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Honourable Speaker,
Honourable Premier of the Province,
Mr. Popo Molefe,
Members of the Executive Council,
Honourable Members of the Legislature,
Distinguished Guest,
Ladies and Gentlemen.

INTRODUCTION

Stability and prosperity in South Africa require that a high and rising standard of living be achieved for all citizens. To achieve a continually rising standard of living, sustainable and equitable economic growth is needed. This is the lofty task towards which the Department of Economic Development and Tourism has been called to contribute to by the people who elected us to be their representatives.

In my first budget speech as political head of the Department of Economic Development and Tourism, I want to clearly spell out how we see ourselves turning our vision into a reality in this financial year. I want to start of by immediately assuring this honourable House that our Department does not intend for the North West province to be a mere spectator of the global economic growth bandwagon.

We do not intend the North West province to be isolated from the global economy and from the many advantages (not least amongst them freedom of choice) that globalisation of the world economy can offer. And let us deal finally with those who wish to use the word "globalisation" as a scapegoat for all that goes wrong in our economy. Mr. Speaker, let us remind ourselves that "globalisation" is actually not a process nor an exogenous force out there, but an outcome. It is the outcome of free trade agreements between trading nations such as the South African European Free Trade Agreement and the SADC Free Trade Protocol. It is the outcome of the rapid circulation of ideas and opinions across an interconnected world. We cannot, and I am sure we do not want to attempt to reverse these trends.

The budget we present in this House today is a piece of evidence of our desire to further consolidate the gains made by our people in this province since 1994. This budget is an account of a commitment we made to the members of this House in the previous year. It is a living projection of our programme of action and through it we mirror not only our vision but also the rapid steps we are already taking towards the consolidation of what has been so far achieved.

This budget is OUR ACTION AGENDA. It is an embodiment of twelve months of examining the linkages between the department and the communities of the province. It is an articulation of the Way Forward within the framework co-owned by the government and the people of the province. To this end, we see the partnership which was built through the process of developing this Agenda as a force that we are determined to take forward into the future. Each year all Members of the Executive Council are afforded this unique opportunity to present to the North West people their Departmental vision, their strategic thinking and their budget allocations to give effect to those visions and strategies. It is not an occasion that my Department approaches lightly: we are very much aware of the centrality and importance of economic factors in our people's daily lives. We are very much aware of the almost overwhelming odds that so many of our people have to overcome in their daily lives merely to eke out an existence.

We agree with the 2000 Human Development Report that everybody has basic socio-economic rights and that the real purpose of democracy is to ensure that these rights are met and maintained. The Honourable Premier of the North West Province re-affirmed in his State of the Province Speech on 16 February that:

"The critical challenge of government in partnership with Labour, Business and all other sectors is to work for the upliftment of the lives of all South Africans, especially the poor and marginalised sections of our society."

The theme of my address this afternoon is "Bootstrapping Economic Development Through Improved Competitiveness". It is the theme that I am convinced will illustrate our commitment towards the Millennium African Renaissance Programme and towards turning the vision of the African century into a reality.

THE NEED FOR BOOTSTRAPPING ECONOMIC DEVELOPMENT

Mr. Speaker, economists agree that there are two main problems with regional development in South Africa:

* The first is that regional development initiatives have a bad reputation due to the apartheid policy of the homelands. Herein regional development was part of a process of social engineering.

* Secondly, regional development initiatives have been of limited success in South Africa and elsewhere.

Trade policy has really supplanted any industrial and regional policies in South Africa. The opening up of the economy enforces current economic activity. Even the Spatial Development Initiative (SDI) programme has a clear bias towards coastal areas. For inland and previously disadvantaged regions such as North West, the challenges in economic development are truly daunting. Recent international thinking on regional convergence (stimulated by the European Union's experience of regional development whereby some countries caught up with other countries or regions - e.g. Ireland) suggest that the task facing North West if it wants to catch up in terms of economic development with other provinces, such as Gauteng and the Western Cape will not be easy. There is in economic development (particularly in the development of the secondary and tertiary sectors of the economy) the clear notion of circular cumulative causation. Circular cumulative causation means that because firms require economies of scale and agglomeration advantages (external economies), firms would tend to cluster or locate where there already exist other firms as well as consumers and infrastructure. The notion of circular cumulative circular causation suggests that it will be very difficult for the North West Province to build a vibrant economy in a piecemeal fashion: the province will almost literally have to pull itself up by its bootstraps.

The foremost tool to change our people's economic development plight is our provincial government expenditure. We have at our disposal R9.8 Billion for the current financial year and we need to carefully budget how we spend this.

OUR ECONOMIC DEVELOPMENT CHALLENGE

Mr. Speaker, advances in communications technology drive the knowledge economy. Over the past 6 years, the North West Provincial Government has made a huge effort in coming to an understanding of the provincial economy and in determining its strengths and weaknesses. Mr. Speaker, in outlining these I will be brief, as I know the members of this House are thoroughly au fait with this. However, I will still be outlining these issues as I consider it necessary to reflect on what we may not know about the province.

The State of Economic Development in North West:

The challenges of poverty, unemployment and inequality in the North West province are well known. For those who would like to be reminded, we need to create at least 60 000 jobs annually.

