Transcript Industrial Development: IPAP key challenges

Presentation to the Portfolio Committee on
Trade and Industry – the dti’s 2010/11 Annual
Report, including IPAP
Date : 14 October 2011
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
Economic Context
 The focus of the dti’s work was on the upscaled implementation
of IPAP2 to deal with factors affecting the economy's productive
capacity and competitiveness
 The South African economy came out of recession in the second
half of 2009 and showed a modest growth of 2.8% in 2010. This
recovery was broad-based, with all main sectors making positive
contributions to overall gross domestic product (GDP) growth in
2010.
 This growth was supported by particularly strong growth rates in
the first and fourth quarters at 4.8% and 4.4% respectively, with
the second quarter registering 2.8% and the third quarter 2.7%.
 Despite this stable recovery trajectory, unemployment was still
high at 24% in 2010, though it declined by 0.1% in the first
quarter of 2011.
3
Economic Context
Manufacturing performance
 The manufacturing sector, after showing a steep decline of 10.4%
in 2009, performed well in 2010, growing by 5% for the year with its
strongest quarterly growth rates achieved in the first, second and
fourth quarters at 8%, 5% and 4% respectively.
 Although this sector was one of the main drivers of the South
African economic recovery in 2010, its strong rebound is still limited
to a few sub-sectors such as the automotive; basic chemicals; iron
and steel; and food and beverages industries. (Source: South
African Reserve Bank)
International Trade performance
 Exports of manufactured goods remained under pressure due to
poor global demand, particularly from South Africa’s traditional
trading partners from the developed world, and that continues to
limit export performance.
4
Economic Context
Investment performance
 The total real gross fixed capital formation declined by 3.7% in
2010 deteriorating from a 2.2% decline experienced in 2009. This
overall decline was despite a positive growth of 3.7% achieved by
state corporations which in itself represented a significant decline
from the 26.1% achieved in 2009.
 The economic decline was mainly due to persistent contraction in
investment by the government which showed an aggregate decline
of 10.9% for the year after showing consecutive declines in all
quarters in 2010.
 Lack of investment by private business enterprises also contributed
significantly to this decline showing a contraction of 4.4% in 2010.
This decline in private investment was mainly driven by the
construction industry.
5
Economic Context
Employment performance
 The number of employed people increased slightly to 13 132 million
in Q4 of 2010, but that marginal increase was short-lived.
 A further 14 000 people lost their jobs in the first quarter of 2011,
reducing the number of employed people to 13 118 million people,
despite the manufacturing sector’s creation of about 20 000 more
jobs.
 This decline in employment was driven mainly by the transport,
construction and agriculture sectors, which lost 34 000, 25 000 and
24 000 jobs respectively. On the other hand, finance and other
business services; manufacturing; and mining did increase the
numbers of people employed by 37 000, 20 000 and 15 000
respectively.
6
Strategic Objectives
7
Strategic Objectives
the dti’s strategic objectives for the period under review
were:
 Promoting
the
co-ordinated
and
accelerated
implementation of the government’s economic vision and
priorities;
 Promoting direct investment and growth in the industrial
and services economy, with particular focus on
employment creation;
 Raising the level of exports and promoting equitable
global trade;
 Promoting broader participation, equity and redress in the
economy; and
 Contributing to Africa’s development and regional
integration within the New Partnership for Africa’s
Development (NEPAD).
8
The 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
9
Achievements against
planned targets
10
Industrial Development: IPAP key
progress – cross-cutting highlights
• Public procurement and SOE supplier development
Preferential Procurement Policy Framework Act Regulations
- The effective date for the amended regulations is 07 December 2011.
- This will enable designation for local procurement and align the PPPFA
with B-BBEE objectives.
- Enable pro-active promotion of local procurement in non-designated
sectors.
