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"TURNING THE TIDE - PUSHING BACK THE FRONTIERS OF POVERTY"

VISION

"Economic growth, tourism promotion and sound environmental management towards fulfilling the needs of the people"

MISSION

"Working efficiently and effectively with our stakeholders to fulfil the needs of the people through: -
* Sustainable development
* Job creation and sustainable poverty alleviation
* Infrastructure development
* SMME development
* Promotion of tourism
* Promotion of clean and healthy environment
* Promotion of fair trade
* Trade & Investment Promotion"

1. Pushing back the frontiers of poverty - budget priorities

It is clear that the Free State Provincial Government has to continue to play a very active role in reducing the number of people dependant on social welfare and increases the numbers that rely for their livelihood on normal active participation in the economy.

President Mbeki furthermore said "Building on the foundations we have laid down, we must, once more, set ourselves the necessary realistic tasks for the year. Needless to say, these must be located within the broad perspective we have just indicated. These tasks encompass such areas as:

* expanded service provision;
* improvements in the efficiency of the public service;
* increased social and economic investment;
* black economic empowerment;
* greater all-round attention to the challenge of human resource development, to help reduce the unemployment levels;
* further work on the important matter of moral renewal;
* advancing the African Union agenda, including the important issue of peace and security."

Mr Speaker, from this perspective the challenge we face now is to ensure that the achievements and progress that have been made so far as well as future achievements can be extended to push back the frontiers of poverty and ensure a better life for all in our province. Throughout my speech I will highlight the deliberate actions and role of my department in respect of the latter.

2. Pushing back the frontiers of poverty - a brief on our progress

Expanded service provision: -

Mr. Speaker, in ensuring that we deliver good quality services at a swift pace, the department has established regional offices, also as part of the commitment we made in the 2002/2003 budget speech. These regional offices will serve the public in general, but more specifically their mandate entails SMME & Tourism development. This forms part of the department's efforts in providing a service at grass-roots level. True to the spirit of expanding service delivery, we are confident that these regional offices will play a fundamental role in moving people from a social dependant situation to an economic independent situation. The appointment of personnel has been finalized as part of the approved structure, and the offices are fully operational.

Improvements in the efficiency of the public service:

In terms of the Skills Development Act, progress has been made in the implementation of training and development programmes with emphasis on the management cadre in the fields of finance for non-financial managers and project management. Departmental policies were developed to guide and regulate officials in order to improve their working abilities.

Increased social and economic investment:

* The Canadian company Royal South African Manufacturers (RSAM) - established in the Goldfields - is currently championing the jewellery manufacturing activities in Virginia. This company has now grown to provide employment to over 1 000 people, mainly women. Their total exports so far, amount to US$ 1 million, which presents a substantial economic injection for this economically devastated area.

Mr Speaker, it is true that we have had some difficulties whereby investors did not play by the rules of the game and tried to take shortcuts. Although it was unfortunate and has taken us a few steps back, we have also learned from these experiences. The point is clear: investment procurement is a complicated process, which requires persistence. The globalisation of world markets has brought all economies closer, which implies that we have to compete in world markets for investment. The challenge now, is to be constantly innovative in our approach. This will enable us to deliver on our mandate of creating an enabling environment for the business community (both foreign and local) and the public to thrive in.

The department, through its participation in a number of exhibitions, has given substantial exposure to the Virginia Jewellery School. They were also part of the department's stand at SAITEX 2002. Only 2 provinces were selected to exhibit at the International Investment Forum hosted by the President, Mr. Mbeki. The Free State was one of the provinces, requested to exhibit the activities of the jewellery school. The significance of the jewellery school is the fact that it serves as a tool to develop and unleash the creativity especially of our youth. We are very proud of the fact that 18 Black students are enrolled in this school - it is their creative jewellery designs that have captured the attention of exhibition delegates! From our recent rip to Uganda we have registered interest from the Ugandan Government to send their students here for training at the jewellery school. The development of our human resources is of paramount importance in the development of our economy.

The department through the FDC has been instrumental in the refurbishment of vandalised factories at Selosesha in Thaba Nchu. A meat processing plant, Sky Country has been attracted to the industrial estate and has now created 300 additional jobs. This project represents a total investment of R3.8 million. We are in the process of refurbishing the remaining factories as we find new tenants.

