which the country is a member
- developing strategies to encourage conformity with international labour standards in the region.
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Employment equity
To support and accelerate the implementation of the Employment Equity Act, 1998, (Act 55 of 1998) [PDF], the Directorate: Employment Equity focused mainly on developing an employment-equity system aimed at strengthening the implementation and enforcement mechanisms of the Act. An online employment-equity reporting service was developed and implemented from 1 September 2005.
In addition, the Director-General Review System was developed to assess employers’ substantive compliance with the Employment Equity Act, 1998 [PDF]. The programme continued to support capacity-building in trade-union organisations by means of the Strengthening of Civil Society Fund.
Source: South Africa Yearbook 2008/09
Editor: D Burger. Government Communication and Information
System
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Last modified: 28 July 2009 10:14:58. |
