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10 February 2006

Introduction
Members of the press
Ladies and gentlemen

Throughout the week you have been hearing about Accelerated and Shared Growth Initiative for South Africa (ASGI-SA) and the projects identified to achieve its objectives, set to drive the economy to a higher growth rate that will optimise broad-based impact. Today’s briefing will be no different, but will give clarity around specific areas in the Sector Investment Strategies Cluster comprising of the Departments of Minerals and Energy, Environment and Tourism, Arts and Culture.

I will be firstly addressing the cluster issues as they relate to the Department of Minerals and Energy (DME) and then I will briefly report on the tourism issues. My colleague, the Minister of Arts and Culture will then speak to the cluster issues as they affect his Department.

Growing the bio-fuels industry and targeting job creation

The establishment and growth of the bio-fuels industry is one possible solution to addressing both the economic and social challenges and is an important contributor to ASGI-SA, led by the Deputy President. South Africa imports about 60% of its crude oil requirements, which has economic implications in terms of balance of payments as well as vulnerability to rising crude oil prices. Increasing the volumes of ethanol in petrol and increasing the use of bio-diesel would therefore have macro economic benefits for the country. In addition, converting sustenance farmers into cash crop producers to supply the crops or inputs into bio-fuel will start to address the high level of unemployment in the country, particularly in rural areas.

In short we are looking at creating a value chain for bio-diesel and bio-ethanol that would result in significant job creation opportunities throughout the value chain. Most of these jobs could be realised in the second economy, which would assist government in meeting its objective of bridging the gap between the first and the second economies and halving unemployment by 2014.

In December 2005, Cabinet approved the establishment of a task team to develop the appropriate strategy by the fourth quarter of 2006. The task team, which is DME led comprises representatives from Department of Water Affairs and Forestry (DWAF), Department of Science and Technology (DST), Department of Trade and Industry (DTI), National Department of Transport (NDOT), Department of Agriculture (DoA), Department of Land Affairs (DLA), National Treasury (NT) and Presidency.

The key activities to be undertaken by the task team would include:
a. Identification of resource requirements (land, crops, incentives, human capital, etc)
b. Feasibility studies for plant construction (where required)
c. Long term feedstock supply contract aspects and farmer outreach activities
d. Cost benefit analyses, to determine optimal use of land, water, etc
e. How to move farmers from subsistence farming to commercial crop farming, including what support they might need such as in agricultural extension services and advanced farming methods.
f. Dealing with issues such as land tenure, reform and usage
g. Protecting vulnerable participants, such as farmers, from food price volatility, oil price drops and currency fluctuation

To ensure success in our bio-fuels strategy we will also need to consider the cost of the technologies, human resource development and appropriate regulatory changes.

Consultative forums will be established to support the task team and will be made up of Science Councils, higher education institutions, and industry specialists on the technical side and on the commercial side we will have our state-owned-enterprises (SOEs), industry players and business associations in particular Grain South Africa and the South African Petroleum Industry Association (SAPIA).

A project team will be established within the DME to maintain momentum over the coming few years. This team will be co-operating with international players in Brazil and the United States of America (USA) who are active in this area.

In addition to the benefits that bio-fuels will bring to farmers, new job opportunities will be created in the refining, blending and distribution of the bio-fuels products.

Formulating an Industrial Policy Framework (Beneficiation)

The second contribution of our department to the cluster programme is in the area of beneficiation.

The DTI, DME and DPE, together with other government Departments, have been working closely together on related strategies to promote downstream beneficiation of mineral resources. The focus of these efforts is on the development of the metals, machinery, plastics and jewellery sectors in particular. There are three major elements to these combined efforts.

Firstly, the lowering of input costs to the metals, machinery and plastics sectors in particular, through measures to deal with import parity pricing. A number of measures have been approved by Cabinet and are to be communicated by the Minister of Trade and Industry in due course. Success in removing this discriminatory pricing model of Import Parity Pricing would result in greater expansion by downstream processing operations, as well as create business opportunities for smaller enterprises.