Tourism Promotion & Development:

* The domestic market represents the bedrock of the Free State tourism industry. This is backed by the fact that during the past financial year approximately 75 752 people visited the provincial reserves and resorts 2.2 million domestic trips were undertaken to the Free State in 2000/2001. Twenty (20) percent were from Gauteng and six (6) percent from the Eastern Cape. Most leisure travellers were from Gauteng. The importance of land travellers to the Free State should not be underestimated as it represents the major portion of the revenue of the Free State. Lesotho is the dominant market for the Free State, followed by Mozambique as the next largest African land arrivals market to the province. The majority of travellers from Lesotho have visited the Free State already more than 10 times. If we could get these travellers to spend 10 percent more, it could result in R298 million in addition revenue. On the other hand, if they could stay one day longer we could gain R268 million in extra value.

As part of the efforts to develop human resources, the department facilitated the training and accreditation of fourteen (14) tour guides from disadvantage background as well as fourteen (14) young people from across the province. Eight (8) assessors were accredited through the Tourism Hospitality Education & Training Authority. The department also facilitated training for ten (10) PDI B&B owners.

We are however not satisfied about this state of affairs. In the current financial year there will be a concerted effort in including PDIs in each aspect of the tourism industry. We have funded two successful B&B's owned exclusively by women, one in Bloemfontein and the other in Phuthaditjhaba, to the tune of R800 000 and creating fourteen (14) permanent jobs respectively.

In the previous budget vote speech we committed ourselves to promote the Free State extensively as a tourism destination. The department has succeeded in this through participation in major events, such as the recent cricket world cup activities in Bloemfontein whereby the province was marketed to local and international visitors. At the recent Tourism Indaba 2003 our products attracted substantial interest from tourism industry role players. As part of our driving force to get more PDIs involved in the tourism industry, the department had 25 exhibitors from PDI background. They have all very good contacts, which could benefit their businesses tremendously.

In terms of tourism development, the Maluti Drakensberg Transfrontier Project will avail opportunities to many of our people to enter the tourism industry. The department is also working closely with the Lesotho Government in developing and promoting joint projects.

The department has started with regional summits for tourism so as to meet with all the stakeholders in this industry. We had a very successful summit in Thabo Mofutsanyana. The department met all stakeholders in the tourism industry, well attended by all the regions, to forge partnerships between the public sector and industry in promoting tourism growth and development in the Free State Province.

Mr Speaker we are pleased to inform this house that we are finalising what would be a definitive directory of tourism products and a launch of the Free State Tourism website. I invite all members and the public gathered here today to visit our tourism website at www.freestatetourism.gov.za.

We believe that the mining industry in the province could also play pivotal role in terms of tourism development. Hence the fact that we are working with the mining houses in the Lejweleputswa district, so as to come-up with unique tourism products. An example of this is a restaurant, which is located underground in a mineshaft.

An amount of R10, 842 million is budgeted for the above said activities. Mr. Speaker, I wish to announce that the department will be establishing a Free State Tourism authority during this financial year. It will be structured differently from the former Free State Tourism (FST) so as to ensure effective marketing of the province as a tourism destination.

Conservation & environmental management:

In terms of conservation in the Free State, it is worth mentioning that approximately R9.3 million in revenue was generated through the 2002 Free State Game Auction, permits issued as well as the collection of reserve & resort fees. Approximately 75 752 people visited the provincial reserves and resorts during the past financial year.

The department gazetted the Provincial Environmental Implementation Plan (EIP) on the 13th of December 2002. It is now a statutory document, which all the provincial departments and national departments in the province have to implement and comply with. Approximately 140 Environmental Impact Assessments were evaluated of which 130 were approved, resulting in substantial infrastructure development and job creation. Documentation proposing the Vredefort Dome as a World Heritage Site has been submitted to UNESCO in Paris at the beginning of February 2003. This site was accepted in principle to be declared a National Heritage Site by the South African Heritage Resources Council. Once accreditation has been received the Vredefort Dome can become one of the province's tourism icons, attracting an increased number of domestic and foreign tourists.

