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Presentation to the Portfolio Committee on
Trade and Industry – the dti’s 2013/14
First Quarter Report
24 July 2013
Director General
Lionel October
1
Presentation Outline
 Introduction
 Strategic Objectives
 Economic overview
 Key Achievements
 Performance assessment
 Departmental Expenditure versus Budget
 Audit findings and interventions
 Key Challenges
2
Introduction – Global Economic Context
• Three track growth pattern emerging.
– Emerging Markets’ growth strong although moderating in China.
– US recovery gathering momentum.
– EU recovery remains very weak (UK expected to do better than EU
average).
• SA growth performance and forecast very similar to Australia – both
countries are commodity export dependent.
• But Africa’s growth outlook is strong and SA well-positioned to benefit
if structural features of SA manufacturing sector are addressed.
3
GDP Growth Rates, Forecast 2013-14, IMF
12
Percentage Change
7
2
2007
2008
2009
2010
2011
2012
2013
2014
-3
-8
Australia
Brazil
China
India
Russia
South Africa
United States
World
European Union
Sub-Saharan Africa
4
Domestic Employment Trends
• Economy continued to create jobs in Q1 2013 even while
unemployment rose due to new job seekers entering the market.
• Quarterly Labour Force Survey data is used as this reflects informal
sector employment better than Quarterly Employment Survey.
• Q1 2012 compared to Q1 2013:
– Modest gains in a range of productive sectors such as Agriculture,
Mining and Manufacturing.
– Substantial job losses in Wholesale and Retail Trade as impact of
constrained household spending is felt. Consumer spending
remains under significant pressure.
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Domestic Employment Trends, StatsSA
3,500,000
13,850,000
13,800,000
3,000,000
13,750,000
13,700,000
2,000,000
13,650,000
1,500,000
13,600,000
13,550,000
1,000,000
13,500,000
500,000
13,450,000
-
13,400,000
1st Quarter 2012
2nd quarter 2012
3rd quarter 2012
4th Quarter 2012
1st Quarter 2013
Agriculture, hunting, forestry and fishing
Mining and quarrying
Manufacturing
Electricity, gas and water supply
Construction
Wholesale and retail trade
Transport, storage and communication
Financial and business services
Community, social and personal services
Private households
Total
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Total Employment
Employment by Sector
2,500,000
Monthly trade data is volatile and caution should be used
when inferring trends from monthly data.
Manufacturing Trends – Q1 2013
2. South Africa’s trade with the world
Exports from South African (SA) continue to grow slowly from
Jan to April 2013, the growth where: 15, 2 and 2.1 per cent
respectively.
The expansion of exports in April 2013 was primarily driven by
the high demand for primary commodities including Gold,
Coal, Iron Ores, and Platinum. Automotive exports were the
key manufacturing contributor to the growth in exports.
Imports to SA continue to grow in April 2013, growing by
14.6% after a decline of 8% in Feb 2013.
South Africa’s growth in imports was driven by rising demand
for petroleum and crude oils and bituminous minerals from
Saudi Arabia, Nigeria, Angola and Ghana.
450
400
350
300
250
200
150
100
50
-
90
80
70
60
50
40
30
20
10
Imports
Apr2013
Mar2013
Feb2013
Jan2013
Total Manufacturing Sales
Dec2012
0
Nov2012
Current Rands
• Manufacturing sales grew modestly - weak global conditions and
consumer spending in SA.
• Merchandise exports subdued - although demand for commodities such
as coal and platinum have begun to recover.
• Solid Auto exports has helped to sustain manufactured export levels.
• Imports stable - expected to remain Figure
weak
due to the exchange rate.
1: Monthly trade with the world (R billion)
Exports
3. South Africa’s trade balance by continent
SA’s trade balance with the world remained in deficit in April
2013, although it has been trading in surplus with Africa. In
7
Nov, Dec 2012 and Feb 2013 SA traded in surplus with
American continent.
SA’s trade deficit with Americas, Asia, Europe and Oceania
Outlook 2013
• Global economy
– Africa, China and US positive, strength of US recovery surprising – the
possibility of ‘tapering’ Quantitative Easing has rattled markets.
• Domestic economy
– SA manufacturing well positioned to benefit from Africa’s strong growth
outlook over medium-term.