From my Department's point of view the most important challenges for economic development in the province are; the creation of jobs, the alleviation of poverty, wealth redistribution and growing the economy. It is therefore important to determine the extent to which unemployment, poverty and inequalities remain obstacles to the full development of all in the province and to determine what and how the various levels of government can contribute to this end.

The success of the North West government in addressing these shortcomings should be properly judged not only by analysing whether unemployment, poverty and inequality has increased or decreased over the past six years, but should also be judged against the realities of what would unemployment, poverty and inequality levels have been without the initiatives taken by the North West Government since 1994.

It is difficult, using only available statistics to accurately deliberate on the impact of the programmes of the North West Government on unemployment, poverty and inequality. Mr. Speaker we do not know adequately and timeously how unemployment, poverty and inequality in our province are changing. The problem is compounded by lack of reliable and regular statistics. Mr. Speaker, we are glad to announce that Statistics South Africa has started an initiative aimed at producing regional production and employment statistics timeously and we would be forging closer relations with them to ensure that our information base on the North West economy is developed accordingly.

If, as Statistics South Africa suggests that the North West has been characterised by outward migration of labourers and brain drain, then the conclusion is that the mobility of labour makes a provincial or regional focus on unemployment issues difficult to gauge. However, if the figure of 38.7% unemployment in 2000, in the North West is accurate, it suggests that whilst the unemployment problem has worsened in the North West, it has not worsened to the extent predicted in 1995.

Mr. Speaker, the Department's focus on job creation is appropriate if the ultimate test for this government lies in the eradication of poverty. This is so because there is a strong relationship between unemployment and poverty with the former being the primary cause of poverty in South Africa. The focus on job creation as a means to eradicate poverty is therefore a correct one. However, provincial governments across South Africa have limited instruments at their disposal to raise employment rates. This is not only due to the mobility of labour within South Africa, but also because some of the fundamental structural and cyclical causes of unemployment in South Africa are nation-wide problems. These relate to South Africa's competitiveness, labour legislation, skills and educational standards, foreign investment, and the like.

If we as a provincial government want to utilise the limited instruments at our disposal to alleviate unemployment then it is necessary to have an understanding of the national and international driving forces that shape the nature and incidence of the unemployment problem in South Africa.

NORTH WEST AND THE GLOBAL ECONOMY

Economic globalisation involves arguably the most fundamental redesign of the planet's political and economic arrangements since at least the Industrial Revolution. The debate about the merits and demerits of economic globalisation continues with various schools of thoughts accusing each other of not presenting a credible case in favour or against. In so far as the North West is concerned, our challenge does not lie within the framework of the debate, our challenge is what have we done to build the capacity of our industrialists, retailers and manufactures to be competitive enough so that when the strong tides of globalisation hit our coast, the said business people should be able to survive.

When the full might of globalisation finally opens our doors, our business people should not be found wanting, but should immediately be able to prove their worth and demonstrate their competitiveness and effectiveness to match the quality of goods from every quarter in world. It is the department's strategy therefore to provide training and expose our manufactures, industrialists and retailers to the modern techniques of the business.

Whilst we feel strongly and confidently that we can avert the real threat of economic globalisation, we are equally worried by the low quality of goods, which are dumped by other nations into our markets. Not only does dumping present false competition to our local manufactured goods, but also it has the negative effect of confusing consumers of such goods.

Mr. Speaker, I will therefore like to call upon institutions such as South African Bureau of Standards (SABS) and commercial branch of our police services to be vigilant and avert the pollution of our markets with counterfeit goods with false labels. The biggest barrier is however the limited extent of public discussions and awareness on the effects of dumping and how the poor are often trapped in its web. The starting point must be to get the issues on the table and then introduce them into the mainstream policy debates in a way that will catch the attention of both the eye and the ear.

The path towards globalisation depends upon continuous government investment. It requires the build up of a large-scale industrial infrastructure that includes roads, mass communication facilities, energy installations and schools for specialized education. It follows that heavily subsidised infrastructures would enable goods produced on a large scale and transported long distances to be sold at artificially low prices and in many cases at lower prices than goods produced locally.

Mr. Speaker, in addressing issues around economic globalisation, we cannot avoid making a swipe on the danger of the importation of hazardous technologies and products into our markets. It is well known that for a number of years now many trans-national companies have been shifting their production operations to third world developing countries, where safety and environmental regulations are either very lax or non-existent. Some corporations concentrate their sales efforts on third world developing countries markets, where they can sell lower-quality products or outright toxic products which, are banned in the industrialized countries. Because of this, third world people are often exposed to extremely toxic or dangerous technologies that could potentially cause great harm. North West is vulnerable because of her rural nature. We, as a department will therefore ensure that proper regulatory mechanisms are in place to ensure that our people are not exposed to toxic products. The above can effectively be enforced with the assistance of the National Department of Trade and Industry and that of institutions such as the SABS.

CONCERNS ABOUT THE ECONOMIC IMPACT OF HIV/AIDS

Mr. Speaker, the impact of HIV/AIDS on the labour force has a negative effect on the economic growth of South Africa at large, therefore, the concern about the economic impact of HIV/AIDS has rightly been placed at the centre-stage of both the provincial and national debate.

The United Nations expect the HIV/AIDS pandemic do reduce South Africa's annual economic growth rate by 0.3% to 0.4% per annum for the next 10 years, making South Africa's GDP in 2010, 17% lower than it would have been otherwise. Mr. Speaker, our economy is set to lose almost R140 billion over the next 10 years - 14 times the size of our annual provincial budget!

