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12 February 2008

Introduction

In his State of the Nation Address on Friday, President Mbeki committed government to the imperative of Business Unusual, in the work of government.  

As we in the economic cluster reflect on this challenge, and as we present this report today, it is important to appreciate that we do so within the overall context of the objective of the cluster of economic departments, which is to create the conditions for the economy to grow at an accelerated rate whilst systematically transforming its structure. 

It is important to recall that the work of the economic cluster is guided by a Programme of Action that has identified a set of interventions that are critical to overcoming a number of key constraints in order to ensure that the economy’s growth momentum is sustained and broadened. The cluster’s Programme of Action (POA), which was adopted in January 2007 and will be implemented over three years, has three overarching elements viz.
* increasing economic efficiencies
* promoting dynamic sectors
*  integrated support for small and micro-enterprises.

As will be indicated, a number of key actions are proposed in each of these areas of intervention. Another area receiving cluster attention is increasing the institutional capacity to undertake all of these interventions.

It is important to recognise that success in overcoming the various identified constraints to growth requires that our implementation of the actions in the cluster’s POA, is sustained, accelerated and continually improved; hence the President’s injunction for business unusual in the way we work. We are satisfied with the work in progress that we are about to present to you, and intend to exert maximum effort to ensure that the pace and effectiveness of implementation is stepped up.

I will now briefly reflect on some of key areas of progress in 2007 and highlight our plans going forward.

Increasing economic efficiencies,

Most of the work in this area will have been covered in the report of Ministers Erwin and Sonjica, yesterday.

As regards Information and Communication Technology (ICT) policy directives aimed at bringing down the costs of communication were announced in 2007. In addition the Infraco Act was promulgated and the capitalisation of Sentech to provide wireless broadband for government services has been finalised. In 2008 the focus will be on implementing the Digital Broadcasting Policy including the further rollout of digital broadcasting infrastructure by Sentech. A strategy for the manufacture of Set Top Boxes is being finalised and a campaign to raise awareness about Broadcasting Digital Migration will be undertaken. In addition, work will be undertaken to benchmark telecommunication costs with comparator countries to enable us to evaluate the impact of our efforts to bring down costs.

Implementation of the public transport action plan continues to progress. The taxi-recap programme has seen over 13 261 old taxi vehicles scrapped and R663 million paid out as a scrapping allowance. The National Road Passenger Plan that provides for a transformed subsidy system for buses has been completed and detailed public transport operational plans have been developed for 2010 host cities. We will continue the roll-out of the public transport action plan in 2008.

The Cluster will be part of the intensive campaign to improve energy efficiency through ensuring saving of energy by households and industrial users. This is one of our Apex projects committed to in July last year. It is important to register here that there has been much speculation regarding the future of certain economic activities that require high energy input. In responding to the current electricity situation, the effort will be to ensure that projects committed to such as the Alcan smelter are supported. We will examine the improvement of the situation closely and maintain contact with all investors.

Skills for the economy will continue to be an area of intense and concerted focus by the Cluster in 2008. In this regard priority artisan trades have been agreed for 2007 with an update for 2008 currently in progress. The department of Education has recently finalised a student enrolment planning exercise for the period 2007 to 2010. It is anticipated that through this planning process, universities will produce up to 2 000 graduate engineers who will be eligible for registration with the Engineering Council of South Africa. The department is also providing additional targeted funds on an annual basis to engineering and other scarce skill faculties to increase their capacity. Furthermore the work on facilitating the immigration of high skills continues.

Economic regulators remain key role players in increasing economic efficiencies. Work has been initiated to develop a framework for Economic Regulators and an assessment of performance of South African economic regulators will be finalised in April 2008. These studies will be used to conclude the framework.

In our continued efforts to address anti-competitive behaviour we will be implementing changes to competition law during the course of the year to enable the State to proactively address anti-competitive outcomes. This work will be linked to our work to finalise a framework for economic regulators across the economy. In addition we will be broadening a process started last year to review and benchmark existing regulatory requirements for doing business, and initiate a programme to ensure that we are sufficiently but not onerously regulating business in the country.

Promoting dynamic growth sectors

During the course of 2007 the National Industrial Policy Framework and the Industrial Policy Action Plan were adopted by Cabinet.

In 2008, we will continue the implementation of industrial policy measures in the four identified lead sectors, namely:
* capital/transport equipment (including competitive supplier development programmes)
* automotives assembly and components
* chemicals, plastics fabrication and pharmaceuticals
* forestry, pulp and paper and furniture sector

We will also continue to implement key measures in the Accelerated and Shared Growth Initiative for South Africa (AsgiSA) priority sectors – Business Process Outsourcing (BPO), tourism and biofuels, while supporting the stabilisation of the clothing and textile sector.

