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14 June 2007

Honourable Speaker, Mrs YN Phosa
Honourable Premier, Mr Thabang Makwetla
Colleagues in the Executive Council
Members of the Legislature
Mayors and councillors
Chairperson of the House of Traditional Leaders, Inkosi Mthethwa
Your Excellencies, Amakhosi
The Director-General (DG)
Heads of departments (HoDs) and public entities
The business community
The media
Distinguished guests
Ladies and gentlemen

Madam Speaker, this budget and policy speech takes place two days before we celebrate/commemorate our youth. On 16 June 1976 the youth uprising that took place gave momentum to the struggle for freedom and liberation in our country. Today, 31 years later, we must enable and encourage our youth to take up the economic opportunities out there help to develop their skills and secure their future.

"When we set out on our journey in 2004 to create work in order to fight poverty, we fore grounded economic development and planning as the nucleus of our administration plans," honourable Premier Makwetla said this in his 2007 State of the Province address (SOPA). Madam Speaker, a strong foundation has already been laid down from which we can build on further policies and programmes to accelerate the process of economic growth and transformation.

Although there are visible signs of progress on certain areas of work, however, I must indicate that the challenges still lying ahead are enormous.

Our Constitution calls upon us to improve the quality of life of all citizens and free the potential of each person. It is in this context, Madam Speaker, that economic growth is key if we have to improve the lives of our people. Growing a sustainable economy will certainly contribute to development and job creation.

As a Department of Economic Development and Planning (the Department), we will continue to accelerate programmes aimed at stimulating economic growth and development in the province and we believe that this will give us a distinct possibility to come closer to the realisation of our organisational vision.

Mpumalanga economy

Demographics

The re-demarcation of provincial and municipal boundaries has resulted in a 7,9% net population gain for Mpumalanga which translates to approximately 255 500 people thus increasing its share of South Africa's population from 6,9% to 7,4%. This means Mpumalanga has become the sixth largest province in South Africa by population.

The incorporation of Bushbuckridge Municipality into our province, an area that historically lacks economic infrastructure, will need strong attention in order to realise its full potential particularly in the tourism and agro processing sectors. The spatial distribution of the rural settlements is in an area which is far from most of the areas of industry.

Madam Speaker, there was a general increase in the Human Development Index (HDI) which is a measure of people's standard of living. For Mpumalanga's population it rose from 0,50 in 1996 to 0,54 in 2005. The increase was more pronounced within the black population, rising from 0,43 to 0,5 in just under 10 years. Robust government spending particularly on education; basic health services and the implementation of affirmative action policies and employment equity are some of the factors that contributed to the rise in HDI amongst the black population.

Economic growth [regional Gross Domestic Product (GDP)]

Madam Speaker, a number of aspects relating to the economic outlook for the province has already been highlighted in the budget speech of the MEC for Finance. I will only make additions and updates for emphasis.

The contribution of Mpumalanga to South Africa's economy was fifth overall in 2005, accounting for 6,7% of the national total. Mpumalanga's share of national total has remained fairly steady over the past 10 years whilst that of its neighbouring province, Limpopo, has increased steadily over the same period.

Since the low of 1,3% in 2001, the provincial economic growth rate has increased steadily over the years to reach 4,3% in 2005.

Madam Speaker, our goal for South Africa is to grow the economy by at least 6% in order to address the challenge of halving unemployment and poverty by 2014.

Madam Speaker, we conducted sector studies in the financial year 2006/07 focusing on:

* agro-processing
* mining
* tourism
* metals and metal products
* petrochemicals
* film and video, in conjunction with the Department of Sports, Arts and Culture.

The sector studies, Madam Speaker, have proposed catalytic initiatives which if implemented would assist in galvanising the economy to faster growth rates.

There is a growing urgency to support growing sectors and I wish to re-enforce what the MEC for Finance highlighted in her speech that the financial services sector in the sphere of call centres and Business Process Outsourcing (BPO), is an area where opportunities are and needs attention for it to grow.