Our department will endeavour to assess the economic impact of HIV/AIDS on our province and make appropriate recommendations through the EDI Exco Committee.

CONCERNS ABOUT THE RELATIONSHIP BETWEEN CRIME AND ECONOMIC DEVELOPMENT

It is acknowledged that crime in South Africa is at unacceptable levels and has a significantly negative impact on investments, business confidence and job creation. It also has a significantly negative impact on the freedoms that our labour force enjoys. During the past years, however, it was also recognised that crime is not only a cause of underdevelopment, but also that underdevelopment and poverty causes crime. And the cost of crime is a cause for concern.

Let me remind this esteemed House that according to the Nedcor National Crime Survey in 1996, the direct costs of crime to households and business in South Africa amounted to R31.3 billion. In addition to these direct costs, the expenditure by the state on the Criminal Justice System will rise as crime rises. In South Africa the budget for the entire criminal justice system was in excess of R14 billion (in 1996/97). The current government is committing significant resources into the prevention of crime. In the 1999/00 fiscal year, roughly 5% of South Africa's GDP was spent by the state alone on protection services - 5 times as much as it was ten years ago. Disaggregated, the police services consume 2.2% of GDP, prisons 0.8% of GDP, the justice service 0.4% of GDP, and defence 1.7% of GDP. The cost of crime to society is exorbitant, wasteful and rising.

CONCERNS ABOUT THE PERSISTENCE OF POVERTY

Despite many improvements in the plight of the poor, it was evident in the year 2000, that economic growth will not just automatically "trickle down" to the poor, and that significant structural changes are still needed in South Africa to eradicate and not just alleviate poverty. In this regard, the Draft Economic Plan and the Review of the Industrial Development Strategy should integrate the Rural Development Strategy.

Mr. Speaker, economic history has showed us repeatedly that an economically disempowered community will face great difficulties in improving its condition in the absence of structural changes in basic conditions. The structural changes needed to allow South Africa's disadvantaged communities to benefit from market processes, would include amongst others the raising of skills through access to quality education, addressing and speeding up issues of land tenure, accelerating the provision of social and economic infrastructure in rural areas, addressing the question and controversy about mineral rights, investing in the provision and adoption of information and communication technologies to bridge the "digital divide", raising saving rates and foreign direct investment inflows, and re-affirming our commitment towards Black Economic Empowerment as a conscious economic strategy to ensure a particular process of investment and ownership.

Hon. Speaker, in attacking the three scourges of HIV/AIDS, crime and the structural causes of poverty the key to our province's future lies. I will now indicate how the Department intends placing our provincial economy into a strong and strategic position from which to launch this attack.

TOWARDS INTERNATIONAL COMPETITIVENESS IN 2001/2002

Mr. Speaker, in light of the proper understanding of the role and intention of the North West Provincial Government in economic development, and the ever more challenging external environment in which we operate and the limited available resources, it is imperative that our broad strategic direction is correct.

Given the state of economic development in the province, and given the challenges we face, we believe, that based on our extensive knowledge and experience of this economy the proper strategic focus for the Department over the next couple of years should be on doing everything we can in an integrated approach, to raise the competitiveness of the Provincial economy. We believe that such an approach, if successful in addressing the reasons for the low level of competitiveness in the province, can hugely contribute towards regenerating investment, output growth and employment creation. We believe that such an approach is flexible enough to provide us with room to manoeuvre in this fluid global economy.

I will therefore, Mr. Speaker, now proceed to outline our understanding of competitiveness, and identify the urgent steps that can be taken to raise it. In presenting my Department's budget allocations for the 2001/2002 financial year, I will indicate how we intend increasing competitiveness.

For the North West Province, this feature or requirement for competitiveness suggests the following:

* Firstly, a sectoral approach towards certain types of high-technological manufacturing should be adopted. A general approach Mr. Speaker, will not meet the demands of any specific and individualized firm. For instance, given the large rural areas, bio-technological agro-processing could be considered.

* Secondly, only a few locations, such as those cantered around universities (Potchefstroom, Taung Agricultural College and Mafikeng) or other centres of higher learning are likely to provide innovative environments.

To remain competitive requires that manufacturing firms have constant access to relevant and new information, necessarily information management and competitive intelligence practices. This is because the trading environment is now focusing more on the supply side support measures and with little artificial barriers (e.g. tariffs) remaining. Information and Communications Technology (ICT) is therefore vital for competitiveness. Over the next nine (9) months, the North West Province, as part of the Economic Development and Industrial Strategy Drafting process, will investigate the weaknesses in the current ICT in the Province.

CRITICAL AREAS FOR RAISING OUR INTERNATIONAL COMPETITIVENESS

Mr. Speaker, having identified what competitiveness entails and shortcomings in the North West Province, I now wish to outline our Department's proposed critical areas for attention in this matter. These areas are manufacturing development, attraction of foreign direct investment, tourism promotion, small business development and rural development, and continuous product development particularly in the Tourism sector.

INDUSTRIAL DEVELOPMENT ZONES (IDZS)

The debate about Industrial Development Zones as a strategic industrial development programme has finally been settled with the publication of Regulation Gazette No.6936 in December 2000, by the National Department of Trade and Industry. The publication of the said Gazette provides us with a framework within which we as a province would approach the development of Industrial Development Zones.

