1. 1 Presentation on the 2015 Appropriation Bill to the Standing Committee on Appropriations Date: 27 May 2015 Director-General Lionel October

2. 2 CONTENTS Overview the dti’s Vision Background The Industrial Policy Action Plan Strategic Goals of the dti Core Programme and clusters of the department Programmes of the department Linking to NDP, MTSF and SONA Co-ordination of outcome 4 and 11 Strategic priorities for 2015 - 2020 2015 Appropriations Break down of dti’s budget dti’s readiness to implement the budget Cost containment measures Additional measures for cost containment Any other measures to the assist committee

3. 3 VISION A dynamic industrial, globally competitive South African economy, characterised by inclusive growth and development, decent employment and equity, built on the full potential of all citizens

4. 4 BACKGROUND The mandate of the Department of Trade and Industry (the dti) is to steer the development of South Africa’s economy so as to achieve sustainable, inclusive growth thereby alleviating poverty and inequality. As the National Development Plan (NDP) recognises, government and stakeholders must partner to grow the industrial engine of the South African economy, primarily the manufacturing sector. The strategic objectives and programmes of the dti are closely aligned to the goals set in the NDP  Decent employment through inclusive growth  Create a better South Africa and a better world The goals of the NDP filter into the MTSF, APP and ENE of the dti to ensure alignment and integration into the work of the dti.

5. 5 Resolving the energy challenge; Revitalising the Agriculture and the agro-processing value chain; Advancing beneficiation and adding value to our mineral wealth; More effective implementation of a higher-impact Industrial Policy Action Plan; Encouraging private sector investment; Moderating workplace conflict; Unlocking the potential of SMMEs, Co-ops, Township and Rural enterprises; State reform, including boosting the role of state owned companies in broadband, water, sanitation and transport infrastructure; and, Growing the Ocean Economy and Tourism PRIORITIES IN THE 9-POINT PLAN ARE ADDRESSED IN THE INDUSTRIAL POLICY ACTION PLAN

6. To 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. STRATEGIC GOALS

7. 7 CORE PROGRAMMES AND CLUSTERS Industrial Development – the development of policies and strategies that promote sector competitiveness, growth, job creation and efficient administration of support measures. Trade, Investment and Exports – the strengthening trade and investment links with key economies and fostering African development, including through regional and continental integration and development co-operation in line with the New Partnership for African’s Development (NEPAD). Broadening Participation – the development of interventions and strategies that promote enterprise growth, empowerment and equity Regulation – the development and implementation of coherent, predictable and transparent regulatory solutions that facilitate easy access to redress and efficient regulatory services for economic citizens. Administration – effective co-ordination of departmental programmes and provision of necessary support for efficient implementation.

8. 8 PROGRAMMES OF THE DTI Programme 1: Administration Programme 2: International Trade and Economic Development Programme 3: Special Economic Zones and Economic Transformation Programme 4: Industrial Development Programme 5: Consumer and Corporate Regulation Programme 6: Incentive Development and Administration Programme 7: Trade and Investment South Africa

9. 9 SP (5-year) 21 priorities SP (5-year) 21 priorities NDP 5-year MSTF Outcomes 5-year MSTF Outcomes APP (3-year) the dti ESEI & ICTS Clusters of Cabinet ESEI & ICTS Clusters of Cabinet The Presidency (SONA) 9- point plan Impact Outcomes Outputs Activities Inputs IPAP MTEF (3-year) ENE (1-year) Link to NDP, MTSF, SONA

10. THE IMPLEMENTATION OF OUTCOME 4 (DECENT EMPLOYMENT THROUGH INCLUSIVE GROWTH) the dti is tasked with coordinating outcome 4 the dti therefore leads the Executive Implementation Forum (EIF) for outcome 4 which is made up of National Treasury, Economic Development Department and Department of Public Enterprises. This forum reports to the Economic Sectors, Employment and Infrastructure Development Cluster. the dti convenes the EIF once a year to develop the annual programme of action (PoA). This sets out annual and quarterly targets to achieve the 2019 MTSF targets. The budgeting for this process is done within each departments own MTEF processes 10

