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INTRODUCTION

Following hereunder is a briefing based on a selection of The Department Of Trade and Industry (DTI) activities for the period January - July 1998. It would be impossible to summarise its activities for the purpose of this document. So we simply selected what we regard as the most important highlights of oar activities. The full range is covered in our annual reports.

LOTTERIES

The program to institute a National Lottery is currently under way. The following activities have already been implemented:

23 July 1998: The draft Request for Proposal (RFP) and the draft Licence were issued.

06 August 1998: The Bidders' Conference was held at the CSIR in Pretoria. Seven (7) draft RFP and Licence were sold by the Department to would be bidders.

It is expected that the National Lottery operations will start by June-July 1999.

LIQUOR

The new Liquor Bill was ratified by Cabinet on 10 June 1998 and it is currently being technically reviewed by the State Law Advisers and will be tabled in Parliament by 31 August 1998. It will be discussed in the NCOP and in the Portfolio Committee during September 1998 and would be tabled in Parliament by October 1998.

INVESTMENT FACILlTATION

The DTI's investment programme is supported by a set of measures which include the Spatial Development Initiatives (SDIs), Manufacturing Development Programme (MDP), IDC programmes, SMME Development Programmes, and the Industrial Participation Programme. Alongside these is the Cabinet Investment Cluster, a Ministerial level co-ordinating committee reporting directly to Deputy President Mbeki.

Manufacturing Development Programme

Approvals for the first seven months of 1998 under the Tax Holiday Scheme and the Small Medium Manufacturing Development Programmes (SMMDP) showed a marked increase. Under the SMMDP 236 projects from 12 industrial sectors totalled R417 439 045 with a potential to create 7 809 permanent jobs. Kwa-Zulu Natal was the highest with 78 projects and followed by Gauteng with 45. Under the Tax Holiday Scheme 33 projects from nine industrial sectors were approved valued at R1 163 676 789 with a potential to create 2 677 permanent jobs. In this category Gauteng was first with 11 projects followed by the Eastern Cape with seven.

Spatial Development Initiatives

The first half of the year saw the launch of three SDIs at different international conferences that attracted a sizeable number of local and foreign investors. The first in February was the Western Cape SDI at Saldanha Bay. In April was the launch of the Wild Coast SDI and in May came the Lubombo tourism SDI which involved Mozambique, Swaziland, and SA. These SDIs are at different stages of development. But those that have been launched have proved to be a success. The idea is slowly catching up in some parts of Southern Africa. Namibia and Botswana are now co-operating closely around the SDI that runs from Walvis Bay and cuts across Botswana to connect the Maputo Development Corridor in Gauteng.

National Empowerment Fund

The NEF Bill has passed through the Cabinet and will soon be tabled in Parliament. The process of putting in place a more permanent management structure is underway and awaits the approval of Budget by the concerned Directors-General. The Fund will have three subsidiaries, namely:
* Unit Trust (Lefa Trust) - which will make unit trusts accessible to poor and uninformed people and will be charged with cultivating a culture of saving.
* Equity Fund - which will assist people from disadvantaged backgrounds with start-up finance.
* Invest directly in underlying assets and sell shares directly to historically disadvantaged people and to engage them in economic activities.

The NEF will function on commercial basis. Its aim is to ensure that the current privatisation of state assets also benefit the poor.

Government Procurement and Industrial Participation

The Government Procurement Programme's main function is to assist in the achievement of the objectives of increasing Previously Disadvantaged Individuals (PDI) increased involvement in state tenders, and monitoring the process. 1320 Tenders were monitored and the value awarded to PDI's was 0.35 Billion Rands and to others was 1.07 Billion Rands.

The Industrial Participation Programme has been actively involved in many major government purchases in the last financial year. The most significant of which has been the proposed Defence Purchases, the Telkom Purchases for the roll out of '1 million lines', the Home Affairs IT purchase, Eskom upgrading of Koeberg, and the replacement and upgrading of Radar by the Department of Transport.

The result of the leverage of the above purchases and the pro-active commitment of potential bidders for government purchases has resulted in the realisation of large investments. The creation of jobs by the establishment of new ventures as a result of commitments incurred by the bidders due to the Purchases of over 10 Million US $ per contract or recurring contracts to the value of 3 M US$ to one seller over a 2 year period. The nature of the contracts that exist between the Government and the Bidders is mainly export focussed with a resultant export bias on the Strategic Partnership Agreements (SPA).

