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22 June 2006

Madame Speaker
Honourable Premier
Members of the Executive Council
Members of the Legislature
Distinguished Guests
Ladies and Gentlemen

Today’s tabling of the budget vote happens against the backdrop of a number of significant developments in our quest to fight poverty and create work. Amongst other things we are encouraged by the fact that Statistics South Africa’s (Stats SA) Household survey makes some sterling observation about our progress in extending services to the people of South Africa and the Northern Cape in particular. The survey findings reports that on average the number of household that have access to shelter, food, health and sanitation services has increased. The household survey also observes that at least 83 percent of households that rated the water services as good are living in the Northern Cape and that the number of learners aged between 7 and 15 attending educational institutions in our province has increased from 93 percent in 2002 to 96 percent in 2005.
Consistent with the findings of the General Household Survey the opinion survey released by the Afrobarometer reveals the fact that South Africans are very optimistic about many aspects of our society including the economy and public services. Amongst other things the survey reports that more than 50 percent of South Africans are happy with the current state of the economy while at least 63 percent expect the economy to perform even better in the next few years. At least 65 percent of our citizens believe that our country is moving in the right direction.

Madame Speaker, these findings are important in many ways. Firstly, they mean that indeed our country and the province are making significant strides in improving the quality of life of our people. Secondly, the revelations by Stats SA and the Afrobarometer confirm the correctness of the observation by the President during this year’s State of the Nation Address that South Africa is entering the age of hope. We are indeed living in the age of hope.

It is against this inspiring background that we table the budget vote for the Department of Economic Affairs. This budget is also tabled against the backdrop of a buoyant and growing provincial economy. Our analysis of the economic indicators for our province also demonstrates the fact that progress is being made in terms of achieving the objectives of the Provincial Growth and Development Strategy (PGDS). Honourable Members will recall that during the tabling of the Provincial Budget earlier this year we observed that the contribution by inter alia government, finance, real estate and business services, mining and quarrying and transport and communication sectors has led our province to a 3 percent economic growth rate in 2004. The General Household Survey reveals that unemployment stood at 26 percent in 2005. Indeed this is a demonstration of the fact that the interventions of our government as enshrined in the people’s contract to fight poverty and create work, are bearing fruits.

In terms of the expanded definition, the unemployment picture is different for all the five districts. In Pixley Ka Seme the figure stands at 43 percent, 40,3 percent in Frances Baard, 35 percent in Siyanda, 26 percent in Kgalagadi and 23 percent in Namakwa. Frances Baard District contributed 41 percent to the provincial GDPR (Gross Domestic Product per Region), Kgalagadi 24 percent while Siyanda District contributed 13 percent. Namakwa District made a contribution of 10 percent while Pixley Ka Seme contributed 10 percent. The economy of the Namakwa district is driven mainly be mining and agriculture. These sectors contribute 51 and 48 percent respectively to the primary sector in the Namakwa District. Mining is also the highest contributor to the primary sector in both Kgalagadi and Frances Baard District. In Siyanda and Pixley Ka Seme agriculture remains the highest contributor to the primary sectors.

Madame Speaker, these achievements must also highlight the fact that we still need to work harder to ensure that we extend services to all people of the Northern Cape, as the economy grows and creates jobs, and that poverty and hunger are addressed. Pursuance of these goals must happen in the context of the Provincial Growth and Development Strategy. Accordingly, it gives us pleasure to report to the house on a number of developments and progress made in pursuance of the objects of the PGDS.

Mining and Manufacturing sectors

A number of developments in the mining and manufacturing sectors have occurred and much more work is still being done to ensure that these sectors contribute to the growth, transformation and diversification of the provincial economy. The department recently signed a Memorandum of Agreement together with the North West University Centre for Advanced Manufacturing (CFAM) in order to look at ways to increase the contribution of the manufacturing sector to the Gross Domestic Product of the Region. This development is also aimed at giving effect to the objects of the PGDS in particular the diversification of the provincial economy.

