Chairperson, MECs who are present here today, select committee chairperson, members of the select committee, hon members, it is an honour to participate in this debate on the Budget Vote of the Economic Development department today. The work of national government can only be successful if we are able to secure strong co- ordination across the three spheres of government, using the combined public resources in a focused and purposeful way to create jobs directly and to create an environment in which jobs are created on scale within the private sector.
Over the past year, the primary focus of our research and policy development was to finalise the New Growth Path, the NGP, for South Africa. By the end of last year, we publicly released the NGP, which set a target of five million new jobs by 2020. What does the NGP mean for the Department of Economic Development?
As with all departments, it requires a refocusing of efforts towards the priorities and actions of the New Growth Path. The department will help to ensure co-ordination between public agencies, national departments, provinces and local authorities, private investors and our social partners, and co-ordination with efforts to expand our economic links with economic and trading partners. In each of these areas, it must constantly identify employment and economic development opportunities.
I draw specific attention to the goal of economic development. It embraces economic growth but it is not confined simply to improving the gross domestic product, the GDP. Human welfare is not adequately measured only by a rise in the monetary value of the goods and services in an economy. Development requires that growth brings jobs - yes, decent jobs; that the rural poor see an improvement in their livelihoods; that women can contribute as equals and in full in the economy; and that young people are taken from the hopelessness of unemployment to the optimism that having a decent job creates for citizens.
For a national department such as Economic Development, it requires that all our resources be used effectively and with high impact. This means how we utilise the R594,5 million in the department's Vote, the balance sheets and industrial know-how of the Industrial Development Corporation, the IDC; Khula; the SA Micro-Finance Apex Fund, Samaf; and the mandate and regulatory authority of the competition authorities and the trade commission. It is about integrated co-ordinated action across government. The keyword is action.
There are still too many examples of a public bureaucracy that has forgotten why it was created, and indulges in foot dragging and focuses on processes, on meetings and on paperwork. Investment projects are often delayed because decisions are not made, environmental impact assessments are delayed and planning permits are not provided. There is too much cholesterol in the system, and it is affecting the vigour of the economy.
Now that we have our basic jobs framework in place, our big focus for the next 12 months will be on unblocking, facilitating and moving things forward.
Apartheid left South Africa with an extraordinary spatial divergence between the economic centres of the country, linked to the metros, and the densely settled rural areas of the former Bantustans, which have very limited economic resources and investment. Within metros too there are vast disparities and spatial challenges, with townships located far from most employment opportunities.
A core task of the New Growth Path is to break with this legacy through a coherent approach to spatial development, backed by strong investment in infrastructure and the identification of viable and sustainable employment opportunities for historically disadvantaged regions. Rural development, of course, necessarily depends largely on links to the main urban areas, and it's exploiting these synergies that is important.
The New Growth Path therefore has profound implications for spatial economic planning and the work of provinces and local government. This includes co-ordination of policy frameworks, finance for development, regulatory requirements and partnerships in achieving the jobs outcome. Provinces have recognised that economic plans and frameworks need to be aligned with the New Growth Path.
We discussed the basic ideas in the NGP with provinces prior to its adoption by Cabinet. We have taken account of the views of MECs and Salga representatives. I addressed the President's Co-ordinating Council, the PCC, on the NGP, and the Ministry or departmental representatives have attended executive strategy sessions and engaged with officials across the country.
These efforts helped to align provincial plans, and currently the economic frameworks of Gauteng, Mpumalanga, the Eastern Cape, the North West, the Northern Cape, the Free State, Limpopo and KwaZulu-Natal, as well as Ekurhuleni, Johannesburg, Ethekwini and Tshwane metros, have begun to reflect the key messages and priorities of the New Growth Path. Some provinces have begun to submit portfolios of priority projects to the department to assist in facilitating funding or unblocking obstacles to implementation.
Now we need to work with each other to ensure that budgets across government strongly reflect these new priorities. Provinces and local government can also tap into the national funds that we are mobilising. For example, the Industrial Development Corporation has committed to making R102 billion available over the next five years for projects and priorities in the NGP.
The five-year funding allocation will include R22,4 billion for green industries; R22,1 billion for mining and beneficiation; R20,8 billion for manufacturing; R7,7 billion for the agricultural value chain; R14,8 billion for tourism, the creative industries and high-level services; R11,1 billion for logistics, infrastructure and cross-sector projects; R500 million for venture capital; and R2,5 billion for funding for distressed companies. We will allocate and review these based on experience.
This is an extraordinarily high level of industrial funding that is available by the standards of what we have done in the past. Provinces and local government, together with investors, can help us to identify viable projects that can access this funding. But the opportunities for developing coherence go deeper. We want to streamline our processes to avoid duplication and ensure that investors see co-ordinated government in action. Duplication and proliferation of agencies, for example, does not help a small entrepreneur who wants to know what support is available, and where.
National government is taking the first step with the amalgamation of Khula, Samaf and the IDC small-business lending into one agency. The agency will retain the brand name Khula, and is intended to be a wholly owned subsidiary of the IDC. In this way, it will be able to access funding in capital markets at reasonable rates, and draw on the IDC's infrastructure.
Once we have made sufficient progress, we will talk to provinces and the metros to see how we can further reduce duplication in small-business funding. Hon members, your ideas will be warmly welcomed.