Outputs for the year 1997-98

Investments : R 111 Million
Jobs : 1500 :
Exports(7 Yrs3): R 450 Million :.

Cabinet Investment Cluster

The Cabinet Investment Cluster (CIC) consists of 13 National Departments responsible for investments and infrastructure. It became fully functional during the year under review and has managed to draw up a work programme which has formed the basis for its report to the Intergovernmental Forum (IGF). The CIC presentations to the IGF focussed on the development of a "National View of Provincial Growth and Development Strategies" in a particular emphasis on investment promotion. In this regard the CIC set up an Interdepartmental Task Team on a Database for investment and infrastructure which are charged with developing an approach to the co-ordination of such.

The prototype CIC Database was in its development state by March 1998 at which point it has had been tested out with the CIC National Departments and Provinces. Further development of the Database was on track for full implementation by National Departments as a Government Investment Information Management System.

SMALL BUSINESS PROMOTION

INCREASING ACCESS TO FINANCE

A Strategic Plan on Access to Finance

A strategic planning workshop was held in September last year with stakeholders to identify a way forward to increase access to finance for SMME's. The outcome oft he workshop was a draft strategy document which was distributed widely and followed up with a second workshop in April 1998 to reach consensus on the strategy.

Credit Guarantee Scheme

Last year we reported the establishment of a Credit Guarantee Scheme to help banks to extend credit loans to SMME's. The Scheme provides access to over 2000 branches of banks. K~A facilitate-loans between January to June 1998 to the value of R 82.11 million to SMME's through a guarantee of R S2.3 million. This sustained 2 600 jobs.

Seed Loans

These are interest-free loans to new and existing Retail Financial Intermediaries (RFI's). From January to June 1998, R3 1 53 320.00 in grants and loans have been approved so far to 13 RFI's.

Business Loans

These are loans to RFI's for on-lending to SMME's. From January to June 1998, loans to the value of R39.83 million have been made by 36 RFI's resulting in their propensity to create 105 000 jobs.

Micro Loans
KHULA has commenced with a programme for micro-loans, termed "KHULA Start". These loans are mainly directed at rural areas where access to finance for SMME's is limited or non-existent. It is being piloted this year and so far 6 organisations have accepted to become KHULA Start agents.

B INCREASING ACCESS TO TRAINING, INFORMATION AND COUNSELLING

Local Business Service Centres

Ntsika has accredited an additional 13 service providers as LBSC's, while 19 were re-accredited, making a total of 32 altogether. Ntsika has allocated R7 451 985.00 to I3SC's to build their capacity and for programmes. From January to June 1998, Ntsika has granted R270 000.00 to build their capacity and R7 181 982.00 for programmes. This has resulted in assistance to 4 410 new entrepreneurs and 3 330 existing entrepreneurs. Ntsika has supported service suppliers who are not yet accredited as LBSC's to the value of R1 320 000.00 for capacity building and programmes.

A sum of R1 090 835.00 has been granted to 5 University Small Business Units. Th9 have extended services in the areas of industrial extension, counselling and information to 10 877 small entrepreneurs.

Capacity Building

From January to June 1998, R569 350.00 has been expended in capacity building of service providers. Training of Trainers courses, 2 for enterprise development and 1 for industrial counselling were held during this period.

Targeted Assistance

A sum of R1 471 287.00 has been expended on targeted programmes. 283 youths, 1:20 disabled, 198 women and 75 rural persons were assisted by different programmes.

Access to Information

The following information sources were made available to SMME's:
 Information help-line lines available at Ntsika and KHULA.
 A TV programme called "Business Buzz" featured on a weekly basis.
 5 model Information Centres have been established.
 Business Referral and Information Network (BRAIN) information website
available for small businesses on the Internet.

ACCESS TO TECHNOLOGY

The Technopreneur programme is creating technology-based employment opportunities. In the period from January to June 1998, R581 520.00 has been granted for programmes. 25 technical colleges have now joined the programme.

Two Model Manufacturing Assistance Centres have been established in East London and Durban. Ntsika has granted R3 656 000.00 to provide Technical Services to SMME's.

In an effort to empower women, to make them aware of business opportunities, assistance programmes, legal rights and availability of finance, KHULA is organising a series of business conferences. To compliment and enhance KHULA's efforts, TWIB (Technology for Women in Business - a Department of Trade and Industry / Council for Scientific and Industrial Research, initiative) has set itself the following objectives:
* Introduce or enhance use of Technology in Women's Business
* Enable Women in Business (W2) to access Technology based solutions
* Facilitate an outreach strategy from Science and Technology based institutions to WIB
* Encourage needs - driven Industrial Research targeting SMME's
* Expose and encourage Young Women to choose Science and Technology as careers.