Through this agreement the North West University will provide both research and technical skills aimed at assisting with the establishment of manufacturing centres and clusters in our province. This process will also entail identification of those products within the mining and agricultural sectors that are being imported to the province in order to determine the quantity and cost, as well as the annual financial market potential of these products. The establishment of manufacturing centres would also help to ensure that procurement in the mining and manufacturing sector favours people and companies domiciled in the Northern Cape. This will give effect to the commitment made by the Honourable Premier that we need to source at least 50 percent of products from within our Province.

Our work aimed at realising mining beneficiation in the province continues. In the past financial year the department has worked hard to establish partnerships and attract investment into our mineral beneficiation projects. Amongst other things, partnerships were established with Gold Chain Technologies, an Italian-based company, which has expressed an interest to relocate their gold jewellery and manufacturing factory from Italy to South Africa, Kimberley, in the context of the Africa Growth Opportunities Act (AGOA).

This company will very soon be relocating their machinery and start operations to Kimberley. The Industrial Development Corporation has been very helpful in terms of the provision of funding for this initiative and the provincial government will also be making a R8 million contribution in order to ensure that this investment initiative becomes a reality. The initial total investment value of this project will be R45 million. We hope that this initiative will bring the requisite investment capital going forward in order to contribute towards our economic growth and job creation.

The Province has also entered into a development partnership with an organisation from Belgium called the International Economic Strategy (IES) to execute a wide-ranging rapid economic and social development programme in the Northern Cape Province. This company is pioneering a path-breaking Rapid Concurrent Diamond and Economic Development Program (RCDEDP) in the Northern Cape. The RCDEDP seeks to optimise development in the Northern Cape Province in Core Diamond Industry, mining, production, broad beneficiation, jewellery, tourism and branding.

The Accelerated and Shared Growth Initiative for South Africa has identified our province as a diamond beneficiation hub for South Africa. This process is linked with developments in terms of the legislative changes in the diamond industry and our quest to have the State Diamond Trader located in the province. In keeping with this vision, we have started discussions with De Beers Consolidated Mines in order to establish the Kimberley School of Gemmology. This school will be established in order to:

* support the economic growth of the province as a diamond hub by developing the expertise required in all areas of beneficiation
* develop appropriate partnerships with government and industry in order to maintain focus on strategic objectives
* develop local and international institutions and bodies in order to achieve a high quality curriculum
* seek accreditation and recognition with local and international authorities and institutions
* lead and partner in research projects related to the diamond industry
* become a centre of excellence for Africa as a whole and build an international reputation.

Proposals have been completed and submitted to relevant agencies for the establishment of a Diamond Park should we succeed in our quest to have the State Diamond trader located in Kimberley. Within its precinct, we envisage the park to house the State Diamond Trader, diamond cutting and polishing factories, jewellery manufacturing factories, training facilities and the necessary support services to the diamond industry.

I am pleased to announce that we have entered into a further partnership with Mintek to send 15 young women to China to acquire new innovative skills in diamond cutting and polishing as well as jewellery manufacturing. This initiative is aimed at making available necessary skills in the province.
Madame Speaker, our province is synonymous with diamonds and as such it would be important for us to brand those precious stones being cut and polished here as such. To this end we are in the process of developing a branding strategy for diamonds cut and polished in Kimberley and to also link it with diamond jewellery manufactured in the province.

We have established a relationship with Standard Bank in the province with a view to facilitating preferential mining procurement initiatives in the province. To also compliment this process, the department actively participates in the Northern Cape Mining Preferential Procurement Forum. This programme is intended to allow small and micro enterprises to benefit from procurement processes in the mining sector. This is further intended to give impetus to the mining charter.

In terms of current procurement patterns in the Northern Cape mining sector a total of R3, 4 billion was spent on procurement in the previous financial year. In total only R800 million was channelled towards black economic empowerment (BEE) companies in and out of the Northern Cape. This figure represents about 26 percent of the total procurement in the mines. It is also worth noting that only 10 percent of the R800 million went to Northern Cape companies.

