Presentation to the Portfolio Committee on Trade and ... · PDF fileSecond Quarter Report ......

Presentation to the Portfolio Committee on Trade and Industry – the dti’s

Second Quarter Report

11 November 2015

Lionel October Director General

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Presentation Outline

Strategic Goals

Key Achievements

Departmental Expenditure versus Budget

Key Challenges

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Strategic Goals Facilitate transformation of the economy to promote industrial

development, investment, competitiveness and employment creation; Build mutually beneficial regional and global relations to advance

South Africa’s trade, industrial policy and economic development objectives;

Facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth;

Create a fair regulatory environment that enables investment, trade and enterprise development in an equitable and socially responsible manner; and

Promote a professional, ethical, dynamic, competitive and customer-focused working environment that ensures effective and efficient service delivery.

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Key Achievements

1 July – 30 September

2015

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Key Achievements

SG 1: Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation

With regard to localisation, three designation requests were published by National Treasury (NT) in September 2015 with an effective date of 21 October 2015 (i.e. Conveyance pipes, Transformers and Steel Sub-structures).

Amendments to the Critical Infrastructure Programme (CIP) Guidelines were approved in July 2015 to include support for infrastructure development costs to government owned industrial parks.

The CIP programme approved four projects that will leverage an investment of R12 billion; including Berekisanang Empowerment Farm in the Northern Cape and Bakubung Minerals.

Industrial Development

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Key Achievements


The review of the Capital Projects Feasibility Programme (CPFP) has commenced to integrate the Regional Spatial Development Initiative Programme and is planned to be re-launched by November 2015.

The reduction of the cap for section 12i programme led to the approval of 16 projects that will leverage an investment of over R5 billion.

German expansion of Reutech Pty (Ltd) and Naledi Forging Pty (Ltd) are some of the approved projects that are expected to create over 300 jobs respectively.

The Support Programme for Industrial Innovation (SPII) programme has been re-launched and is currently open for applications.


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Key Achievements


The Business Process Services (BPS) programme approved seven applications that will leverage over R2 billion in export revenue.

The Film & TV productions programme approved 30 local and foreign productions.

Lead and facilitated inputs on the Draft Preferential Procurement Policy Framework Act (PPPFA) Regulations 2015 circulated by the NT for the public procurement regime overhaul.

114 textile companies were audited through the South African Sustainable Textiles and Apparel Cluster (SASTAC) to obtain accurate information to be used for resolving outstanding fabric issues and also to establish the database for the PPPFA to facilitate researched decisions (on credentials, capacity, capability, core competence, consumption, compliance and current capacity utilisation).


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Key Achievements


Through the Clothing and Textiles Competitiveness Programme (CTCP)

R3.2 billion worth of approvals, of which R2.9 billion was disbursed with CIP which had R712 million approved with R 324 million already disbursed.

The Textiles and Clothing Development Council was established to replace the SASTAC after receiving concerns from some industry stakeholders - SASTAC will function until March 2016. Consensus was secured from all stakeholders prior to the workshops which were carried out throughout the country main centres of Cape Town, Pretoria, Durban and Port Elizabeth.


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Key Achievements


Secured R3 million from the Fibre Processing and Manufacturing Sector Education and Training Authority (FP&M SETA) for leather industry professionals to study for a Masters Degree in Leather Technology at the University of Northampton in England.

The Renewable Energy Independent Power Producer Procurement

(REIPPP) bi-lateral decision making structure was established in September 2015 to advise Government on localisation issues. The permanent members will be the dti, Department of Energy (DoE), Independent Power Producer (IPP) and NT.


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Key Achievements

SG 1: Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation Volkswagen South Africa made an investment announcement of R4.5

billion. Goodyear made an investment announcement of R670 million.

Pasdec Automotive Technologies was one of the companies that

received the Volkswagen AG Global Award.

The KwaZulu-Natal (KZN) Provincial Department of Economic Development and Tourism announced an intention to establish a Automotive Supplier Park of about R8 million commencing 2018/19.


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Key Achievements


Inputs made into the International Trade Administration Commission (ITAC) tariff review for the introduction of a 10% ad-valorem tariff on 3 steel products i.e. increase in the rate of customs duty on zinc-coated/galvanised steel, aluminium-zinc coated steel and colour coated steel.

Local industry has requested a duty increase from 20 to 30% ad valorem due to increasing volumes of cheap sanitary ware.

