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Presentation to the Portfolio Committee on Trade and Industry – the dti’s 2011/12 Annual Report. Date :14 September 2012 Director-General Mr Lionel October. Presentation Outline. Economic Context Strategic Objectives Achievements against planned targets Industrial Development
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Presentation to the Portfolio Committee on Trade and Industry – the dti’s 2011/12 Annual Report Date :14 September 2012 Director-General Mr Lionel October
Presentation Outline Economic Context Strategic Objectives Achievements against planned targets Industrial Development Trade, Export & Investment Broadening Participation Regulation Administration & Co-ordination Financial Management Challenges 2
Key highlights for 2011/12 Industrial Policy gained traction in 4 key sectors (Autos, Clothing, BPS and Film) Progress on reforming the Companies registrations landscape; and Started key initiatives in the areas of co-operatives, SMEs Incubators. Trade diversification to high growth markets (China). 3
Economic Context The global economic recovery still fragile since the sovereign debt crisis still haunts Europe. The rate of the world’s real gross domestic product (GDP) growth declined from 5,2% in 2010 to 3,8% in 2011. Negative impact on tradeable sectors (manufacturing, mining and agricultural sectors) However, growth in developing economies was still generally robust during the course of 2011, but was moderated in the last quarter due to a deteriorating global demand, which affected export performance 4
Economic Context Manufacturing Real Gross Value-Added Growth 2006 – 2011 Source: Stats SA
Economic Context International Trade Performance • Global economic growth slowed significantly from 3,7% in the third quarter of 2011 to 2,6% in the fourth quarter, mainly on account of slower output growth in advanced economies. • European trade narrowly avoided a technical recession in the first quarter of 2012. Real output was at zero percent in the first quarter of 2012, following a contraction of 1,3% in the last quarter of 2011. • South Africa’s exports to the BRIC countries have increased significantly, with China being the main driving force behind this increase and India not far behind. Exports to BRICS in 2011: 72% of exports were to China; 21% to India; 5% to Brazil and 2% to Russia. Total trade with BRICS at R263,5 billion in 2011. • The stagnation in world trade volumes in 2011 and the rising domestic expenditure, which manifested itself in increasing imports in South Africa. • This culminated in an annualised trade deficit of R17,1 billion in the fourth quarter of 2011. • 14,3 % of RSA exports were to Africa of which 73,3 % were to SADC 6
Economic Context Investment performance • Real gross fixed capital formation grew steadily in 2011, showing an annual rate of 4,4%, recovering from a decline of 1,6% in 2010. • The fourth quarter recorded a particularly strong performance of 7,2%, with public corporations recording the strongest acceleration in capital spending. • The introduction of new amendments into the Companies Act, which came into effect in April 2011 has contributed to improvement in the investment climate.
Economic Context Investment performance • Over the past year, South Africa has gained some ground in becoming a more attractive investment destination. • South Africa has improved its ranking on the ease of doing business from ranking 74 in 2011 to 44 out of 183 countries in 2012. (Doing Business 2012 by the World Bank) • In the World Economic Forum’s 2012 Global Competitiveness Report, South Africa moved up four places to number 50 out of 142 countries surveyed. • Overall, South Africa was ranked number one in ease of obtaining credit; number one in Auditing Standards; and number one in the regulation of the securities exchange. • In addition, it ranked number three in the protection of minority stakeholders and number 10 in the strength of protection of foreign investors.
Economic Context Employment performance • The weak global economic recovery, together with the prevailing uncertainty about the global economy, is still weighing significantly on job creation. • However, the economy managed to create 365 000 new jobs between the fourth quarters of 2010 and 2011. • This growth was supported by finance and other business services contributing 145 000 jobs, trade contributing 85 000, and community and social services 76 000. Manufacturing lost jobs in second and third quarters and gained 52 000 in the fourth quarter of 2011. 10
Structure of the dti‘s work the dti’s work is organised in terms of the following clusters: Industrial development; Trade, Investment and Exports; Broadening Participation; Regulation, and Administration and Co-ordination
The implementation of the Automotive Production and Development Programme (APDP) helped renew confidence This has been demonstrated through large investment commitments of R15 billion made by original equipment and component manufacturers. China’s First Auto Works committed to an investment of $100 million for a truck and car assembly plant, and Toyota SA to assembling minibus taxis locally. Industrial Development - highlights 13
Industrial Development – Public Procurement • Amended PPPFA Regulations effective from 7 December 2011. DTI empowered to designate sectors / industries from which govt departments and state-owned enterprises (SOEs) must procure locally • First round of sector (six) designations: • Rail Rolling Stock: locomotives, wagons and carriages; • Power Pylons; B • Buses; • Clothing, Textiles, Leather and Footwear; • Canned Vegetables; and • Set Top Boxes. • Second round designation included 70 pharmaceutical products (Oral Dosage Tender) • Instruction notes signed by NT. Issues with respect to the localisation threshold in the RFP for STB’s subject of ongoing engagement.