In my budget speech in the National Assembly on 12 April this year, I advised that I had requested the IDC to develop support measures for companies affected by the exchange rate. The IDC has completed its work, and it is my pleasure to inform hon members today of the new facility. The IDC will make available up to R2 billion, through the distress-sector facility, for companies that face challenges as a result of the strong rand. This can take the form of equity or loans for working capital for upgrading machinery and technology, or for developing new export markets.
For companies in this position, where there is also a significant employment gain or employment consequence, the cost of the funding will be at a significant discount. Depending on the specific circumstances and source, IDC funding will cost either prime less 3% or a fixed rate of 6%. Where appropriate, the IDC will look at capital and interest moratoriums for a period to allow the company space to turn around and trade back into profitability.
This facility is significant. It is much lower than rates offered on the commercial market, and the 6% fixed rate will be financed through the job development bond facility that we launched last year.
As we pursue the ambitious goal of five million new jobs, we need to think in new and innovative ways. Joseph Stiglitz, Nobel Laureate and a member of the economic advisory panel that I set up last year, made the observation that governments across the world had decommissioned many public policy instruments over the past 30 years. He called on governments to "re- commission" in the service of development. That is exactly what we are doing across a wide front.
The direction of government is to use state-owned enterprises, development finance institutions, or DFIs, public agencies and regulators to promote the public interest with vigour. We recognise that this will attract some criticism from vested interests and commentators. But, unless we do things differently, we will not have different results.
Economic orthodoxy has its limits. One of the lessons of the global economic crisis is that developmental states that are prepared to do things differently have been able to recover faster and create more employment than those who had a business-as-usual approach.
I would like to take the example of competition policy to illustrate the approach. The Competition Act is an important and carefully crafted piece of legislation. It is not simply a copy of the antitrust legislation found in the United States or Europe. In its preamble, it recognises the need to balance the interests of workers, owners and consumers. The purpose of the Act is to promote and maintain competition in order to achieve six specified outcomes.
One of these is, and I quote: "to promote employment and advance the social and economic welfare of South Africans". Another outcome is to promote ownership among black South Africans in the Competition Act. A third outcome is to provide consumers with competitive prices and product choices. The remaining three outcomes relate to greater efficiency in the economy, the promotion of small businesses and expanding South Africa's participation in global markets while recognising the role of foreign competition.
These outcomes go to the heart of what a modern developmental state, faced with our challenges, would seek to do. It is therefore not a narrow mandate. Competition is a means to an end, not an end in itself. In other words, the test of successful pursuit of competition goals will be in the outcomes, not only in the structure of markets, but also in the level of employment, transformation, industrial development and consumer welfare.
The Act specifically sets out four public-interest considerations that the competition authorities are required to consider. It provides for the Minister of Economic Development to make representations on public interest grounds to the Competition Commission, to the Competition Tribunal and to the Competition Appeal Court.
We believe that the goals of the Competition Act can be achieved in two interrelated ways: first, by improving competition itself, we create the dynamic, flexible and innovative corporate agents that can drive economic growth and performance, so that is important; second, by implying appropriate conditions in proposed transactions where these are necessary, we can ensure not only an appropriate balance between the interests of workers, owners and consumers, but also achieving success with the public interest objectives set out in the Act.
I am pleased that our competition authorities are making great headway in both these areas. I hope that a less strident and more informed public debate can be conducted on how we can deepen this process in a manner consistent with our legal obligations and our developmental goals.
A big focus of the competition authorities, which have been allocated R141,8 million for the 2011-12 financial year, will be on the construction industry. The commission identified 70 cases of possible price-fixing or collusion, many involving public infrastructure projects. Some R29 billion worth of contracts are under scrutiny. It is an important investigation for government as the New Growth Path relies heavily on cost-effective infrastructure with investment set at over a quarter of a trillion rand a year.
I have spoken at some length about the competition authorities, but our focus is across the economic agency landscape. My colleague Minister Gordhan announced a few days ago the progress with finalising a new set of procurement regulations that will provide for the designation of specific sectors, so that public entities are required to purchase products in these designated sectors only from local manufacturers. In this way, the state will create a demand stream that local entrepreneurs can satisfy. I have asked the development finance institutions to examine how they can create packages of funding support for local entrepreneurs, to take up this opportunity. Over the past year, two of the DFIs together provided R272 million to small and medium-sized enterprises which tendered for state contracts.
Khula is working on additional specific support measures. I have now requested that a policy guideline be developed on sustainability.
One part of the guideline is to focus on areas that are critical to the New Growth Path, so that we can generate local industrial opportunity. Another guideline is to ensure that measures are in place so that local entrepreneurs who start with public contracts can graduate to supplying the private sector, so that we avoid a situation where enterprises are solely reliant on state tenders, and so that we can provide new opportunities for new entrants to the market.
Khula is also involved in expanding its funding base, and is in discussions with public agencies. We plan to announce a new Khula direct funding model by the end of this month, and to publicly launch its direct lending facility by 1 July 2011.
The Department of Economic Development and the agencies accountable to it have worked on projects that cover all nine provinces. In the limited time available, let me illustrate a few. The department assisted in securing R39 million funding from the Employment Creation Fund for feasibility studies, for the phyto-energy biofuels refinery and integrated canola farming in the Eastern Cape.
The department participates in the work of the Solar Park Steering Committee, a Northern Cape project which aims to contribute 5 gigawatts of renewable energy in the medium to long term. It serves on the Square Kilometre Array task team, which has commissioned research on the socioeconomic impact of the programme for the Northern Cape. It has facilitated feasibility studies for the use of sludge from the silicon smelter in Polokwane to manufacture building materials. The project promises to create employment, protect the environment and improve the living conditions of the surrounding communities.