Consumer Affairs:

The Consumer Affairs office mediated on a number of consumer complaints during the 2002/2003 financial year, and successfully resolved complaints to the value of R1.1 million. The success was due to a strong focus on education campaigns, workshops, road shows, radio talk shows, all geared towards increased public awareness.

Mr Speaker, I would like to mention that an acting Consumer Protector has been appointed. Furthermore the Consumer Court had its first case held on 5 May 2003.

Economic Development & Job Creation:

Black Economic Empowerment (BEE):

Mr Speaker, in order to emphasise the importance of this, I would like to extemporise from the State of the Nation Address, which says: The government is firmly of the view that economic growth, development and black economic empowerment are complementary and related processes. The empowerment we speak of is an inclusive process and not an exclusive one. No economy can meet its potential if any part of its citizens is not fully integrated into all aspects of that economy. Equally it follows that an economy that is not growing cannot integrate all its citizens into that economy in a meaningful way.

The government will lay greatest stress on black economic empowerment that is associated with growth, development and enterprise development and not merely redistribution of existing wealth, with special reference to the mining industry. We will work in partnership with the private sector and will further ensure that government actions are coordinated and monitored.

Government has a lot of influence and leverage by insisting that it's objectives outlined in the preferential procurement policy are met, namely BEE, youth employment and empowerment and gender equality

We have prevailed on all departments to make sure that during of their procurement processes all tender specifications should make clear all jobs created. We are taking advantage of the opportunity created by mining houses through their procurement policies to help black SMMEs to tender by providing them with finance through the FDC.

Job creation:

Mr. Speaker, loan financing to the amount of R122, 85 million has been approved by the Free State Development Corporation. From this, 90.46 per cent were allocated to PDI businesses with a view of promoting black economic empowerment. As a result approximately 3600 jobs were created. As part of the broader objective of pushing the frontiers of poverty back, the department will pay special attention in this financial year to black economic empowerment. We have succeeded in opening the following factories namely Emaleni Enterprises, Tereen Trading to mention but a few in Thabo Mofutsanyana with a total number of approximately 1300 jobs.

Foreign direct investment to the tune of R213 million has been attracted to Harrismith for the establishment for a textile mill to be operational in August 2003. This will create eventually create 2000 jobs over a 3 year period. We are currently negotiating 3 new investments, which is a direct result of the investment in the textile mill. They will ultimately also be located in this industrial estate.

Mr Speaker, I also wish to mention that the Free State Gambling Board is at the final stage of adjudicating and awarding casino license applications. It is expected that the total capital expenditure will amount to R242 million, with the average Black Economic Empowerment equity shareholding at 33.33 per cent.

During the construction phase approximately 3119 job opportunities will be created, whilst 504 job opportunities will be created and maintained during the operation phase.

Besides loan financing geared towards the promotion of BEE, the FDC also provides assistance to contractors so as to make sure that they fulfil their contracts. In the 2002/2003 financial year the FDC has approved bridging loans for RDP houses amounting to R76, 8 million (of which 99 per cent went towards BEE). An amount of R5.87 million has also been approved for small contractors having government tenders and who have difficulty to secure financing.

New investments have been secured for the Xhariep and Jacobsdal - it is for a game meet processing plant as well as a bottling plant. The local community will be afforded a 33% share.

The department has put in place an HIV/ AIDS task team, which will work together with the Moral Regeneration Movement. By way of creating a conducive environment for economic development and job creation, the department strives to make a positive impact toward moral regeneration. In attracting foreign directing investment, investors are stating that there is human cost to HIV aids. We are all in agreement that the link between HIV/AIDS and poverty is the reason why we have to fight in this province against HIV/AIDS as a way of reducing joblessness and create more jobs to stimulate economic growth and development.

"What will guide us in everything we do will be to create a caring society. This society must guarantee the dignity of every citizen on the basis of a good quality of life for every woman, man and child without regard to race or colour or disability." President Mbeki, opening of Parliament on 25 June 1999.