State Owned Enterprises
- First phase of mobilisation within SOEs to introduce localisation and
supplier development into the procurement process. SOEs introducing
new policies, processes, systems and capacity building to embed
supplier procurement leverage more systematically
- Some success stories e.g. recent Transnet procurement of 100
locomotives: 90 to be assembled in SA
11
Industrial Development: IPAP key
progress – cross-cutting highlights
• National Industrial Participation Programme
- Study into more strategic evolution of NIPP – including
consolidation of CSDP and NIPP – completed in the period.
- New framework will introduce Fleet, Indirect and Direct
procurement provisions.
- Obligations monitored in the region of +/- US$15.5bn
- Of these, 80% arise out of the Strategic Defence packages
- More than 220 projects have been implemented
- Under the Strategic Defence Packages, 5 out of the ‘Big 6’
have completed their obligations in full
12
Industrial Development: IPAP key
progress – cross-cutting highlights
• Industrial Financing
Industrial Development Corporation
- IDC has made available R102 bn mostly in loan finance for IPAP and NGP
sectors
- R10bn Job Creation Fund at Prime less 3% over five years
- R25bn earmarked towards Green Economy
- R7.7 5bn agricultural value chain, including forestry
- On budget incentives such as EIP and 12i tax allowance supported an
estimated commitment of 30 085 jobs
- IDC funding to create approximately 17 760 direct and indirect jobs and 9
880 have been saved as a result
Study on long term funding
- The completion of Phase 1 of a study into concessional industrial financing
lays the foundation for a framework for securing long-term sources and
provision of concessional industrial financing and the requisite financial
products for key sectors
- Phase 2 of the work set for completion will feed into appropriate processes
13
Industrial Development: IPAP key
progress – cross-cutting highlights
• Trade and technical infrastructure
- Exporters Early Warning System on Technical Barriers to Trade
developed by SABS launched
 Identified technical barriers to trade for exporters notified to WTO
 Distributed via free weekly email to exporters
- ITAC processed numerous applications for increases, rebates and
reductions of duties in line with IPAP priorities
- SABS developed a range of enabling standards for various industries /
products including solar water heaters; water efficient buildings; wind
energy turbines; energy efficient appliances; electrical components; water
efficient components; electric vehicle batteries; automotive fuels;
energy/electricity co-generation and transport of dangerous goods.
- New accreditation program for energy efficient measurement and
verification finalised
- Draft Legal Metrology policy proposal subject of stakeholder consultation
14
Industrial Development: IPAP key
progress – sectoral highlights
• Automotives
– Automotive Investment Incentive with a budget of R2, 69bn over the MTEF
period has been instrumental in securing R14 billion investment commitments,
including R9 billion investment from assemblers
• Volkswagen: to produce 136,000 new Polo and Vivo cars per annum (pa)
• Toyota: production expansion to reach 130,000 vehicles pa
• Ford's launched Ranger pickup and associated engine plant for export to 148
countries producing 85,000 pickups and 145,000 engines pa
• BMWSA to increase production of fourth generation 3-Series to 80,000 units pa
from the current 50,000 with more than 80% for export
• Nissan: production to rise to 76,000 vehicles pa
• Daimler Chrysler's to produce 70,000 new C-Class Mercedes pa
• General Motors brought production of Chevy Spark to South Africa
– APDP regulatory amendments with ITAC and SARS for finalisation
– 15 component manufacturers benchmarked
– MHCV value chain report and draft action plan completed
15
Industrial Development: IPAP key
progress – sectoral highlights
• Clothing & Textiles
– R112m was approved under the Clothing and Textiles
Competitiveness Programme (CTCP) in 22 applications for 106
companies .
– Production Incentive (PI) 189 applications totalling R 619 million
approved. A total of R71m has been disbursed in the period.
– This is in support of at least 40 591 jobs
– SA handmade leather brand ‘Tsonga’ export contracts to Australia
and France.
