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26 August 2004

Colleagues, members of the media, diplomatic corps, ladies and gentlemen, in a statement that I made on 24 May 2004, I sketched out tasks that were set out in the President's State of the Nation Address to the 3rd democratic Parliament and the cluster's programme for the year. Today, I will give an overview of the progress made to date since the 1st Cabinet Lekgotla of the 3rd democratic Parliament that was held in May.

Before I start by furnishing you with the progress made to date, it is important that I mention the Cluster's long-term goals as contained in Vision 2014 so that you understand on the premise, we are coming from. The Cluster's long-term goals are to:

* Place the economy on a higher growth trajectory
* Reduce levels of inequality
* Eradicate poverty
* Sustainable employment creation

In order to achieve these long-term goals the Cluster has identified medium term strategic objectives, which are:

1. Maintain macroeconomic balance
2. Increase levels of public investment in infrastructure and ensure efficient and affordable economic infrastructure
3. Lower cost structures throughout the economy and enhance levels of competition
4. Develop manufacturing and services sectors that are growing, increasing exports and creating jobs
5. More enterprises, particularly black and women owned and managed enterprises
6. Labour force with the skills required by the economy
7. Increased spending on research and development and diffusion of new technologies
8. More equitable geographic spread of economic activity
9. To address the challenges of the second economy

In response to realising its objectives, the Economic and Employment Cluster has set four key strategies:

* Continue to maintain the macroeconomic balance
* Accelerating the implementation of the microeconomic reform strategy
* Targeting interventions in the second economy
* Implementing a governance strategy to strengthen the institutional capacity for implementation, sequencing and monitoring and evaluation

PROGRESS TO DATE

1. A STABLE MACROECONOMIC ENVIRONMENT

In terms of the first objective, the macroeconomic environment continues to be stable. The economy has managed to achieve inflation rates, which are within the target range of 3%-6%. I am also glad to report that the joint National Treasury and Reserve Bank inflation targeting technical committee has been established. And finally a bilateral between the Governor of the Reserve Bank and Minister of Finance will be held tomorrow

Furthermore, a ten-year framework is being developed for the January 2005 Lekgotla.

2. ACCELERATING THE IMPLEMENTATION OF THE MICROECONOMIC REFORM STRATEGY

Government remains committed to a number of microeconomic reforms to facilitate economic growth, employment, equity and poverty eradication. Key in this regard is increasing the level of investment in infrastructure. In broad a comprehensive review of the governance structure of State-Owned Enterprises (SOEs) has been completed. The SOEs have sent investment plans and definition of infrastructure investment and areas of focus of SOE investment have been identified. In terms of the SOEs we have completed a financial evaluation of their borrowings and guarantees that have an impact on infrastructure investment. We are also currently continuing with the financial analysis of the electricity capex plans totalling R55 billion over years, split into various Generation (30), Distribution (10) and Transmission (15) projects. We are at the advanced stage of the financial review of analysed capex plans totalling R50 billion over 5 years, split into various Ports (8) and Rail (42) projects. Discussions of possible funding strategies for the following are underway: increased Public Private Partnerships (PPPs), joint ventures, preference shares, outright sale, sale and leaseback. Build operate and transfer, concessions, convertible bonds, recapitalisation and access to capital markets (infrastructure bond).

The following initiatives are being planned to enhance the level of public investment in infrastructure: The receipt of financial analysis of infrastructure plans of other sectors such as water and telecommunications, finalising infrastructure investment plans, GAP analysis to establish if the CAPEX projections address the infrastructure SOE backlog, and developing criteria to assess alignment of investment plans with government objectives.

3. LOWERING THE COST STRUCTURES THROUGHOUT THE ECONOMY AND ENHANCING LEVELS OF COMPETITION

As government we want to improve the efficiencies of input sectors identified in MERS in order to reduce costs and thus lower the cost structure of our economy enhancing competitiveness and affordability. Moreover we want to increase access to economic infrastructure to economic citizens across the country. Developments to date include the start of an identification process of bottlenecks in the national logistics system. In relation to the national logistics system preparatory work to develop a strategy is at an advanced stage and investigation into logistics corridors has started. In addition a project team tasked with the finalisation of the National Ports Bill has been established and Spoornet has finalised a 15-year locomotive investment plan. In terms of utilities two cities have been chosen as the first regional electricity distributors (Cape Town and eThekwini) and options for new electricity generation capacity have been finalised. In the same utilities vein an asset register of national water infrastructure has been compiled and institutional options for the new national water utility have been finalised.

Progress on sector-specific infrastructure investment plans and strategies including increased capital expenditure financing strategies will be announced in September 2004. The Department of Public Enterprises will be leading this work. A common regulatory framework for corporate governance and standards for corporate practices in parastatals, and systems for performance management of these enterprises by government will also be put in place this year. Sector regulators will be strengthened.

