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4 July 2007

1. Introduction

The Economic Cluster's programme seeks to increase the rate of growth and employment in the economy and, focuses on ten priorities over the next three years. These priorities are aimed at achieving the following outcomes:

a) Increase economic efficiencies: Interventions in this area are of a cross-cutting nature and will have economy-wide benefits, such as improving infrastructure or skills provision.
b) Promote dynamic growth sectors: These interventions include the implementation of industrial policy and interventions to grow or strengthen sectors that will advance the goals of the Accelerated and Shared Growth Initiative for South Africa (AsgiSA).
c) Integrated small- and micro-enterprise service delivery: The interventions of the Cluster in this area are focused on improving the opportunities for small enterprises to participate in the economy.

In addition, the Cluster is focusing, as part of its work, on improving institutional arrangements, such as monitoring and evaluation and government capacity to ensure that our interventions have the desired impact.

It is within this framework that we present progress achieved in the second cycle report in the implementation of the Cluster's programme of action.

2. Progress report

a) Increase economic efficiencies

As stated, most interventions within this area are aimed at developing a more conducive environment to growth in the economy. The interventions are therefore mostly of a cross-cutting nature, with successful implementation supporting growth across the economy.

Government has continued to gradually implement reforms in the South African telecommunications sector to address pricing and access issues. Policy directives have been announced to start the local loop unbundling process. The directives are an important step in enabling increased competition and thereby cheaper broadband. The directives will be supported by new regulations to be developed by the Independent Communications Authority of South Africa (Icasa). Successful implementation of these directives will take forward the growth of South Africa's service and knowledge-based industries. Regarding Infraco has received initial funding to enable the roll out of the launch network to all main commercial centres.

As evidenced by the example of Icasa's role in implementing information and communication technology (ICT) directives, the need for a framework for regulators in network industries is crucial. The target date for the development of this framework is December 2007. The work of economic regulators will be further enhanced by the Competition Policy Review, of which a first draft has been finalised and amendments have been drafted for Cabinet consideration.

With regard to the phased rollout of the public transport network, seven of the twelve cities that are to be a part of the first phase of the rollout will have implementing plans ready by August 2007. On the implementation of the reformed bus subsidy system, the first draft of the National Passenger Road Plan has been completed and presented to the Transport Lekgotla in June 2007.

The Ports and Rail Investment Plans have been finalised. The Department of Public Enterprise is now conducting consultations within the Cluster departments to bring on board all relevant perspectives.

The Cluster is investigating ways to increase integration of skills and industrial priorities with a view to ensuring sufficient long-term planning for the needs of industry. In this regard, the Department of Education (DOE) has been co-ordinating the implementation of the National Human Resource Development Strategy. A concept document has been developed and consulted with the Cluster's Skills Focus Group and the Presidency. The DOE will be convening a meeting of relevant government departments to discuss the proposed co-ordination and integration proposals.

On Regulatory Impact Assessment (RIA) the implementation plan has been completed and pilots are to commence after Cabinet Lekgotla.

b) Promoting dynamic growth sectors

Beyond the interventions mentioned above that are aimed at enhancing cross-cutting efficiencies, the Department of Trade and Industry (dti) has been leading a government-wide process aimed at developing sectors that we believe have a potential to grow and enhance employment in the economy.

The Industrial Policy Action Plan has been completed and will be presented to Cabinet for consideration. In terms of implementing Key Action Plans (KAPs) for Business Process Outsourcing (BPO), discussions on developmental pricing for telecommunications are being finalised including the benchmarking of prices.

In tourism, work continues in various work streams, a baseline study on the extent of the sector's transformation has been conducted and will form an important part of Cluster deliberations to ensure that growth in the sector will have broad-based impact.

Processes to finalise KAPs in biofuels, forestry, clothing and textile and metals and engineering sectors are on track. A draft strategy for biofuels has been finalised. A process to identify forestry potential beyond the provinces of KwaZulu-Natal (KZN) and Eastern Cape is underway.

Led by the dti and the Presidency, the Cluster has been investigating interventions in a number of sectors, namely: mining and beneficiation, agriculture/ and agro-processing, white goods sector, retail, creative industries, pharmaceuticals, and capital goods.

Implementation of the Export Strategy is underway. Research and analysis now enables us to match specific products with export markets and this will be further improved by the completion of the Export Portal, Exporters' Directory and the Export Promoters' Strategy by July 2007.

The Department of Science and Technology (DST) has completed the first draft of the Ten-Year Plan for Research and Development (including the Technology Innovation Agency). The ten year plan is aimed at increasing the quality and quantum of research and development in South Africa and to boost the contribution of cutting-edge sectors. DST is undertaking consultations with other departments on the plan.

In January 2007, Cabinet approved that current infrastructure expenditure be leveraged to develop industrial capabilities in sectors such as capital goods. To ensure that the current Capex benefits the growth of strategic sectors, a Competitive Supplier Development Manual has been developed. Procurement workshops have and are continuing with state owned enterprises (SOEs) that report to the Department of Public Enterprises (DPE).

c) Integrated small enterprise service delivery

The Cluster has a number of interventions in this area designed to assist small enterprises' participation in the economy. Interventions are focused on improved regulation and support as well as mobilising finance for small enterprises.

The roll-out of infrastructure to support small enterprises is near completion. The Small Enterprises Development Agency (SEDA) now has eight provincial offices, 39 branches and 102 enterprise information centres, and is strengthening its product offering through this network. The work being done by the dti and National Treasury on key goods and services to be procured from small enterprises is complete. Work is also at an advanced stage regarding the regulatory environment facing small enterprises and the Presidency is due to release proposals in this regard.

The Cluster has also reviewed a framework for massifying Second Economy interventions. In terms of communicating these programmes, the Cluster has advertised a tender for a multi–media communication campaign on Second Economy programmes of government and how to access them. The campaign pulls together all programmes from government departments.

However there remain challenges. The integration of small enterprise initiatives across government has posed significant co-ordination challenges. In this regard integration of support across all levels of government is being addressed as well as the adoption of funding protocols between national and provincial departments and agencies.

Conclusion

The implementation of the current POA for the Cluster is on track and important progress is being made. The Cabinet Lekgotla in three weeks will allow us an opportunity to address those areas that require strategic intervention going forward. These will be reported on after the Lekgotla has been held.

Issued by: Government Communications (GCIS)
4 July 2007