16
Industrial Development: IPAP key
progress – sectoral highlights
• Business Process Services
– R42 million new investment commitments approved linked to 806 jobs
– 3,400 young trainees being trained under the Monyetla II Programme –
+70% employed in period
• Green Industries
– New building standards require mandatory installation of solar water
heaters or similar technologies in new buildings
– IDC allocated R25bn with 54 projects in pipeline
– Draft Green Industries customised sector programme (CSP) developed for
finalisation and draft action plans for solar and wind completed
– Intra-departmental South African Renewables Initiative (SARI) initiative to
leverage international climate finance to supplement domestic funding
sources for renewable energy production linked to domestic manufacturing
17
Industrial Development: IPAP key
progress – sectoral highlights
• Forestry
- 1, 186 water licences for 14,960 hectares of land granted by DWEA
- Establishment of Panel for Environmental Impact Assessment
Practitioners to assist with EIA’s
- Skills programme for new growers and land reform beneficiaries
• Biofuels
- Petroleum Products Act Regulations amended to allow ethanol
blending
- Standard published for fuel grade ethanol
- Mandatory upliftment and pricing formula for biofuels and support
mechanism agreed to by Task Team and is being processed
• Agro- processing
- Detailed action plan for organic food sector completed
- Aquaculture strategy completed and implementation plan being
finalised
18
Industrial Development: IPAP
Progress overview
• Significant progress over period with 51 KAP’s achieved
• 21 KAP’s close to achievement and carried over for final sign off
• 13 KAP’s for the period affected by intra-governmental and
regulatory hurdles;
–
–
–
–
–
–
–
–
Mineral beneficiation
Domestic production of ARV’s
Biofuels regulation,
Water licences, afforestation, saw mill development and charcoal
production
REFiT
SWH’s
STB’s and Digital TV’s
Fluospar beneficiation
19
Industrial Development: IPAP
Progress overview
• Some KAP’s transferred to other departments in terms of
refinement of roles – tourism (DOT), National Food Control
Agency (DAFF) and water licences (DWEA)
• Some KAP’s deleted from future IPAP iteration because
progress reliant on long term strategic decisions of government
and/or business. (Projects Mthombo and Mafutha)
• Funding constraints negatively impacted some programmes:
–
–
–
–
–
Competitive financing for Capex suppliers
National Tooling Initiative
Gold Loan Scheme
Sector Specific Centres of Excellence
Mentoring of SME manufacturers and ERA programme in Auto
Sector
20
Industrial Development: IPAP
key challenges
• Slow recovery of global economy and key traditional export
markets, in particular the US and EU with threat of prolonged
recession
• Sustained rapid growth of large developing economies / regions
such as China, India, Brazil and Africa
• This implies a challenging process of trade adjustment in a context
where value-added exports have gone to advanced trading partners
and Africa and commodity exports to other developing trading
partners
• Continuous appreciation of real effective exchange rate (REER) to
highest levels on record in Q3 2010 in the context of massive
capital inflows and a large current account deficit
• Real interest rates significantly above major developing and
developed economies
21
Industrial Development: IPAP
key challenges
• South African economy still recovering domestically from the
global economic crisis
• Slowdown in public and private fixed investment expenditure
• Large increases in electricity prices increasingly difficult for
manufacturing sector to absorb
• Rail and port inefficiencies coupled with very high port
charges
• Large drop in manufacturing employment between Q1 2008
