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

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

Second Quarter ReportSecond Quarter Report

29 November 2012

Group Chief Operating Officer: Ms Jodi Scholtz

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Presentation OutlinePresentation Outline Introduction

Strategic Objectives

Key Achievements

Departmental Expenditure versus Budget

Key Challenges

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Introduction – Introduction – Economic ContextEconomic Context

The South African economy has displayed some resilience and continued to grow in the midst of a fragile global economic outlook. The Gross Domestic Product (GDP) grew by 3.1% in 2011 and 2.7% and 3.2% in the first and second quarters of 2012 respectively.

The South African Reserve Bank’s leading indicator points to continued uncertainty within the next 6-12 months. Sectors with greater export exposure, particularly manufacturing and mining, are expected to perform less impressively in the coming months – held back by the euro zone debt crisis and global uncertainties.

As a result National Treasury forecasts the real DGP to grow by 2.5% in 2012 and 3% in 2013.

The South African Economy is gradually creating jobs after losing about 1 million jobs during the global recession in 2008/9; in the 12 months period between the third quarter of 2011 and the third quarter of 2012 , 327 000 jobs were created.

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Strategic ObjectivesStrategic Objectives 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.

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

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Key AchievementsKey Achievements1 April – 30 Sept 1 April – 30 Sept

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Key AchievementsKey Achievements

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

Industrial Policy Action Plan (IPAP) 2 approved by Cabinet and launched.

Seven (7) designation instruction notes issued for implementation by the National Treasury.

IPAP 2011/12 annual report presented to National Economic and Development Council’s (Nedlac) strategic session and tabled before the Portfolio Committee on Trade and Industry.

Concluded Draft Industrial Policy Framework for Southern African Development Community (SADC) and the Framework will be presented to the Committee of Ministers of Trade (CMT) by South Africa.

Transition from Motor Industry Development Programme (MIDP) to Automotive Production and Development Programme (APDP) completed with a gazette published for public comments and final APDP implementation guidelines due for publication.

Industrial DevelopmentIndustrial Development

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Support Programme Industrial Innovation (SPII) approved 26 projects worth R96 million.

The Critical Infrastructure Programme (CIP) approved a total of five (5) projects worth R8.911 billion.

Termination of the Tourism Support Programme and the Department of Tourism to implement the new programme.

Project Schedule between the Industrial Development Corporation (IDC) and the dti finalised for administration of Manufacturing Competitiveness Enhancement Programme (MCEP).


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A total of 148 applications received under the dti’s MCEP and 26 approved with majority from Capital Equipment and three (3) applications approved under the IDC’s MCEP.

Passenger Railway Agency of South Africa (PRASA) issued an optimised tender for 3600 coaches with 65% minimum local content.

Transnet issued two (2) tenders for 599 new dual-voltage electric locomotives and 465 diesel locomotives; and

Eskom issued a tender for amorphous transformer with 80% local content.


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Overview of Incentive SchemesOverview of Incentive SchemesDescription

ActualNumber of firms/projects

supportedPotential jobs supported Investment

leveraged

Industrial Financing

MIP 252 5 417 R 4.54b

TSP 64 607 R 528m

AIS 11 316 R 2,26b

BPS 6 2 583 R 590,2m

Film & Television 36 R 761m

12i 2 307 R3,8b

CIP 5 5 043 R 8,91b

MCEP 29

Broadening Participation

Co-operatives (CIS) 96

BBSDP 343

SPII 26 R 96m

Trade, Investment & Exports

EMIA 686

Trade, Investment & ExportsTrade, Investment & ExportsSO 2: Build mutually beneficial regional & global relations to advance SO 2: Build mutually beneficial regional & global relations to advance South Africa’s trade, industrial policy & economic development South Africa’s trade, industrial policy & economic development objectiveobjective

Cuba economic package ratified by Parliament.

Active participation in United Nations Conference on Trade and Development (UNCTAD) and World Trade Organisation (WTO) Public Forum on investment treaties.

Established enhanced engagement with United Nations Conference on Trade and Development (UNCTAD) (regional value chains, investment policy).

Active participation in African Growth and Opportunity Act (AGOA) Forum, Trade and Investment Framework Agreement (signature), South Africa-United States Dialogue, revitialised Trade, Investment and Development Cooperation (TIDCA), held AGOA Beneficiaries’ Conference for SA lobbying strategy to retain benefits.

Advanced trade positions at United Nations Framework Convention on Climate Change (NFCCC) session.

Trade input to South Africa–European Union Trade Cooperation Committee, Joint Cooperation Committee, South Africa –European Union Summit.

Engaged Brazil to avoid World Trade Organisation challenge on poultry Anti Dumping measure.