In BPO, implementation of the government assistance support programme to industry has begun with six new investments secured. Funding for the piloting of Monyetla, the BPO skills programme has also been secured. In tourism, 993 small, medium and micro enterprises (SMMEs) have been supported through the Tourism Enterprise Programme and 500 tourism establishments with a total of 87 281 rooms were graded. In addition provinces have continued to develop and implement safety strategies. One of the key constraints to increasing the numbers of tourists coming to our country has been sufficient routes and in this regard the implementation of the Airlift Strategy has begun.

In terms of biofuels, the Strategy has been approved by Cabinet.

In clothing and textiles we are also implementing key action plans. These actions focus on recapturing the domestic market, technology and industrial upgrading and implementing country of origin labelling regulations.

In the metals and engineering sector, the business plans and funding for the National Foundry Technology Network has been finalised. Implementation of the National Tooling Initiative is already underway as a means to reduce manufacturing life cycle costs. To ensure that the public investment programme leads to greatest possible benefits for the economy as cost-effectively as possible, Eskom, Transnet and Pebble Bed Modular Reactor (PBMR) are currently developing their Competitive Supplier Development Programs. Eskom and Transnet anticipate completing their plans in the first quarter of 2008 and PBMR mid-2008.
 
In 2008 we will be finalising and implementing key action plans in a number of sectors taking into account their overall impact on growth and employment, including;
* agriculture and agro-processing
* mining and minerals beneficiation, with a focus on identifying market failures and selecting where potential exists in terms of correct skills and technology
* construction, with a focus on enhancing potential for substantial employment creation
* retail, with a focus on integrating small enterprises within value chains
* marine aquaculture, with a focus on promoting increased production capacity particularly through establishing Aquaculture Development Nodes  
* creative industries – including an audit of activities across government and
* consumer durables, with a focus on developing the potential for local manufacture, repairs and maintenance

Alongside these sector interventions, work will continue to implement other strategic and cross-cutting interventions in the following areas.

* research and development (R&D) interventions for the development of new cutting-edge industries e.g. pharmaceuticals
* a dedicated centre to support all investment applications of R100 million and above
* reviewing water usage scenarios and develop measures for efficient management of water resources
* finalising long-term mitigation (climate change) scenarios and implement decisions that arise out of this work
* implementing anti-poverty interventions that directly address employment and economic development and ensure integration into sector strategies where appropriate
* improving the design and administration of industrial financing.

Integration of small and micro enterprises

A key focus of the Cluster has been on strengthening integrated state financial and business development support for small enterprises through strengthened institutional mechanisms and more effective co-ordination. A delivery network integrating both financial and non-financial support for small enterprises is complete and covers the entire country. This network includes the Small Enterprise Development Agency (seda), the South African Micro-Finance Apex Fund (SAMAF) and Khula as well as our programmes to support co-operatives. In 2008 we will continue to roll out this support network for small enterprises with a focus on improving synergies between various department and inter-governmental programmes that exist to support small and micro-enterprises. In terms of strengthening linkages between small enterprises and the rest of the economy, the ten products for government procurement from small enterprises was approved by Cabinet in 2007 and we also finalised the mechanism to monitor the payment of small enterprises within 30 days.

Some of the new projects to support small enterprises that we have set ourselves for 2008 include:
* consideration of improved financial support to small enterprises including consideration of the Khula direct retail finance option
* leveraging procurement to increase demand for goods and services from small enterprises by aligning the Borad-based Black Economic Empowerment (B-BBEE) Codes of Good Practice and the Preferential Procurement Policy Framework Act (PPPFA)
* rolling out the ten products for government procurement from small enterprises, including support for small enterprises
* setting up the small enterprise procurement call centre with appropriate dedicated resources and protocols across all government department to ensure thirty day payment to small enterprises
* strengthening the Tourism Enterprise Programme to promote tourism development

Another project that will enhance job creation whilst simultaneously addressing infrastructure constraints will be the implementation of the National Maintenance Strategy using the Expanded Public Works Programme. Finally we will also be looking at how we can reinforce the decision to speed up land and agrarian reform.

To ensure improved communication on second economy initiatives, a publication on economic opportunities has been produced and translations into all South African official languages has commenced. A 16 part radio series on 12 SABC language stations has commenced and discussions are underway to finalise the scheduling of a television series in 2008.

In conclusion

The Economic Cluster will strive to improve delivery and create an environment that will be conducive to the creation of work opportunities in 2008 and the deepening of advances we made in 2007.

I thank you

Issued by: Department of Trade and Industry
12 February 2008