11. THE IMPLEMENTATION OF OUTCOME 4 (DECENT EMPLOYMENT THROUGH INCLUSIVE GROWTH) This process also serves to align various activities within the allocated budgets to ensure there are no overlapping responsibilities. the dti also coordinates quarterly reporting against the PoA. Some of the key achievements in the implementation of the PoA include a general shift in procurement towards procuring locally manufactured products. Examples of these are  61.4% of the R14 billion ARV tender for 2015/18 was allocated to local manufactures;  most buses procured for the Bus Rapit Transit (BRT) system across the country will be manufactured locally and;  most of the locomotives procured by TRANSNET and coaches by PRASA will be manufactured locally 11

12. 12 Outcome 4: Decent employment through inclusive growth Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation MTSF the dti Strategic Goal Proclaim three Special Economic Zones (SEZs) All IPAP (Industrial Policy Action Plan) interventions implemented – 250 projects implemented Industrial Development Cooperation (IDC) to fund two higher level beneficiation projects Develop Mineral Beneficiation Action Plan (MBAP) and incorporate into IPAP Increase use of local metals in South African manufacturing Increase localisation target to 75% Develop options for stable and competitive exchange rate Priorities STRATEGIC PRIORITIES FOR 2015 - 2020

13. THE IMPLEMENTATION OF OUTCOME 11 (CREATE A BETTER SOUTH AFRICA AND A BETTER WORLD) The coordinating departments for outcome 11 are the Department of Telecommunications and Postal Services (DTPS) and Department of Defence. the dti is responsible for the coordination of its relevant inputs into the implementation of Cluster priorities. On a quarterly basis the dti reports to the Cluster Secretariat on the status of implementation of these priorities. These activities are budgeted for within the business plans of the relevant Business units. 13

14. 14 Outcome 11: Create a better South Africa and a better world Build mutually beneficial regional and global relations to advance South Africa’s trade, industrial policy and economic development objectives MTSF the dti Strategic Goal Export Council to develop African Export Markets Foreign Direct Investment (FDI) investment pipeline of R50 billion Economic diplomacy and pavilions Seven investments and five trade promotion projects South Africa’s position on Southern African Development Community (SADC) Regional Indicative Strategic Development Plan (RISDP) Southern African Customs Union (SACU) development integration Tripartite-Free Trade Agreement (T-FTA) South Africa’s position on T-FTA and Continental-FTA 26 bilateral cooperation agreements in Africa 59 bi-laterals with countries of the South Priorities STRATEGIC PRIORITIES FOR 2015 - 2020

15. 15 2015 APPROPRIATIONS

16. 16 MTEF ALLOCATIONS 2015/162016/172017/18 ProgrammesMedium-Term Expenditure Framework (MTEF) (R ’000) Administration689 740720 145763 734 International Trade and Economic Development 164 754172 530180 838 Special Economic Zones and Economic Transformation 263 224279 013285 312 Industrial Development 1 973 5342 045 3382 143 330 Consumer and Corporate Regulation294 496306 963321 887 Incentive Development and Administration5 795 6396 554 1935 369 264 Trade and Investment South Africa412 328427 132444 821 Total for Programmes9 593 71510 505 3149 509 186

17. 17 MTEF ALLOCATIONS 2015/162016/172017/18 Economic ClassificationMedium-Term Expenditure Framework (MTEF) (R ’000) Compensation of Employees897 730950 3111 007 778 Goods and Services577 945593 042622 946 Transfers and Subsidies8 083 8788 928 6997 843 622 Departmental Agencies and Accounts761 528784 809855 793 Highest Education Institutions12 47413 13513 792 Foreign Governments and International Organizations 31 73833 58534 523 Public Corporations and Private Enterprises7 131 5977 956 5126 799 523 Non Profit Institutions144 078138 107137 352 Households2 4632 5512 639 Payments for Capital Assets34 16233 26234 840 Total Economic Classification9 593 71510 505 3149 509 186

18. BREAKDOWN OF the dti’s BUDGET  the dti’s budget is allocated mainly to transfer and subsidies. Transfers and subsidies comprises 84.3% of the dti budget of which 74.3% is used to fund the dti incentive programmes (transfers to public corporations and private enterprises), 7.9% is transfers to departmental agencies, and 2% is other transfers.  Transfers to public corporations include the following : Manufacturing Incentive which consist of Enterprise Investment scheme, Manufacturing Competitiveness Enhancement Programme (MCEP) and Automotive Production and Development Programme. Special Economic Zone (SEZ) Service Sector Incentive which consist of Film and TV incentives and Business Processes Incentives  Transfer to departmental agencies include transfer payments to the dti entities e.g. NCC, NCR, NCT etc, Compensation of employees comprise 9.3% of the allocated budget and Goods and services comprise of 6% of the allocated Budget 18