Trade, Investment & ExportsTrade, Investment & ExportsSO 2: Build mutually beneficial regional & global relations to advance South SO 2: Build mutually beneficial regional & global relations to advance South Africa’s trade, industrial policy & economic development objectiveAfrica’s trade, industrial policy & economic development objective

Development of Brazil Russia India China South Africa (BRICS) strategy (Summit) under theme “Africa and BRICS: Partnership for industrialisation, integration and infrastructure development”.

Organised five (5) National Pavilions during the quarter (in Angola, Mozambique, South Africa, China and Germany).

TISA won a prize for the 2nd best National Pavilion for foreign exhibitors at FACIM in Mozambique in September 2012.

State visit to Botswana from 29-30 August 2012. A Memorandum of Understanding (MoU) was signed between Trade and Investment South Africa (TISA) and Botswana Investment and Trade Centre (BITC).

395 companies assisted financially in Quarter 2 of which 26% were emerging exporters.

Trade, Investment & ExportsTrade, Investment & ExportsSO 2: Build mutually beneficial regional & global relations to advance South SO 2: Build mutually beneficial regional & global relations to advance South Africa’s trade, industrial policy & economic development objectiveAfrica’s trade, industrial policy & economic development objective

19 Government to Government Platforms.

19 Successful Technical and Business missions.

Facilitated exports sales of R1.5 billion.

Achieved R31,9 billion pipeline of investments.

216 companies have been trained through export awareness capacity building and exposure programs of which 114 from Limpopo Province, 31 from Eastern Cape Province, 52 from Free State Province and 19 from Gauteng Province.

Broadening ParticipationBroadening ParticipationSO3: SO3: Facilitate broad-based economic participation through targeted Facilitate broad-based economic participation through targeted interventions interventions to achieve more inclusive growthto achieve more inclusive growth

Hosted the International Small Business Congress held at Sandton Convention Centre in September 2012.

Broad-Based Black Economic Empowerment Amendment Bill approved by Cabinet.

Revised Broad-Based Black Economic Empowerment Codes of Good Practice have been noted and approved by Cabinet for public comments.

Incubation Support Programme launched as a support measure for Small and Medium Enterprises.

Special Economic Zones Policy approved by Cabinet.

Broadening ParticipationBroadening ParticipationSO 3: Facilitate broad-based economic participation through targeted SO 3: Facilitate broad-based economic participation through targeted interventions interventions to achieve more inclusive growthto achieve more inclusive growth

Cabinet noted and approved the revised B-BBEE Codes of Good Practice to be published for public comment in August 2012.

The Workplace Challenge (WPC) has reached its annual target (30 new companies) already (cumulative total: 51 new companies) as part of the re-engineering of the WPC; 44 unemployed graduates have been placed.

The Co-operatives Amendment Bill is being discussed in Parliament.

RegulationRegulationSO 4: SO 4: Create a fair regulatory environment that enables investment, trade & Create a fair regulatory environment that enables investment, trade & enterprise development in an equitable & socially responsible manner enterprise development in an equitable & socially responsible manner

Draft Policy Framework and draft Bill for Business Act developed – provides framework for enhancing the manner in which commercial and business activities are conducted.

Policy Framework and draft Bill for Lotteries Act developed – Policy presented to Cabinet for adoption to enable public consultation process – provides framework for distribution of grants and streamlining of processes.

Draft Policy Framework and Draft Bill on the Business Reform Registration developed – aims to simply and integrate business registration process.

Draft Policy Framework on the Liquor Act developed – aims to assess socio-economic effect.

RegulationRegulationSO 4: SO 4: Create a fair regulatory environment that enables investment, Create a fair regulatory environment that enables investment, trade & enterprise development in an trade & enterprise development in an equitable & socially responsible equitable & socially responsible manner manner

Final Policy Framework Intellectual Property produced incorporating Copyright Review Commission report – aims to harmonise IP legislation and laws - dealing with IP in relation to access to medicine, access to education, exceptions, interface between competition and IP, Consumers and IP, etc

Draft Regulatory Impact Assessment on the National Credit Act developed.

Regulatory Impact Assessment on the Business Act reviewed.

Regulatory Impact Assessment on the Business Reform Registration commenced.

Notice presented to Cabinet and adopted for “country of origin of products” emanating from Israel/Palestine.

Administration & Co-ordinationAdministration & Co-ordinationSO 5: SO 5: Promote a professional, ethical, dynamic, competitive & customer-Promote a professional, ethical, dynamic, competitive & customer-focused working environment that ensures effective & efficient service focused working environment that ensures effective & efficient service deliverydelivery

Vacancy Rate is at 6.28%.

Women statistics in Senior Management Service (SMS) positions are at 43.48 % and the rate of people with disability is at 2.53%.

Creditors’ payments processed within 30 days with most processed in 21 days.

Policy Framework on the Governance and Oversight of public entities approved by the Minister to strengthen the relations between the Department and entities.