The department has participated in the evaluation of green projects proposed to the Gauteng provincial government which also have significant employment potential. In the Free State, a large new investment was facilitated through industrial funding for a chicken broiler and abattoir, which includes a workers' trust and which will create 900 direct jobs at the facility and provide a reliable demand for maize, of which product South Africa currently has a surplus.
In KwaZulu-Natal the department is working in one of the rural districts to support a rural dairy co-operative so that the local community can convert their cattle assets to sustained cash income.
In Mpumalanga, the department and the province are working with an investor to unblock obstacles to an agro-processing project that involves a large foreign investor and which holds the potential to create large numbers of jobs in the factory but also in the agricultural supply chain.
In the Western Cape, one of the DFIs has helped to fund alternative economic opportunities for a fishing community, displaced by the closure of a processing factory, by financing a new freezing facility for fish and helping a fishing co-operative to buy their own boat.
The department has reviewed the local economic development strategies of municipalities that we have visited under the leadership of the Deputy President in the antipoverty campaign. These include Bitou near Plettenberg Bay, Nthunda village in the Nkomazi Municipality in Mpumalanga, and Manthe in the Taung area in the North West. We have also asked key development finance institutions to deepen their engagements in these impoverished areas and there has been some initial success.
We have worked with the Department of Co-operative Governance and Traditional Affairs on the implications of the New Growth Path for integrated development plans, IDPs.
Clearly, we need to help build greater expertise at local level. With this in mind, in March this year, the department hosted an economic capacity- development programme for provincial economic development departments. Eighty-five officials attended the five-day certificate course, presented by the Graduate School of Public and Development Management at the University of the Witwatersrand. The course dealt with local and regional economic development, and outlined how the New Growth Path supports development of provincial economic competitive advantages and niches.
We are focusing strongly on implementation, on ensuring that what we do now, what our social partners in business and labour do in partnership with us, can help to achieve the five million new jobs by 2020. Thank you. [Applause.]
Hon Chairperson, hon Minister Patel, hon Deputy Minister Godongwana, hon provincial Ministers, hon members, comrades, ladies and gentlemen, a Budget Vote is both a political and financial instrument used to ensure that the ANC's policy programmes are brought into effect through the allocation of financial resources.
The prosperity of the Department of Economic Development Budget Vote lies in its addressing the following fundamentals: the need to foster a thriving and integrated economy which draws on the creativity and skills that South Africans can offer and building on South Africa's economic endowments to create decent work for all, as well as eliminate poverty; increasing social equality and a growing economy, which reinforce each other and constitute a positive cycle of development that improves the quality of life of all people; advancing to national prosperity through a mixed economy path, where the state, private capital, co-operatives and other forms of social ownership complement each other in an integrated way to eliminate poverty and foster shared economic growth; and ensuring national prosperity through rising productivity, brought about by innovation and cutting-edge technology, labour-absorbing industrial growth, competitive markets and a thriving small business and co-operatives sector.
The strategic goal of economic transformation is the material response to the call of the Freedom Charter that the people shall share in the country's wealth. Whilst recognising our successes since 1994 and responding to this call, we are deeply mindful of three fundamental contradictions and challenges that remain on the road to substantive economic transformation. These are unemployment, poverty and inequality.
Economic transformation in our country must ensure that a national democratic society, characterised by a thriving and integrated economy, increasing social equality, national prosperity, socioeconomic rights and a mixed and sustainable economy, is achieved.
For this to happen the state must play a central role by directly investing in underdeveloped areas and directing private-sector investment. The ANC has committed itself to halving unemployment and poverty and to substantially reducing social and economic inequality. Binding constraints to meaningful economic transformation, inter alia, skewed patterns of ownership and production, and dualism and marginalisation, have been identified as needing decisive action for their elimination.
Monopoly capital domination of the economy is an obstacle to the goal of economic transformation, growth and development. The South African model of a developmental state locates it at the centre of a mixed economy, and projects the state as the one that guides the economy, intervening in the interests of the people as a whole, particularly in the interests of the poor.
In his inaugural state of the nation address in June 2009, President Jacob Zuma declared:
It is my pleasure and honour to highlight the key elements of our programme of action. The creation of decent work will be at the centre of our economic policies and will influence our investment attraction and job-creation initiatives. In line with our undertakings, we have to forge ahead to promote a more inclusive economy.
This statement gave impetus to the growing consensus that creating decent work, reducing inequality and defeating poverty can only happen through a New Growth Path, founded on a restructuring of the South African economy, to improve its performance in terms of labour absorption as well as the composition and rate of growth.
A policy package to facilitate employment creation was developed in the shape of the New Growth Path to ensure a comprehensive drive to enhance both social and economic equity; to bring about systemic changes to mobilise domestic investment around activities that create sustainable employment; and to encourage growth in employment-creating activities.
The New Growth Path is a broad framework that sets out a vision and identifies key areas in which jobs can be created. It is intended to address unemployment, inequality and poverty in a strategy that is principally reliant on creating a significant increase in the number of new jobs in the economy, mainly in the private sector.
It sets a target of creating five million jobs in the next 10 years - a target which is projected to reduce unemployment from 25% to 15%. Critically, this employment target can only be achieved if the social partners and government work together to address key structural challenges in the economy.