A positive sign is that all the broad sectors of the economy posted positive growth for the year 2005. The construction industry led the growing industries as it grew by 9,8%. Transport and communication as well as the finance and business services all did relatively well, growing by 5,6% and 6,5% respectively. Although agriculture, forestry and fishing only grew by 3,7% this was an improvement upon the previous year's figure of 1,8%. Madam Speaker, this industry is key in that it has a high rate of absorbing labour. The two major industries in the province, manufacturing and mining, grew at 3,9% and 2,7% respectively. Although they recorded positive growth, indications are that the primary and secondary industry share to the provincial economy is growing at a slower rate. From 1996 to 2005, tertiary industries increased their overall share contribution towards the provincial economy by 3%. Share contributions by primary as well as secondary industries shrunk by approximately 1,5% each.

Tourism

Tourism related activities fall within the tertiary sector and in 2005 total foreign direct spending in tourism related activities contributed close to 7% of provincial GGP. The ever growing importance of tourism towards the provincial economy cannot be overlooked. It is therefore appropriate that Heritage, Greening Mpumalanga and Tourism are one of the "Big 5" projects for Mpumalanga. Madam Speaker, Mpumalanga consistently retains its number four ranking with regard to international visitors but has not performed as well on the domestic front. It should however be noted that statistics on domestic tourism have been called to question many a time. Government needs to work with the private sector and communities to invest more resources into building tourism infrastructure as well as undertaking a concerted marketing drive that improves the brand of the province both locally and internationally.

Madam Speaker, we are now looking seriously into other forms of tourism to increase our product offerings and diversify our tourism base. Further, a new shared vision is currently being developed with the intention that it will define the way in which we will turn tourism around and make a substantial contribution to the economy of the province. In collaboration with the Department of Safety and Security, the Department continues to play an active role of ensuring that the safety of our tourists remains high on the agenda.

To further augment our efforts of promoting tourism, we will hold a Tourism Summit during the course of this year with the aim of elevating tourism in Mpumalanga to greater heights.

Madam Speaker, I intend setting up a tourism forum that will include all sectors of the tourism industry in the next two months. The following individuals will help me in attaining this objective:

a) Dr Bandile Mkhize of South African National Parks (SANParks)
b) Mrs Nelly Mashinini, Mpumalanga Gaming Board (MGB) board member
c) Mr Nico Oosthuizen, Chairperson of Regional Tourism Forum
d) Mrs Natalia Ndaba Mafumo, Mpumalanga Tourism and Parks Agency (MTPA) board member
e) Mr Isaac Sambo, Acting Director for Tourism Directorate
f) Solly Mosidi, MTPA Chief Executive Officer (CEO).

Madam Speaker, the 2010 FIFA Soccer World Cup brings to us a challenge of ensuring that the provincial tourism industry is ready to receive all the participants and soccer fans that will be visiting our shores during this event. I am sure that we will live up to this challenge by working closely with all the stakeholders.

Madam Speaker, the Department has transferred a number of activities that were done in-house to our public entities for implementation. This means the Department will now focus more on policy development and monitoring while our public entities serve as the implementing arms. We are conscious of the fact that this undertaking might have an effect on our staff members within the Department doing the work linked to our public entities. In this regard, I would like to assure this House that we will do all that is necessary to ensure the smooth transition, if needs be.

Biodiversity conservation

Madam Speaker, as a province we pride ourselves that MTPA has achieved an excellent track record with regard to the processing and issuing of conservation related permits and has completed the most advanced Biodiversity Conservation Plan which is to be used as the national benchmark.

Several new conservancies were added to the Mpumalanga portfolio. The Heritage, Greening Mpumalanga and Tourism Programme of Mpumalanga will receive much attention from the MTPA.

Securing water for all remains one of the flagship projects and MTPA programmes will concentrate on protecting wetlands and mountain catchments in the province right at the source where water is generated.

An amount of R147 606 000 has been allocated to MTPA in this financial year.

Employment

Mpumalanga experienced employment growth in trade, construction and the finance sectors. Government infrastructure spending coupled with the growth in the property market has fuelled employment growth in the construction as well as finance and business services sectors. Employment growth in agriculture, mining, electricity and the household services sectors have decreased over the years (1996, 2004 and 2005) due to drought and reduced mining operations and mechanisation. The future for growth in mining is however promising but will need to be linked to Small Medium and Micro Enterprise (SMME) supplier and support services in order to create a knock on effect in other sectors like manufacturing, construction, trade and finance.

