Media briefing by Minister A Erwin for the Economic, Investment and Employment Cluster on Government’s Programme of Action, Cape Town
7 September 2005
This media briefing provides an update on Government’s Programme of Action (POA) in Cycle 3 as reported to the Cabinet Committee on the 24 August 2005.
South Africa’s economic performance continues to be positive. Business confidence has escalated, and South Africa has had its credit rating upgraded. Continued growth and declining interest rates have spurred strong consumer demand and has boosted foreign investor confidence. Economic policies implemented thus far have provided room for a more expansionary approach. Significant challenges remain and will need to be addressed, including the strong and volatile exchange rate, distorted input pricing, a structural shift to high capital and skill intensive activities, rising oil prices, slow pace of investment, critical skills shortages, insufficient coordination amongst government actors and the need for increased alignment of macroeconomic policy with growth and development objectives. Nonetheless, the positive turnaround of the South African economy has created a strong platform for accelerated growth in the next decade, with an emphasis on achieving higher levels of productive investment, employment creation, exports, and productivity.
Advancing from the strategic direction outlined in the Micro Economic Reform Strategy (MERS) adopted in 2002, a renewed emphasis on fast-track economic growth is being made through a cabinet initiated process to formulate a programme for accelerated and shared growth.
1. Broad Economic Stance
The targets for accelerated growth over the period 2004-2014 include GDP growth of 6-7%, investment growth of 10%, employment creation of 500,000, and export growth of 10%. The central goal of accelerated and shared growth is the building of a diversified, sustainable and employment-creating manufacturing and services economy.
Monitoring of the implementation of MERS remains an ongoing activity as undertaken by the Government’s Economic Cluster and the programme for accelerated and shared growth will seek to boost these activities as well as identify new interventions to achieve higher levels of shared growth.
A National Export Strategy, which is being developed in consultation with stakeholders, is almost complete.
2. Increased levels of investment in the public sector
Consultations between Eskom and Government have begun regarding the establishment of a framework for electricity tariffs that facilitates investment. It is proposed that the new tariff system will be introduced in April 2006.
Commuter rail infrastructure and rolling stock will be refurbished/ upgraded also with the FIFA 2010 Soccer World Cup in mind. The Department of Transport has produced an Interim Passenger Rail Plan providing a vision for the long-term strategic direction of passenger rail over the next decades. A preliminary business plan that envisages a significant increase in investment has been developed and will be brought to Cabinet for authorisation.
Cabinet has approved new Institutional arrangements for national water infrastructure with the identification of a R21 billion programme to expand the water resource management infrastructure. Implementation of projects to the value of R8 billion is currently underway. Projects are ongoing in the Olifants river, where the infrastructure is ready to provide additional bulk water for domestic and industrial (mining purposes). A separate project on delivery of water via pipeline to augment supplies to SASOL/ESKOM is also in progress.
3. Increased levels of investment in the First Economy
State-owned enterprise investment plans will be leveraged to increase private sector investment. Independent Power Producers will complement ESKOM investments in the electricity sector to the extent of 30% of the new capacity requirements.
A review of the efficiency and efficacy of NEDLAC as an institution that impacts both on economic and social policy is being undertaken and a Growth and Development Summit report was presented to the President’s Joint Working Group in July. The NEDLAC review report is due in November 2005.
Government is in the process of developing an integrated investment promotion strategy that will be finalised by end March 2006. A national branding strategy has been developed and its implementation has been coordinated with the International Marketing Council and the Government Communication Information System (GCIS).
4. Lower cost structures and enhanced competition
Government is committed to work on lowering the costs of key resource-based inputs. A key development in this regard is the completion of a policy on Import Parity Pricing, which will soon be submitted to Cabinet for decision.
The development of a National Freight Logistics Strategy which seeks to address the lowering of cost of freight logistics chain and transport has been completed
Cabinet has approved the final safety requirements for the taxi recapitalisation programme. The Department of Transport is in the process of finalising conversions of permits to operating licences for mini bus taxis. The Minister of Transport has also published a gazette with the closing date of applications for conversions being end November 2005. A tender for the scrapping administration agency is currently being drafted and is targeted for issue at the end of October 2005. The once off scrapping allowance of R50 000 covering a total of 97 000 mini bus taxis will be provided from the fiscus.
5. Key sector development strategies
As regards the Tourism sector, phase two of the Complete Competitiveness Study for Tourism is complete and implementation has commenced. A R4 million transfer to Tourism SA and the signing of an MOU between the Department of Environmental Affairs and Tourism and SA Tourism has already been achieved to establish the Tourism Satellite Account.