Supported and facilitated Hulamin’s application for an increase in import duty on aluminium rolled products, which has since been gazetted for public comment.


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Key Achievements


The Competition Commission approved the acquisition of the Bayside cast-house in Richards Bay, KZN by Isizinda Aluminium and transfer of ownership took place in July 2015. The transaction is expected to support economic transformation of Richards Bay and the development of the downstream aluminium industry in South Africa.

Collaborating with Cipla to confirm investment in biosimilar manufacture in KZN Dube Tradeport which is a completely new high-value manufacturing process and products for SA.

Collaborating with Adcock to expand manufacturing lines for liquids, install new manufacturing lines for effervescent and relocate pharmaceutical analytical services from India to South Africa.


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Key Achievements


Completed a case study to establish a local syringe manufacturing plant - a potential investor has been identified through the National Empowerment Fund (NEF) with an investment of about R79 million towards the project.

Supported the 2015 Africa International Hair Extravaganza where 10 local cosmetics companies exhibited their products held in Midrand, Gauteng in September 2015.

Facilitated the creation of a Community Trust in Alexandria Municipality, Eastern Cape in September 2015, to promote the chicory production for Nestle to replace imports.


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Key Achievements


Co-hosted and participated in the 2015 African Programme for Rethinking Development (APORDE) Capacity Building Programme and parallel workshops from 31 August to 1 September 2015.

The Non-Ferrous Metals Crime Combating Committee (NFMCC) and the Inter-governmental Task Team on scrap metal theft finalised its strategic plans collaboratively which will assist in formulating collective interventions to deal with scrap metal theft.

Hosted the World Forestry Conference in KZN in September 2015.

Undertook an Oil and Gas fact finding mission to Mozambique in September 2015.


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Key Achievements


Participated in the South Africa and United States of America (US) Energy Storage Workshop held in July 2015.

Co-hosted and participated in the National Cleaner Production Centre (NCPC) Conference on Industrial Energy Efficiency in July 2015 in Durban, KZN.

Participated in a high level visit to Japan in August 2015 with a focus on advancing investment and collaboration in key areas e.g. fuel cells.

Facilitated the participation of emerging jewellery manufacturers in the

London international exhibition in September 2015.

568 companies participated in the Export, Marketing and Investment Assistance (EMIA) scheme.


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Overview of Incentive Schemes

Description Actual

Number of firms/projects supported

Potential jobs supported

Manufacturing Investment Incentives

Automotive Investment Scheme (AIS) 15 285

12I Tax Allowance Incentive 16 1 037

Critical Infrastructure Programme (CIP) 04 14 229

Manufacturing Competitiveness Enhancement Programme (MCEP)

71 24 254

Services Investment Incentives Business Process Services (BPS) 7 3 303

EIP: ADEP- Seven applications were conditionally approved due to budgetary constraints- to be remedied during the AENE process. ISP: 19 applications received did not meet the requirements and were rejected. Client engagements being held to market the scheme and address compliance requirements.

Trade, Investment & Exports

SG 2: Build mutually beneficial regional & global relations to advance South Africa’s trade, industrial policy & economic development objective

Facilitated R1.443 billion of export sales.

Awarded second best National Pavilion at the Mozambique International Trade

Fair– FACIM held from 31 August to 6 September 2015.

Facilitated the approval of the establishment of Africa Export Council (AEC) and

the recruitment process to appoint the CEO.

Facilitated the Business Forum in the Deputy President’s working visit to China

and Japan in July 2015.

Facilitated the South African Business participation at the Business Council

during the Brazil, Russia, India, China, and South Africa (BRICS) Summit in Ufa,

Russia in July 2015.

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Facilitated the participation of Business in the SA-IRAN Joint Bilateral Forum in

July 2015.

Finalised the legal process on the amendment of the Memorandum of

Understanding (MoU) with Ethiopia and exchanged the draft in September 2015.

Finalised the negotiations on the SA – Liberia MoU and awaiting the signing of

the Presidential Minute.

Exchanged the Draft MoU with Ivory Coast (Cote d’Ivoire) in September 2015.

Participated in the second Congo – SA Joint Trade Committee held in

Brazzaville, Republic of Congo in July 2015.

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Participated in the third SA- Cameroon Joint Trade Committee held in Durban,

KZN in August 2015.