and Q3 2010 of 153 000 with slight improvement in Q4 2010
before declining again during the first two quarters of 2011
22
Industrial Development: IPAP key
challenges - currency
23
Source: SARB
Industrial Development: IPAP key
challenges - investment
Real gross fixed capital formation Q1 2005 to Q2 2011 (Rm 2005 prices)
24
Source: SARB
Industrial Development: IPAP KAPs
requiring fast-tracking
• Promulgation of Biofuels Mandatory Uplift Regulations (Lead
Department: DOE, supported by the dti, EDD and DAFF) and
implementation of Biofuels fuel levy rebate (Lead Department:
NT, supported by DOE, the dti, EDD and DAFF)
• Significant progress with REFIT rules with associated
localisation requirements for renewables (Lead
Department/agency: DOE and NERSA supported by DPE, the
dti)
• Standard offer for Solar Water Heaters SWH’s with associated
localisation requirements (Lead Department: DOE supported
by the dti)
• Strategy drafted to establish and define minimum levels of
beneficiation for 10 commodities to lay foundation for building
beneficiation value chains (Lead Department: DMR supported
by the dti, EDD and DST)
25
Industrial Development: IPAP KAPs
requiring fast-tracking
• Set Top Boxes (STB’s) roll-out and associated
localisation (Lead Department: DOC, supported
by the dti)
• Process to amend SOE shareholder compacts to
secure fleet identification and localisation
underway and to be completed (Lead
Department: DPE supported by the dti, DST and
EDD)
• Customs Fraud Campaign underway but requires
scaling up (Lead Agency: SARS supported by
the dti, EDD and DOJ)
26
Overview of Incentive Schemes
Actual
Description
EIP
AIS
BPO&O
Film & Television
12i Allowance Programme
Co-operatives (CIS)
BBSDP
EMIA
COEGA
ELIDZ
RBIDZ
CIP
SPII
TOTALS
759
36
3
Jobs supported
15,018
806
Investment
leveraged
R'000
11,300,000
7,300,000
-
49
-
991,000
3
-
4,100,000
232
1,104
1,753
6
7
0
12
20
3,984
3,084
1,067
193
521
0
9,271
29,960
406,000
342,000
0
34,600,000
21,700
59,060,700
Number of firms
supported
Export sales
value
R'000
2,856,000
2,856,000
The incentive schemes and IDZ funding cumulatively supported 3,984 firms, 29,960 jobs and
leveraged R59b in investments. The EMIA scheme supported R2,9b in export sales.
27
Industrial Development
2010/11 targets and achievements – Industrial Financing
Enterprise Investment Programme (EIP) and Industrial Development
Zones (IDZs)
•
EIP approved investments amounting to R11,3 bn, projecting to create
12 394 jobs in the manufacturing sector and 2 624 in the tourism sector
IDZs
• The East London Industrial Development Zone and Coega IDZs signed
13 investments .
• These IDZ investments will support an estimated 4 551 construction
and 1 400 direct job opportunities
• Oliver Reginald Tambo International Airport Industrial Development
Zone (ORTIA IDZ) was awarded an operator permit in December 2010
enabling the development of a jewellery manufacturing precinct in this
IDZ
CIP
• Approved 12 new investment projects to the value of R34,6 bn which in
turn will create 9 271 new jobs
Trade, Investment & Exports
2010/11 targets and achievements
Africa
SACU
 A new Vision and Mission for the Southern African Customs Union
(SACU) was approved by the SACU Heads of State in April 2010 and
South Africa hosted a SACU Summit in July 2010.
 As Chair of SACU since July 2010, South Africa, through the dti has
assisted in forging consensus on a work programme in SACU
focused on industrialisation,
infrastructure
development,
trade
facilitation, revenue sharing and unified engagement in trade
negotiations.
 Work initiated in SACU to develop common competition and industrial
policies.
 Concept document prepared on possible industrial projects that could
be the basis for the industrial work programme for SACU.