For the North West people to take advantage of potential opportunities that are likely to flow from IDZs, the department will and is determined to create awareness and where possible market this concept through our Invest North West Programme. In this way Invest North West shall have something saleable with the potential of attracting investments into the province. The advantages of IDZs lie in their capacity to create jobs through attracting strategic industries. They have the potential of boosting up the economy whilst at the same time creating a foreign exchange pool. Diversification of the industry can be promoted and in this way, production can be linked to different niche markets.

In South Africa, there are indications that distribution costs may be outstripping labour costs in manufacturing, and that inadequate distribution infrastructure may be hampering South Africa's trade as well as the attraction of significant volumes of Foreign Direct Investment. Transportation costs and systems, and inherited infrastructure and past transport policies, may hence also explain the unequal spatial distribution of economic activity in South Africa. The redeployment of Mafikeng International Airport and the development of the surrounding area as an Industrial Development Zone (IDZ), the Platinum Spatial Development Initiative and the various tourism nodes are important anchor projects of the North West province that are consistent with our strategic vision.

MANUFACTURING DEVELOPMENT

The Province has been one of the few provinces where longitudinal surveys of the manufacturing sector have been conducted since 1999. These surveys, by national and international research institutions, have suggested that the Province's manufacturing sector has seen an initial contraction between 1996 and 1998, but that between 1998 and 2000 this contraction had levelled out and that the sector is now in a consolidation phase.

Manufacturing is an important sector, and given the need to diversify any economy, it is therefore important that the manufacturing sector be supported to ensure that it can enter a phase of growth and job creation in the near future. Government, organised labour and organised business should join hands in ensuring the adjustment of our manufacturing sector to a global economy.

FOREIGN DIRECT INVESTMENT AND TOURISM PROMOTION

We realise that building and maintaining distinct advantages of provincial economy will require a long-term commitment and strategy from government to raise skills, accumulate and transfer appropriate knowledge and build robust and enduring institutions that promote economic development across its many dimensions.

Invest North West will play an important part in this regard. It is one of our province's most important institutions for opening our economy, raising our competitiveness and restructuring our economy over the medium to long term. On 15 March this year, Invest North West was re-launched in Rustenburg. The theme of the launch was "Putting North West at the Cutting Edge of Globalisation" reflecting the commitment of the Department in establishing a world-class institution.

During the current financial year Invest North West will amongst others host an international investors' conference, it will draft an Investment and Trade Promotion Strategy and it will complete an integrated marketing strategy for the Province. Mr. Speaker, in addition, Invest North West will actively encourage both domestic and foreign investment into the province through each phase of the investment promotion value chain. A special focus of Invest North West will be in agro-processing, high-value added manufacturing, mineral beneficiation, information and communication technology, niche-market tourism and trade and transport infrastructure and services.

Internationally, experience shows that effective investment promotion agencies can improve the volume and growth of foreign direct investment in a country or a region. However, a big pre-condition for this is that the investment promotion agency must be supported by national and provincial governments in the implementation and maintenance of complementary policies and strategies. For instance, national government must maintain a stable and predictable fiscal and monetary policy stance, and the real exchange rate must not be overvalued. Regulations and red tape must be minimized.

SPATIAL DEVELOPMENT INITIATIVES (SDIS)

The promotion of SDIs is central to the expansion of the economy of the province. For strategic reasons, SDIs shall be spread all over the province and thereby providing evenly spread job creation opportunities.

As we reported last year, the development and identification of certain areas as SDIs have been receiving attention. It was indicated that amongst others, areas encompassing Hartebeespoort Dam and Magaliesberg because of their strategic geographical positions are well placed to be developed as nodes.

Mr. Speaker, the department is currently examining the possibility of creating a company, which will drive the SDIs in the province. In moving towards the development of an economic framework for the province, we shall re-examine the various roles of different economic initiatives in the province with a view to consolidate and align them where there is obvious duplication.

NORTH WEST DEVELOPMENT CORPORATION

As we reported in this House last year, the North West Development Corporation (NWDC) and the National Transport Investments (NTI) are under judicial management. The key focus areas and core businesses of the said institutions have been identified. It is our pleasure to report to this House that this year we intend to reposition the North West Development Corporation (NWDC) and the National Transport Investment (NTI) to make it effectively respond to the needs of the province.

The focus on North West Development Corporation (NWDC) in the past financial year was the turn-around strategy, which aimed at shedding the non-core activities and re-aligning the Corporation. This together with the management of property portfolio and the collection of current book debts were the major focus of the Corporation in the 2000/01 financial year.

I am glad to report that the restructuring is now complete and the Corporation has the capacity to play a meaningful role in SMME development in the North West Province.

REVIEW OF PROGRESS MADE DURING THE PREVIOUS FINANCIAL YEAR

Mr. Speaker, the fact that the economic salvation of our country lies in the collective effort of both private and public sectors is already accepted in South Africa. Notwithstanding that however, the role of the private sector in the economy is being vigorously promoted and the government's role reaffirmed as that of governance including the provision of an economic framework within which the economy can develop. Through private public partnership 'PPP' the private sector is able to deliver what the public sector is not designed and geared to deliver. However within the spirit of ensuring that the imbalances of the past are not being perpetuated, government will ensure that policies are in place whilst at the same time ensuring that the private sectors fulfil what it can do best. In view of this and other factors without which real transformation cannot be realised, we are pleased once more to draw the attention of this Honourable House to the strides we have so far taken in the name of progress.