Nationally, the share of employment created by the informal sector continues to grow but the formal sector is also beginning to create more jobs. This calls into focus the status of our women with regard to employment. Although the total unemployment rate for the province stood at 26,9% in September 2005, women were at 33,9% as compared to men at 21,3%.

Madam Speaker, the unemployment rate in the province has been below the national average in the past five years until the re-demarcation process which resulted in the incorporation of Bushbuckridge to Mpumalanga. This rate has now risen above the national average, implying that the province is only managing to create a number of jobs that offset the new entrants to the job market.

Trade

Madam Speaker, the export contribution to the economy of Mpumalanga was steady from 1996 to 1999 then it grew steadily from 1999 to 2002 in line with the national trend.

Mpumalanga currently exports more of primary products from its mining and agricultural activities with little value addition. By adding value to its export products through beneficiation, the province will be able to increase the share of export contribution towards provincial GDP.

Economic growth

Madam Speaker, the favourable performance of the South African economy witnessed in 2005 which saw economic growth reaching the 5% level for the first time in a quarter of a century was sustained into 2006.

The provincial economic growth rate has increased steadily over the years to reach 4,3% in 2005. Within this context, Mpumalanga province enjoys a comparative advantage on agriculture, mining, manufacturing and electricity.

Black Economic Empowerment (BEE)

Madam Speaker, the Department has established BEE directorate during the last financial year. In strengthening our resolve to give impetus to BEE, the Department co-ordinated and hosted a BEE Conference on 25 to 25 May 2007 in order to share and impart knowledge with both big and small businesses on BEE matters. Honourable Speaker, we are delighted that 500 delegates attended the conference. An exhibition of various business support agencies also ran parallel with this conference.

The delegates at the conference made recommendations on three important areas, namely, funding, challenges facing BEE and monitoring and evaluation. Madam Speaker, I want to assure all stakeholders that the Department is following up the BEE Conference resolutions. The lessons learnt from this conference are truly remarkable and they will go a long way in taking the province forward in achieving its BEE targets.

Speaking at the conference, Premier Thabang Makwetla indicated his concern about the slow growth and development of black businesses in the province. Madam Speaker, the Premier correctly pointed out the lack of capital for black entrepreneurs and heavy reliance on government contracts as among major threats to BEE in the province. In addressing this situation, the honourable Premier announced the establishment of a provincial BEE Advisory Committee that will assist in the implementation and monitoring of BEE in the province.

I have the pleasure of announcing the names of the task team members who will assist the Department in setting out the BEE Advisory Committee.

They are:

a) Mr Hendry Pieterse, Chairperson of Afrikaanse Handelinstituut (AHI)
b) Mr Gay Mokoena, Provincial Secretary of National African Federated Chambers of Commerce (Nafcoc)
c) Ms Immy Serakalala, Director for BEE in the Department
d) Ms Lydia Schumann, Sasol BEE Manager.

Enterprise development

A major milestone has been achieved in the development of our enterprises. The Department working together with the office of the Premier, Nafcoc and other chambers in the province successfully hosted the Procurement Conference aimed at assisting SMMEs in the province to deliver quality service to government when awarded tenders. Madam Speaker, workshops and seminars were also organised wherein businesses were trained in the area of supply chain.

The Department together with the Provincial Treasury is monitoring the implementation of the Procurement Conference resolutions. The review of the provincial SMME Development Strategy which was supposed to have been started in the last financial year is well on course and a call for proposals from the service providers has already been done. Madam Speaker, we envisage to complete the review of the strategy in this financial year. The Department has also embarked on a process to develop a Provincial Strategy for Co-operatives, targeted to be finalised in this current financial year. Madam Speaker, through the Co-operatives Act, all forms of co-operatives will be promoted. We will seek to assist in the establishment of ten co-operatives in the province.

A Memorandum of Agreement (MoA) with the Industrial Development Corporation (IDC) to broaden access to finance for SMMEs is moving forward with the working relationship with Mpumalanga Economic Growth Agency (MEGA). On the other hand, the South African Micro Enterprise Apex Fund is assisting our rural communities to also access finance. Madam Speaker, the establishment of a growth fund will go a long way in unlocking the potential of entrepreneurs in the province.