The key next step to be taken in order to achieve what we set out to do in the briefing given in May comprise the tabling of the National Ports Bill in Parliament On that same day we, as government vowed to look into the issue of administered prices more broadly in order to ensure that telecomm, water, energy and transport services prices are affordable and accessible to the poor as well as enhancing the competitiveness of enterprises. In this regard a regulatory framework for dealing with administered prices would be discussed by the cluster in August. A research study on the impact of import parity pricing on the development of downstream industries is to be completed by October 2004.

The Department of Communications have concluded the market study required by the Telecommunications Act of No 103 of 1996 as amended. Deriving from the study is a number of recommendations that address the following areas.

* Those that allow further liberalisation of the sector
* Those that require the Minister to determine a date from which various provisions of the Act can be activated and stimulate sectoral growth.

Accordingly, the Minister of Communications will be making a number of policy announcements on these matters in the coming week.

In May we also reported that Cabinet would closely monitor the progress made in establishing the Second Network Operator (SNO) so as to ensure the introduction of greater competition in the telecommunications sector. My colleague, the Minister of Communications, Dr Ivy Matsepe-Casaburri will make an announcement in this regard.

4. DEVELOP MANUFACTURING AND SERVICES SECTORS

In terms of the services sectors considerable strides have been made and on the tourism front a competitive strategy has been completed and its growth strategy has been implemented as well as the marketing campaign. More than twenty investment promotion road shows to promote opportunities in priority sectors, which have been identified by MERS, are being implemented. The dti recently launched an incentive for the film industry. On trade related matters an agricultural trade forum has been established. The South African- European Union free trade agreement is up for review and we are also pursuing several bilateral negotiations of preferential trade agreements. We as government want to increase market access of our goods and services and a campaign to increase awareness of market access opportunities has been developed.

A set of key steps to be taken in order to accomplish this objective consists of tabling the Tourism competitiveness strategy in Cabinet. In order to develop the priority sectors a first set of customised sector programmes would be presented to all government clusters by November 2004. And within the services sector, we mentioned that Business Processing Outsourcing (BPO) and call centres will be receiving incentives and I am pleased to announce that a BPO incentive will be launched in October this year.

5. MORE ENTERPRISES PARTICULARLY BLACK AND WOMEN OWNED AND MANAGED ENTERPRISES

In terms of enterprise development and support with a focus on the previously disadvantaged noteworthy advances have been made. The National Empowerment Fund has launched financial products for black owned enterprises. Furthermore the merger between Ntsika Enterprise Promotion Agency and National Manufacturing Advisory Centres announced in May is underway and an interim CEO of the new single enterprise development agency has been appointed.

The Cooperatives Bill, which will assist historically disadvantaged, has been completed and the Nedlac process concluded. We also aim to create a conducive environment for these enterprises for them to thrive and an evaluation of the regulatory framework has been completed. In the agricultural sector, a business plan and financial model for the Agricultural credit scheme is completed and R200 million has been allocated to provinces for a comprehensive farmer support programme. The AgriBEE framework review is a significant step towards deracialising the agricultural sector and enhancing the participation of historically disadvantaged individuals in this very important sector. R37 million has been set-aside for the Tourism Enterprise Programme.

Important steps to be undertaken include the launch of a campaign that will communicate economic opportunities and available government support, operationalising a new single enterprise development agency in October. The Broad-based Black economic empowerment Act Codes of good practice and regulations would be submitted in September this financial year.

The fourth draft of ICT BEE Charter has been released for public comment. The final draft will be presented to Cabinet for consideration in October this year.

6. A LABOUR FORCE WITH THE SKILLS REQUIRED BY THE ECONOMY

Comprehensive work in the area of Human Resources Development (HRD) and addressing critical skills shortages in the economy is underway and is still on track. Research has been completed into critical skills shortages and Sector Education and Training Authorities (SETAs) have submitted a list of scarce skills. To date 21 Employment and Skills Development Lead Employer Agencies launched in May 2004 and R90 million is allocated from National Skills Fund. The issue of under performance in some SETAs prompted government to conduct an evaluation and their performance audit has been completed. With regards to learnerships, 100 new venture creation learnerships have been piloted in KwaZulu-Natal and 1000 learners have been recruited for the 2005 programme.

The 21 agencies are expected to recruit and train 11 000 learners in the learnership programme by October 2004.