TOURISM

Tourism is one of South Africa's foreign exchange earners. The geographic position of North West declared her a gateway to neighbouring states such as Botswana and Zimbabwe. Our human efforts have complemented natural endowments of nature by aesthetic additions such as Sun City, Hartebeespoort Dam, Mankwe Safaris, Pilanesberg National Park and many others.

Our challenge therefore is to turn our own province (North West) into a leading tourist destination. We acknowledge that our game parks have given our province the unique character of her own, whilst the beauty of hotels and lodges have responded well in meeting the demand of tourists.

Mr. Speaker, we recognise the fact that unless North West is properly marketed, tourists are likely to arrive at Johannesburg International and proceed to Kruger National Park and cross our borders into Mozambique, Zimbabwe or Swaziland and forget about North West. To avoid the further marginalisation of our province within South African boundaries and neighbouring states, we have embarked on a strategy to market the province.

The branding and marketing of North West as South Africa's Heritage destination is strengthened by our adoption of the theme: "TAKING PRIDE IN OUR HERITAGE", which resulted in the launching of the Heritage Route both at the World Travel Market in London and at the International Tourism Travel Market in Germany. The heritage brand has become an attractive tourism trademark which has given the Province her own distinctiveness. The North West share of international visitors had declined from 7.7% in 1996 to 5.5% in 1998, but due to concerted efforts, the North West international market share increased to 6% in 1999, according to the latest national statistics. The Heritage Route is made famous by the towering Hartebeespoort Dam, the fantastic Sun City Resort Complex and the wonders of Pilanesberg, which received an acclaim at the Indaba Expo in Durban in May 2000. By the usage of the heritage theme, we are well positioned to offer without feeling inferior to anyone, a variety of eco-tourism products to both international and domestic tourists.

In order to become even more distinctive, it is intended that the process of theming and branding of routes be taken further but strengthened by the Treasure Route which will be launched this year.

I need to indicate to this House that whilst the marketing of the Province to foreigners is important, we should not forget to strengthen and promote tourism within South Africa. We owe it to the children of the Province and to the citizens of South Africa in general that they too be exposed to the beauty of the motherland. To this end, the Board conducted a three (3) months domestic marketing campaign from August to November last year. The said campaign, which was launched at Taung, was aimed at revitalising and entrenching a culture of tourism in the province. The Domestic Marketing Campaign adopted an inter provincial strategy in tourism education workshops and about 5 million people were reached through the well-planned advertising campaign.

As it was indicated in the Premier's policy speech, we shall continue to consolidate our tourism development work within the platinum corridors in the coming year, at the same time expanding our spatial approach to further enhance opportunities on both the N12 and the Mafikeng/Taung corridors.

PROTECTED AREAS

Much of the tourism development that has taken place within the Platinum Corridor is anchored in or around Protected Areas. Further, within the context of utilising protected areas for eco-tourism purposes, two new lodges have been opened at the Madikwe Game Reserve and a further six new lodges are planned to be constructed. The private sector has also been attracted by the potential of this game reserve. A state investment capital of R35 million has led to the successful leveraging of a private sector investment of R50 million with another R60 million expected to be invested thereafter. Additional projects in Madikwe included usage of labour intensive bush clearing and brick paving work method which, formed part of the strategy to address poverty. Other spin-offs included the awarding of a fence maintenance contract (for Big 5 Game Reserve) to an SMME company owned and managed by a woman, Mrs. Agnes Medupe. Within the terms of the contract, she is now responsible for the daily patrolling and maintenance of the 145 km, elephant and lion proof electrified fence of the Madikwe Game Reserve.

May I, at this stage, take this opportunity to congratulate Mrs. Medupe for her indomitable spirit displayed by her vigour in taking up this challenge.

As part of our attempt to understand the market, a domestic market survey was conducted, the report of which formed part of the discussions at our strategic marketing Lekgotla held in Rusternburg and will lay the basis of the planned Domestic Marketing Campaign in the 2001/2-tourism year. The dynamic role of the domestic market cannot be over-emphasised because, 85% of tourists to the Province are domestic (as opposed to 15% international) and of these 56% come from Gauteng.

NEW PRODUCT DEVELOPMENT

Mr. Speaker, it was indicated to this House during the Department's budget speech last year that a Product Development Unit was being established within the North West Parks and Tourism Board which would be facilitating the development of new tourism products within the Province. I am pleased to report that this Unit is up and running and has already made a considerable impact within it's sphere of operation.

In addition, I am glad to indicate further that funds have been accessed from a range of sources including the National Business Initiative and the National Poverty Relief Funds for planning and executing a range of projects including the establishment of the Mogwase Craft Factory, the Moruleng Heritage Centre, the Mapoch Cultural Village Project, the Bontle bo Kwano - traditional cuisine project, and the Tlhabane Shebeen Tours.