 Work on amending the SACU agreement to institutionalise the SACU
Summit has been undertaken
29
Trade, Investment & Exports
2010/11 targets and achievements
Africa
SADC
 The Southern African Development Community (SADC) Ministerial Task
Force approved an action plan with nine (9) priority focus areas
that will help to consolidate the SADC Free Trade Area and provide
greater impetus to regional industrialisation
 SA Government Position on future of SADC agreed
 SADC has begun to forge a common position on the SADC- East
African Community (EAC) – Common Market for Eastern and Southern
Africa (COMESA) Tripartite Free Trade Area (TFTA)
 Work initiated on SDIs in Zimbabwe, Mozambique, Tanzania, DRC and
Angola
30
Trade, Investment & Exports
2010/11 targets and achievements
South-South:
 South Africa and China signed a Comprehensive
Strategic Partnership Agreement (CSPA) that included
an undertaking to increase South Africa’s value added
exports to China and to encourage Chinese investment in
South Africa
 Agreements were reached with India and Brazil to address
non-tariff barriers that impede our bilateral trade
31
Trade, Investment & Exports
2010/11 targets and achievements
Multilateral
 Participated in World Trade Organisation (WTO) Doha
Development Round negotiations with a view to ensuring
a developmental outcome. Negotiating positions on all key
issues have been strengthened and updated as the
negotiations have unfolded
32
Trade, Investment & Exports
2010/11 targets and achievements
Policy
 Finalised the Trade Policy Strategic Framework which
sets out Government's approach to trade policy and
strategy
 Cabinet also approved the dti's Policy Framework on
Bilateral Investment Treaties (BITs), which will guide
South Africa's approach to future international investment
treaties
33
Trade, Investment & Exports
2010/11 targets and achievements
Investment and Export Promotion
 Outgoing State visits: facilitated business delegations to the following
countries i.e. Algeria (27), India (226), Russia (112), China (380),
Lesotho (20), Egypt (150), Cuba (17), France (144), for Presidential
visit by the Deputy President, facilitated business delegations to the
following countries; Turkey (49), Syria (8), Kenya (19) and United
Kingdom
 Support for the business forum programme during State visits was
also facilitated in Zambia, Angola, Botswana, Uganda and Brazil
 Five (5) Investment and Trade Initiatives (ITIs) were facilitated to
Zimbabwe, Brazil, Russia, the Democratic Republic of the Congo
(DRC) and India and sixteen (16) National and one (1) Local Pavilion
as well as twenty (20) Group Trade Missions took place
34
Trade, Investment & Exports
2010/11 targets and achievements
Investment and Export Promotion
 Substantive progress has been made in recruiting foreign direct
investment in a targeted manner. Targeted countries included: China,
India, Russia, Brazil, Japan, Spain, Germany, France, the UK, the
United States of America (USA) and the Middle East
 The work programme will translate over the next three years into an
investment pipeline of R115 billion in projects. The results of the year
are R 31,228,820,000 in potential investment and 14 055 jobs. The
pipeline reflects R 15,546,320,000 in domestic investment and
R 15,682,500,000 in foreign investment
 The EMIA scheme supported R2,9b in export sales
35
Broadening Participation
2010/11 targets and achievements
Enterprise development
 Developed 100 new small scale co-operatives creating a
minimum of 500 self-generated income and employment
opportunities
 Legislative amendment of 2005 Cooperatives Act formulated
and gazetted for public comment
 The Technology Incubation Programme of the Department,
which is managed by seda created 202 new Small Medium and
Micro Enterprises (SMMEs)
36
Broadening Participation
2010/11 targets and achievements
Enterprise development
 The Department through the Small Enterprise Development
Agency (seda) has to date established a network of forty two
(42) branches, seventeen (17) mobile units and fifty eight (58)
Enterprise Information Centres (EICs) countrywide
 Close to 63 916 new clients accessed the seda branch network.
 Black Business Supplier Development Programme (BBSDP)
– 1 104 enterprises supported under the incentive
 Co-operatives Incentive Scheme (CIS) – 232 cooperatives
have been supported under the CIS incentive
37
Broadening Participation
2010/11 targets and achievements
B-BBEE and Women Empowerment
 B-BBEE Advisory Council operational. Presidential Council
recommendations formulated, developed, tabled in Cabinet,
resulting in a reorientation of B-BBEE and alignment to broader
government
priorities
(IPAP,
NGP).