Madam Speaker, the Department has successfully transformed the Micro Enterprise Finance (MEF) in the province to be a fully fledged Umsobomvu Youth Fund (UYF) outlet to provide all UYF services to the youth of our province. To complement our enterprise development efforts, the Department has recruited the new business finance to operate in the province. This fund provides bridging finance to SMMEs who have been awarded tenders. We hope that new business finance will open up satellite offices in the Gert Sibande and Nkangala region.

Mpumalanga Economic Growth Agency (MEGA)

Madam Speaker, the newly constituted MEGA managed to establish one foreign direct investment project worth R5 million and there are other foreign projects in the pipeline which should be implemented in this financial year. MEGA has also been successful in attracting six local investment projects worth R51 million and there are 13 other projects in the pipeline to be implemented in this financial year. MEGA also manage to expose 27 new SMMEs exporters to new markets through exhibitions, including those from the previously disadvantaged backgrounds. Madam Speaker, this initiative has generated exports to the value of R22 million.

Though MEGA did not have sufficient budget to meet the loan demand, 51 new loans to the value of R13,3 million were disbursed to small businesses. It is quite clear that the success of the programmes of MEGA depend largely on strategic partnerships with other institutions. In this regard, MEGA has entered into a formal partnership with the Small Enterprise Development Agency (SEDA), IDC, Enablis and Kruger Mpumalanga International Airport (KMIA). MEGA has a property development portfolio with an overall occupancy rate that has increased from 77% to 93%. To improve its property portfolio, MEGA will undertake an assessment study of the property portfolio and begin to implement a maintenance plan, providing basic and targeted maintenance of its properties.

In this financial year MEGA will be consolidating and implementing all the processes of the previous year. An aggressive strategy to deal with debt collection in order to reduce the long outstanding loans in the loan book and the outstanding rentals from the properties will be implemented henceforth.

To promote trade and investment, MEGA will establish at least five foreign and five local new investment projects. MEGA will identify and package three major projects for promotion purposes and facilitate 10 new export deals and establish three exports based development programmes. And to broaden access to finance, MEGA will approve loans to the value of R20 million and provide aftercare services to the clients.

Both MEGA and MTPA face a challenge of appointing qualified and competent staff in order to fulfil their mandates and address other challenges of a transformative nature. Madam Speaker, it is therefore of paramount importance that these institutions should have the right calibre of people to facilitate the implementation of policies in a manner that benefits our people.

An amount of R60 905 000 has been allocated to MEGA in this financial year.

Local Economic Development (LED)

Madam Speaker, we have not done as well as we would have liked to in facilitating LED in the province. We hoped we would have finalised the provincial LED strategy by this time, however, due to capacity challenges we have not. To address this challenge, Madam Speaker, we have established an LED directorate to ensure that we deliver on our mandate and speedily finalise the draft strategy incorporating the outcomes of the sector studies.

Madam Speaker, the Department participated in the development of the National LED Regulatory Framework launched in August 2006. This framework emphasises good governance and covers areas of service delivery, public and market confidence; spatial (locality) development planning and comparative advantages; enterprise support and business infrastructure development and community investment programming.

Madam Speaker, the Department will further provides support in the analysis of local municipalities LED plans to ensure that they are viable and generate sufficient interests for investment. The process of integrated development planning will be enhanced through the district level to ensure synergy in economic planning.

Using the comparative and competitive advantage of the localities, we must be able to develop an investment plan to be used to market our localities attract and retain investors. The Department will be supporting the district municipalities in developing investment plans so as to attract more investors.

Accelerated and Shared Growth Initiative for South Africa (AsgiSA)

Madam Speaker, in line with AsgiSA the Premier announced two economic development corridors, namely the Maputo Development Corridor and the Moloto Rail Corridor. Together with the Heritage, Greening Mpumalanga and Tourism Project, which aims to revitalise tourism, restore and preserve our heritage, we have embarked on an ambitious programme of the big five flagship projects to give Mpumalanga a competitive edge.

Maputo Development Corridor

To paraphrase the words of the Premier, "We believe that these flagships will provide our development partners, both in the private sector and other areas, a focal point of priority activities and outcomes to which they will be able to contribute their resources and expertise in order to advance the resolutions of the 2005 Growth and Development Summit."