BPS – mega investments relate to customer call centres, e.g. Amazon African customer service centre in Cape Town, with an investment of R834 m, Entersite to the value of R845 m and Mindpearl to the value of R356 m. Under Monyetla II Programme, 3 400 young people were trained, 70% of which were placed in employment by the Business Process Outsourcing (BPO) consortium. On Clothing and Textiles Competitive Incentive Programme (CTCIP) brought manufacturers and retailers such as Foschini, Truworths and Edcon together to take advantage of the proximity, quality and flexibility that domestic manufacturers offer. A total of R112 million was disbursed of which R14,4 million was meant for supporting 208 companies. Industrial Development - Highlights 15
BPS Mega Investments 2011/12 Investment: R 834m Incentive: R 32m Jobs: 1 100 Investment: R 845m Incentive: R 69m Jobs: 5 131 Investment: R 466m Incentive: R 20m Jobs: 2 300 Projects Approved: 23 Investment: R4bn Grant: R1.8bm Jobs: 15 149 Payments: R51m Investment: R 150m Incentive: R 7m Jobs: 540 Investment: R 149m Incentive: R 2m Jobs: 226 Investment: R 121m Incentive: R 5m Jobs: 408 Investment: R 119m Incentive: R 1m Jobs: 160 Investment: R 356m Incentive: R 14m Jobs: 891
12I Mega Investments 2011/12 Investment: R 762m Incentive: R 68m Jobs: 1 924 Investment: R 2bn Incentive: R 904m Jobs: 10 130 Investment: R 533m Incentive: R 191m Jobs: 174 Investment: R 531m Incentive: R 168m Jobs: 204 Investment: R 1.5bn Incentive: R 237m Jobs: 309 Investment: R 1.4bn Incentive: R 484m Jobs: 2 394 Investment: R 2bn Incentive: R 552m Jobs: 194 Investment: R 8bn Incentive: R 353m Jobs: 1 163 Investment: R 1.8bn Incentive: R 606m Jobs: 2 145 *Note: Jobs include direct & Indirect
Vacancy report Vacancy reduction Recruitment efforts * Includes posts additional to the establishment
Governance & Oversight of the dti’s entities • As part of strengthening relations between the dti and its entities, the Minister continuously engaged with Accounting Authorities through individual engagements with the Commissioners and their deputies as well as the Chairpersons of Boards and/or Tribunals to discuss strategic priorities and key challenges. • The Policy Framework on governance and oversight on the entities was finalised – it is aimed at bringing a uniform approach to oversee the entities. • Critical interventions were made at EAAB, National Regulator for Compulsory Specifications (NRCS), National Credit Regulator (NCR) and the National Consumer Commission (NCC). • the dti also intervened in situations where governance problems were identified as a risk in some entities and worked collaboratively with them to stabilise the situation. 36
Budget vs. expenditure for the 2011/12 financial year – per programme
Budget vs. expenditure for the 2010/11 financial year – economic classification ** Amounts in respect of AIS are already included under the manufacturing incentives
Overview of expenditure • The expenditure based on the annual projections of R6,876 billion is 98.9% or R6,801 billion, implying an under-spending of R75 million (1.1%). • The under-expenditure is as a result of:- • Compensation of Employees (R21m) - Due to vacancy rate of 8.4%; • Goods and Services (R41m) – Creditor invoices totalling R4,5m and DIRCO claims totalling R29,1 that were only received after financial year end; and • Incentives (R10m) – claims for approved incentives not received timeously from private companies for processing in the financial year under consideration.
AG’s Report • Unqualified Audit Opinion. • Matters successfully dealt emanating from previous audit - 2010/11 • Performance information – improved performance indicators to SMART criteria- zero findings; and • Asset management – monthly asset reconciliations conducted. All losses were investigated and reported. • Current matters raised • Contingent liabilities in respect of lawsuits and incentive grants approved by the department but not paid.
AG’s Report cont.. • Current Matters raised • Irregular expenditure relate to: • The irregular expenditure is of a technical nature and the department did received value for money • The absence of at least three comparable quotations for expenses in excess of R10 000 (in most cases three quotes requested but not all received). • The use of single source service providers without obtaining the required approval, e.g. training, conferences,media and publishing etc. • The expenditure should have been authorised by the Accounting Officer or the delegated officials. The view of the department is that this was inherent in the delegations of power for expenditure. Such deviations are required to be specific in the delegations which have since been updated.
Key Challenges • Global slow down and its impact on tradeable sectors. • Management and governance of the dti entities. • Inter-governmental coordination. • Mainstreaming and/or formalisation of co-operatives/ small black business and increasing demand for 10 set asides for small businesses procurement. • Short vs Medium- term job creation.