Secondly much work has been undertaken with respect to identifying and promoting downstream linkages from Government’s Capital Expenditure Programme, particularly in relation to the investment to take place in transport and electricity infrastructure over the coming years.

Thirdly, the development of customised sector programmes is well advanced and we are looking at downstream beneficiation incentives. A background study on downstream beneficiation has been completed and the process of development of downstream beneficiation incentives is to commence over the next month. Here we look forward to using the excellent capabilities of Mintek amongst others. There also exist several possible projects in establishing new smelters.

During the last quarter of last year we made significant progress on promoting beneficiation on the legislative front, with Parliament passing the Precious Metals and the Diamonds Act.

The Diamonds Act introduces a new era in the regulation of the Diamond trade in South Africa by combining the diamonds trade with the precious metals trade through the Diamond and Precious Metals Regulator. This Regulator will in essence replace the current South African Diamond Board (SADB), which had both the promotion and the regulating function. These functions are now to be split, where the Regulator will focus only on the administration of the law and the newly established State Diamond Trader (SDT) on Promotion.

These two pieces of legislation will go a long way in assisting us achieve our long term vision of greater value addition taking place in our country.

For diamonds and precious metals, local companies will now be able to access the raw materials and rough, which up to now has been predominately sold on international markets. Consequently, we expect to see our country expanding its capabilities in the cutting and polishing industry, as well as in the jewellery manufacturing industry, thereby creating jobs.

The DME will during this year put structures in place to enable smooth implementation of the Act. Training initiatives are a priority to either sharpen the skills we have or to increase the quantities of people with jewellery manufacturing skills. We are working with the sector education and training authority (the Mining Qualification Authority) and we are all set to send ninety young South Africans from the previously disadvantaged communities to train in China; in addition we already have people being trained in Antwerp, Belgium. More such initiatives will be undertaken by the department during the year.

The changes in our diamonds legislation as well as the shifts taking place by our neighbouring countries (Botswana and Namibia in particular) are resulting in a change in how foreign investors are viewing this region. Since taking office I have met with serious global players in the diamond cutting, polishing and processing industry all of whom are now investing in Southern Africa. I hope to be able to make specific announcements on their investments in due course. In my discussions with them they have indicated they will bring with them the world class technology and industry knowledge they have developed.

Accelerate Growth of Tourism to enhance job creation and Foreign Exchange Earnings
The South African tourism sector has been identified as one of the key contributors to the intended 6% growth platform. The sector has experienced impressive growth in recent years. The period of strong growth since 1990 has fundamentally changed the face of the tourism industry in South Africa. With a small domestic market and less than 1 million annual foreign arrivals in the two decades before 1990, we have grown to a destination that welcomed 6.7 million visitors in 2004.

The Tourism Act is aligned to this vision of building a world class tourism destination that delivers sustainable economic growth, and clearly sets out the mandate and objectives for tourism. In this regard, the Department’s mandate is to contribute to:
* Sustainable gross domestic product (GDP) growth
* Sustainable job growth
* Redistribution and transformation

This mandate is achieved through focusing on six key objectives, namely:
* Increasing the number of tourists to the country
* Increasing tourist spend
* Increasing tourist length of stay
* Improving the geographical spread of tourists
* Improving seasonality patterns
* Promoting transformation

The sector has been identified as one of the immediate priority sectors within ASGISA. In this regard, for tourism to fulfil its role, focused action is required particularly in respect of the key areas outlined below. The targets in these areas over the next six months are:

A. Skills: Building skills partnership in tourism:
Skills development work will result in co-operation among and co-ordination between different stakeholders in government, business, labour and communities. The Department of Environmental Affairs and Tourism (DEAT) will seek to clearly understand what the needs of the industry are, where the blockages are, what resources are required to meet our needs and challenges. It will also expand its foreign language training, develop a tourism volunteer programme and revitalise the SA Host and Welcome programmes.