3. Economic outlook & Challenges for The Free State Province In 2003

The Free State contributes to approximately 5.5 per cent of the national GDP. Provincial agriculture in particular plays a vital role to total agricultural output - in 2001 it was at 11.6 per cent. Other major contributors to the national economy are mining (7.8 per cent), electricity (7.3 per cent), community & social services (6.5 per cent) and manufacturing (4.7 per cent).

In a provincial context, it is clear that the Free State economy is reasonably well diversified compared to the situation in the early 1990s where agriculture and mining were the main contributors to real output. The community & social services sector is the biggest contributor to provincial output - with 24 per cent followed by manufacturing (17 per cent). In third position are agriculture (11 per cent), mining (11 per cent), trade (11 per cent) and finance (11 per cent).

The latter is very positive and represents a major achievement in terms of steering the local economy in the desired direction. The challenge now is to expand these sectors especially the manufacturing and service sectors. The information technology sector should also receive our undivided attention. As the president stated in the opening of parliament earlier this year, "The Tide has indeed turned".

Mr Speaker, I will just briefly outline the crux of the Free State's economic policy. It basically entails:

* Beneficiation of our natural resources, which should receive our undivided attention.
* But in this whole process of adding value, we should also empower/capacitate our people to become involved in manufacturing ventures, through JV's, mergers, etc.
* Furthermore, as we move up on the learning curve, we also have to compete in the global market place globalisation is a prerequisite for economic advancement.

This three-tier process is also underlined by two important principles, namely industry clustering (to avoid fragmented development); and utilising the opportunities provided by forward & backward linkages of existing and new economic ventures.

In order for us to be successful globally, we will have to move up on the value chain of production - from little or no-value-added products to high tech/high value-added products ultimately.

5. Pushing back the frontiers of poverty - addressing the challenges

The main components within the department, namely Tourism, Environmental and Economic Affairs are complementing each other in terms of their respective contributions to economic growth & job creation, poverty alleviation and people development. Together they form a central thrust geared towards economic development. Henceforth, the department has adopted a project team approach, whereby a number of programmes work together on the implementation of departmental projects. This has proven to be most successful.

An amount of R193, 706 million is budgeted for this vote in 2003/2004, which includes transfer payments of R50, 720 million and R826 000 to the Free State Development Corporation and the Economic Advisory Council respectively.

The 2003/2004 allocation to this vote increases by 1.80% compared to the 2002/2003 allocation.

We have reprioritised our budget over the years that have seen the allocation for capital expenditure grow from a base of less than 1 percent in 2000/2001 to almost 6 percent in 2003/2004. Actual spending on capital expenditure in 2000/2001 was R433 000, and in 2002/2003 the estimated actual expenditure is R276 000. The budget allocation for capital expenditure in the 2003/2004 financial year is R11, 426 million. This shift shows our commitment not only to improve service delivery through investing in infrastructure, but also our commitment to growing the economy by investing in strategic economic infrastructure.

Mr. Speaker, I now wish to deal with the detail of how my department will facilitate in addressing the challenges.

Tourism Promotion & Development

Focus areas & objectives for 2003/2004 are:

* Finalisation & Implementation of "Free State Tourism Development Plan";
* Tourism Routes Development & Promotion to add value to the current achievements starting with road shows and other marketing strategies like branding, packaging;
* Establishing a partnership programme, especially with the corporate and NGO sector for the promotion and development of tourism products related to eco-tourism, sports & adventure tourism as well as cultural tourism;
* The formation of regional and provincial tourism associations; etc.

Trade & investment promotion

Mr Speaker, in terms of restructuring the Free State economy, I am glad to report that my department's efforts are reaping positive results. In brief the progress is as follows:

* The Free State's exports have increased from approximately R974 million in 1999 to approximately R1, 334 billion in 2000, representing an increase of 37%. In 2002 it declined slightly to approximately R1, 303 billion. Exports contribute to approximately 3% of the Free State's GDP.

* The Free State share of the GDP is 5,5%. Why the share of the Free State is diminishing the reason is quite simple. The reason is that those sectors of the economy that has shown the highest growth i.e. automobiles, financial services and IT, the Free State is under represented in those. The Free State economy growth rate is 1% less than the national for the reasons I have outlined above. It is now more imperative and necessary that the Free State must concentrate on the sectors where it has competitive edge that is beneficiating agro processing and chemicals down streaming.