The aim of the New Growth Path is to target and focus capital and capacity on activities that maximise the creation of decent work opportunities. To that end, both macro-and microeconomic policies that create a favourable overall environment and support more labour-absorbing activities represent the direction in which the New Growth Path steers the economy.
To achieve profound changes in the structure of investment and changes in the nature and ownership of production, key policies and programmes must steadily and consistently be pursued over at least a decade. Moreover, efforts must be co-ordinated around core priorities rather than dispersing them across numerous efforts that do not contribute to a sustained expansion in economic opportunities.
This means that government must both strengthen its own capacity for engagement and leadership, and redesign delivery systems to include stakeholders meaningfully. Long-term structural change will be carried out in phases, assessing progress and evaluating at given points in time.
The component parts of the New Growth Path taken together constitute a key means to address the income inequalities in society. They place decent work at the centre of the battle against inequality, but also include measures such as skills enhancement, small-enterprise development, progressive taxation and support for the social wage.
South Africa was left with an extraordinary spatial divergence between the economic centres of the country linked to the metro areas and the densely settled rural areas of the erstwhile homelands, which have very limited economic resources and investments. Within metros there are vast disparities and spatial challenges with townships located far from most employment opportunities.
A core task for the New Growth Path is to break with this legacy through a coherent approach to spatial development, backed by strong investment in infrastructure and the identification of viable and sustainable opportunities for historically disadvantaged regions. Rural development will necessarily depend largely on links to the main urban areas.
Given the extraordinary differences in natural, economic and social conditions across our country, provinces and localities must adapt the broad drivers in the growth path to their circumstances. A spatial economic strategy will indicate how the job drivers affect different provinces, municipalities and rural areas, linking in to the rural development strategy and industrial policies.
An important step will be to enhance communication between the spheres of government on their development strategies and to improve their alignment. As a start, we need to recognise the importance of local governments in the metros in maintaining the centres of economic growth, as the Minister has alluded to. National government will develop a realistic spatial perspective on long-term settlement patterns and opportunities for employment creation and economic development.
The Department of Economic Development was created out of ANC policy. It therefore would be expected that the Budget Vote be structured to address critical principles, such as building greater equity within the economy and society, reflected in a greater equitable sharing of resources; advancing a gender approach in the allocation of resources for programmes; being pro- poor; and tackling poverty.
When looking at the programmes of the department and the performance indicators, the bulk of the funds for the department, namely R499 million, go to the economic planning and co-ordination programme, which is what would be expected. However, R464 million of that is for transfers to development finance institutions and economic regulatory bodies for which the department has oversight and responsibility. Only R35 million is left for economic planning and co-ordination across government sectors and social partners. This is not much, considering the scope that the department needs to cover.
The economic policy programme grows substantially in the next two financial years from R23 million to R29 million, but then flattens out in the outer years. This is worrying since this particular programme is responsible for the implementation of the growth path, and for the development and implementation of sector plans. In addition, the small business sector, new growth path sectors and companies in distress are all meant to benefit from this programme.
In conclusion, transforming the economy requires an employment growth path that addresses the structural constraints of absorbing large numbers of people into the economy and creating decent work. The Department of Economic Development has assumed responsibility for key outputs relating to this outcome. The ANC believes that the Minister, Deputy Minister and the department will honour and deliver on that mandate. The ANC supports the Economic Development Budget Vote. I thank you. [Applause.]
Chairperson, Minister, Deputy Minister, hon members, it is an honour and a pleasure to take part in this Budget Vote policy debate of the Department of Economic Development.
May I say, as we start to understand the roles that provinces need to play, that I welcome the Minister talking about all three spheres of government and how together we all need to make sure that we deliver on this economic New Growth Path and the need to grow the economy in order to deliver on the creation of jobs, and specifically the target that has been set for us by the President of five million jobs.
May I say, on behalf of the Western Cape, we commit not only to playing our part in helping the Minister in delivering on his contract with the President, but also doing our part in creating as many of those five million jobs as possible.
I must also, at this stage, welcome specifically the inclusion in the Industrial Policy Action Plan 2 of oil and gas and boat building, which, I think, relates specifically to this province and also to a number of other provinces as well. We really do welcome that.
In his address, the Minister spoke about the effect of growth, and about jobs within that growth. But at the end of the day, whatever happens, we cannot create jobs unless we have growth. If we have no growth, it is much, much harder. Obviously, from government's point of view, we need to make sure that we are steering that growth in the right direction.
As part of that policy, and as part of this debate, I just need to highlight some of the risk areas, not only within this department. I do think this department plays a key role in making sure not only that the three spheres of government deliver on what we need to deliver on, but also that there is co-ordination across different components of government. It is pertinent that the Budget Vote debate prior to this one was Transport because of the key role that transport plays in how we have to deliver. I'll talk to some of those issues and perhaps some of those blockages.
At the moment the key risk areas that I would like to outline, overall, are electricity and energy supply. We all know that there is a massive investment into this space. But, as the economy starts to grow, if we are not ready to take up that growth, that is a huge risk and must be highlighted. Water falls in exactly the same space, and I have spoken about transport.
We also need to speak far more about being competitive - being competitive in the market, being competitive within our own production levels in South Africa, and being competitive in a way of ease of doing business. Today the Minister spoke about the cholesterol that gets in the way. We need to make sure that we ease that flow, because it is about being productive, it's about being competitive and it's about being able to claim that space that we need to claim to really make it possible for us to create these jobs.