A partnership has been developed between DEAT, the Tourism Hospitality and Education Training Authority and the National Business Initiative to undertake most of the work mentioned above. A sum of about R10m has been allocated for the project. The tourism industry through the Tourism Business Council of South Africa is also involved in the discussions related to the projects above.

The Department has trained 13 tourist guides in Chinese and 161 in French, more partnerships will be formed with other governments in this regard.

B. Product and Business Development and Investment:
DEAT will also be focusing on developing tourism (SMMEs), enhancing the product offering and implementing a targeted investment strategy for tourism; which will require institutionalisation of the Tourism Enterprise Programme (TEP) to ensure that it remains sustainable after funding from government and the Business Trust ceases. Expansion of TEP’s work to cover the whole country more effectively, especially its engagement at the local government level.

The TEP targets for the next six months are:
* Value of transactions: R200 000 000
* Number of transactions: 250
* Number of HDE transactions: 188 and Jobs: 3 362.

By the end of 2006/7 financial year TEP will achieve the following SMME targets:
* Value of transactions: R450 000 000
* Number of transactions: 500
* Number of HDE transactions: 400
* Jobs: 7275

C. The DEAT second economy interventions
Interventions in the second economy include over R1 billion investment in social responsibility projects which seek to improve environmental integrity and unlock local economic development, these projects are implemented using labour intensive methods, for the period 1 April 2005 till 31 January 2006 the following has been achieved:
* 11 100 jobs have been created, out of which direct benefit went to 48%women, 30% youth, 1% disabled, all beneficiaries were provided with training in various skills development areas

D. Enhanced Resourcing of Tourism Marketing Efforts
Tourism marketing is undertaken by South African Tourism, as statutory body of DEAT. This marketing is guided by the Tourism Growth Strategy (updated in 2005) and is focused on a set of core markets and markets segments identified on the basis of their volume and value for South Africa. Tourism growth, as outlined above, has been achieved through the focused Implementation of the Growth Strategy.

However, from a broader perspective, the reality is that South Africa has only just scratched the surface. South African Tourism, in its strategic research programme over the last three years, has identified bands of consumer segments (in key markets) who are not only frequent long haul leisure travellers for whom holidays to faraway places are an essential part of life, but are also have a positive sentiment towards South Africa and actively interested in visiting our country.

E. Black Economic Empowerment
The tourism sector has much to gain from broadening economic participation. The benefits of this broadened economic participation can be geographically spread across the country, more so than in other sectors. Some of the potential benefits of tourism sector Black Economic Empowerment (BEE) include: BEE makes competitive business sense, as it will introduce innovation with new players entering the industry and bringing their experience to bear. This will lead to new markets being attracted and associated product development.

Addressing the competitiveness imperative of BEE in the tourism sector the Minister of Environmental Affairs and Tourism launched the BEE Tourism Scorecard and Charter in May 2005, after industry engagement. Furthermore, the DEAT has, in accordance with the legislative framework surrounding national and sectoral charter councils, as well as the legislative framework surrounding broad based black economic empowerment (BBEE), committed to establishing a national BEE Charter Council for the implementation of the BEE Charter. The Charter Council was appointed in October 2005 and it has now developed a three strategic plan based on the Tourism Charter.

The goal of the Charter Council will be to ensure, through the provision of information resources and support services, that the desire of industry to broaden economic access to all citizens is turned into action. This action must be well informed so as to benefit all stakeholders and in that way, meet the desired objectives of BBEE.

4. Conclusion
To conclude it is important to note that each of the initiative outlined skills development has been prioritised as has co-ordination of efforts across departments. Government on its own will not succeed in achieving these goals without the involvement of its social partners (labour and the private sector).

Issued by: Ministry of Minerals and Energy
10 February 2006