* The department's involvement (finding markets, exposure at exhibitions, etc) has resulted in the expansion of an arts & craft company, Glaasstudio. Their number of employees increased from 8 to 19, whilst the company's turnover has doubled. Their export turnover has increased by 178%. They have for instance supplied the Bloemfontein Protea Hotel with all their art work.

* At the 2002 SAITEX, most of the art & craft products (especially of PDI) were purchased for an art gallery in Holland. SA Gems & Crafts, a Welkom based company has also expanded due to the direct involvement of the department (through exposure to international markets). The company has also opened an office in the Czech Republic.

* Establishing the Eastern Free State as South Africa's Agro-processing Hub. This is done through inter alia exposing commercial & emerging farmers to opportunities for value-adding to traditional agriculture products, e.g. fruit juices, canned fruit & vegetables, new crops such as herbs, essentials oils, etc.

The drive to gear up the Free State economy towards sustainable growth, thereby addressing the high unemployment rate and the need for social upliftment, is based on the comparative and competitive advantages of the five regions:

* Motheo (Central Region), with the Mangaung axis, focusing especially on the textile manufacturing sector as well as plastic products manufacturing.

* Lejweleputswa (Goldfields Region), with Virginia, Welkom as axis, developing gold jewellery manufacturing. Farming machinery & equipment manufacturing presents also opportunities.

* Northern Free State, with Sasolburg as the province's number one petrol chemical hub focusing on chemicals down-streaming and pharmaceuticals.

* Thabo Mofutsanyana (Eastern Free State), with Bethlehem, Phuthaditjhaba and Harrismith as pivotal centres, focusing on agri-industry beneficiation and tourism development.

* Xhariep (Southern Region), with Jacobsdal known for wines, craft products and ostrich products. Opportunities prevail also in the leather tanning & finishing sub sector.

To ensure that more people do share in economic benefits - we should facilitate & assist with the identification of new & unique economic opportunities, which could be implemented. The opportunities created by forward & backward linkages should be exploited in full.

This programme has targeted Africa as an important trading and investment partner. We have had successful investment promotion efforts both in Uganda and Kenya in the last two weeks.

We intend to sign trade and cooperative agreement between the Free State and the two countries mentioned. We are certain that the Free State has made a gateway to the east and central African markets to showcase our products. We will be signing a memorandum of understanding with BIE province in Angola and accelerate our investment promotion in West Africa.

Mr Speaker, given that we function in a global environment where the competition for foreign direct investment is fierce, we need to have a strong investment promotion capacity. This authority will have to focus on the province's competitive and comparative advantages in terms of investment and trade. It is my department's intention to establish such an authority during the current financial year.

Economic research & planning

Without up-to-date figures it is very difficult to measure the economic performance and the impact of governmental policies & projects. With the above in mind, my department has created capacity to do inter alia the following, namely:

* Analyse economic activities in the Free State Province, with particular emphasis on sectoral growth, trends, forward & backward linkage opportunities, etc.
* To be a source of value-added information in the department.
* Play an advisory role to department, other departments, the Cabinet Cluster on Economic Growth & Job Creation, business people, etc. through targeted research, advice, referrals & contacts.
* Facilitate the development of policies on economic development, Black Economic Empowerment (BEE), etc.

Mr Speaker, according to a discussion document released by Statistics South Africa, the Free State Province was one of the worst performing provinces i.t.o. economic growth, with a growth rate of -0.6 per cent in 2001. I wish to make it clear that this is not the case - average growth is estimated to be between 1 and 2 per cent per annum. The Free State's economy is well diversified making it less vulnerable to external shocks compared to the situation, which prevailed up to the early 1990s. During that time our economy was heavily dependant on the primary sectors. We are therefore calling for optimism amongst our leaders in business, labour and other spheres of life about the Free State's economic potential.

SMME promotion & development

Special emphasis will be on strengthening the capacity of the regional offices, which the department launched during February 2003. The strategy of having regional offices in order to bring service delivery to the people is in line with the request that President Mbeki made during his State of the Nation Address at the opening of parliament on the 14th of February 2003.