Madam Speaker, together with MEGA we will do an in depth study of the master plan of the Maputo Development Corridor to detail projects to be embarked upon in different municipalities along this corridor. We have seen development taking place along the Maputo Corridor, however, it appears that no one has tracked and documented this development. To deal with this challenge we are developing a database of all the developments since the corridor was initiated. To this effect, we will partner with the private sector and the relevant municipalities in establishing a Maputo Development Forum which will focus on the non-freight elements of the corridor.

Madam Speaker, we have to re-look at the market survey that we are conducting on the possibility of the dry port in Komatipoort.

Along the Maputo Corridor, the feasibility study on development of an industrial park around the Kruger Mpumalanga International Airport identified two possible sites where the industrial park will be situated. This study has also identified fruits, fish from Mozambique, motor vehicle spare parts and petro-chemicals as possible products that may be suitable for exporting by air. Madam Speaker, we also foresee opportunities for courier services, storage and warehouse facilities. The spin offs for the small entrepreneurs can be enormous.

Madam Speaker, other projects along the Maputo Development Corridor are the Steve Tshwete Industrial Park and the Kruger-Mpumalanga International Airport Cargo Terminal. The Steve Tshwete Municipality has established an industrial township that occupies 300 hectares of land. This industrial township is adjacent to the N4 toll road, which is the Maputo Corridor backbone. This land will be developed by the Germans into industrial stands. Madam Speaker, the servicing of these industrial stands will start in July 2007.

Madam Speaker, the aviation study by the Department of Roads and Transport and Kruger-Mpumalanga International Airport will help us to determine the type of cargo that is viable for the airfreight.

In agriculture the projects identified are biofuels, vegetable tunnels and agro processing. The Department together with the Department of Agriculture and Land Affairs has plotted a map of all the activities along the Maputo Corridor on the geographical information system. This will assist in marketing the Maputo Corridor to investors. To this effect we will be hosting an Investor's Conference in November on business opportunities in the Maputo Corridor.

Madam Speaker, I am delighted that most of the bottlenecks in the South Africa/ Mozambique border post are currently being removed. The hours at the border have been extended to 22h00 and there are no visa requirements for South African visitors to Maputo. I must however point out that one challenge that still remains is the establishment of a one stop border post that will drastically reduce time for the business and tourists alike.

Moloto Rail Corridor

Madam Speaker, we have also commenced work on identifying economic opportunities along the Moloto Rail Corridor. The first draft of the report shows that there will be direct impact on the regional GDP of Mpumalanga of R245 million per annum. Six thousand long term job opportunities will be created, while 115 000 short term job opportunities will be created over a period of three years.

Madam Speaker, the Moloto Rail Corridor is a project falling within the functional area of both the Department of Economic Development and Planning and the Department of Roads and Transport. Given this scenario, the MEC for Roads and Transport will further elaborate on this project during his policy and budget speech.

Trade and industry promotion

Trade and investment promotion

Madam Speaker, all Development Bank of South Africa (DBSA)/departmental development projects took off the ground. These include Middleburg Stainless Steel Incubator (MSI) learnership programme which is nearing completion before the end of the year. The granite beneficiation feasibility study is completed. The furniture manufacturing centre opened its doors for the first time in January 2006 for the incubation programme and training of small businesses in furniture technology. Madam Speaker, in the stainless steel industry, the MSI has received a huge Pall rings order from SASOL to manufacture and replace imports. However, the challenge is that MSI is required to install automated tooling machinery but faced with skills and capital scarcity.

The Mpumalanga Mining and Energy Preferential Procurement Initiative (MMEPPI) was launched in June 2006. Interactions are taking place with the mining companies to implement MMEPPI to assist the BEE companies to get procurement deals within the mining industry. Madam Speaker, this process is slow and must begin to gain momentum. The mining industry must begin to procure services from our Mpumalanga companies.

Business regulation

Madam Speaker, you will recall that this House passed the Mpumalanga Liquor Licensing Act in the previous financial year. This Act regulates the licensing and operations of all retail liquor outlets. The Mpumalanga Liquor Authority as a creature of this Act became the successor in title to the Mpumalanga Liquor Board.

Madam Speaker, this piece of legislation among others seeks to facilitate the entry of new participants into the liquor industry and to address and reduce the economic and social costs of excessive alcohol consumption. The implementation of this legislation, Madam Speaker, will pave way for a speedy and simpler way of processing applications for liquor licenses and speedy evaluation by the Mpumalanga Liquor Authority. Madam Speaker, the HoD will ensure that the Mpumalanga Liquor Authority will be functioning before the end of this year. At the same time she will ensure a smooth transition from Mpumalanga Liquor Board to Mpumalanga Liquor Authority.