– Designation of sectors - especially supporting infrastructure build
programme has contributed to sectoral optimism and ‘tooling up’ in sectors
Capital Goods/Machinery sectors.
– Growing number of applications for the dti’s incentives suggest higher level
of optimism in manufacturing than is commonly assumed.
– A number of leading business and multilateral publications have pointed to
the improving and positive SA investment environment.
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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
interventions to achieve more inclusive growth;
through
targeted
 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 customerfocused working environment that ensures effective and efficient
service delivery.
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Key Achievements
1 April – 30 June 2013
10
10
Industrial Development
SG 1: Facilitate transformation of the economy to promote industrial
development, investment, competitiveness and employment creation
 Industrial Policy Action Plan (IPAP) 2013/14-2015/16 launched in April
2013 and implementation reports produced.
Key Achievements
 Instruction note for designation of Electrical and Telecom Cable
Products published in May 2013 .
 Joint venture between Iveco SA and Larimar Group on R600 million
truck and bus assembly plant under development in Rosslyn.
 Through the National Tooling Initiative - 87 students completed phase 1
of level 2 apprenticeship programme and 17 students completed
Foundation programme. 303 students completed apprenticeship
programme for phase 1 Toolmaker apprenticeship programme has been
approved by the Quality Council for Trades & Occupation (QCTO).
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11
Industrial Development
SG 1: Facilitate transformation of the economy to promote industrial
development, investment, competitiveness and employment creation
 Memorandum of Understanding (MOU) with Foundation for African
Business and Consumer Services (FABCOS) to establish a number of
Small Scale mills in four provinces (Eastern Cape, Gauteng, KwaZuluNatal, Free State)
Key Achievements
 To improve competitiveness of the Clothing, Textile, Leather and
Footwear (CTLF) sector
o R1.029 billion was disbursed to 362 clients from the Production
Incentive Programme (PIP)
o R59. 696 million disbursed to 27 companies from Competitiveness
Improvement Programme (CIP)
o Approvals made for R365. 6 million and R1.75 billion from CIP and
PIP respectively.
12
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Industrial Development
SG 1: Facilitate transformation of the economy to promote industrial
development, investment, competitiveness and employment creation
 Special Economic Zones (SEZ) Bill has been introduced in Parliament
in April and public hearings were received and responded to in
Parliament. SEZ Guidelines approved by Minister.
Key Achievements
 The Workplace Challenge Programme (WCP) -13 new companies
participating.
 Business Process Services (BPS) - South Africa named best
“Offshoring Destination of the Year” by the European Outsourcing
Association in April 2013.
13
13
Overview of Incentive Schemes
Actual
Description
Number of firms/projects
supported
Potential jobs supported
MIP
96
3723
AIS
3
14
BPS
1
185 (projected over 3 years)
Film & Television
29
-
12i
2
278
CIP
2
374
MCEP
97
28 059 (to be sustained)
Industrial Financing
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Overview of Incentive Schemes
Actual
Description
Number of firms/projects supported
Broadening Participation
Co-operatives (CIS)
107
BBSDP
344
SPII
5
ISP
3
ADEP
3
Trade, Investment & Exports
EMIA
396
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Trade, Investment & Exports
SG 2: Build mutually beneficial regional & global relations to advance
South Africa’s trade, industrial policy & economic development
objective
 National Exporter Development Programme (NEDP) launched in April
2013.
 The following were achieved:
o 7 National Pavilions (LAAD, ZITF, SIAL, IDEF, Zambia Copperbelt,
South Korea Boat Show and Automechanika in Middle East)
o the World Cup Legacy Exhibition in Doha, Qatar
o The African Fair in Tokyo, which generated 26 quality trade leads. In
the following sectors agro-processing,(Rooibos, Wines and
Confectionary) creative industries and home textiles (mohair)
o The participation of 8 companies at the Tunis-Med Exhibition in
Tunisia
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Trade, Investment & Exports
SG 2: Build mutually beneficial regional & global relations to advance
South Africa’s trade, industrial policy & economic development
objective
 Facilitated the Nigerian Presidential visit and arranged the Business
Forum in May 2013.
 Facilitated the Business Forum from Benin and participated in the Joint
Trade Commission with Kenya.