As department, we will make sure that these regional offices operate in a co-ordinated manner with all development agencies so as to accelerate SMME & tourism development. This implies that district municipalities, development agencies (such as Khula, Ntsika and others) all link-up with the regional offices in order to provide a proper service to the people at grassroots-level.

Matjabeng Industrial Development Centre aims to assist with business skills, SMME development in the area of Matjabeng. We are please to establish one of the first industrial parks in the province with a budget of almost half a million rand. We have put money aside for the reactivation of the Botshabelo Entrepreneurial Centre to ensure maximum impact in terms of economic development in the area and experts advising us on how best this project can be sustainable.

Amongst others, it is also important to mention that this programme will launch the Free State Manufacturing Advise Centre (FSMAC) in September 2002, whereby the development of SMMEs will be fast tracked. The first office of FSMAC will be opened in Bloemfontein, with a view of rolling it out to Welkom within the next three years. An amount of R2.750 million has been set-aside for the first year.

A Black Economic Empowerment Symposia will be hosted by this department, so as to fast track the process of absorbing BEE enterprises into the mainstream of the economy, which will in turn assist us in our overall objective of pushing back the frontiers of poverty.

Economic development & job creation

As a department, we are emphasising the promotion of local economic development, i.e. building on the strengths and harnessing the weaknesses that are present in our Free State communities. It is a fact, that most new businesses in a community are formed by local entrepreneurs. Furthermore, most new jobs result from local business expansions and start-ups and not so much from businesses moving to a community from somewhere else. These facts indicate that the development and nurturing of locally based businesses should be a significant part of a local development strategy. This is where the co-operatives could play a meaningful role. Based on the experiences in different countries applying the concept, it seems that it is really worth considering the establishment of community co-operatives.

Co-operatives could be important to the Free State economy, playing a key role in the agriculture and agri-food sector as well as other sectors. They are of particular importance to rural communities. It is believed that co-operatives could go a long way to help build local solutions for local challenges.

As government, we should provide assistance through a variety of programs, but the key to the effectiveness of these programs is that initiatives are community driven and address local issues and priorities. The co-operative model exemplifies this approach, because co-operatives are a form of organisation that empowers people to take charge of their own future and destiny.

There is no doubt that one of the tools to build the capacity of communities is co-operatives. They have had proven success in bringing economic and social benefits to communities and providing a means for community development. Mr. Speaker, my department therefore intends to establish at least three community co-operatives in the Free State Province during the 2003/2004 financial year.

Furthermore, an amount of R50, 720 million has been budgeted as transfer payment to the FDC, which will be used to fund key projects with a view of expanding the economic base of the province. No administrative or other overhead costs will be funded out of these funds. Mr Speaker, the same approach as with SMME service providers, will apply to the FDC - they have to deliver according to the contractual agreement with government. In fact all expenditure is guided by the key objectives of job creation, poverty alleviation and Black Economic Empowerment. The FDC is currently finalising four (4) major investment projects - two (2) are in the Xhariep region (meat processing plant and a bottling plant), one (1) in Harrimsith (wooden tile factory targeting the export market, amounting to R27 million and job creation of approximately 300. In the case of the bottling plant the BEE equity will be 33 per cent and for the meat processing plant approximately 35 per cent. The other project is in the Lejweleputswa region (toilet paper manufacturing), amounting to R10 million with 10% BEE equity and 500 job opportunities.

Infra-structure development

A number of provincial resorts & reserves are currently being upgraded resulting in a number of jobs created (52 directly & 21 indirectly). On all capital projects a development goal is specified. This means that even if a contract is awarded to a non-PDI, a certain percentage of the value of the contract must be sub-contracted to PDIs.

Effective revenue collection

Mr Speaker, I now wish to highlight the revenue collection figures of the department. For 2003/2004, it is expected that the department will collect revenue to the amount of R25, 276 million.

Revenue collection is expected to increase to R38, 565 million in 2004/2005 and R29, 249 million in 2005/2006.

The main sources of this revenue are from horse racing, licenses & permits, other sales (e.g. game auction) as well as rental revenue. The bulk of the revenue comes from horse racing (46.68%) and other sales (26%).

Issued by Free State Provincial Government

15 May 2003