7. INCREASED SPENDING ON R&D AND DIFFUSION OF NEW TECHNOLOGIES

Significant progress has been made in the area of Research and Development (R & D). A new model for strategic management of South Africa's science system has been developed. The preparatory work to transfer oversight of the Council for Scientific and Industrial Research from the dti to the Department of Science and Technology is at an advanced stage. Likewise the Pebular Modula Reactor (PBMR) has human capital strategy in place and the development of National Biodiversity Strategy is underway. Other developments include the submission of a bid to locate the Square kilometre Array in South Africa and the construction of the Southern African Large Telescope is on track for its completion in December 2004.

Steps to be undertaken consist of the development of incentives to increase private sector investment in Research and Development. The science budget vote is to be redesigned in line with the new strategic management model.

8. MORE EQUITABLE GEOGRAPHIC SPREAD OF ECONOMIC ACTIVITY

In respect of promoting a more equitable geographic spread of productive and sustainable economic activity, we emphasised that we will be building on programmes already in place to address the skewed economic participation and access to infrastructure, services and economic opportunities in the country. The development of a comprehensive Geographic Information System to map economic activities and infrastructure is underway and a plan for the development of a strategy to promote a more equitable geographic spread of economic activity has been concluded. In addition priority areas for investment in tourism infrastructure have been identified with eight concession sites awarded in greater St Lucia Wetland Park.

By December 2004 draft economic maps of South Africa are to be completed.

TARGETED INTERVENTIONS AT THE SECOND ECONOMY

It is common knowledge that South Africa's economy is dual with a developed area and an underdeveloped area that is plagued by poverty and unemployment. In May we announced that the Economic, Employment and Investment Cluster would focus on the following issues in respect of the second economy:

* Human resource development with special focus on artisan and entrepreneurial training
* Improving labour and market opportunities intelligence
* The Expanded Public Works Programme (EPWP)
* Acceleration of land and agricultural reforms

The EPWP is a nation-wide programme covering all spheres of government and state-owned enterprises. It aims to draw significant numbers of unemployed into productive work accompanied by training so that they increase their capacity to earn an income between unskilled yet abundant labour on one hand and job opportunity on the other.

We believe that in order to reach government's target of halving unemployment by 2014 that is reducing the unemployment rate from thirty per cent to fifteen per cent (30-15%) five hundred and forty six thousand (546,000) new jobs would have to be created each year, in other words, two hundred and seventy six thousand (276,000) more than has hitherto been the case.

In respect of the acceleration of land and agricultural reform, an integrated agricultural development strategy has been completed. R20 million has been allocated to the Department of Education for Adult Basic Education and Training for human resource development in the Agricultural sector.

The allocations set aside for the 2004/5- 2008/9 period are as follows: Infrastructure has been allocated R15 billion, Environmental and culture sector R 4 billion, Social Sector at least R 600 million and Economic Sector is being determined.

We believe that at the inadequate and inappropriate skills contribute significantly to unemployment, hence learnerships - a combination of class learning and practical training- are at the centre of the EPWP.

The Apex Fund that was announced in May is in the process of being incubated at Khula and an interim CEO has been appointed. The Apex Fund will provide small loans to micro-enterprises, with a focus on women in rural areas. Key steps that will be taken to ensure that this objective is realised include the disbursement of first loans by the Apex fund in October 2004.

With regards to consumers, the Consumer Credit Bill has been finalised. This will significantly contribute towards consumer protection in our country.

Discussions will be conducted with the private sector in October 2004 regarding the integrated agricultural development strategy.

GOVERNANCE STRATEGY TO BUILD CAPACITY

At an assessment of the progress made to date in implementing the Microeconomic Reform Strategy since 2001, several institutional or governance matters were identified that required strengthening in order to speed-up implementation. These included intergovernmental planning, strengthening the role of local government, management of agencies, and the need for monitoring and evaluation. To date the reporting system has been developed and work on the development of a monitoring and evaluation system has started.

The cluster reporting system would be refined for the next quarterly report.

CONCLUSION

In concluding this media brief, considerable strides have been made to fast track the attainment of objectives set out by the Economic, Employment and Investment cluster. Many projects and programmes are still on track and over the next 3-5 years, we will measure progress in respect of the following key strategic objectives:

* Continued macroeconomic stability, lower interest rates and a competitive currency
* Increased levels of public investment in infrastructure
* Efficient, maintained and affordable and accessible economic infrastructure
* Lower cost structures throughout the economy and enhanced levels of competition
* Manufacturing and services sectors that are growing, creating jobs, increasing the value-add, meeting basic needs and competing globally
* More enterprises especially black and women-owned and managed enterprises
* A labour force with the skills needed by the economy
* Increased spending on R & D activities and the diffusion of new technologies across the economy, and
* More equitable geographic spread of economic activity

I thank you.

Issued by: Ministry of Trade and Industry
26 August 2004