1. Presentation to the Select Committee on Trade and International Relations – the dti’s 2010/11 Annual Report Date : 26 October 2011 Director-General Mr Lionel October

2. 2 Presentation Outline  Economic Context  Strategic Objectives  Achievements against planned targets  Industrial Development  Trade, Export & Investment  Broadening Participation  Regulation  Administration & Co-ordination  Auditor-General’s Report  Expenditure vs Budget  Key Challenges 2

3. 3 Economic Context  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

4. Economic Context  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  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. 4

5. 55 Achievements against planned targets for 2010/11

6. 6 Industrial Development  Finalisation and launch of the new iteration of the Industrial Policy Action Plan II (IPAP2) covering the 2011/12 - 2013/14 period.  The revised IPAP2 consolidates and further strengthens Government’s interventions to support industrial development and employment creation and is an integral component of the New Growth Path.  The key focus areas of the revised IPAP2 are skills development, technological innovation and public procurement. 20010/11 targets

7. 7 Industrial Development Clothing and Textiles  171 companies benefited from government support under the new Clothing and Textiles Competitive Programme (CTCP) and the Production Incentive (PI) programme.  40 591 jobs were supported or saved and at least 1 111 new jobs being created. BPO  Investments of R40 million in the Business Process Services sector have resulted in the creation of 950 jobs in the 2010/11 financial year.  New investment commitments worth R42 million were approved that can be linked to 806 jobs.  Under the Monyetla II Programme, 3 400 young trainees were trained of whom 70% are guaranteed employment by the Business Process Outsourcing (BPO) consortium. 2010/11 targets and achievements - Sectors

8. 8 Industrial Development Implementation of Customised Sector Programmes Automotives  Decision by automotive assemblers and component suppliers to make investment commitments of R14 billion.  Investment will create a minimum of 12 000 jobs and scale up capacity in the sector. PPPFA Regulations  Cabinet approval of amendments to the regulations of the Preferential Procurement Policy Framework Act, 2000 (Act No. 5 of 2000) to allow for the designation of sectors for local production and alignment with B-BBEE codes. 2010/11 targets and achievements - Sectors

9. Industrial Development Enterprise Investment Programme (EIP) and Industrial Development Zones (IDZs) EIP approved investments amounting to R11.3 billion. The investments are projected to create 12 394 jobs in the manufacturing sector and 2 624 in the tourism sector. East London Industrial Development Zone (ELIDZ) - signed seven (7) investments worth R342 million Coega IDZ - signed six (6) investments worth R402 million These IDZ investments will support an estimated 4551 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 which will enable the development of a jewellery manufacturing precinct in this IDZ. 2010/11 targets and achievements – Industrial Financing

10. 10 Overview of Incentive Schemes Description Actual Number of firms supportedJobs supported Investment leveraged R'000 Export sales value R'000 EIP75915,01811,300,000 AIS36-7,300,000 BPO&O3806- Film & Television49-991,000 12i Allowance Programme3-4,100,000 Co-operatives (CIS)2323,084- BBSDP1,1041,067- EMIA1,753--2,856,000 COEGA6193406,000 ELIDZ7521342,000 RBIDZ000 CIP129,27134,600,000 SPII20-21,700 TOTALS3,98429,96059,060,7002,856,000 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.

11. 11 Provincial Spread North West: BPO: 0% Film: 1% MIP: 2% TSP: 7 % CIP: 17% Northern Cape: BPO: 0% Film: 2% MIP: 1 % TSP: 3% CIP: 8% Western Cape: BPO: 36 % Film: 54% MIP: 28% TSP:13 % CIP: 0% Eastern Cape: BPO: 0% Film: 2% MIP: 11 % TSP: 15 % CIP: 8% Kwa Zulu Natal: BPO: 14% Film: 4% MIP: 20 % TSP: 10 % CIP: 8% Mpumalanga: BPO: 0% Film: 0% MIP: 3 % TSP: 7% CIP: 17% Limpopo: BPO: 7% Film: 2% MIP: 4% TSP: 11% CIP: 17% Gauteng: BPO: 43% Film: 33% MIP: 29% TSP: 26% CIP: 25% Free State: BPO: 0% Film: 2% MIP:2 % TSP: 8 % CIP: 0% Provincial Spread: Investment Incentives

12. Trade, Investment & Exports 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.  South Africa took over Chairpersonship of SACU in July 2010 SADC  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 2010/11 targets and achievements 12

13. Trade, Investment & Exports South-South/ BRICS:  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 Multi-Lateral 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 2010/11 targets and achievements 13

