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Introduction.

Chairperson, members of the National Council of Provinces (NCOP). I am privileged to once again present the budget for the Department of Trade and Industry to the NCOP. It is not possible to provide a full review of trade and industry in South Africa as this is a massive field. My purpose in this address is to set out some of the key features in the DTI budget and how this relates to the broader issues of trade and industry.

For those of you that participated in the Workshop on small, medium and micro enterprises (SMMEs) in this house last week you will know that the Department of Trade and Industry (DTI) is undertaking a major reorganisation. Accordingly the coming period will be an important time for the work of the Department of Trade and Industry.

As the President indicated in his opening address to this Parliament we have never been better placed as an economy to achieve sustainable and more equitable economic growth. But this is not guaranteed and all major economic actors - including the DTI - will have to ensure a maximum effort to translate this potential into a reality. The volatile world that we live in has once again been illustrated over the last weeks.

The DTI has reflected long and hard on its performance in, and the experience of, the years of our democracy. Much has been achieved but much has to be done. In this year we are going to be carrying out an important reorganisation of the operations of the DTI in order to better focus our efforts and improve on our capacity to deliver the economic services that we are responsible for providing.

The range of work covered by the DTI is very extensive and it is not possible to examine in any depth all aspects of that work. We have tried to improve the quality of information on all aspects of the work and to make it more accessible to members. For those of you able to use the Internet - all of you I hope - I would encourage you to use our web site.

We have also increased the level of interaction with both of the Parliamentary Committees. I believe that our work is very professionally and thoroughly monitored and assessed by Mr. Moosa and the Select Committee in the NCOP and by Dr. Davies and the Portfolio Committee in the House. I would like to thank them for keeping us on track and doing so in a very supportive but frank way.

The Basic Task of the DTI.

In the commentary from all quarters on the work of the DTI the three most frequent matters addressed are our industrial strategy, the criticism that we are not creating enough jobs and another criticism that we are failing to generate enough small and medium enterprises. This is certainly focusing on the correct areas as these are without doubt at the heart of the work of the DTI. As Minister I would accept that in each case the DTI would like to be able to say that there is no cause for criticism, but I cannot.

The fact that we must reassess our policies, programs and actions from time to time makes plain good sense and does not imply some wholesale policy change as some seem to hope. As a case in point what I said on SMMEs recently in this House needs to be read carefully so that we do not generate any false expectations.

I am confident that the basic policy approach adopted is correct in our circumstances. Given the massive structural problems that we are dealing with the effects of policy change will take a number of years. We can now see that we did underestimate the depth of the structural problems and accordingly the time that it would take to bring about change. The impact of the international financial crisis was severe and came as we were gathering momentum. In specific areas such as in the SMME sector we did err in our expectations in a number of areas.

We will be adjusting but overall we are doing well. The main task now is to increase the tempo of positive change and to utilise the greater policy space that we have built for ourselves.

What did we set out to do?

In short we had to induce a major restructuring of our economy. This could not be dealt with in the DTI alone and our work both complemented and required changes in finance, labour, agriculture and the public sector. These other areas of change have all proceeded in the consistent and effective way that was required.

In this massive campaign to turn around a whole economy the DTI had to focus on a particular set of fronts. The real economy that we faced in 1994 can be succinctly described as being overly protected, dependent on primary and commodity exports, with high costs of domestic production, characterised by extreme wealth, racial and geographic inequality and a crisis of investor confidence. The few support measures used by the old regime were unfocussed and fiscally unsustainable.

When an economy exports some 30% of its production and imports a little more in exchange then it is part and parcel of the world economy in all aspects of its economy. Globalisation is something that we have to adjust to in a manner that leads to growth and development. We cannot try and ignore it or protect ourselves from it by a tariff wall.

To accept this as a basic starting point for action is not to see globalisation as some panacea or new utopia. Like all processes of political economy it holds both potential and threat. This is because it is a process of change. If there is a defining dimension of the present process then it must be the speed with which change can now be effected and knowledge disseminated. This holds great opportunity and equally great threat.