CRITICAL OUTPUT
..
* Enlarge/create a function 1RIB network of:
* Technology Institutions eg Telkom, FRD
* Individuals
* Students large and small Business who are actively involved in providing technology support to SMME's, etc
* Give visibility to Women with Science and Technology skills as role models and mentors, especially to young women
* Increase the number of SMME's who are utilising technology in their Business
* Adopt SMME's who meet the criteria as TWIB project-partners

TWIB SECTOR FOCUS

* Information Technology
* Textile Clothing and Crafts
* Food and Agro-processing
* Construction and Infrastructure

CROSS-CUTTIN& SECTORS

 Management systems
 Information Technology

PROSECT LOCATI02

CSIR and NTSIKA

The 8th of August 1998 will see the official launch of TWIB at the Free State Province; this event will be coupled with various seminars and culminate into the Women's Day celebrations.

D MARKETING AND LINKAGES

The process of increasing access to Government Procurement was identified as a priority in January 1998. The CSBP is in the process of finalising a discussion document on a national procurement support programme for SMME's. The programme will focus on co-ordinating the activities of implementing agencies and building the capacity of SMME's to supply government. The programme will be workshopped with stakeholders on 20 and 21 August 1998.

In pursuit of encouraging small businesses to develop their capacity to tender, Ntsika has granted R823 375.00 to the Tender Assistance Centres that were accredited. They have in turn assisted 1485 entrepreneurs in the area of advice while 12 678 entrepreneurs have been supported with specific tenders. 13 Tenderers have been successful in obtaining contracts to a value of R1 249 503.00.

TRADE FACILITATION

Tariffs

The Government is gradually phasing down tariffs rather than drastic cuts. The tariffs are still seen as an important instrument to support industrial and agricultural activities and employment. At the same time tariff reform should encourage increased competitiveness and export orientation.

EMIA

Note: EMU provides exporters with assistance in terms of exhibitions, primary research, national pavilions as well as inward and outward trade missions.

The latest results (those of applicants approved up to October 1997) indicate that industry is securing new business and international contracts as a result of EMIA assistance. A total of R21 9m in export sales had been generated and orders to the value of R3 1 8m were received. For each rand spent on EWA, an average of R36s46 worth of export sales was generated. The value and number of approvals for EMIA assistance each month have increased three-fold. At present, the DTI is approving approximately 250 applications a month on average to the value of between R6m and R7m, whereas at its inception, between 50 to 60 applications a month were approved at a value of R2m.

EXPORT CREDIT AND FOREIGN INVESTMENT REINSURANCE

The medium/long term real exposure increased over the last 7 months from R2,3 b to R2,5b. The potential exposure (applications approved but contracts not concluded), increased from R9,9b to RI4,4b. Short term exposure increased from R1,87b to
Rl,9Sb. This is an indication of the extent to which Department supports exporters by providing reinsurance cover to export debtors.

EXPORT PROMOTION

The Department led a series of remarkably successful missions abroad. The first, a ground breaking mission to the People's Republic of China, comprised more than a hundred members. This was followed a mission to the Benelux countries (the Netherlands, Belgium and Luxembourg). A significant " new style " mission went to the US cities of New York, Chicago,

Orlando and Atlanta to promote our fledgling arts and crafts industry as exporter and expose members of the industry to the conditions and demands of that particular market. A mission to the Nordic countries of Sweden, Norway and Finland followed. In keeping with Government' s commitment to create an African renaissance, the Department undertook two missions into Africa; one to West Africa (Ghana, Ivory Coast and Senegal) and one to East Africa (Tanzania, Uganda and Mauritius). Although some of these markets are not traditional trading partners, they hold significant export and investment opportunities for South African business The last mission for the year will be to Canada in September.

To instil and nurture an export culture among our business community and take information about available Departmental assistance and services to grass roots level, a Departmental team has begun to conduct a series of twenty export and investment seminars in various centres throughout the country. The first took place on 27 July. Particular attention will be devoted to the needs and requirements of small business. These seminars cover topics such as tax holidays, small and medium manufacturing development, finance packages, export promotion services and export incentives.
.
The Department has also been collaborating with various industries to guide them towards establishing export councils for these industries. Details are to be announced soon. An Export Week will be presented at Gallagher Estate in Midrand from 23 to 26 November 1998 and the week will culminate in the presentation of the President's Awards for Export Achievement during a gala evening at Gallagher Estate an 26 November 1998.