There are a couple of other areas that I would like to highlight, and I would like to start with the green economy. The Minister did speak about the green economy at length. There is one issue that I am picking up from potential investors and potential local businesses and I want to highlight that today. The green economy is something new for us. It is something that we need to grab with both hands and, I think, the green economy is a huge opportunity for us as a country, specifically with regard to where we are placed in the African context.
The one problem that we have is the communication with those investors and companies. So we have had the refit and the delays, and we have had the announcement of a reduction in that refit costing. That, in itself, is creating some confusion. I am picking something up now that is on top of that confusion, specifically coming out of the Treasury at the moment, and this is that the refit is actually not going to work. We have to have an open-bid process. I am not sure. I am only picking this up from industry players. I have actually spoken to the Minister of Finance's department about it. I have not received any feedback, but apparently it is what they are working on at the moment: looking at an open-bid process. It is all very well to become competitive in that space, but if we have a straight open-bid process without steering that growth, without steering that investment - whether it be local or international - I see huge risks there. I see risks first of all from the communication process in which we are now putting something else on the table. And, second of all, if we push this too hard we must learn from other countries that have been in the same space. What happens is that the big international investors then eventually own that green space, and our smaller companies get sidelined and primarily our component of the manufacture of that industry also gets sidelined.
It's very, very important that we really understand, if this threat is coming - from this department's space and, Minister, I think we also have to take this discussion further in the Minmec tomorrow - how we are going to steer this process so that we do retain manufacturing and our space that we need to retain in steering that economy. We also don't want to become a dumping site for old technology, when the rest of the world is purchasing new technology at a far higher rate while we get left with the old. So, I think, it is a risk and something that we really need to look at very seriously.
With regard to green technology, I also want to say that natural gas, specifically on the west coast of our country, gets used. I started my speech by speaking about the risk of electricity supply, which could be an inhibiting factor for economic growth in the longer term. At the moment, the Ankerlig Plant which produces peaking power in the Western Cape at Atlantis uses R780 million worth of diesel a week. It is not peaking any more; it is starting to pick up much more of the load, and that is at R7,80 per kilowatt hour.
If we could get gas into that system the price comes down to 90 cents per kilowatt hour. That really starts to make more sense, and I think in the space between now and the Medupi and Kusile Power Plants coming on-line, we do have a risk. We need to make sure that we get those green energy turbines and solar panels up and running. But I think we also need to look seriously at how we can use natural gas, because that will also make sure that we minimise those risks.
I spoke about and said thank you very much for oil and gas being included in Ipap 2. The services of the oil and gas industry are expected to be in the region of US$200 billion over the next five years. That is the African component on the west and east coasts of Africa. We need to make sure that we are playing our part. I know that the national department is involved with us in the province and with the Municipality of Saldanha Bay, looking at the industrial development zone, the IDZ. I thank you so much for that support. I also think we need to become more energetic and make sure that we take the space far more seriously and act far quicker than we are at the moment, because we are seeing our competitors in Namibia and Walvis Bay starting to pull ahead of us and starting to pull some of those service jobs down into that space.
If we do really want to create the jobs, we need to be more on top of our game. I want to refer specifically to the risk around ports. It is a difficulty that we have in this province - I know it is not this Minister's responsibility but this also forms part of that economy. The delays that we are experiencing in the ports - not in the export space of getting our goods out through containerisation, which seems to be running far better and getting better and better all the time - are in the ship repair and in the oil and gas spaces as there seem to be blockages after blockages.
In the past I referred to a vessel coming into this harbour and being delayed by 12 days. It's here, booked in for one month exactly - there are US$32 million worth of jobs and 1 800 jobs on this vessel. We cannot afford to delay these jobs by 12 days. What happened in that specific case concerning Chevron, for whom we did the job - this was one vessel of 60 vessels that operate along the west coast of Africa - was that we got the first job last year, but we have not gotten another job. The work has now gone to Singapore or Europe. That is because of our inefficiencies. We need to make sure that we pick up on those inefficiencies so that when we go out and hunt for this work, it remains here, because when we get the job we are actually offering the right service. We have got the people to deliver on that job, but if we are delaying in our communication and getting those vessels into our ports, it gives the wrong message.
We have oil rigs on their way to our harbours, whether it be Saldanha Bay or the port of Cape Town. They are on their way, and the vessel is days out of port - workers standing on the dock waiting to work on these vessels - and we go and get permission from the ports authority to allow the vessel into the harbour. And then there is confusion about which harbour it is going to, and phone calls from America at 2 o'clock in the morning because they do not know where this vessel is getting harboured. That kind of communication is not helping us create the jobs that we need to create.
Minister, I must also welcome your point on red tape. That is something on which we really need to work a lot harder, in order to remove those blockages that are slowing down this growth. Minister, I look forward to working further on making sure that, through this productivity and communication, we actually start to remove these blockages and start to really push hard for that growth that is going to create jobs. Thank you. [Time expired.] [Applause.]
Chairperson, Minister Patel, Deputy Minister Godongwana, and hon members of this august House, I greet you all this afternoon. I know Gauteng is extremely cold, colder than Cape Town, and I think that is part of climate change.
ANC government! [Laughter.]
Of course, I don't know. How can the ANC be blamed for the weather?
In the past few months, we have focused on making sure that the province has strategies. These include the Gauteng Employment, Growth and Development Strategy, the GEGDS, and we have approved a spatial development framework. We have also approved an industrial strategy. All these are aimed at making sure that we streamline with the national strategies, including the national growth path and the Industrial Policy Action Plan 2, Ipap 2, and many other important imperatives where we must make sure that we work together in synergy to ensure that there is economic growth.