To take advantage of this requires adaptability in the economy and at the level of the individual. Rigidities in the structure of an economy or public and private sector institutions are a danger. This is not to argue that the market is the most efficient way of conducting economic policy. The market is adaptable but in the absence of institutional direction it is capable of expedient and short sighted resource allocation. In a global market this can happen on a global scale. The speed with which the market can now respond makes it adapt fast but it also increases the speed with which mistakes can occur.

The demands made on a state to actually facilitate growth and development are more complex than ever before. The state has to define this role and then carry out the necessary institutional changes to effect this role. We must avoid futile policy debates as to whether the state is good or bad and whether it should directly intervene in economic activity. The state has to change if it is to have a positive impact on the economy and it has to change the composition of its resources and the qualities of its actions.

As a new democracy we have in fact done remarkably well in meeting this complex and real challenges. At times we forget just how much has been achieved.

The key issue is to keep changing and improving. For the DTI we have to become more intelligent and the quality of our intervention on all matters has to rise. This requires the correct deployment of our human resources and a higher quality of management systems.

The work of the DTI.

It is worth reminding ourselves what exactly the DTI is responsible for in the public sector. The DTI is charged with the following :

* to facilitate access to sustainable economic activity and employment through a restructuring of our economy.

* to facilitate and encourage higher levels of investment, both national and international.

* to increase market access for South African products to strengthen our status as a trading nation.

* to establish a fair, efficient and competitive market place for business, workers and consumers.

These objectives in turn require programmes and strategies that will lead to the above outputs. Accordingly, the following are the main thrusts of the work of the DTI:

* adding value in the economy so that it is capable of providing more and better quality employment opportunities.

* contributing to the international competitiveness of our economy remembering the injunction that a division between traded and non traded sectors is no longer an accurate understanding of the economy.

* promoting SMMEs so as to ensure greater participation in the economy, more employment opportunities, greater economic efficiency and a more equitable distribution of wealth.

* black economic empowerment to overcome the economic destruction and reduction of capacity that has been caused by racism. Growth, development and democracy require the economic empowerment of all of our people - which means that we have to pay particular attention to the majority who were previously excluded.

* building the SADC region since we cannot grow if our neighbours are not growing. We are not a large enough economy to be able to ignore the importance of the total economic potential of this region and Africa as a whole.

* reducing wealth inequality. Poverty is a fundamental obstacle to growth and development. The past has created excessive wealth disparity and distorted our economy. A powerful tendency in globalisation at present is that it can exacerbate wealth disparity unless specific steps are taken to counter this.

Does the DTI have an industrial strategy?

If this is the work of the DTI then clearly it has to have an industrial strategy to achieve these objectives. It does but it is complex in line with the challenges that we face. Actions within the industrial strategy can range from detailed negotiations on investment projects in the auto industry or steel or eco-tourism; to industry programmes for auto, steel or clothing to macro interventions such as tariff reform or competition law. We accept that this strategy is not sufficiently well set out in an accessible form. We are working on correcting this problem.

We have also realised that the management of such a strategy needs a new institutional structure and more efficient means of delivering the services we provide. The support programs provided by the DTI have to be taken up by the private sector. However the size of the rollovers is a cause for concern and caused us to re-examine the way in which we interact with enterprises in the private sector and how the DTI delivers the support programs that we have.

Can we create jobs in this economy?

The level of unemployment in the economy is unacceptable. What that level is remains imprecise as does the extent of structural employment change in the economy. These latter two issues are crucial in determining how we may need to adjust policy but they do not detract from the urgent need to create more jobs.

The government has made a choice to restructure the economy in a very profound way and the DTI is responsible for a large part of that restructuring process that must take place in the private sector. The reasons for this have been spelt out above. In taking this decision we knew that there would be job losses as the inefficiency and at times outright decrepitude of the old economy was exposed.

There can be no doubt that in general the hundreds of thousands of new jobs created since 1994 are of a more sustainable quality than before. There is a caveat to this and that is the extent of the casualisation in certain sectors. Casualisation that is designed solely to reduce wages is a short sighted response. We can address these matters in a concrete and detailed dialogue. The preparatory meeting for the Clothing and Textile Sector Summit that was held last Friday will address these issues and I believe that we will be able to find practical responses to the challenges that we face.