 Consultations towards a SA and SACU offer for Tripartite - Free Trade
Agreement T-FTA negotiations are in an advanced stage.
o Technical working Groups, Tripartite Trade Negotiating Forum
established
o Modalities for negotiations agreed
o The text is being negotiated
o Member States are to present offers
 Draft progress report produced on the African Growth and Opportunity
Act (AGOA) lobbying activities.
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Trade, Investment & Exports
SG 2: Build mutually beneficial regional & global relations to
advance South Africa’s trade, industrial policy & economic
development objective
 Won 1st place for the best foreign pavilion at the Zimbabwe
International Trade Fair, April 2013.
 SA-EU Cheese Agreement ratified.
 Developed SA position for the Tokyo International Conference on
African Development (TICAD).
 Drafted and circulated terms of reference for Brazil, Russia, India,
China and South Africa (BRICS) Joint Trade Study, which has been
agreed following consultations with the BRICS partners.
o First draft of the country chapters expected end of September.
The final study will be presented to Trade Ministers at the next
summit in Brazil in 2014.
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Trade, Investment & Exports
SG 2: Build mutually beneficial regional & global relations to advance
South Africa’s trade, industrial policy & economic development
objective
 Delivered SA Presentation to United Nations Conference on Trade and
Development (UNCTAD) expert workshop on domestic support
measures for the green economy in Geneva, Switzerland.
 42 Government to Government Platforms.
 12 Successful Technical and Business missions (Africa Bilateral).
 Exports of R295 million facilitated.
 Achieved R12.7 billion pipeline of investment in manufacturing, green
economy and resource based sectors.
 327 companies trained on exporting during workshops held in Limpopo,
Eastern Cape and Mpumalanga Provinces.
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Broadening Participation
SG 3: Facilitate broad-based economic participation through
targeted interventions to achieve more inclusive growth
 Broad-Based Black Economic Empowerment Bill adopted by the
National Assembly.
 Launched the partnership between the dti and State Owned Entity
Procurement Forum after signing MoA.
 Launched the Centre for Entrepreneurship hosted by the
Ekurhuleni West FET college.
 Analysis of public comments on revised B-BBEE Codes of Good
Practice completed and key issues of the comments presented to
the Presidential Advisory Council.
 The Co-operatives Amendment Bill was adopted by the National
Council of Provinces. Business cases for establishment of Cooperatives Development Agency and Tribunal approved by the Minister.
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Broadening Participation
SG 3: Facilitate broad-based economic participation through
targeted interventions to achieve more inclusive growth
 Youth Enterprise Development Strategy (YEDS) approved by Minister.
 Support Programme for Industrial Innovation (SPII) – 5 new projects
approved to the value of R 10.6 million.
 The National Strategic Framework on Gender and Women’s
Economic Empowerment presented to the Economic Cluster.
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Regulation
SG 4: Create a fair regulatory environment that enables investment,
trade & enterprise development in an equitable & socially responsible
manner
 Policy Framework and Licensing of Business Bill developed and
public consultations conducted.
 Policy Framework and Lotteries Amendment Bill developed and
public consultations conducted.
 Policy framework and National Credit Amendment Bill developed
and submitted to Cabinet for approval.
 Impact Assessment Study on the Liquor Act conducted.
 Final Policy Framework on Intellectual Property developed.
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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
 Vacancy Rate is at 9.03% -increase due to 16 new posts created from
1 April 2013.
 Statistics for women in Senior Management Service (SMS) positions is
at 43.43% and the people with disability is at 2.6%.
 All creditors payments were processed within 30 days.
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Performance Assessment
The following targets were not fully achieved:
 3 new incubators supported by the Incubators Support Programme
(ISP) (target 10) as this is a new programme.
Key Achievements
 Informal Sector Strategy (ISS) – reference group inputs incorporated in
to draft document. (Target – report on internal consultations of draft
ISS).