Trade in Services Protocol signed by State President, Jacob Zuma at the

Southern African Development Community (SADC) Summit in August 2015.

Agreement reached with Department of International Relations and Cooperation

(DIRCO) to implement and disburse funds under the SA-Cuba Agreement on

Economic Assistance.

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Cabinet approval obtained to ratify an additional Protocol to the Trade,

Development and Co-operation Agreement (TDCA) to include Croatia -

Presentation to both Houses of Parliament has been done.

the dti facilitated an agreement between Department of Agriculture, Forestry and

Fisheries (DAFF) and United States Department of Agriculture (USDA) to

address Sanitary and Phytosanitary (SPS) issues on pork, beef and poultry to

ensure that the Africa Growth and Opportunities Act (AGOA) benefits are

leveraged optimally.

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Special Economic Zones and

Economic Transformation (SEZ &ET)

SG 3: Facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth The Memorandum of Agreement (MOA) between the dti and the Development

Bank South Africa (DBSA) for the implementation of revitalisation of the old Industrial Parks was signed in September 2015.

Facilitated a R100 billion investment pipeline in proposed Special Economic Zones (SEZs).

Draft SEZ Planning Guidelines being reviewed and consulted on.

Draft SEZ Regulations are in place, and an external law firm appointed to review and finalise.

Maluti-a-Phofung SEZ designated in Free State Province.

The Technical Assistance fund for Middle Income Countries with a value of R20 million was approved by the African Development Bank.

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Regulation

SG 4: Create a fair regulatory environment that enables investment, trade & enterprise development in an equitable & socially responsible manner Liquor Policy - public comments from consultations held with

stakeholders as well as interviews and on national radio received and analysed for finalisation of Policy before adoption by Policy Council and Cabinet

Gambling Policy - public comments from consultations held with stakeholders as well as interviews on SABC and on national radio received and analysed for finalisation of Policy before adoption by Policy Council and Cabinet

Copyright Amendment Bill - Consultations held with stakeholders as well as interviews on national TV and radio. Public comments received for analysis.

Incorporated clauses for the office functions of the Broad Based Black Economic Empowerment (B-BBEE) Commissioner into the B-BBEE Regulations

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Administration & Co-ordination

SG 5: Promote a professional, ethical, dynamic, competitive & customer-focused working environment that ensures effective & efficient service delivery

Payments of all eligible creditors within 30 days. The vacancy rate at 7.4% against quarterly target of 6.2%. Women in SMS at 47% against quarterly target of 48%. Disability status at 2.9% against quarterly target of 2.9%.

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Departmental expenditure versus budget

Segmentation of YTD expenditure to the dti programmes

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Summary of Projections vs Expenditure as at 30 September 2015

Programme

Revised Budget 2014/15

Year-to-date (YTD)

Available budget

% budget available

YTD Cash flow

projections YTD

Expenditure

Variance (Budget less expenditure)

% variance

R’000 R’000

R’000

R’000

%

R’000

%

Administration 768,304 361,893 344,802 17,091 4.72% 423,502 55.12% International Trade and Economic Development 116,576

71,830 54,102 17,728 24.68% 62,474 53.59%

Special Economic Zones and Economic Transformation 89,704 133,719 36,627 97,092 72.61% 53,077 59.17%

Industrial Development 1,964,268 1,300,460 1,096,300 204,160 15.70% 867,968 44.19% Consumer and Corporate Regulation 296,385 212,862 207,936 4,926 2.31% 88,449 29.84%

Incentive Development Administration 5,827,591 2,522,435 1,613,095 909,340 36.05% 4,214,496 72.32%

Trade and Investment South Africa 435,016 274,046 269,792 4,254 1.55% 165,224 37.98%

Total 9,497,844 4,877,245 3,622,653 1,254,592 25.72% 5,875,191 61.86%

The expenditure based on the YTD projection of R4.877 billion is 74.28 per cent or R3.623 billion, implying an under-spending of R1.255 billion or 25.72 per cent. Overview of expenditure per programme:

Segmentation of expenditure per economic classification

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Economic classification

Revised Budget 2014/15

Year-to-date (YTD)

Available budget

% budget available

YTD Cash flow

projections YTD

Expenditure

Variance (Budget less expenditure)