Government has prioritised high growth sectors, such as BPO, as well as those sectors that have been experiencing recent decline. The textiles and clothing sector is an example of such a declining sector and proposals to support the sector are under way, including an interim arrangement to replace the duty credit certificate scheme in the industry.
6. Enhance international economic relations
A strategy for advancing African economic development through the NEPAD framework is being developed. This will guide and coordinate the activities of the government and the private sector in the African continent.
7. Enhance economic inclusion and impact on the Second Economy
The objective of interventions under the Expanded Public Works Programme is to draw marginalised people into the world of work through providing access to basic training and information about careers, as well as business opportunities and resources. In line with the Cabinet decision at the July 2005 Lekgotla the process of identification of opportunities for expansion has been initiated.
A mass communication campaign to inform particularly people citizens in the second economy about opportunities, including for skills development, and available support and how to access these is a priority of government. In this regard a campaign is being initiated, and will include cooperation with the SABC.
An Integrated Small Business Development Strategy has been finalised and is to be submitted for decision to Cabinet by end September. This seeks to draw on the lessons of the last decade of government’s efforts to stimulate this sector, including successes and shortcomings with the objective of enabling small business to contribute to employment growth and economic inclusion.
The implementation of the Broad Based BEE Strategy is ongoing and the formulation of a third of the charters is complete, while the gazetting of the ICT, Mining, Financial Services, Petroleum and Tourism Charters will be done as soon as the Codes of Good Practice are finalised.
The following charters are in various stages of formulations: Wine; Transport; Construction; Agriculture; Auto and Aerospace; Property; Pharmaceutical and Health.
The rollout of the Small Enterprise Development Agency is continuing with the latest provincial office recently launched in the North West with two satellite district branches.
The Apex Fund to support the financing of Micro enterprise is also being rolled out, along with the agricultural credit scheme (MAFISA).
8. A labour force with skills needed by the economy
The following achievements can be reported:
* National skills funding windows have been developed, approved and a budget has been allocated
* Provincial workshops on the National Skills Development Strategy (NSDS) were conducted
* 23 SETA establishments have received certification
* SETA grant and service level agreement regulations were published in July
* The Labour and Education Departments have marketed learnership programmes aggressively to recruit more school leavers and graduates.
* The new target set for 31st March 2006 in the NSDS 2005 – 2010 is 25 000, with an allocated amount of R21.9 billion over five years.
* The performance management system for the NSDS 2005-2010 has been implemented to improve the effectiveness of the skills development structures in government for the implementation of the Human Resource Development (HRD) strategy
* Relevant government department are participating actively on SETA Boards
9. Increased R&D Spending and the diffusion of new technologies
Both public sector and private sector spending on R&D has to grow almost two-fold over the next three years to achieve higher levels of competitiveness, meet the sector growth targets through science, engineering and technology and develop appropriate human capital. In order to drive growth in private sector spending on R&D, government has embarked on a process to develop options on incentive models. An interdepartmental committee is working on a draft plan that profiles these models to be submitted for Cabinet's consideration at the end of September 2005. To improve the role of science and technology investment in modernising the economy and improving delivery, all government departments will have to report on science and technology expenditure through the Estimates of National Expenditure (ENE) report from 2006.
10. More Equitable Geographic Spread of Economic Activity
To establish a framework for ensuring more equitable geographic spread of economic activity, a comprehensive map of the South African economy is being developed. StatsSA is developing spatial economic indicators including an integrated business register in cooperation with SARS, the dti and the Department of Labour. Other efforts include implementation measures to align national, provincial and municipal strategies around priority spatial interventions.
There is a need to revamp the existing infrastructure in the Citizen’s Post Offices (CPO) and the Multipurpose Community Centres. SENTECH will be able to provide connectivity to the Post Offices as well as the Health centres to the MPCCs. This will enable the health facilities to implement the registration of births and deaths and connect primary, secondary and tertiary health institutions. SENTECH will also provide connectivity to 2 248 schools in the nodal areas.
While progress is being made in implementing Government’s Programme of Action for the economy, several challenges remain as indicated earlier in this brief, and are receiving priority attention as was agreed at the July Cabinet Lekgotla. The establishment of the Task Team to devise a programme for accelerated and shared growth has to be seen in this context.
Issued by: Department of Public Enterprises
7 September 2005