This scenario makes it imperative for the government to engage relevant role players to ensure that Northern Cape companies benefit sufficiently from mining related procurement. To this end we are encouraged by the fact that the forum is likely to approve a new policy framework in the coming few weeks aimed at improving and increasing the share of procurement that goes to BEE companies and Northern Cape based companies. In particular we are encouraged that through the new policy the measurement will be shifted from narrow BEE to a broad based approach, preference will be awarded to Northern Cape companies and more focus will be devoted to manufacturing. Implementation of these measures will ensure that the province is placed in a good path for accelerated and shared growth.

Fishing and Mari culture

In line with the Provincial Growth and Development Strategy provincial government has attached a high priority to promoting investment in the fishing and Mari culture sectors as a means to mitigating the future negative socio-economic impact associated with diamond mining downscaling. It is our view that exploration of this sector to its maximal potential will help us to achieve and maintain an economic growth rate of between 4-6 percent.

Honourable Members will recall that in January this year the Premier officially launched the Fishing and Mari culture Park in Port Nolloth. The launch of this park was also made possible by the investment secured from our partners in China. It is expected that this project will create more than 250 jobs in the medium term. Following the official launch of the Fishing and Mari culture Park in January this year we are able to report that detailed development planning has been completed. This includes engineer’s designs for the water intake and pump house, surveys of the site, entrance designs and dam designs. The Environmental Impact Assessment has been completed together with all the specialist studies required. The specialist studies included a vegetation impact assessment, a marine ecology assessment and a heritage and archaeological assessment.

Part funding has also been provided for operations to be transferred to the Mari culture Park once the entire infrastructure has been erected in the Park. The operations include an abalone nursery in Port Nolloth, an oyster farm in Kleinzee and kelp processing in Hondeklipbaai and Port Nolloth. About 30 people were employed from the Hondeklipbaai and Port Nolloth communities on these operations.

The employees are undergoing on-the-job training whilst working. The personnel costs have thus far been carried by the Social Responsibility Funding. The erection of the boundary fence has been completed. The construction of the internal roads and the entrance is virtually 80 percent complete. Thus far more than 100 people have been employed in the construction phase. The rest of the infrastructure development is expected to commence in the current financial year.

Our work in other sectors continues and at this stage we are able to report for instance that the Finish government has committed to assist our province financially with the development of Northern Cape Information Society Strategy and Development Plan (NC ISSAD). This strategy will focus on the development of the small, medium and micro-enterprises (SMME) sector in the Northern Cape. It is important that we are able to keep track of the impact made by projects launched and financed by the provincial government. To this end, we have developed a Social Accounting Matrix to use in guiding and evaluating the impact of economic policy through indicators such as household income distribution, growth sectors as well as studying and understanding the macro economic impact of high impact and anchor projects in the province.

Business regulation

Madame Speaker, business regulation is another important function that needs additional attention in our quest to create an environment conducive for economic growth. In particular gambling, liquor and consumer protection are areas that require more focus than provided in the past.

Honourable Members will recall that in the past financial year the Gambling bill was tabled as part of our quest to improve and modernise the regulatory framework in the province. During this financial year we intend to table in this house the Northern Cape Liquor bill and the Northern Cape Unfair Business Practices bill.

The purpose of the new liquor legislation is to amongst other things regulate the retail sale and micro-manufacturing of liquor, set ethos of social responsibility in the industry, set up the liquor board as a public entity, encourage community participation in the issuing of liquor licences, confine liquor outlets in business areas away from residential areas, combat and reduce alcohol abuse.

Madame Speaker, it is also befitting and appropriate to report that both the Liquor and Gambling Boards are now properly constituted and in full operation. Through the work done by the Gambling Board the Executive Council resolved in the previous financial year that the location of the third casino licence should be shifted to the Kuruman area. This decision will make provision for the construction of a casino and entertainment centre in Kuruman.