Work-plan
and
subcommittees for Council approved
 PPPFA regulations aligned to B-BBEE Act
 Support was given to 1 209 SMMEs, 35% of which are women
owned and 91% black-owned
 The Bavumile Skills development programme supported
close to 80 women in two Provinces namely the Northern Cape
and the Eastern Cape in the clothing and textile and arts and
craft sectors
38
Broadening Participation
2010/11 targets and achievements
Enterprise Finance and Technology Support
 A Techno-girl workshop was held in Limpopo Province where 100
girl learners, from 10 schools in the five districts benefited through
skills development
 The Technology for Women in Business (TWIB) awards
ceremony 2010/2011 was held in Gauteng and seven finalists
competed for the awards, which comprised two Categories namely
micro and small-sized businesses in sectors such as engineering
and wood and furniture
 6 Women owned enterprises have been assisted to the value of
R5m through the Isivande Women’s Fund (IWF)
39
Broadening Participation
2010/11 targets and achievements
Enterprise Finance and Technology Support
 Through the Support Programme for Industrial
Innovation (SPII) supported 20 projects with total SPII
contribution of R22,7m and industry contribution of R21,7m.
 Total value of projects assisted was R44,3m
 Through the Technology and Human Resources for
Industry Programme (THRIP) supported 235 projects and
1664 students
40
Regulation
2010/11 targets and achievements
Policy and legislative development
 Finalised the Companies Amendment Bill and
Regulations which introduces simplification of business
registration processes, reduces red tape and enhances the
transparency of companies
 Finalised the Consumer Protection Act Regulations
which give effect to the Consumer Protection Act
 Finalised the Estate Agency Policy Framework and the
draft Bill was produced for tabling to Cabinet which
provides a framework for drafting of the new Estate Agents
Act to sufficiently protect consumers
41
Regulation
2010/11 targets and achievements
Policy and legislative development
 Finalised the Intellectual Property Laws Amendment Bill
for the Protection of Indigenous Knowledge
 Developed National Liquor Licensing Guidelines and
Liquor Regulations for the 2010 FIFA World Cup to
streamline application procedures and align trading terms
across the country
 Minister introduced Regulations and a Directive to
improve accessibility of funds to needy communities and
causes, improve governance structures on lottery matters
and ensure optimal distribution of lottery fund for
developmental purposes
42
Regulation
2010/11 targets and achievements
Policy and legislative development
 Interactive Gambling Regulations has been completed
 Gambling Review Commission assessed and produced a
report on, inter alia, the socio-economic impact of gambling
particularly on the poor, proliferation of gambling which
might result from legislative or implementation gaps and the
impact of technological development in this industry
 Draft research report produced on the review of the
Alienation of Land Act aimed to align it with the Estate
Agency Affairs Act and draft RIA report on the Estate
Agency Policy and Law reform were finalised
43
Administration & Co-ordination
2010/11 targets and achievements
Continuous improvement
 Facilitated the implementation of key projects within the IPAP2
through its participation in the Economic Sectors and Employment
Cluster (ESEC) of Cabinet
 Concluded a major upgrade of the ICT infrastructure which
resulted in a reliable and faster ICT network
 Vacancy rate reduced to 16,9% as at 31 March 2011. Vacancy rate
reduced despite an increase in newly created posts and normal
attrition
 42.56% of women are employed at SMS level as at 31 March 2011
 41% of total procurement spent on HDI and 64% of total
procurement spent on SMMEs
 Revised and implemented Fraud Prevention Plan based on new
risks
44
Governance (Entity Oversight)
 Out of 15 agencies, 14 had unqualified audit reports with one,
namely CIPC (formerly CIPRO) , being qualified
 CIPC received a qualified audit due to lack of a management
system to accurately account for revenue and debtors from annual
returns. The new Companies and Intellectual Property
Commission (CIPC) is addressing this issue
 Increased capacity and strengthened processes to assist with
entity oversight
45
Financial management
46
AG’s Report
Audit Opinion
•
The Auditor General SA expressed an unqualified audit opinion on the 2010/11 Annual
Financial Statements
Emphasis of matters
•
Irregular Expenditure
This relates to single source procurement where in most instances the service provider
was a sole supplier of such service (e.g. SABC Radio, training, etc.).
Additional controls introduced – new internal control unit being established and additional
capacity approved: Group CFO & deputy CFO posts created.
•
Material Impairments
This impairments largely relate to the General Export Incentive Scheme, which was in
existence pre 1994. These debts are in a litigation process and in terms of prudent
accounting provision has been made for impairment. Full report on this matter was
presented to SCOPA.