Mpumalanga Gaming Board

Madam Speaker, there has been a tremendous growth in the gambling industry. In the last financial year, 2006/07, our gambling regulator saw its name being changed from Mpumalanga Gaming Board to Mpumalanga Gambling Board (MGB) pursuant to the promulgation of the Mpumalanga Gaming Amendment Act.

Of the R31,14 million gambling levies collected in 2006/07 financial year, the contribution of the casinos was R23,56 million. We applaud the efforts of the MGB in ensuring the appropriate collection of gambling levies. As part of the Tsogo Sun Casinos bid commitment to Emalahleni Municipality, the Highveld Shopping Complex has been developed. We hope that this development will serve as a catalyst to the casino operations in this province.

Madam Speaker, there has been a minimal increase in the limited payout machine sites due to the slow roll out and the re-demarcation processes in the last financial year. In this regard R3,91 million to the gambling levies was collected.

In this current financial year, we undertake to empower SMMEs especially those from the previously disadvantaged backgrounds. Madam Speaker, we are looking at the possibility of rolling out 40 machine sites to fulfil this objective and thus create opportunities for economic development and jobs.

Madam Speaker, the projections for 2007/08 financial year is that the gambling industry will generate R35 million in gambling levies.

Although we celebrate growth in this industry, we are aware of the social challenges associated with gambling. In this spirit, we will intensify our education and awareness campaigns to promote responsible gambling.

An amount of R26 853,000 has been allocated to MGB in this financial year.

Allocation

Madam Speaker, the Department has been engaged with the National Treasury to review the organizational structure in order to streamline a generic reporting format in line with all the Departments of Economic Development in the country.

Madam Speaker, this re-engineering process has a long term implication for the budget of the Department and a bearing on the organisational structure. In the past financial year the Department had only three programmes. Madam Speaker, in line with Treasury guidelines, the Department of Economic Development and Planning will now have five programmes.

Madam Speaker, allow me to present the budget allocation for the Department.

Programme 1: Administration, which includes the Office of the MEC, HoD, Chief Financial Officer (CFO) and corporate services has been allocated R52 168 000.

Programme 2: Integrated Economic Development Service which includes the public entities, enterprise development, LED services and BEE has been allocated R259 594 000.

Programme 3: Trade and Industry Promotion, which includes trade and investment promotion, sector development, industry development and tourism biodiversity conservation has been allocated R19 806 000.

Programme 4: Business Regulations and Government, which includes consumer protection services, liquor regulation, gambling and betting and business regulation has been allocated R14 796 000.

Programme 5: Economic Planning, which involves policy and planning, research and development, knowledge management and monitoring and evaluation, has been allocated R14 984 000.

Conclusion

In conclusion, Madam Speaker, the large capital spending infrastructure projects such as the Maputo Development Corridor which includes Lion Ferrochrome Smelter, which is the world's largest ferrochrome expansion worth R1,6 billion and the Moloto Rail Corridor will increase investments and growth. The diversification of our economy and value adding will see us halving poverty and unemployment by 2014.

Madam Speaker, this noble goal will be achieved by strengthening our partnership with the private sector and labour. My meeting with the organised business will be a regular one. The proposal from Business Mpumalanga that we create a forum that will meet regularly is accepted and will be implemented henceforth.

Let me thank the honourable Premier and colleagues in the Executive Council for their guidance and support, members of the Legislature in particular the Portfolio Committee on Agriculture; Land Administration and Economic Development and Planning, board members of our agencies, CEOs, the HOD Ms Simangele Sekgobela, all the staff in the Department and our agencies. Lastly, I would like to thank my family for the unwavering support and words of encouragement even when I have to spend many hours and days away from home.

Madam Speaker, I request this House to approve the budget of the Department of Economic Development and Planning totalling R361 348 000.

Madam Speaker, South Africa is alive with possibilities and everyday in Mpumalanga is a beautiful day.

I thank you!

Issued by: Department of Economic Development and Planning, Mpumalanga Provincial Government
14 June 2007