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Departmental expenditure
versus budget
25
Summary of Projections vs Expenditure per programme– total dti
30 June 2013
Programme
Revised
budget
2013/14
R’000
YTD
projection
R'000
YTD
expenditure
R'000
Variance
Value
R'000
Available
Budget
R'000
%
Administration
690,529
167,330
152,559
14,771
8.83%
537,970
ITED
138,638
30,458
28,871
1,587
5.21%
109,767
BPD
968,307
252,700
245,895
6,805
2.69%
722,412
IDPD
1,606,074
505,618
487,431
18,187
3.60%
1,118,643
256,157
121,731
102,909
18,822
15.46%
153,248
IDIA
5,543,134
1,224,927
860,850
364,077
29.72%
4,682,284
TISA
369,741
102,895
94,885
8,010
7.78%
274,856
9,572,580
2,405,659
1,973,402
432,257
17.97%
7,599,178
CCRD
TOTAL
26
Summary of Projections vs Expenditure per economic classification– total dti
30 June 2013
Economic
classification
Revised
budget
2012/13
R'000
Variance
YTD
projection
R'000
YTD
expenditure
R'000
Value
R'000
%
Available
Budget
R'000
Compensation of
employees
854,246
190,869
175,896
14,973
7.84%
678,350
Goods and services
638,835
158,746
132,655
26,091
16.44%
506,180
0
0
604
(604)
0.00%
(604)
20,177
4,662
353
4,309
92.43%
19,824
8,059,322
2,051,382
1,663,894
387,488
18.89% 6,395,428
9,572,580
2,405,659
1,973,402
432,257
17.97% 7,599,178
Payments for
Financial Assets
Payment for capital
assets
Transfers &
subsidies
TOTAL
NB: The expenditure based on the year to date projections of R2,406 billion, is 82% or R1,973 billion, implying
an under-spending of R432 million (18%).
27
Year-to-Year comparison of actual expenditure: 2012/13 vs 2013/14
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Reasons for material expenditure variance
Item description
Compensation of
Amount
(R’000)
Reasons for under/(over) expenditure
14,973 Under spending due to 125 (9%) vacant positions out of 1385 posts, as well
as 81 new posts which are still being consulted with DPSA.
employees
Good & Services
Capital
26,091 Under spending occurred largely on business and advisory consultants due
to:

Late commencement of new projects and delays in finalising some
existing projects

Final report for the Rail infrastructure Industry Analysis was received
late and payment will be made during July 2013.
The
procurement of hardware and software for the Integrated Electronic
4,309
Management System (IEMS) could not be finalised due to the cancellation of
the bid. The bid was handed over to SITA for re-advertisement.
Transfer & subsidies
CSIR: Fibre and Textile
Centre of Excellence
Centurion Aerospace Village
[current]
Industrial Development
Corporation: CSP
National Consumer
Commission (NCC)
1,501 Funds earmarked for the CSIR: Fibre and Textile Centre of Excellence could
not be disbursed due to delays in the finalisation of the 2013/14 business
plan. Payment is anticipated for July 2013.
3,811 R3.8 million earmarked for the Centurion Aerospace Village could not be
disbursed due to an outstanding business plan and Memorandum of
Agreement
10,000 Payment under the Industrial Development Corporation for the
Craft Sector Support Fund (R10 million) could not be made as
projected due to an outstanding MoU. The concluding of a new
MoU was done late in June 2013 and payment is expected to be
made during July 2013.
17,477 Payments are made on a monthly basis in line with the NCC’s spending
pattern
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Reasons for material expenditure variance (continued)
Item description
Small & Medium Enterprise
Development
Programme
[SMEDP]
Enterprise Investment
Programme (EIP)
Manufacturing Competitiveness
Enhancement Programme
[MCEP]
Business Process Services
Incentive
Film & Television Production
Incentive
Automotive Production &
Development Programme
Amount
(R’000)
Reasons for under/(over) expenditure
(2,551) Over expenditure of R2.5 million under SMEDP is due to more
unanticipated claims. It should be noted that although the
expenditure is more than the YTD projections it is still within the
allocated budget.
(3,980) Over expenditure of R3.9 million under EIP is due to additional
claims received and paid than anticipated. It should be noted that
although the expenditure is more than the YTD projections it is still
within the allocated budget.
317,887 R317.9 million under the Manufacturing Competitiveness
Enhancement Programme could not be disbursed as a result of
claiming procedures that were not yet in place.
(6,329) Over expenditure of R6.3 million under BPSI is due to 2 more
claims received and paid than anticipated. It should be noted that
although the expenditure is higher than the YTD projections it was
still within the allocated budget.
