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1 July 2008

Introduction

The Economic Cluster continues to implement its three-year programme of action (POA) focused on facilitating conditions to enable the achievement of government’s 2014 vision. Generally, good progress has been made in implementing Cluster priorities; however, the Cluster is taking stock to consider emerging challenges to enable progress going forward. Cluster departments have, in the six weeks since the last report, been engaged in intense work on legislation given the parliamentary requirement to submit all Bills for consideration by 2 June 2008, this includes the amended Competition Bill which is relevant to the Cluster.

While the Cluster's work is broad ranging, this media report will focus on areas of progress in the implementation of the Cluster's POA approved by Cabinet in January and some consideration of emerging challenges that we are currently addressing.

It is important to contextualise the work that we are undertaking as a Cluster. Our economy has been growing steadily since 1994 and underwent truly significant growth over the last decade. Most recently, the economy grew by 5,4 % in 2006 and at 5,1% in 2007. Fixed investment has grown dramatically from 15% in 2004 to 21% in 2007. Real income per capita (average income per person) rose at around four percent per person annually since 2004. The rate of unemployment fell from 31,2% in March 2003 to 23% in September 2007. This translates into an increase of approximately 1, 8 million employed people in South Africa, a significant development that shows that the economy has turned the corner on unemployment. The work of the Cluster is to reinforce positive trends where they exist and actively respond to challenges that may arise.

Increase Economic Efficiencies

The Cluster has considered the Revised National Human Resource Development Strategy (NHRDS) and is ready to submit the Strategy to Cabinet for its consideration. The Strategy will replace the current HRD strategy with an updated and refocused version that has been jointly worked on by relevant departments. The revised strategy will address shortcomings in the current strategy and optimise the efficacy and outcomes of human resource development in respect of South Africa’s development agenda. The revised NHRDS is explicitly aligned to existing strategies such as the Medium Term Strategy Framework, the National Industrial Policy Framework and other relevant strategies and policies. It is proposed that the Strategy has both long and medium term objectives focusing on the next five and the next twenty years. Once processed by Cabinet the draft NHRDS will be gazetted for public comments and input from our social partners.

Regarding ICT infrastructure, in particular the submarine cable initiatives, Nigeria has joined the UHURUnet initiative and the participation of Kenya is being finalised. Infraco has reserved manufacturing slots with prospective suppliers to ensure timely deployment of the African West Coast Cable. Both initiatives are due to be completed in the first half of 2010. To facilitate this process, guidelines for rapid deployment of electronic communications facilities have been published and a new policy covering security and prioritising SA and African investment in cables has been developed.
On the roll-out of the Sentech wireless broadband network, which is essential for improving broadband capacity and access particularly for rural communities and public facilities such as schools, courts, post offices and Thusong Service Centres, the Department of Communications has concluded the collection of topographic data. This data is aimed at planning the connectivity for the 235 most needy Dinaledi "maths and science" schools. R500 million has been allocated to Sentech to provide this roll-out of wireless broadband. In May 2008, the Competition Amendment Bill was approved by Cabinet and has been introduced into Parliament, including a briefing to the Portfolio Committee for Trade and Industry. This Cluster intervention is crucial if we are to address market failures resulting from uncompetitive behaviour and outcomes.

The National Maintenance Implementation Plan was officially launched in Cape Town on the 21 May 2008. The Plan will seek to ensure that maintenance of vital infrastructure is linked to opportunities to maximise employment, thereby fulfilling two important objectives of the Cluster.

Public Transport is a strategic focus of the Economic Cluster with the key focus being the development of an integrated rapid public transport network and the Cluster will be considering the industrial policy opportunities that arise from investment programmes in this sector. With regard to the implementation of the reformed Public Transport System, the development of an integrated transport network design has commenced in all the Metros.

On the Taxi Recapitalisation Programme, a turnaround strategy has been developed for the Operating Licensing Board focused on improving operational efficiency and service delivery. In addition the Department of Transport is engaging the Transport Education and Training Authority to discuss taxi industry training needs.

Simultaneously, Department of Home Affairs (DHA) is focusing on improving mechanisms to fast track high skill immigration to South Africa for specific categories, twenty new Large Accounts were selected on 21 May 2008 and DHA staff and immigration specialists from outside DHA have started the process to service these. This initiative is crucial to address short-term skills shortages as government and SOEs scale up their infrastructure projects. By October 2008 it is envisaged that service delivery will be improved to the extent that work permits will be issued to highly skilled foreigners within 15 workings days. A system to monitor compliance with this target will be installed before the end of 2008.

The energy emergency is being addressed, not only by government, but by all relevant stakeholders. The Nedlac Energy Summit in May was a success that demonstrated the commitment of all stakeholders to address areas requiring action. Some electricity savings target have been achieved, however, it is important to register that residential areas are still lagging behind industry. Our current savings through demand side management is 100 megawatt; however, our target is 600 megawatt in this financial year.

In terms of progress, the NERT is proving effective in developing an integrated response to the emergency including Demand Side Management. In addition cogeneration tariffs and rules have been determined and published and Eskom's coal stockpiles have improved. The following regulations have been developed and published for comment: (1) Rationing of power consumption in support of Power Conversation Programme (2) Building standards (3) Limiting use of incandescent light bulbs (4) Quality of power supply (5) Pricing for liquid petroleum gas
The Cluster is also considering the industrial policy response and opportunities that arise out of the electricity emergency.