In addition considerable progress has been in terms of the allocation of the Kuruman Casino licence to a successful bidder. The successful bidder will have to satisfy government policies of broad-based BEE as well as contribute to the betterment of the lives of the people of Kuruman. The operation of the third casino in the province is expected to increase revenue derived from the gambling related activities to about R15 million. This will further boost the efforts by the provincial government to increase provincial revenue. In addition, we expect the tourism and leisure industry to contribute an extra R50 million rands to the Gross Domestic Product of the Region. This is in addition to the R12, 5 million collected in terms of revenue.

We are also in the process of formulating the Horse Racing Bill and it is envisaged that this bill will be completed by 2007. The new promulgated horse racing legislation will repeal the current ordinances. We are currently investigating the feasibility of establishing a fully-fledged horse racing track, associate infrastructure, amenities and facilities.

In relation to consumer protection significant progress has been made and we will shortly be appointing a Consumer Protector to the Consumer Tribunal. The Consumer Protector will have the responsibility of establishing the Office of Unfair Business Practices. The Department will continue to provide the necessary support in order to ensure that this office is established in earnest. We will also address matters of consumer education in line with the new National Credit Act. The Department will ensure that the necessary conditions exist in order to allow for this legislation to be more effective.

Economic developments

The support we provide to SMMEs in the province is critical to the development of this sector and ensuring that it contributes to economic growth and job creation. It is for this reason that in partnership with the Department of Trade and Industry and concomitant funding, the Local Business Service Centres (LBSCs) were collapsed into the Small Enterprise Development Agency (SEDA). The launch of the Provincial SEDA office was conducted recently and work continues for the establishment of regional offices. The Frances Baard regional office should be ready for occupation by Mid July while the Siyanda and Namakwa regional offices will be launched by the end of July 2006.

We are also in the process of winding up activities of the Kalahari Development Agency (KDA). It is our wish that both Kgalagadi and Pixley Ka Seme offices be launched during August 2006. We expect to have fully fledged and functional SEDA offices by the last quarter of the 2006/07 financial years.

Apart from the establishment of the SEDA regional office in the Pixley Ka Seme District the department will be devoting more resources towards assisting with the development of this area. It is well known that Pixley is the poorest district in the province and that its economy has not been performing well recently. In order to address the institutional weaknesses and facilitate new and increased economic activities in this district a District Growth and Development Summit will be held before September this year.

The support we provide to SMME development must be guided by some form of policy framework in order for it to be effective. It is for this reason that the Provincial SMME Strategy was developed. Consultations with relevant stakeholders are currently underway and we anticipate these to be concluded by November 2006. An official launch will take place during December 2006.

Our department views the Expanded Public Works Programme (EPWP) as an opportunity to alleviate poverty, develop skills and create jobs. This approach should further be amplified in order to ensure that those persons who participate in the programme are not lost but are trained in order to participate in our SMME sectors. Further to this is our wish to see that these participants actively partake in the second economy with a view to them graduating to the first economy.

We are seriously focusing our attention on Local Economic Development in order to place this mandate at the centre of our broader economic development strategy. We are in consultation with the Department of Housing and Local Government to facilitate capacity building within the different municipalities in our Province. This is done through the facilitation of training in the following areas:

* cooperatives development
* franchising business opportunities
* networking facilitators course

We are in the process of re-aligning and refocusing our strategic approach to investment promotion within our province. We envisage establishing a trade and investment promotion agency that will work with other agencies to make the Northern Cape an investment destination of choice. Madame Speaker, the proposed Northern Cape Investment and Empowerment Promotion Agency (NCIEPA) would be positioned within the context of the PGDS to promote investment and attract domestic and foreign direct investment.

The position of the provincial government remains that the Economic Growth and Development Fund, formerly the Innovation Fund, should be used systematically to unlock development funding for creative and innovative business initiatives. In line with the spirit of this policy a number of projects have been funded. Amongst other things a feasibility study for the establishment of the Upington Airport as an International Cargo Hub was funded to the tune of R2 million. This airport will be developed as a competitive destination for the trans-shipment of both perishable and time-sensitive products out of the Southern Africa region as well as other surplus cargo products not catered for by the more congested cargo hubs in other areas.