The knowledge economy requires skill and there is no part of our economy that will escape the pressure to incorporate IT into its operations. More flexible working hours and different locations of work and ownership structures are inevitable in the changing economy. For unions this means new organising techniques and different forms of protection that need to be offered to workers.

The employment situation is undergoing deep structural change. We have I believe made major and positive structural changes in the old formal sector of the economy. The employment situation in the most dynamic sectors of the economy is stabilising and its income level has improved.

New sectors and geographic areas of the economy now have to receive priority. Services, IT, agro-industry and tourism are going to be and already are important. The structural base for employment creation has been laid and the dangers of rapid de-industrialisation have been avoided. However, the effort to build on this is going to have to be immense.

The level of interaction with both business and labour and the DTI is being increased and we are applying more resources to this. A co-ordinated approach pays dividends as we have seen in the success of the Export Councils.

What about SMMEs?

I addressed the issue of the development of SMMEs at some length in this House last week. I will not enter this area again today. However, I do want to say that the initiative taken by the Select Committee, with the support of the Portfolio Committee, was most welcome and successful. This type of interaction between the DTI and the NCOP could well be a model for some very constructive work. It is my view that we may want to have a chance in three or four months to report back to the NCOP as to what has taken place since the Workshop.

Developments in the Provinces.

The NCOP is specifically charged with the oversight of Provincial matters. The interaction between the DTI and the Provinces is considerable and has been steadily improving in its efficiency. I would like to see even better interaction and I think we will achieve this. In the Minmec of the 9th May we approached matters more systematically and I think that this will be of benefit to all. In areas of important interaction such as the liquor industry and gambling we will be moving forward in the next few months to both introduce and amend legislation.

In regard to the SDIs we are moving to ensure that the Provinces take a more active and leading role. The announcements in Gauteng are an example of a good working relationship in such project development. I am also pleased to say that the Coega project is now moving to the more detailed implementation stage with a consortium to undertake key aspects of the development.

In the Small and Medium Manufacturers Development Program and the last period of the Tax Holiday the Provincial approvals make interesting reading. These are appended to this document. For those of you who can recall these sort of figures of a few years back I think that you will agree that the spread across Provinces has markedly improved.

Some other matters.

As I indicated at the outset it is not possible to cover all matters. This includes some big matters such as the great grappa saga. The first of the Joint Councils with the EU has now taken place. Nothing will be easy - but it never is in trade relations. However, it is a major achievement that we now have such a comprehensive agreement with our major international economic partner. I would like to thank the house for it cross party support. Sonqoba simunye! Together we overcame.

Trade in terms of the Agreement is now flowing and there are benefits being experienced already.

The Lottery is launched and some are richer and some a little poorer. Everyone wants money. As I indicated in my Budget address in the National Assembly we will commence disbursement when there are adequate funds to do this equitably and meaningfully. Our intention is not to distribute through administratively heavy structures. Where ever possible we want to distribute directly to the cause.

Conclusion.

I am confident that the interaction between the NCOP and the DTI is entering an exciting new period where the NCOP can play an active role in development. The end product of the work of the DTI is an impact on the economies of Provincial and Local Government jurisdictions. This means that the NCOP can play a vital role in overseeing and assisting the work done by this important department. We look forward to achieving much for our people.

This will be an exacting year. We have to perform better with what we had as we build the new DTI of the 21st Century. Our aim is to provide a better service and to sharpen our focus to increase the impact. I know that we can expect the support of the Committees and their frank and honest criticism.

My thanks to the committees, Deputy Minister Hendricks and the new DG Dr. Alistair Ruiters and his new team which has all the benefit of experience - including that of my special advisor Dr Rustomjee. For my colleagues, the Provincial MECs, I thank them for the work we have done together. This will be a decisive period and I know that we all accept the challenge. End.

Issued by the Office of the Minister of Trade and Industry, 16 May 2000