Multilateral Trade Relations

The current global environment has witnessed increased attention to the development of s~hened systems of global economic governance to manage the processes of globalisation and hieralisation. UNCTAD and the WTQ are among the key intergovernmental institutions concerned with the management of- and regime making in- international trade and investment.

Key activities during this period included:
* participation of South Africa at WTO Trade Policy Review in April 1998 where our trade policy came under scrutiny by members of the WTO;
* participation at the 2nd WTO Ministerial Conference and 50d' celebrations of the bilateral trading system, in Geneva in May 1998, in which President Mandela delivered a highly acclaimed keynote address.
* participation in the negotiation of the Trade, Development and Co-operation Agreement with the European Union, concentrating on the trade-related provision and clauses related to co-operation (financial and technical) in the proposed Agreement. In addition, we participated in an extensive technical evaluation of the costs and benefits of South Africa's possible accession to the United Nations Industrial Development Organisation (UNIDO) which has since been approved by Cabinet.
* attended the Cairns Group Ministerial Conference in Sydney during April when South Africa was admitted as a full member and continues to follow closely the preparatory activities of the Group in Geneva with a view to the September Special Meeting of the General Council of WTO to start organising WTO activities for the next Ministerial to be held in the latter part of 1999. That meeting is expected to pave the way for comprehensive negotiations to begin in the year 2000.
* South Africa also became a member of the working Parties on the Accession to WTO of China, Russia and Vietnam and preparatory work is currently under way for those tariff and non-tariff negotiations.

Africa Trade Relations

The renegotiations of the SACU agreement continues and a multilateral Ministerial meeting will take place within a month to seek common ground on the outstanding issues. In the meantime the DTI played a pivotal role in the negotiation of a Preferential Trade Agreement between SACU states and Zambia which was approved in July according to which Zambia will grant BLNS states tariff preferences on a range of products.

In the drive to establish a Free Trade Area (FTA) within SADC, South Africa has unveiled its trade offer to other SADC states. The final offer will be made in conjunction with other SACU members. According to the offer SADC states will enjoy duty free access to SA markets very rapidly but SA will only enjoy free access after eight years. This is designed to enable the region to move towards a regional industrial policy involving regional specialisation and upstream and downstream linkages as supply chains develop.

Further afield, during 1998 the DTI led two trade missions to West and East Africa respectively. These missions were regarded as very important because of the centrality of the continent in the Government's trade strategy. Although trade with most African states is still loaded in SA's favour, the DTI is working on measures to promote investments into these countries and also open up its markets to Africa.

IMPROVING BUSINESS ENVIRONMENT

The Competition Policy

The inadequacies of the present Maintenance and Promotion of Competition Act are widely recognised. The current Act does for example not deal with vertical mergers. The few outright prohibitions specified in regulation are subject to criminal sanction and hence to the judicial process associated with criminal law. This has resulted in a handful and generally unsuccessful prosecutions.

Principles underlying new Competition Bill

The stated objective of the Bill is the promotion of competition in order to promote economic efficiency, competitive prices, promote employment, ensure ease of access for SMME's and to promote greater spread of ownership.

The new bill looks at:
* horizontal and vertical restrictive practices - these are horizontal and vertical arrangements between firms that restrict competition;
* actions by dominant firms that amount to abuse of that dominant position, and
* horizontal, vertical and conglomerate mergers that are likely to restrict competition.

Interested parties may ask the Minister to review a decision with respect to a merger on a limited number of public interest grounds. In contrast with the wide ranging powers extended to the Minister in the present Act this is the only discretion granted to the Minister in the new Bill. The review - as with all other procedures provided for in the Bill - will be transparent. .

National Consumer Affairs Office

* The DTI and state law advisers are currently finalising the Regulation to exempt certain categories of money lending from the provisions of the Usury Act. The document will soon be published for public comment and thereafter signed by the Minister.
* The drafting of the amendment to the Usury Act will be completed by November.
* The amendments to the Estate Agents Act were finalised and adopted.

Trade Remedies Group

The Government remains firm on its commitment to support domestic producers against unfair international trade practices such as dumping. The capacity for dealing with such cases is being strengthened and the Board on Tariffs and Trade is coping well with a sharp increase in dumping applications. The number of investigations initiated has increased from seven in 1977 to nine in the first seven months of this year.

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