We are also able to report that the initial feasibility study was successfully conducted and its findings put Upington in a favourable position in the bid to make it an International Cargo Hub. The study found amongst other things that in the light of congestions in various airports in our country there is a wide interest by airfreight companies to use Upington as a cargo facility and that there is a proven need for a cargo facility in Upington.

Because cargo facility needs both incoming and outgoing cargo a challenge lies in ensuring that Upington achieves this balance. In this regard our discussions with the automobile industry in the Eastern Cape have led us to agreement for a possibility for them to export their cargo through Upington. This development has increased possibilities for cargo from various parts of the country to be exported to the global market through Upington.

In the coming few months the Municipalities in the Siyanda District will consider the findings of this study and introduce this item as a priority in their District Growth and Development Forum. This process will be followed by a formal presentation of this item to the provincial government, which will facilitate interaction and lobbying of relevant national stakeholders. The Department of Economic Affairs has entered into a number of partnerships in order to allow us to carry out our mandates. We have facilitated the partnership between the Office of the Premier, NEDBANK and the Umsobomvu Youth Fund. This partnership is called the Batsha Fund and the three participants have jointly contributed R5 million rand each to this fund.

Human resources

Honourable Members, during the presentation of last year’s budget vote we highlighted the need to position the department in such a manner that it can respond appropriately to the developmental challenges of our province. It is in this context that the recruitment process has been completed and we know have a more stable organisation. In the past financial year we have recruited 37 new people to undertake different responsibilities in the department. It is our expectation that through this increased human resource the department is better positioned to carry out its mandate by creating an environment conducive for economic development in the province.

Through the recruitment of staff we have ensured strategic acquisitions aimed at further boosting capacity in the department. Our main aim was to strengthen the department and gear it towards service delivery. In this regard two directors were appointed in the Economic Development Programme with the responsibility and mandate to manage processes relating to enterprise development, local economic development as well as trade and investment. Our Policy, Planning and Research Programme was also beefed by the appointment of the director for strategic management. These acquisitions are expected to position the department in a better position for quality service delivery. Madame Speaker, we are also able to proudly report to this house that of the four senior management service appointments made 50 percent are female.

This is line with the policies of our government aimed ensuring equity and fair representation of women in key and management positions. More than 50 percent of the total appointments made were also female. Through the recent appointments the proportion of people with disabilities was increased to 4 percent which brought the department closer to 5 percent targeted by our provincial government.

Summary of the budget

Honourable Members at this point let me provide an overview of the budget for the Department of Economic Affairs for the 2006/07 financial year. The department has been allocated a total budget of R67 million which represents about 1, 53 percent of the total Provincial Budget. Transfer payments including the Economic Growth and Development Fund makes about 43 percent of the total budget of the department.

An amount of R9, 4 million has been allocated to the Economic Development Programme which is charged with the responsibility to manage the implementation of the economic development strategies, focusing on a diversified economy, job creation, urban and rural regeneration, industries, SMME, business creation and sustainable enterprise development. In addition R11, 9 million will be channelled to the Policy, Planning and Research Programme in order to render policy, planning and research services in line with the vision and mandate of the department.

In order to ensure effective regulation of business practices and compliance with and implementation of liquor and gambling legislation while maximising provincial revenue, an amount of R6, 6 million will be channelled towards the Business Regulation and Consumer Protection Programme.

Madame Speaker, in essence this is the manner in which the department will be utilising the financial resources allocated to it to enhance and create an environment conducive for economic growth and job creation in the province. I commend this budget to this house.

Thank You!

Issued by: Department of Finance and Economic Affairs, Northern Cape Provincial Government
22 June 2006
Source: Northern Cape Provincial Government (http://www.northern-cape.gov.za)