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10 May 2007

Introduction

At the January 2007 Cabinet Lekgotla the Cluster outlined a Critical Path to grow the economy to meet the Accelerated Shared Growth Initiative for South Africa (AsgiSA) 2014 goals. Cabinet approved ten priorities for the Cluster for the next three years. Achieving the ten priorities will make an important contribution to transforming the structure of the South African economy to promote employment, growth and halve poverty in line with the AsgiSA objectives. The ten priorities are:

Priorities to increase economic efficiency:
1. strengthen economic regulator capacity in key industries
2. amend competition policy to support effective regulation
3. increase access, uptake and usage of Information Communication Technology (ICT) infrastructure
4. phased roll-out of overhauled public transport network
5. monitor implementation and impact of infrastructure roll-out
6. co-ordinated National Human Resources Development Strategy (NHRDS), with focus on AsgiSA priorities

Priorities to promote dynamic growth sectors:
7. implement industrial policy framework, focusing on key sectors and leveraging public spending
8. supportive macro-economic management (especially competitive and stable real effective exchange rate)

Priorities to integrate small and micro-enterprises:
9. integrated small enterprise service delivery (including comprehensive procurement strategy, marketing cooperatives, business development support and access to finance)
10. reduced small, micro and medium enterprises (SMME) regulatory burden (including by-laws)

The Programme of Action of the Economic Cluster will be directly related to achieving these priorities. As highlighted earlier this year, the Cluster has thirty eight actions this year, clustered within the priorities.

Progress Report
For this report, the Cluster will focus on areas of significant progress.

Strengthen economic regulator capacity in key industries

This priority will be addressed in 2007 through the development of a framework for regulators and research into administered prices. This intervention is aimed at lowering the cost of doing business across the economy and reducing the cost of living, for example, through better and cheaper public transport. Ultimately this will improve the competitiveness of our key sectors and promote growth and labour-absorption. The Presidency is leading the development of the framework for regulators.

Increase access, uptake and usage in ICT

This intervention is targeted towards bringing ICT costs within a competitive range with comparator countries and increasing access to ICT infrastructure. Currently a task team led by the Presidency and including the Directors-General (DGs) from Department of Communication (DOC), Department of Education (DOE), Department of Public Enterprise (DPE) and National Treasury (NT) is elaborating on this initiative and has finalised a report for the consideration of Cabinet.

Amend competition policy to support effective regulation

This intervention is aimed at enhancing competition policy to address monopoly rents, particularly in upstream and network industries. The competition policy review is being finalised and will be presented to Cabinet during May 2007 or the earliest opportunity.

Phased roll-out of overhauled public transport network

This intervention will support implementation of a fully integrated, mass-transit public transport strategy, with the first phase focusing on the host cities for the 2010 World Cup. The Public Transport Investment Plan is in the process of being finalised by the Department of Transport.

This intervention includes the project to merge Shosholoza with Metrorail, and effecting the necessary legislative amendments. The Department of Transport is continuing to implement the Taxi recapitalisation Programme with the scrapping of old taxis initiated in all provinces. The second draft of the subsidised road-based Public Transport Strategy has been prepared and is currently being discussed within government.

Monitor implementation and impact of infrastructure roll-out

Led by the Department of Public Enterprises, this intervention is important in light of the high priority of infrastructure roll-out, and the need to facilitate its smooth progress. This intervention focuses on monitoring progress and impact, and also pays attention to ensuring that infrastructure input price hikes are addressed.

The infrastructure monitoring system has been developed and is being piloted with Eskom and Transnet. The information on the system is being updated on a quarterly basis. Results of the monitoring will be fed into the Cluster for analysis.

The Competitive Supplier Development Programme has been approved by Cabinet. The programme targets the development of the local supplier industry in a manner that meets build infrastructure timelines. Transnet and Eskom are expected to participate in the programme, and are working on draft sector investment projects to be finalised in June. Next in this initiative will be the inclusion of the Square Kilometre Array.

An integrated Port and Rail Master Plan has been approved by both Transnet and the Department of Public Enterprises and will be considered by the Cluster. Regarding ports, an Independent Ports Regulator has been established.

Co-ordinated National Human Resource Development Strategy (NHRDS), with focus on AsgiSA priorities

This intervention includes a review of National Human Resource Development Strategy targets and strengthening co-ordination including Joint Initiative on Priority Skills Acquisition (JIPSA) to ensure long-term provision of core and critical skills.