47
AG’s Report - continued
Emphasis of matters
• Asset Management
Asset verifications to be continued on a bi-annual basis. This will include reconciliation
between the fixed asset register on LOGIS and count sheets. An analysis will be
performed at a more senior level to ensure accuracy of the asset register.
The department is considering procuring an asset management system to address the
LOGIS limitations, which include fields not being able to capture the full serial number and
specific location of an asset
•
Financial Statements
Additional quality checks will be implemented including a review by Internal Audit section
48
AG’s Report - continued
Emphasis of matters
• Management of Performance Information
Engagement with NT and AG to agree on methodology for SMART criteria. Additional
capacity created – Chief Risk & Compliance Officer created at CD level.
Policy developed to manage performance information.
Strategic planning session convened led by Minister Davies – key priorities set for each
area.
Planning cascaded to various fora in the dti to discuss operational and divisional plans and
progress is reported and assessed quarterly.
Annual departmental plan introduced.
Minister approves departmental performance information.
Formalised quarterly performance reviews to monitor and manage progress
49
Notes to the AFS
Unauthorised expenditure (Note 12.1 of the AFS)
• Unauthorised expenditure to the amount of R37 380 million was incurred in the
2004/05 financial year.
• R31 075 million relates to the General Export Incentive Scheme (GEIS) debts
(pre 1994), which were written off.
• R6,1 million relates to claim from an investor for loss of investment.
• Full report on this matter was presented to SCOPA.
World Cup Tickets (Note 39 of the AFS)
• the dti took a collective decision to purchase 200 tickets for the World Cup as
part of its investment promotion drive to showcase SA as an investment
destination.
• International investors were invited and officials from the department had to
interact with these investors.
• Erratum to be issued regarding ticket allocation to Minister to reflect 2 instead of
5 tickets. 173/200 tickets issued to local and foreign investors.
50
Five Year Comparison of budget
vs Expenditure – R’000
51
Overview of expenditure
 The budget allocation for the 2010/11 financial year was
R6,194,208 million as compared to R 6,402,076 million in
2009/10. The expenditure for 2010/11 was R5,796,741 million, i.e.
93,6% of the budget.
 This spending pattern should be considered in the context of the
departmental cost drivers, comprising mainly incentive schemes
and transfer payments. Approximately 58% of the expenditure
consisted of incentives and 22% of transfers to the departmental
agencies. The remaining funds were utilised for operational
expenses.
 The under spending was mainly in the division responsible for
Incentive Administration, viz, The Enterprise Organisation division,
by 4.09%, which is mainly attributable to the Automotive
Investment Scheme (AIS).
52
Budget vs. expenditure for the 2010/11 financial year –
per programme
Programme
2010/11
Final
Appropriation
Actual
Expenditure
Variance
R’000
R’000
R’000
Expenditure as
% of final
appropriation
Unspent as % of
final
appropriation
Administration
443,251
435,815
7,436
98.32%
1.68%
International Trade and
Economic Development
125,088
106,949
18,139
85.50%
14.50%
Empowerment & Enterprise
Development
814,034
801,173
12,861
98.42%
1.58%
Industrial Development
1,156,961
1,142,033
14,928
98.71%
1.29%
Consumer and Corporate
Regulation
195,531
145,021
50,510
74.17%
25.83%
The Enterprise Organisation
3,046,652
2,792,994
253,658
91.67%
8.33%
Trade and Investment South
Africa
353,476
328,582
24,894
92.96%
7.04%
59,215
44,174
15,041
6,194,208
5,796,741
397,467
75%
93.58%
25.40%
6.42%
Communication & Marketing
Total
53
Budget vs. expenditure for the 2010/11 financial year –