Mr. Speaker, I cannot emphasise enough the importance of our Protected Areas such as Pilanesberg and Madikwe in terms of their value in the conservation of our natural heritage, but also as catalysts for rural development. There are currently 730 direct and sustainable jobs within these two units. To this we could add the 160 jobs of the staff of the North West Parks and Tourism Board, on the basis that these two parks will be self-sustaining in relation to their operational and staff expenses as of next year. The combined contribution to the Gross Geographic Product and to the regional economy (excluding Sun City) is estimated to be around R112 million per annum.

This year we will be consolidating the gains already made in respect of Madikwe and Pilanesberg, but we will also be aiming to bring investment and eco-tourism developments into a number of other Protected Areas including inter alia the Rustenberg Nature Reserve, Borakalalo Park, and the Boskop Dam Nature Reserve.

I am proud in this regard that the North West Parks and Tourism Board is playing a significant role in the Southern African region through supporting a number of initiatives for the regeneration of eco-tourism and the conservation project in a number of SADCC countries. In the past financial year, the Board has:

* Provided 16 elephants to Angola for the restocking of the Quissana National Park;

* Provided a further 3 white rhinos to the Khama Rhino Sanctuary in Botswana as part of a project to re-stock the white rhino population of Botswana.

* Donated a black rhino to Malawi in a joint project with SA National Parks in the Liwonde National Park.

INCOME GENERATION

The North West Parks and Tourism Board is on target to meet its projected own generated income of R18.2 million for 2000/1, which represents an increase of 17% on the previous financial year. The projection for 2001/2 is for the generation of R26.2 million, which would amount to a 44%, increase if achieved.

All in all, the North West Parks and Tourism Board has made great strides in its income generation strategy, and is aiming at being 50% state funded by 2003/4, from a situation where it was 84% state-funded in 1998/9. Given that a number of functions of this institution are not income generating (such as tourism marketing, and tourism development) we believe that this is a realistic target.

HOTEL SCHOOLS

The institute of Hotel and Tourism Management (IHTM) in Mafikeng and the Ga-Rankuwa Hospitality and Catering Training Centre (GHCTC) have continued in the year under review to perform the key function of skills development within the tourism and hospitality sector. The Institute of Hotel and Tourism Management (IHTM) is currently producing in the region of 60 graduates a year, comprising two year and three year diploma's while the Ga-Rankuwa institution produces 450 short course trainees per year.

The hotel schools are being integrated as part of the North West parks and Tourism Board in the 2001/2 financial year, and no longer appear as separate programmes of the Department on the budget. I would need to indicate further that a decision has been made to integrate the management of these institutions as a Division within the Board, and that there is currently a review process underway to determine how best to consolidate the tourism skills development function in the light of scarce available resources.

REGULATORY SERVICES

In pursuit of the spirit of ensuring that the balance of interest of different stakeholders in the economy is achieved, the regulatory framework was established. We therefore wish to report that the directorate regulatory services was established in June 2000 with specific reference to cover:

* Consumer affairs;
* Liquor trade and administration, and
* Legal services.

ENTREPRENEURIAL SUPPORT CENTRES (ESCS)

The launching of the Entrepreneurial Support Centres (ESCs) in Mogwase (Rustenburg), Orkeney (Southern District) Bophirima region and in Garankuwa (Eastern Region) ESC has resulted in the creation of 71 businesses through the centres, with 225 people trained and 210 jobs created from April 2000 to January 2001.

The establishment of Micro-Technology Development Centres in the province has finally brought technology to grass roots people and businesses. The three Micro-Technology Development Centres namely: Batlharos Development Centre; Morokweng Development Centre; and Kosh Development Centre have since their inception made sterling contribution to the advancement of economic development particularly in the area of capacity building. It is the department's intention to encourage the establishment of about two more centres in the rural areas of the Eastern Region during this financial year.

The founding of Technology Advice Research Fund (TARF) is an innovative move by the province, to introduce technology in the rural areas, which enhance entrepreneurial development and thereby ensured that our rural areas become centres of excellence.

INDIGENOUS FIBRE PLANTS

The first phase of the feasibility study of this project has been completed and a further proposal for the extension of investigative work, which is also a pilot project, has been accepted under the 2000 programme. What remains therefore is to begin with specific pilot manufacturing projects.

WILD SILK PROJECT

Mr. Speaker, the Wild Silk Project has provided temporary jobs to 40 people and created 18 permanent jobs. Funding to the tune of R1 million has so far been injected into the project by DACST (Department of Arts, Culture & Technology) for poverty alleviation. Plans to commercialise downstream enterprises of the project are underway.

INFORMATION & COMMUNICATIONS TECHNOLOGY (ICT)

The Centre of Excellence project in which an amount of R869 600 (1999/2000) was invested, is one of the support services geared to strengthen the interaction between government departments and the private sector. The findings and observations captured during its pilot stage are now to be matured into the establishment of the Centre of Excellence. The Centre's Manager has already been appointed and is headquartered at the ABSA Building in Mmabatho. It is expected that with all things being equal, activities of this centre should be duplicated in all regions of the province.

OUTSOURCING, PRIVATISATION AND PPPs

Mr. Speaker, it is only by combining resources both of the private and public sectors that stimulation of the economy can be achieved.

Through the 'PPP' arrangement, private sector money and technology can be brought together with black economic empowerment initiatives and utilise state owned assets for the betterment of the economy. We should recognise the fact that there are areas where the private sector have developed skills and technology to be able to tackle certain activities within government better.