% variance

R'000 R'000 R'000 R'000 % R'000 %

Compensation of employees 897,730 460,300 436,363 23,937 5.20% 461,367 51.39%

Goods and services 663,258 304,416 287,100 17,316 5.69% 376,158 56.71%

Payments for financial assets 0 0 199 (199) 0.00% (199) 0.00%

Payment for capital assets 35,653 12,765 4,613 8,152 63.86% 31,040 87.06%

Transfers & subsidies 7,901,203 4,099,764 2,894,379 1,205,385 29.40% 5,006,824 63.37%

TOTAL 9,497,844 4,877,245 3,622,653 1,254,592 25.72% 5,875,191 61.86%

Summary of Projections vs Expenditure as at 30 September 2015

Overview of expenditure per economic classification:

Reasons for material expenditure variance

Item description Amount (R’000) Reasons for under/(over) expenditure Compensation of employees 23,937

Under spending on compensation of employees due to vacant posts. The vacancy rate as at 30 September 2015 is 7.64 per cent.

Good & Services

17,316

The under spending is mainly as a result of the following: Payments for construction at Cape Town and Durban regional offices

were not made as drawings were approved late. Outstanding invoice from DPW for refurbishment at Port Elizabeth

regional office. A delay in the development of B-BBEE Technical Assistance Guide,

which is expected to be finalised in October 2015. Delays at the beginning of the year in the finalisation of the Personal

Development Plan analysis report. However roll out of training has commenced and it is anticipated that funds will be utilised before end of financial year 2015/16.

Funds earmarked under venues and facilities were not spent as internal and other government facilities were utilised.

Payment for capital assets 8,152

Under spending on payment for capital assets is due to: Delays in planned purchases of capital assets in foreign offices. Delays on implementation of IEMS project.

Reasons for material expenditure variance (continued)

Item description Amount (R’000) Reasons for under/(over) expenditure

Transfer & subsidies

DBSA: Regional Spatial Development Initiatives 10,832

The under spending on a transfer to DBSA due to the integration of the SDI Programme into the dti. Funds were redirected to programme 6 during the AENE process.

National Research Foundation: THRIP 93,200 Under spending of R93.2 million under the National Research Foundation: THRIP is because of the integration of THRIP into the dti.

IDC: Clothing and Textile Production Incentive 198,643

Under spending under the IDC: Clothing and Textile Production Incentive due to a payment of R198.643 million that is not yet transferred to the he IDC as they need to perform an assessment on the cash flow for the remainder of the financial year.

Enterprise Investment Programme 36,205

Under spending of R36.2 million under EIP due to additional checks (i.e. site visits for stages 3-6 claims) introduced to confirm operational existence before claims can be paid.

Manufacturing Competitiveness Enhancement Programme 226,998

Under spending of R227 million under MCEP due to delays by claimants in submitting outstanding supporting documents such as tax clearance certificates.



Business Processing Service Incentives (33,524)

Over spending of (R33.5) million under BPS is because of payments made to 7 new projects that were approved on the revised BPS incentive scheme guidelines in the last quarter of 2014/15 financial year. It should be noted that although the expenditure is more than the YTD projections, it is still within the allocated budget.

Film & TV Production Incentive (28,454)

Over spending of (R28.5) million under Film & TV Production Incentive due to more claims being received and paid for film projects.. It should be noted that although the expenditure is more than the YTD projections, it is still within the allocated budget.

Automotive Production and Development Programme 174,047

Under spending of R174 million under APDP due to fewer claims received than anticipated and delays by claimants in submitting outstanding claims documents (such as banking details).

Industrial Development Zones - Other 33,353 Under spending of R33.4 million under IDZs-Other due to outstanding quarterly reports from provinces on claim files.

Special Economic Zones: Investment Incentives 464,009

Under spending of R464 million under SEZs: Investment Incentives due to outstanding compliance documents that must be submitted by the applicants in order for the claims to be finalised.



Export Market and Investment Assistance (28,817)

Over spending of (R28.8) million under EMIA due to deposits paid on upcoming national pavilions as required by the contractual arrangements with the service providers. It should be noted that although the expenditure is more than the YTD projections, it is still within the allocated budget.

Support programme for industrial innovation 14,837

Under spending of R14.8 million under SPII due to delays to finalise a contract for the appointment of consulting engineers to conduct pre-funding feasibility studies as well as assessment of innovativeness of the product.

Critical Infrastructure Programme 44,059 Under spending of R44.1 million on CIP due to slow responses by municipalities on incomplete claims.