With regard to the GEGDS and the national growth plan, one of the sectors we are focusing on is the green economy. Why are we focusing on the green economy in a province such as Gauteng? We believe that we must focus on the mixed renewable energy resources, which are solar energy and gas. I think it is important for a continent such as ours, and in a province such as Gauteng where we do not have access to water in abundance and do not have wind in abundance, to focus on solar energy and gas, because we believe that the security of energy for the economy and the role that it plays in the Gauteng economy cannot be overemphasised. It is in our interests to make sure that issues around solar energy and gas power in the province play a very important part, including attracting investors.
We have taken a decision in the executive committee that public institutions will be retrofitted. We are talking about schools, clinics and hospitals that we are going to retrofit. In terms of hospitals, for instance, that are currently getting their power through coal, which is an old source of energy, we want to provide for energy needs through gas and solar power, and we are working very hard with industry players to make sure that our hospitals are supported, either through gas or solar power. Indeed, climate change is a factor and all of us have to make sure and demonstrate through our actions that we have programmes to deal with climate change. With regard to meeting these obligations in terms of policies approved by the executive committee - of retrofitting schools, clinics and hospitals - we are making sure that we are talking to companies that want to establish their presence in South Africa, particularly in Gauteng, to manufacture the necessary products, and we will be supporting them by making sure that we procure these resources from them.
We believe that this is going to guarantee energy security so that the old fossil-fuel-generating energy can be directed to other sources.
We are embarking on a very intensive strategy of working with the private sector, as we did before, in making sure that people embark on energy- saving programmes. This has literally nothing to do with what we do in economic development, but for energy security in an economy such as ours, it's key because we regard Gauteng as the biggest economy in South Africa and the fourth largest economy on the continent. It is very important to have lights turned on 24 hours per day, of course using alternative energy.
A part of the strategies I referred to focus on township development. The biggest population in South Africa resides in Gauteng, and the bulk of those communities are located in our townships. The focus on townships for us means making sure that the underutilised or dilapidated infrastructure that is currently not being used is utilised for light industries, particularly supporting women and young people to make sure that we help them to develop the necessary skills, because without a skilled labour force, the economy is not going to grow and prosper. Those will be linked to a number of areas - for instance, their own self-orchestrated businesses that they want to venture into, including the ones that government will directly support, particularly fixing of cars and so on. We will make sure that through the direct procurement of government, those are supported by others fixing ambulances and those things.
The importance of growing the township economy has been given impetus by massive investment in the townships. If you go to any township in Gauteng today, the majority of then have significant investment from the private sector, through having shopping malls. We believe that the continuation of this is indeed giving the people the dignity that they deserve, other than making sure that townships are no longer places that are the back of beyond, because nothing happens there and everything happens in the suburbs. This investment we are making in the townships is going to go a long way in continuing to give dignity to the citizens of our country.
The success of these programmes will of course largely depend on how we are going to work together as provincial, national and local governments. There are a lot of obstacles that I want to refer to, which I think is important for us to talk about. These were identified when we were talking about the Accelerated and Shared Growth Initiative for South Africa, Asgisa, many years ago, and they continue to bedevil us even today. Those obstacles, amongst other things, are environmental impact assessment studies that take forever, and sometimes the animal species that are found take precedence over development. I think we need to strike a balance. We are not necessarily saying that we must destroy the ozone layer and do away with what are considered environmentally sensitive areas, but there has to be a balance that we strike in that process, and that balance must give effect to growing the economy. The rate at which we approve those applications must also take into account that people who have money largely do not have the luxury of government backing when people are still trying to decide.
The price of wood and steel continues to be an obstacle in our economy. Local entrepreneurs are forced to buy steel and wood at the price of those who are buying it as if it is imported into South Africa. I believe, Minister, that this issue continues to be one of those issues that are choking growth in the South African economy. Wood is very important for the production of furniture and other products. We have a lot of these players in the Gauteng space. They are not merely local players; they are local players but with the intention to supply the rest of the continent.
We have to work very hard to make sure that these raw materials that are sourced in South Africa are utilised for the benefit of growing our economy and empowering the citizens in our country. We have to make sure that in doing so - the province has about five or eight agencies - we are streamlining the agencies that fall under the department of economic development. The intention of streamlining these agencies is exactly to do what the Minister spoke about in his input. Some of the things that we have observed in our own agencies in the province are that there has been too much duplication by agencies, and, among these agencies, we must also strive to improve efficiency in terms of the movement of goods and services. I think that we would agree with some of the issues raised by my colleague from the Western Cape, for example how we clear the goods destined for the Gauteng market when they arrive in bulk, particularly at the KwaZulu-Natal port. The delays are causing difficulties.
Issues of economies of scale, and information and communications technology costs, remain issues that we are looking into when we do streamlining and also in the external environment. The transparencies that we must also talk to when we deal with investors are very important.
Going forward, what is going to be key, Minister, is that we must really work very hard across the spheres of government, including the citizens and the private sector, to define the things we expect investors to comply with when they want to invest in South Africa.
There must be transparency. People in the energy sector must know which things to comply with. In the transport sector, they must know which things to comply with in order to be considered and know what obstacles they must overcome before they get those things. As things stand now, there is no transparency. People decide at will that today, for instance, they will fill in an application to the National Energy Regulator of SA, Nersa; tomorrow they must get the purchasing agreement from Eskom, etc. There is no certainty, and I really want to appeal that there be certainty up front so that investors coming to the country and those that want to expand can do so with absolute clarity.