(5,775) Over expenditure of R5.8 million under the Film and Television
Production Incentive is due to 3 additional claims received and
paid than anticipated. It should be noted that although the
expenditure is higher than the YTD projections it is still within the
allocated budget.
55,269 R55 million earmarked under the Automotive Production and
Development Programme could not be disbursed due to fewer
claims received and paid than anticipated.
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Reasons for material expenditure variance (continued)
Item description
EMIA
Black Business Supplier
Development Programme
(BBSDP)
Co-operatives Incentive Scheme
(CIS)
Critical Infrastructure
Programme (CIP)
Amount
(R’000)
Reasons for under/(over) expenditure
(7,193) Over expenditure of R7 million under EMIA is due to 12 more claims
received and paid than anticipated. It should be noted that although
the expenditure is higher than the YTD projections it is still within
the allocated budget.
(20,870) Over expenditure of R20.8 million under BBSDP is due to 23 more
claims received and paid than anticipated. It should be noted that
although the expenditure is higher than the YTD projections it is still
within the allocated budget.
(5,988) Over expenditure of R5.9 million is due to 8 more claims received
and paid than anticipated. It should be noted that although the
expenditure is higher than the YTD projections it is still within the
allocated budget.
33,000 Funds earmarked under the Critical Infrastructure Programme
could not be disbursed due to the introduction of a new
requirement, which requires auditors verification reports before
clients submit claims.
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Interventions to address
AG Audit Findings
32
Interventions to address AG Audit Findings…cont
Finding
Management interventions
Material misstatements in
financial statements
subsequently corrected
No management intervention was required for the 2012/13
financial year. The department is commended by AGSA in
the preliminary report for submitting financial statements
that were free of material misstatements
Employees performed
remunerative work without the
relevant approvals
A circular on remunerative work circulated to all staff. All
staff required to obtain approval for remunerative work.
Awareness-raising presentations are being made to
divisions to ensure proper understanding and compliance.
33
cont…Interventions to address AG Audit Findings
Finding
Management interventions
Goods and services with a
transaction value below R500k
procured without obtaining the
required price quotations
•
These relate to transactions where three quotations
could not be obtained and the delegations of authority
did not specifically provide for these deviations. The
delegations have been amended to provide for these
deviations.
The Accounting Officer did not
take steps to prevent irregular
and fruitless and wasteful
expenditure
•
Irregular expenditure is being monitored monthly. An
independent exercise is also performed on all
expenditure to ensure completeness of reporting of
irregular expenditure.
Regular refresher sessions on the requirements for
procurement for the staff have been implemented;
including communication via financial circulars
Quarterly memoranda were issued to DDG’s to take
appropriate disciplinary action against any official who
makes or permits irregular expenditure.
•
•
34
cont…Interventions to address AG Audit Findings
Finding
Management interventions
Proper control systems to
safeguard and maintain assets
not implemented.
This related to exact locations of the assets not being
reflected in the asset register, for which the current
transversal system has limitations. The department has
implemented an asset management system parallel to
Logis.
Monthly reconciliations between the financial systems and
the asset register are being performed. Bi-annual asset
verifications will be performed by Finance staff during
August 2013 and January 2014. Officials will sign off during
the bi-annual verifications – sign off already implemented
and will remain going forward.
Going forward monthly asset verifications will be performed
by each Division as recommended by the AG’s office. The
SCM Policy is in the process of being revised to make
provision for the monthly verification of assets by relevant
divisions. It is anticipated that this process will be
implemented with effect from 1 September 2013.
35
Key Challenges
 Outlook for EU economies remains very poor – now includes Germany,
France and UK.
o SA exports to EU still not recovered to pre-GFC levels
o Emerging protectionism in EU e.g. Citrus Black Spot
o Imports from the EU growing rapidly and undermining domestic
production in key sectors such as Poultry
 Domestic demand remains quite weak – household indebtedness
suggests consumption-led recovery unlikely in short-term.
 Global uncertainty is making Rand volatile – current level suggests
overshooting and Rand has already begun recovering making it difficult
for manufacturers to plan investments and export contracts.
 Competitiveness of manufacturers is being addressed but firms are still
not proactive enough in export markets.
36
Thank You
37
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