14. Trade, Investment & Exports Investment and Export Promotion  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  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 2010/11 targets and achievements 14

15. Trade, Investment & Exports Investment and Export Promotion  Provincial Export Fora established in all Provinces to coordinate and enhance Provincial export development- and promotion efforts.  15 Export awareness workshops held in all 9 provinces for emerging and established exporters by 31 March 2012.  A total of 521 exporters were assisted year to date from all 9 provinces: Gauteng (224), Western Cape (143), KwaZulu-Natal (48), Eastern Cape (18), Northern Cape (7), Free State (3), Limpopo (25), North West (27) and Mpumalanga (26).  Year to date an amount of R 11,494,552.00 was spent on assisting the above mentioned 521 exporters. 2010/11 targets and achievements 15

16. Broadening Participation 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) 2010/11 targets and achievements 16

17. Broadening Participation 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 in various provinces 2010/11 targets and achievements 17

18. 18 Provincial Spread North West: BBSDP: 6 % CIS: 6% Northern Cape: BBSDP: 1 % CIS: 0% Western Cape: BBSDP:5% CIS: 9% Eastern Ca p e: BBSDP: 4% CIS: 13% Kwa Zulu Natal: BBSDP: 8% CIS:6 % Mpumalanga : BBSDP: 5 % CIS: 10% Limpopo: BBSDP:12% CIS: 28% Gauteng: BBSDP:53% CIS: 26 % Free State: BBSDP: 5% CIS: 2 % PROVINCIAL SPREAD: BROADENING PARTICIPATION INCENTIVES 18

19. Broadening Participation 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 2010/11 targets and achievements 19

20. Broadening Participation 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 2010/11 targets and achievements 20

21. Regulation  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  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 2010/11 targets and achievements 21

22. Regulation  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  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 2010/11 targets and achievements 22

23. Administration & Co-ordination Vacancy report 23 Baseline vacancy reduction Recruitment efforts * Excludes posts additional to the establishment 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 1913842 Posts filled through promotions 299727 Total recruitment efforts *4823569

24. Governance and Oversight on public entities  Out of 13 agencies, 12 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 24

25. AG’s Report 25 Audit Opinion - Unqualified 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.). Remedial Action - 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. Remedial action - Full report on this matter was presented to SCOPA. 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. Remedial Action - 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

26. AG’s Report – cont.. 26 Emphasis of matters Management of Performance Information – Concern regarding the measurability of performance targets, not complying to “SMART” criteria in terms of National Treasury requirements Remedial Actions –Started an engagement with NT and AGSA to agree on methodology for SMART criteria. – Developed internal Policy and procedural guidelines on how to manage performance of the Department and fully comply with Treasury requirements -Strategic planning session convened and led by Minister Davies to discuss key priorities set for each area. - Formal performance review sessions held to assess progress against approved plans -at Departmental and divisional levelsnd progress is reported and assessed quarterly. 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.

27. 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). 27

28. Five Year Comparison of budget vs Expenditure – R’000 28

29. Economic classification2010/11Unspent as % of final appropriation Final Appropriation Actual Expenditure VarianceExpenditure as % of final appropriation R’000 Compensation of Employees551,748514,93536,813 93.33%6.67% Goods & Services545,826474,83070,996 86.99%13.01% Interest and rent on land 2762751 99.64%0% Transfers to:5,073,8684,789,206284,662 94.39%5.61% Departmental agencies872,762838,98033,782 96.13%3.87% Manufacturing incentives, including: 1,389,1761,144,261244,915 82.37%17.63% **Automotive Production & Development Programme 538,000294,252243,748 54.69%45.31% Programme payments1,216,9841,216,225759 99.94%0.06% Infrastructure incentives1,224,3741,224,33737 100%0% Export Incentives274,636274,511125 99.95%0% Other95,93690,8925,044 94.74%5.26% Payments for capital assets20,18315,1894,994 75.26%24.74% Payment for financial assets2,3072,3061 100%0% Total6,194,2085,796,741397,467 93.58%6.42 Budget vs. expenditure for the 2010/11 financial year – economic classification 29 ** Amounts in respect of AIS are already included under the manufacturing incentives

30. Reasons for under spending ItemAmount unspent Reasons R’000 Automotive Production & Development Programme (AIS) 243,748The 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 SADC 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 36,813Vacancies Departmental agencies 33,782Delays in the establishment of the National Consumer Commission and the Companies and Intellectual Property Commission. 30 If the AIS under spending excluded, the percentage underspent would be 2%

31. 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 31

32. 32 Thank you