We have engaged with many investors, as I said, locally and overseas, and we are very encouraged, as an important province as Gauteng, that these investors want to continue to expand and relocate from overseas, or wherever they are operating from, to South Africa. However, that is going to be determined and characterised by what we do today for them to change their minds tomorrow and for them to want to come and settle in South Africa.
We continue to be positive, Minister, because of the energy that you and the Deputy Minister are exuding in this portfolio, and we are determined that the road ahead will be bright, but all of us have to work very hard and put our shoulders to the wheel for this objective to be achieved. Gauteng supports the budget as presented by the Minister. [Applause.]
Hon Chairperson, I will stick to English today. I was recently reminded by one of the very talented officials of the Department of Economic Development that, during the 2010 debate, I stated that the department should have been stillborn.
Whilst I rejoice in the obvious extensive talents of the officials of the department, the position of the DA remains unchanged. This view was reinforced when it was observed that Minister Trevor Manuel's National Planning Commission, the Department of Trade and Industry and the National Treasury, as well as local government, played little or no role at the recent economic development summit hosted by the department. This was particularly stark given the prominent role played in the summit by the Department of Labour and by various trade union organisations.
The International Monetary Fund, the IMF, indicated to us yesterday that the rate of economic growth of 6% per annum, as projected in the New Growth Path, will not be achieved in the short to medium term. This means that unless there is radical change in the way that South Africa does business, the five million jobs target will not be achieved. The hon Minister, I think, acknowledges this, because he has said that unless we change the way we do things, we will not get different outputs.
What then are the radical changes that are required? There is no doubt that continued and strident efforts need to be made with international trading partners to ensure that barriers, such as agricultural subsidies and others which prevent South African goods from being competitive, are removed. However, this is not under our direct control and is not likely to be a fast process.
The visitor from China, who recently addressed a Joint Sitting of Parliament, made the point that China had concentrated on economic growth rather than on issues such as job creation and had stepped out without a carefully crafted and lengthy plan. If I recall, he used the analogy of crossing a river which had rocks submerged under water and that they had to feel their way rock by rock.
Well, we need to start feeling for our own rocks, even if we occasionally misplace our feet. However, there are measures that are under our control. We need to do what hon Minister Gordhan said two days ago. "Action is needed," he said, or we continue on the warpath of endless debates.
There can be no doubt that our regulatory regime, particularly as it pertains to labour, needs to be relaxed. For example, it is simply unworkable to enforce national bargaining on plants when neither the industrialists nor their employees have any direct say in the bargaining process. Closed-shop arrangements, which may be the history of the hon Minister of Economic Development, are simply unworkable and are in direct conflict with the freedom of association enshrined in the Bill of Rights.
The long-vaunted youth subsidy, or wage subsidy, must be introduced. A simple way of doing this would be to take the R1,2 billion budget allocated to the ANC Youth League in disguise - and here I refer to the National Youth Development Agency - and to allocate it to the youth wage subsidy. At least the money would not be wasted on debauched parties costing tens of millions of rands.
The hon Minister has not made any mention of productivity. The hon Winde made the point that we need to become more competitive. The hon Deputy Minister has acknowledged - I think, quite bravely - that our productivity levels need to be improved. We need to meet our competition internationally. Economic growth and the resultant spin-off of new jobs come with hard work. There is no short cut. The sooner the ANC cuts its unfortunate alliance with Cosatu and starts putting the interests of the unemployed ahead of those of the employed, the sooner there will be economic growth and the creation of jobs for the millions of our people who are unemployed and starving.
These are but a few of the interventions that are required. No justice can be done to a subject of this magnitude in a matter of just six minutes. In that respect, this debate cannot honestly be called a debate, and some may even refer to it as a farce. We have no choice, hon Chair. If we want a prosperous future for South Africa, we must implement the open opportunity society for all. I thank you. [Applause.]
Hon Chairperson, hon MECs present here, chairperson of the select committee, hon members, we have just emerged from a global financial crisis which has reversed a number of the gains we had made over a decade, cutting down the jobs we created over that period by almost 50%.
On 25 October 2010, the South African government adopted the New Growth Path. Among other things, this is to use the infrastructure deficit to anchor the development of our economy and the creation of jobs. I normally quote the statistics I have seen from reputable consultants which suggest that, if our economy grows by 4,5% over the next 15 years - which is basically an achievable figure - we have to invest about a trillion rand in roads, ports and rail. In itself, rolling that infrastructure out is also part of job creation.
The challenges of putting together an additional 50 000 megawatts in our economy over the next 20 years could be a potential job creation exercise if we manage it correctly. The risks aside, that is what we should be looking at. The key aspect, which I concede from Mr Winde, is to create the regulatory framework and transparency in relation to that.
Therefore, the contribution of the Economic Development department, through the New Growth Path, is to make sure that we can achieve the twin objectives of increasing employment and greater equity in our society. I think what Minister Patel was trying to set out is what the strategy is in order to achieve those twin objectives. What is the broad framework? What is the arsenal of instruments we are trying to deploy to achieve those objectives which, I think, he has outlined fairly eloquently?
A promising note is that we achieved 4,8% growth in the first quarter of this year. Clearly, we demonstrated that our economy is rebounding, which is quite an important exercise. I think the New Growth Path is trying to steer this economy in the right direction, because it is asking what the best labour-absorbing sectors are. Which are the sectors where we are likely to generate more jobs? For your interest, hon members, for 25 years from 1970 to 1995, this economy created zero jobs for Africans.