19. BREAKDOWN OF the dti’s BUDGET  Compensation of employees comprise 9.3% of the allocated budget  Goods and services comprise of 6% of the allocated budget 19

20. the dti’s READINESS TO IMPLEMENT  the dti has already successfully implemented its programmes and has made significant contributions to the economy in term of investments leveraged in the manufacturing and services sector, job creation, industrial development and trade with export markets amongst others.  Below are some of the key stats for 2013/14 in relation to the above:  22 886 projected number of jobs created  106 559 jobs retained  R40.6 billion projected investment from approved projects  83 Film and TV productions supported  R3.4 billion increase in manufactured exports  2 164 projects approved under various incentive schemes  the dti will continue to implement its programmes in accordance with its strategic goals in ensuring that it stimulates growth in the economy by promoting industrial development, job creation, investment in South Africa and building mutually beneficial global relationships to steer the development of South Africa's Economy to achieve sustainable and inclusive growth. 20

21. TRANSFER TO THE DEPARTMENTAL ENTITIES  The Minister of the dti has 13 entities that fall within its portfolio (see slide below)  These entities are overseen by the Group COO and a dedicated Public Entity Oversight (POE) unit. This unit provides an oversight role in ensuring that funds are spent effectively and efficiently and performance targets are met.  The shareholders compact is updated annually to ensure that the roles and responsibilities of the dti and its entities are clearly are clearly articulated.  In addition the entities report quarterly to the Minister on its performance against its strategic objectives. There is also a dti representative on the audit committees of some entities.  The respective entities also report quarterly to the Portfolio Committee on its performance 21

22. TRANSFER TO THE DEPARTMENTAL ENTITIES 22 Below are the budgeted transfers to be made to its public entities R'000 2015/162016/172017/18 Companies and Intellectual Property Commission (CIPC)000 Export Credit Insurance Corporation (ECIC)165 447171 566177 644 National Consumer Commission (NCC)54 59658 01360 914 National Consumer Tribunal (NCT)43 02946 15148 459 Companies Tribunal (CT)14 22115 06915 822 National Credit Regulator (NCR)65 72769 57773 056 National Empowerment Fund (NEF)000 National Gambling Board (NGB)31 48330 12131 627 National Lotteries Board (NLB)000 National Metrology Institute of South Africa (NIMSA)250 895264 193252 803 National Regulator for Compulsory Specifications (NRCS)91 73285 918128 245 South African Bureau of Standards (SABS)000 South Africa National Accreditation System (SANAS)26 02522 20841 630

23. IMPLEMENTATION OF COST CONTAINMENT MEASURES the dti has fully implemented all areas of the cost containment measures as per NT instruction note 01 of 2013/2014. These include amongst others the following :  Travel and Subsistence  Venues and Facilities  Catering and Events  Consultants  Delegations to events 23

24. ADDITIONAL MEASURES IMPLEMENTED BY the dti In addition to NT’s instruction note on cost containment, the dti has also issued a circular with further cost containment measures to be implemented in the following areas:  Newspaper subscriptions  Entertainment  Consumables (printing)  E-training the dti also continuously reviews its policies to ensure more effective and innovative ways of managing expenditure. 24

25. OTHER MEASURES TO ASSIST THE COMMITTEE  The Economic Competiveness Support Package (ECSP) was introduced by the then Minister of Finance to support industries during the recession.  ECSP is ending in the 2017/18 financial year. Two of the dti flagship programmes are funded by the ECSP i.e. MCEP and SEZ.  After 2017/18, there will be no funding to support the manufacturing sector which is key to growth and job creation.  the dti will also be engaging National Treasury with a view to provide long term funding for the Black Industrialist programme.  The Portfolio Committee on Trade and Industry has recommended that the Minister in consultation with the Minister of Finance, look at ways in allocating additional finance to continue supporting manufacturers in their competitiveness in the 2017/18 financial year going forward. 25