CONSUMER PROTECTION

Mr. Speaker, I wish to report that the plans to establish the Consumer Court are in place. An announcement shall therefore be made at the appropriate time when the President and members of the said court would have been appointed.

LIQUOR TRADE AND ADMINISTRATION

The restructuring of the liquor industry in the province is affected by lack of finalisation of restructuring at national level but are hopeful that this will be finalised this year.

GAMBLING LEGISLATION

The review of the gaming legislation is underway and will be completed within the next few weeks for tabling in this house.

THE NON-MOTORISED SCHOLAR TRANSPORT PROJECT

The Gazebo Industries (Pty) Ltd (India):

The Department is currently negotiating with the Gazebo Industries (Pty) Ltd. in India, towards facilitating for the establishment of a bicycle manufacturing plant in Stilfontein in the North West. Progress will be reported in this august house.

The Itsoseng Shopping Complex Rehabilitation Process:

The Department is currently leading a process that aims to rehabilitate the Shopping Complex, which has been identified as one of the Premier's Lead Projects. An amount of R1 800 000.00 was allocated from the Provincial Capital Development Fund towards rehabilitating the shopping complex.

DAMDORYN PROJECTS DEVELOPMENT

In addition, in recognising the importance of the developments at Damdoryn from a tourism development perspective, the department secured a sum of R3 679 350.00 from the Provincial Capital Development Fund to assist the informal traders with the building of proper facilities, that would include ablution blocks, parking areas and stalls. Consultants have also been appointed by the Provincial Government to design and put on tender the upgrading of the road.

WAY FORWARD

BLACK BUSINESS

Mr. Speaker, black business has for many years been at the receiving end of the stick. Seven years of democratic government has not brought about the desired change that can empower black business to be a strong agent for economic transformation. In fact, instead of black businessmen and women becoming stronger within the political environment designed to empower them, we have in fact witnessed and still witness the closure and failure of black business. In order for our democracy to be sustainable and be provided with a solid foundation, black business has to be strengthened so that it too should contribute to the fight against unemployment. Towards the strengthening of this sector therefore, the first step should be the identification of the factors that contribute to its collapse and then together with the stakeholders work out possible solutions. It is only by involving the role players in black business that sustainable solutions can emerge. To start addressing problems of black business, the department shall this year convene a meeting with National African Federation of Commerce (NAFCOC) and FABCOS with a view to convene a black business conference in the province. It is the intention of the department to spearhead programmes that could ensure the resuscitation of black business.

If problems that beset black business are not identified and addressed now, the economic emancipation of black people shall remain an unattainable dream.

BLACK ECONOMIC EMPOWERMENT

To redress the economic imbalances, which are the results of the apartheid past, black economic empowerment shall continue to receive our support. However, it is our belief that black economic empowerment should not only be restricted to benefit the few whilst the majority of the previously disadvantaged people remain marginalized; at the periphery of the economy. Towards effective implementation of black economic empowerment, we shall endeavour to tie projects driven within black economic empowerment framework to job creation whilst at the same time providing the mechanism of checking if the intended results are reaching the targeted disadvantaged groups.

Black economic empowerment shall encourage diversification of black entrepreneurs in every sector of the economy. It should promote the involvement of members of the disadvantaged communities in the economy not just as investors but also as true participants in the economy. Black economic empowerment should therefore be a medium of the transfer of skills and this could only be effectively employed if black investors are not sleeping partners.

BUDGETARY CONSTRAINTS

The budget, we have just presented Mr. Speaker falls far below the levels of enabling the Department to successfully deliver on its mandate.

SMALL BUSINESS DEVELOPMENT

Mr. Speaker, the department can be proud of its commitment to the small, micro and medium enterprise (SMME) sector.

As a reflection of this commitment, the North West Province was one of the first provinces to adopt, after the National Small Business Act of 1995, a "Five Year Strategy for the Development of the SMME sector" in 1996/1997.

However, it is time for a critical review of that strategy, and for a pertinent and integrated update of the provincial SMME strategy. The context of this paper is the admission by the Minister of Trade and Industry, that government has largely failed the SMME sector, it is the closure of the National Small Business Council (NSBC) after financial mismanagement has been alleged, it is the failure of Khula Credit Guarantee Scheme to unlock sufficient financial resources for SMMEs, and it is the perceived failure of SMMEs as vehicles of job creation and export growth.

Because of the financial constraints facing provincial government, SMME development has become a top priority for economic development thrust of the North West provincial government. The basic motivation is that SMMEs provide jobs, make people self-reliant, lessen dependency on the government and may act as a seedbed for entrepreneurship. One of the roles that successful SMME development can play is one that is emphasised in the 1995 White Paper on SMMEs. This is the potential of SMME promotion to help (partially) to reverse the socio-economic distortions inherited from apartheid.

Mr. Speaker, entrepreneurship, risk-taking, innovation and free competition was inhibited under apartheid so that an important vehicle for learning and human capital formation was not available or repressed. Secondly, on a local government level the spatial imbalances and obstacles created by apartheid through the Group Areas act and skewed municipal planning and infrastructure investment inhibited the development of a Black middle-class business community. As a result, South African cities and towns are still characterised by "the missing middle" - a relative lack of medium sized businesses. SMMEs policy must be designed to allow for the upward mobility of small and micro-enterprises into medium sized businesses with the ultimate aim of entering the export market.