Draft service level agreements will be concluded with Sector Education and Training Authority (SETA) before 31 July 2007. The agreements will include a consolidated target of at least 12 500 artisans to be registered during the 2008 to 2009 financial year. SETA service level agreements and performance assessment scorecards are aimed at strengthening annual monitoring and reporting on SETA performance.

Implement National Industrial Policy Framework (NIPF) focusing on sector strategies

An Action Plan to implement the National Industrial Policy Framework is being finalised within the Cluster. The Action Plan will focus on key projects across the priority sectors that will be implemented over the medium-term in addition to the on-going implementation of BPO and Tourism and the advanced work of bio-fuels, chemicals and clothing and textiles.

With regard to the BPO strategy, the Government Assistance and Support Programme was launched in March 2007. The process to pilot the Monyetla Work Readiness Programme is underway. Negotiations on Telecommunication pricing packages are at an advanced stage.

On tourism, a National Tourism Skills Development Forum has been constituted by DEAT to drive the work on tourism skills. In addition, a tourism skills audit is under finalisation, with the final report due in May 2007. Other work includes; conducting an investigation into incentives for tourism, development of an airlift action plan under the leadership of DoT and ensuring alignment between the Tourism black economic empowerment (BEE) score card with the Codes of Good Practice. Finally, work is underway to develop a national tourism safety and security plan.

Stakeholder consultation in all provinces on the draft bio-fuels strategy has been completed and the refined strategy will be submitted to Cabinet in May 2007. In clothing and textiles, quotas on imports from China are under implementation. South African Revenue Service (SARS) is working on measures to reduce illegal and under-invoiced imports. Country of Origin Labelling amendment legislation has been published and consultation at the Southern African Customs Union (SACU) level is underway.

In metals and engineering State Owned Enterprise (SOE) supplier development plans are being formulated. In Chemicals, a sector summit agreement between government, business and organised labour is to be signed later this month.

The implementation of the National Export Strategy is underway, including the determining of priority markets and projects, finalising the market access programme, implementing the trade information system, supporting emerging exporters in the Small Exporter Development Programme, and strengthening of export finance.

In terms of promoting Research and Development (R&D), Section 11D of the Income Tax Act amendment took effect on 2 November 2006 and SARS and DST Department of Science and Technology (DST) are finalising changes to the Income Tax Return forms to accommodate the new tax incentives. A questionnaire that will be included in company tax returns as a means of verifying R&D claims has been drafted. Regarding cutting edge technologies, a draft concept on the Foundation for Technological Innovation will be considered by Cabinet in August 2007. This initiative involves amendments to the Innovation Development Act.

Integrated small enterprise service delivery

The intervention is targeted towards developing integrated delivery support to small and micro-enterprises across the different sectors and tiers of government. A DTI-National Treasury task team has identified ten products for targeted procurement from SMMEs by government. The task team has also identified other key implementation and monitoring mechanisms, including the enforcement of government's commitment to pay SMMEs within 30 days.

Work continues on strengthening and increasing the reach of small enterprise support network. During 2006/07, 39 partner organisations were approved by SAMAF with funding commitments of R69 million. Khula has also achieved success in reducing bad debts, with write-offs declining substantially to 5% of all approvals. SEDA infrastructure rollout continues and 40 branch offices will be operational nationwide by the end of 2007.

Other initiatives of the cluster

On the Second Economy, a draft framework for Second Economy interventions, including possible avenues for scaling up projects, is being developed. It is important to communicate such projects to the beneficiaries and an inter-departmental task team has been established to finalise agreement with private sector associations and SOEs on communication initiatives. This includes provincial publications detailing the economic opportunities in the provinces. Beneficiary workshops will be held by GCIS working closely with the Regional Managers at selected provinces. Radio will be used to detail the extent of the programme on economic opportunities in the provinces, including support for the Vuk'uzenzele programme. Development of a television series demonstrating the extent of the programme on economic opportunities is also planned. Ongoing research is being used to assess the impact of the campaign at every stage.

To improve the possibilities for better economic utilisation of communal land, regulations under the Communal Land Rights Act (CLaRA) were finalised on 30 March 2007. Workshops on these regulations are envisaged to take place between April and June 2007. The regulations will be tabled in Parliament by the end of July 2007.

Conclusion

The focus on the ten priorities over the next three years will enable the Cluster to take advantage of the many economic growth and development opportunities that are emerging, as well as enable us to better address some of the complex challenges. The three year timeframe also allows us to strengthen the implementation, monitoring and evaluation capacity of the Cluster to support the ten priorities.

Issued by: Department of Trade and Industry
10 May 2007