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Funding pressures due high uptake in some incentive programmes such as MCEP, Film and TV, EMIA, AIS.

Developing countries experiencing downward pressure on capital flows-

currencies continue to weaken. Commodity prices (SA’s main exports) continues to decline. Competitiveness of the metals/mining industry cluster is under serious

pressure, mainly due to a glut in global steel markets; rising imports; electricity challenges & other utility price hikes.

Challenges

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Thank You

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Acronyms/Abbreviations TERM DEFINITION TERM DEFINITION

ADEP Aquaculture Development and Enhancement Programme COMESA Common Market for Eastern and Southern Africa

AEC Africa Export Council CPFP Capital projects Feasibility Programme

AGOA Africa Growth & Opportunities Act DAFF Department of Agriculture, Forestry and Fisheries

AIS Automotive Investment Scheme DBSA Development Bank of South Africa

APORDE African Programme for Rethinking Development DIRCO Department of international Relations and Cooperation

APP Annual Performance Plan DoE Department of Energy

B-BBEE Broad Based Black Economic Empowerment DPW Department of Public Works

BPS Business Process Services DTP Dube Tradeport

BRICS Brazil, Russia, India, China and South Africa EAC East African Community

CCRD Consumer and Corporate Regulation Division EIP Enterprise Investment Programme

CIP Critical Infrastructure Programme EMIA Export, Marketing and Investment Assistance

CIS Co-operative’s Incentive Scheme

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FTA Free Trade Agreement MoA Memorandum of Agreement

FY Financial Year MoU Memorandum of Understanding

GSSSD Group Systems and Support Services Division MTEF Medium Term Expenditure Framework

IDC Industrial Development Corporation NCA National Credit Act

IPAP Industrial Policy Action Plan NCC National Consumer Commission, a public entity of the dti

IPP Independent Power Producer NCR National Credit Regulator, a public entity of the dti

ISP Incubator Support Programme NCPC National Cleaner Production Centre

ITAC International Trade Administration Commission NFMCC Non Ferrous Metals Crime Combating Committee

ITED International Trade and Economic Development Division NCT National Consumer Tribunal, a public entity of the dti

ITUP Informal Traders Upliftment programme NEF National Empowerment Fund, a public entity of the dti

MCEP Manufacturing Competitiveness Enhancement Programme NGB National Gambling Board, a public entity of the dti

MIP Manufacturing Incentive Programme NIP National Industrial Participation

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NIBUS National Informal Business Upliftment Strategy PGM Platinum Group Metals

NLA National Liquor Authority RIA Regulatory Impact Assessment

NLB National Lotteries Board, a public entity of the dti SA South Africa

NMISA National Metrology Institute of South Africa, a public entity of the dti

SABS South African Bureau of Standards, SOC limited, a public entity of the dti

NP National Pavilions SACU Southern African Customs Union

NRCS National Regulator for Compulsory Specifications, a public entity of the dti

SACU- EFTA

Southern African Customs Union - European Free Trade Association

NT National Treasury SACU-EU

Southern African Customs Union - European Union

ODG Office of the Director-General SADC Southern African Development Community

OECD Economic Cooperation and Development SADC FTA

Southern African Development Community- Free Trade Agreement

OSM/OIM

Outward Selling Mission/Outward Investment Mission SANAS South African National Accreditation System, a public entity of the dti

PPPFA Preferential Procurement Policy Framework Act SAPS South African Police Services

PTA Preferential Trade Agreement SARS South African Revenue Service

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SDI Spatial Development Initiatives the dti Department of Trade and Industry

SDIP Service Delivery Improvement Plan THRIP Technology and Human Resources for Industry Programme

seda Small Enterprise Development Agency, a public entity of the dti

TIPS Trade and Industrial Policy Strategies

SEIF Shared Economic Infrastructure Facility TISA Trade and Investment South Africa

SEZ Special Economic Zone TOR Terms of Reference

SIAL Salon International de l’Alimentation TPSF Trade Policy and Strategy Framework

SLA Service level Agreement TSP Tourism Support Programme

SMME Small, Micro and Medium Enterprise UAE United Arab Emirates

SPII Support Programme for Industrial Innovation UN United Nations

SMS Senior Management Service US United States

stp seda Technology Programme WCP Workplace Challenge Programme

T-FTA Tripartite Free Trade Agreement YEDS Youth Entrepreneurship Development Strategy

YTD Year to Date

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