Supporting SMMEs is thus seen as an instrument for mending many ailments. Certainly all of the objectives listed above are needed urgently in the North West. However, one should take care not to have conflicting goals. For instance, raising international competitiveness and raising employment may (at least over the short-term) be conflicting goals, as firms will improve cost competitiveness over the short-term by reducing labour input, thereby raising average productivity.

A large body of research on SMMEs in South Africa is beginning to be more pessimistic of the lofty ideals that are being set for South African SMMEs and urges that we temper these with realism.

Specifically, research by Kesper1 (2000:1) found that: "Research on South African SMMEs reveals, however, a mismatch between the reality and the model of the SMME sector used by South African policy makers: The South African SMME sector is far from being homogenous and would require a fine-tuned set of interventions rather than the generic assistance currently provided. Only a few, dynamic SMMEs show a potential to contribute to rapid employment creation, whilst survivalist activities constitute the vast majority of South African SMMES."

Thus, the implication is that a broad approach to provide support can only really help survivalist firms, and thus act as some break on poverty. If job creation and some of the other goals are to be realistic goals, then fine-tuning, targeting, and picking winners may be a better SMME strategy to follow.

In respect of the specific measures used to support SMMEs, Kesper in his research (2000:1) found that:

"The finding reflects a widely held view that the current supportive measures of government, including the North West Provincial government is too supply-oriented. For instance, education, training and finance dominate the support strategies of national and provincial governments. Such a view is based in the increasingly realization that the core problem for most SMMEs are lack of demand. The evidence from our Department certainly shows that the most successful ways of stimulating SMMEs are through outsourcing, subcontracting and linkages with big firms."

Because of smallness, many SMMEs fail to generate sufficient economies of scale to expand into export markets, unless they are in very specific niche markets or participate in high-value added supply chains. Most SMMEs compete with one another in the domestic retail and service markets with little scope to grow in size. In geographically distant areas such as North West, many SMMEs will have difficulty in forming part of a dynamic supply chain because they would need to keep large inventories (to avoid the risk of running out of stock and compromising the whole supply chain) which is prohibitively expensive for most of these firms.

Mr. Speaker, in our economic development and industrial strategy that will be drafted this year, we would need to put special emphasis on the following aspects pertaining to SMME development.

* Firstly, a much stronger demand-side focus may be needed. Here subcontracting, outsourcing and procurement, inter-firm networks, building of marketing skills and the clustering of enterprise sectors may be used. Also, the use of large projects (e.g. SDI, etc.) in stimulating demand for SMME products must be investigated. Subcontracting can also be an important source of finance for SMMEs as experience in other countries have shown.

* Secondly, we need to come to an understanding of the role of macro-economic, trade and labour policies on the SMME sector need - and to analyse these more critically. Most of these policies fall outside the direct influence of local and provincial government (is a national competency). If the effects of for instance exchange rate volatility are known, support agencies may design mechanisms to compensate.

It is recommended that we refine our SMME-strategy to distinguish between two segments, namely micro and other small businesses.

BUDGETARY IMPLICATIONS

In Summary, Mr. Speaker, the total budget allocated to the department is eighty six million seven hundred and sixty six thousand rand (R86 766.000). Out of this amount, forty two million six hundred and forty four thousand rands (R42 644 000.00) is allocated to our parastatals namely: North West Parks and Tourism Board; Invest North West; and the Gambling Board. This leaves the economic development of the department with forty four million one hundred and twenty two thousand rands (R44 122 000.00), of which, Mr. Speaker, twenty one million two hundred and forty nine thousand rands (R21 249 000.00) is allocated to personnel expenditure. This leaves the department with only twenty two million eight hundred and twenty three thousand rands (R22 823 000.00) for operational expenditure.

The budget as annexure Mr. Speaker falls far below the levels of enabling this Department to successfully deliver on its mandate, leaving much to be desired.

CONCLUDING REMARKS

Mr. Speaker, having outlined what I believe to be a very progressive and dynamic strategic vision of our Department, and having indicated to you how we will be allocating our budget in this financial year to work towards this vision, allow me to conclude by raising one last issue. I raise it last because it is not least - it is perhaps the most important plea that I will make here this afternoon. This plea is that we must all be convinced of the importance of institutions in economic development and that continual institutional building must form part of every element of our Development Strategy. We therefore need to align the visions and functioning of all our potential vehicles for raising our international competitiveness. Whilst many of the steps that need to be taken in this regard fall outside the direct activities of our Department, our broader responsibility towards economic development makes it imperative for us to provide guidance and leadership in this regard.

May I at this stage take this opportunity to pay tribute to all those in our province who supported programmes and projects which the department has spearheaded and continue to pursue. I wish to mention the support the department has enjoyed from the community of traditional leaders, organised business and labour, hawkers, the youth and women structures. We appreciate the support we received from the Honourable Premier, Mr. Popo Molefe, and his office, Exco colleagues, in particular my predecessor, Honourable Molewa, Honourable members of this House, Honourable Sebekedi and the Standing Committee on Economic Development and Tourism, Chambers of Commerce in the province the parastatals in my department, other community formations, the departmental Head, management and staff of the department.

I want to dedicate my sincere appreciation to the support that I have enjoyed from my husband, Dr. Peter Modiselle and my family.

Issued by: Office of the MEC for Economic Development & Tourism, North West, 4 April 2001