economic classification
Economic classification
2010/11
Final
Appropriation
Actual
Expenditure
Variance
R’000
R’000
R’000
Expenditure as %
of final
appropriation
Unspent as % of
final
appropriation
Compensation of Employees
551,748
514,935
36,813
93.33%
6.67%
Goods & Services
545,826
474,830
70,996
86.99%
13.01%
276
275
1
99.64%
0%
5,073,868
4,789,206
284,662
94.39%
5.61%
872,762
838,980
33,782
96.13%
3.87%
1,389,176
1,144,261
244,915
82.37%
17.63%
538,000
294,252
243,748
54.69%
45.31%
Programme payments
1,216,984
1,216,225
759
99.94%
0.06%
Infrastructure incentives
1,224,374
1,224,337
37
100%
0%
274,636
274,511
125
99.95%
0%
95,936
90,892
5,044
94.74%
5.26%
Payments for capital assets
20,183
15,189
4,994
75.26%
24.74%
Payment for financial assets
2,307
2,306
1
100%
0%
6,194,208
5,796,741
397,467
93.58%
6.42
Interest and rent on land
Transfers to:
Departmental agencies
Manufacturing incentives,
including:
**Automotive Production &
Development Programme
Export Incentives
Other
Total
** Amounts in respect of AIS are already included under the manufacturing incentives
54
Reasons for under spending
Item
Amount
unspent
Reasons
R’000
Automotive
Production &
Development
Programme
(AIS)
243,748
The Automotive Investment Scheme (AIS) only became operational in
December 2010. 53 projects have been approved by the Adjudication
Committee with the total concession amount of R1,861 billion as at 31 March
2011. R293,918 million was paid during the first quarter of the new financial
year.
Goods &
Services
70,996
• Outstanding foreign mission accounts from DIRCO. The account for March
2011 was only received on 19 May 2011 and charged against the budget for
2011/12
• Postponement of the SACU Tripartite Summit from February to June 2011
• Payments for funds earmarked for variation orders for a building currently
occupied by CIPC could not materialise pending their move to new premises
• Cost savings initiatives on venues and facilities as well as on travel
contributed to the under expenditure
Compensation of
Employees
36,813
Vacancies
Departmental
agencies
33,782
Delays in the establishment of the National Consumer Commission and the
Companies and Intellectual Property Commission.
If the AIS under spending excluded, the percentage underspent would be 2%
55
Vacancy report
Baseline vacancy reduction
Baseline vacancies as at
01.04.11
253
Baseline vacancy rate as at
01.04.2011
18.2%
Baseline vacancies as at
30.06.2011
184
Baseline vacancy rate as at
30.6.2011
13.2%
Recruitment efforts
2010/11
Quarter 4
(1.1.11 – 31.3.11)
2010/11
Quarters 1 - 4
2011/12
Quarter 1
(1.4.11 – 30.6.11)
Posts filled through
appointments
19
138
42
Posts filled through
promotions
29
97
27
Total recruitment efforts
*
48
235
69
* Excludes posts additional to the establishment
56
Key Challenges




Global economic climate
Challenges to job creation and skills for economy
Growing the manufacturing sector
Funding and business support for informal sector and
establishing new innovation incubators
 Strengthening corporate governance of
some
agencies
 Substantive application within BBEEE Framework ,
characterised by opportunistic fronting and lack of
punitive measures
57
Thank you
58
Appendices
59
Appendix - Real interest rates
Short term interest rates as at August 2011
60
Source: The Economist
Appendix - Real interest rates
Long term interest rates as at August 2011
61
Source: The Economist
Appendix - Currency
Real Effective Exchange Rate (2000 = 100) and Rand / US Dollar, Jan 2009 – Jul 2011
62 62
Source: SARB
Appendix - Manufacturing
Manufacturing monthly production indexed (2005 = 100) and Y-O-Y growth,
January 2005 to July 2011
63 63
Source: StatsSA
Appendix - Trade Balance
Trade balance by sector Q1 1990 – Q2 2011 (Rm)
64
Source: Quantec
Appendix - Manufacturing employment
Employment in the manufacturing sector ‘000, Q1 2008 – Q2 2011
65 65
Source: StatsSA