This includes:
* roll-out of solar water heating and other energy efficiency devices
* promotion of more electricity-efficient / relatively more labour-intensive industries
* industrial policy/technological potential of renewable electricity generation, e.g. solar
* promotion of energy-efficiency of existing industry

Promoting Dynamic Growth Sectors

It is almost a year since the launch of the Industrial Policy Action Plan and progress has been made in the implementation of key actions in lead sectors as well as sustained implementation of plans in AsgiSA priority sectors. Implementation of sector agreements reached with industry stakeholders at NEDLAC in both the metals and engineering and chemicals sector has begun.
In metals and engineering, the Cluster is investigating mechanisms that can be used to limit the exportation of scrap metal to allow for sufficient supply in the domestic market.

In chemicals, the proposed land for the Halogen project has been identified in Enseleni and negotiations have been initiated to explore other suitable areas. The Chemicals Sector Expert Advisory Committee is planning an outward mission focusing on plastics. The purpose is to attract investors to locate these labour-intensive industries in South Africa.

In forestry, Department of Water Affairs and Forestry (DWAF) has initiated a process to develop a sawlog strategy for South Africa and important progress has been made in the prioritisation of the process to finalise the use of General Authorisations for water use for specific areas in KZN and Eastern Cape for small scale forestry. This process will enable the fast tracking of water licensing in those areas that are not water-stressed.

In consultation with industry stakeholders, the dti has developed a comprehensive package of proposals that will take work beyond the CSP for the clothing and textiles sector. In the BPO sector, the first 1 000 graduates of the BPO Monyetla Work Readiness Programme were all employed during May achieving 100 percent absorption rate of the learners. The training of a further 2 000 unemployed youth is planned for the current financial year. Within the 2nd Economy Strategy, four call centres have been launched creating 315 jobs. On finalising the Telecommunication Developmental pricing, the Ministers of Trade and Industry and Communications will soon pronounce BPO a strategic sector for advancing developmental goals.

The licensing criteria have been finalised and Department of Minerals and Energy (DME) is in a process of finalising the financial mechanisms of the bio-fuels implementation plan. The issuing of some bio-fuel licenses is planned for the end of 2008. As part of the National Industrial Participation Programme work on a major pilot to produce bio-diesel for the European market is underway in the Eastern Cape.

Department of Environmental Affairs and Tourism (DEAT) and the Tourism Grading Council of SA are embarking on a comprehensive review of the awareness grading system that will ensure that quality is maintained in tourism establishments. DEAT has also begun the implementation of the Universal Accessibility framework that seeks to ensure that all establishments are accessible to individuals with disabilities The Tourism Human Resource Development strategy and its implementation plan have been drafted and stakeholders will be consulted for further inputs. The strategy will be finalised by August 2008 and will be launched in September at the Tourism Career Fair.

The work on other sectors such as creative industries has also progressed. A Blue Print for provincial craft hubs has been completed and business plans completed for Eastern and Western Cape and Kwa Zulu Natal. The establishment of the Technology Innovation Agency (TIA) and integration of other agencies into TIA is on track. The Legislative processes for establishing the space agency by August 2008 are also underway. An interdepartmental task team approved the establishment of a proposed Centre of Competence for titanium. This is currently being scoped for implementation in the 2008/09 financial year. A centre of competence for information security is in place, and the process of operationalising its detailed outputs is currently underway in consultation with key government departments.

On Finalising the Long Term Mitigation Scenarios (LTMS), a second meeting with industry CEOs to discuss the LTMS was held on 22 April 2008. The proposed plan for the finalisation of the LTMS process has been drafted and will be presented to the July 2008 Cabinet Lekgotla.

Regarding the process to improve design and administration of industrial incentives, the Enterprise Investment Programme's which replaced the SMEDP was gazetted in May and is to be launched on 3 July 2008. The establishment of the IT system to increase operation efficiency on the disbursement of incentives is underway and the training of staff on the system commenced in May 2008. A draft discussion document on the tax incentives in support of the implementation of industrial policy is being discussed within the Cluster.
Cabinet resolved on 19 April 2008, that an Inter- Ministerial Committee be established to review the food prices and come up with short, medium and long term interventions to alleviate the impact of escalating food prices. The outcome of the process has potential implementation implications for a number of POA items and these will be considered by the Cluster as the process unfolds.

Integration of small and micro-enterprises

On rolling-out the ten products for government procurement from small business, provincial consultations in North-West, Gauteng, Mpumalanga, and Western Cape have been completed. A National Indaba will be held during October 2008 to complete the consultation phase.

An integrated framework for small, medium and micro enterprises (SMME) support has been presented and approved by the Trade and Industry MinMec and the process of aligning PGDS and IDPs has been initiated. This process will ensure that support for small enterprises is prioritised in PGDS and IDPs. The Tourism Enterprise Programme has been institutionalised into a Tourism Enterprise Partnership. The strategy for enterprise development has been approved and will focus on delivering on sustainable jobs, sustainable enterprises and transformation. Nine areas have been identified as having a potential to enhance competitiveness of South Africa as a destination. A decision has been taken to pilot implementation in the Eastern Cape and Kwa-Zulu Natal. The focus would be on developing new products and training enterprises.

On promoting communication on second economy initiatives, the printing of the economic opportunities publication and all the provincial pullouts has been completed. Of the 12 SABC language stations that are broadcasting the economic opportunities programme, seven have completed the series.

Conclusion

While it is true that the economy faces challenges such as the shifts in macro-economic variables, the downturn in the global environment and energy and food price challenges it is important to note that government's interventions in the real economy, such as the National Industrial Policy Framework and Action Plans and the work on infrastructure investments are correct, and will in time mitigate against these challenges that we face. The Economic Cluster will utilise the opportunity provided by the July Cabinet Lekgotla to take stock of both progress and challenges and will report back on relevant outcomes in August.

Issued by: Department of Trade and Industry
1 July 2008