Held several engagements with the public through “Taking the dti to the People” programme, being championed by Deputy Minister Elizabeth Thabethe.

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Departmental expenditure Departmental expenditure versus budgetversus budget

Summary of Projections vs Expenditure as at 30 September 2012

TOTAL dti

Revised budget

2012/13

YTD projection

YTD expenditure

Variance

Available Budget

CommitmentsValue Percentage

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

Administration 607,312 303,048 283,849 19,199 6.34% 323,463 12,236

ITED 134,262 58,654 59,039 -385 -0.66% 75,223 179

BPD 879,613 461,152 451,765 9,387 2.04% 427,848 415

IDPD 1,483,764 1,103,431 1,091,770 11,661 1.06% 391,994 899

CCRD 244,713 143,253 123,317 19,936 13.92% 121,396 1,051

IDIA 5,437,565 2,040,596 2,018,017 22,579 1.11% 3,419,548 135

TISA 304,826 115,935 120,582 -4,647 -4.01% 184,244 288

TOTAL 9,092,055 4,226,069 4,148,340 77,729 1.84% 4,943,715 15,204

Expenditure per economic classification

TOTAL dti

Revised budget

2012/13

YTD projection

YTD expenditure

Variance

Available Budget

CommitmentsValue Percentage

Economic classification R'000 R'000 R'000 R'000 % R'000 R'000

Compensation of employees 713,995 324,349 325,203 -854 -0.26% 388,792 0

Goods and services 582,053 267,831 261,057 6,774 2.53% 320,996 14,343

Interest and Rent on land 0 0 1 -1 0.00% -1 0

Payments for Financial Assets 0 0 1,896 -1,896 0.00% -1,896 0

Payment for capital assets 20,556 6,846 8,197 -1,351 -19.74% 12,359 861

Transfers & subsidies 7,775,451 3,627,043 3,551,986 75,057 2.07% 4,223,465 0

TOTAL 9,092,055 4,226,069 4,148,340 77,729 1.84% 4,943,715 15,204

NB: The expenditure based on the year to date projections of R4,226 billion, is 98.2% or R4,148 billion, implying an under-spending of R77,7 million (1.8%).

Year-to-Year comparison: 2011/12 vs 2012/13

Reasons for material expenditure varianceReasons for material expenditure variance

Reasons for material expenditure variance (continued)Reasons for material expenditure variance (continued)

Amount (R’000)

Reasons for under/(over) expenditure

Enterprise Investment Programme -16,112 More claims received than anticipated

Business Processing Service Incentives 1,864 Fewer claims received than anticipated

Film & TV Production Incentive -24,325 More claims received than anticipated

Automotive Production and Development Programme 30,735

31 claims received from Original Equipment Manufacturers have not yet been processed, and are awaiting verification and approval by the division

Black Business Supplier Development Programme -14,827 More claims received than anticipated.

Co-Operatives Incentive Scheme -415 More claims received than anticipated.

Critical Infrastructure Programme 30,067

The projected amount was not fully paid due to outstanding compliance issues

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Interventions to address Interventions to address AG Audit FindingsAG Audit Findings

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Finding Management interventions

Material misstatements in the annual performance report.

Material misstatements were corrected.

Material misstatements in financial statements subsequently corrected

To improve the quality, financial statements are being produced more regularly. Quarterly financial statements are produced and the June and September interim financial statements were completed. Monthly financial statements are being produced from September. Internal Audit has been also requested to audit the third quarter financial statements.

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.

Interventions to address AG Audit FindingsInterventions to address AG Audit Findings

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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 by 30 November 2012.

Proper control systems to safeguard and maintain assets not implemented.

This relates to exact locations of the assets not being reflected in the asset register, for which the current transversal system has limitations. The department has commenced a process of implementing a parallel asset management system, which will be finalised by the end of the calendar year. Sample monthly verification of assets will be conducted once the new system is fully implemented, with total verifications being conducted

quarterly. Further, all assets purchased at foreign offices are now captured on the asset system prior to it being transferred to DIRCO.


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The Accounting Officer did not take steps to prevent irregular and fruitless and wasteful expenditure.

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.

These relate to transactions where three quotations could not be obtained and the delegations of authority did not specifically provide for these deviations and hence, were irregular. The delegations have been amended to provide for these deviations.Regular refresher sessions on requirements for procurement for the staff at the dti has been implemented, including correspondence via e-mail.

A written policy on overtime was not in place

The Overtime Policy was approved on 16 March 2012 and is being implemented.


Key ChallengesKey Challenges

Current strikes in various sectors negatively impacted on the economy.

Delay in the overhaul of the Preferential Procurement Policy Framework Act (PPPFA); and

The slow uptake of incentives such as the MCEP.

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Thank You

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

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