The reasons are clear. There was a decline from more than 2 million farm workers in agriculture to about 930 000. We also saw a decline in mining from about 630 000 to about 223 000 jobs. Clearly, if you turn the question around and ask what kind of workers were losing jobs, they were the unskilled workers.
So, that is a challenge we are trying to grapple with in this economy. Having been given the profile of the unemployed, I think we are beginning to look at those sectors that are likely to ensure we can generate jobs, wipe out unemployment and achieve the broader objectives set out in the New Growth Path.
The one aspect which is really going to be critical, moving forward, is support for small and medium enterprises, particularly access to finance. I think our approach is twofold. It is one that asks how to use the existing institutions within our stable to make sure they can contribute to that, but also how to organise across government in such a manner that we can maximise the impact. That is going to be critical, moving forward.
Part of what the Minister has referred to is to achieve this effectiveness by combining some of the institutions that are dealing with small and medium enterprises. However, as we discuss that, one of the issues we should not forget to address is the unequal geographic spread of our economy, and its spatial dimension.
It is going to be critical that that matter be attended to in a better way, because in some areas - particularly in the former homelands - you have a concentration of unemployed people combined with low levels of business activity. So, we are seized with that task and it is a major one we need to deal with.
One aspect I also want to deal with is the kind of dichotomy people tend to create between the New Growth Path and the Industrial Policy Action Plan, Ipap. We have not spelt out industrial policy in the New Growth Path precisely because Ipap is a component of what we are talking about as part of the New Growth Path. Part of what the hon member is saying draws a distinction between job creation and growth, as if these things are mutually exclusive.
When you talk about job creation, you are not necessarily talking about growth. We are talking about growing this economy and, in the process, in a manner which creates jobs. So, those should not be treated in isolation. It is in that spirit that we place long-term or long-running economic planning in the driving seat of growth.
When we work together with provinces, we want to create an infrastructure, both physical and nonphysical. We think Minmec is an important institution to achieve that objective. So, collaboration is going to be critical, moving forward.
One other issue I want to talk about is the ship repair industry. There are two problems which we need to address, and we need to work with the Western Cape government to do so. The first problem is that of the ownership structure, which creates confusion. Even the message you are sending out creates a whole lot of confusion. The equipment is owned by Transnet, but the people who operate it are from the private sector. Who will get that stake? It is a matter that we are seized with. We are discussing it with the unions. There are two different opinions from two different unions in this regard. It is a matter which is receiving attention.
The second problem you have is that there is no land available in Cape Town. For us to develop these structures, more land is needed. We have got to move most of the stuff to Saldanha. It is something that needs to be looked at in detail.
I think, hon members, what we need to do, between ourselves and provinces, is to move into action. Moving into action means prioritisation, it means identifying what I would call low-hanging fruit.
What are the areas in which you can achieve quick wins? What are the areas where you can make an impact quickly, particularly those areas where there is more labour absorption?
So, that is the kind of challenge that we think we should be dealing with amongst ourselves. We have a collective responsibility to deal with the scourge of unemployment, inequality and poverty. Achieving this objective requires coherence and proper co-ordination at leadership level. As the Department of Economic Development, we commit ourselves to working together with the provinces to achieve these objectives.
I concur with the hon Mahlangu that the road ahead is bright. The challenge for us is to achieve what the eminent Indian scholar Amartya Sen in his book Development as Freedom calls expanding the possibilities for our people. Thank you. [Applause.]
Hon Chairperson, hon Minister Patel, hon Deputy Minister Godongwana, members, comrades and distinguished guests, before I begin my speech I need to assist the hon Lees. He complained about the opportunity of having only six minutes to address this House. I think the hon member would appreciate that the ANC was voted for by many South Africans. That's why we have the opportunity to speak for more than six minutes.
The voters did so because they reject an open opportunity society because it results in open toilets. The hon member talked further about cutting our alliance with the Congress of South African Trade Unions, Cosatu. At least, as the ANC, we have an alliance and are not swallowing political parties, as they did with the ID.
The hon member predicted that we would not be able to reach the five million jobs target that we have set for ourselves as the ANC. I would request the hon member to be patient, to wait and see, because the ANC will deliver. I know that from where you are seated, you want the ANC to fail, but we will disappoint you.
The hon member talked about the R1,2 billion given to the ANC Youth League, which was misleading. No government money can be given to the Youth League or the DA. Is that what they do in the Western Cape: give the DA Youth government money? We are not doing that as the ANC. [Interjections.]
The central and most pressing challenges we are faced with are unemployment, poverty and inequality. This means that we must simultaneously accelerate economic growth and transform the quality of growth. Our most effective weapon in the campaign against poverty is the creation of decent work. Creating work requires faster economic growth. Moreover, the challenges of poverty and inequality require that accelerated growth take place in the context of an effective strategy of redistribution that builds a new and more equitable growth path.
Decisive action is required thoroughly and urgently to transform the economic patterns of the present in order to realise our vision for the future. To do this we need to proceed on a sustainable, equitable and inclusive economic growth path.
Central to the country's economic challenges in the current phase is to build an integrated and growing economy from which all South Africans can benefit. The ANC will continue to strive for macroeconomic balances that support sustainable growth and development. These balances are requirements that ensure higher rates of growth, labour absorption and poverty reduction.
ANC government action will be guided by building an economy that is characterised by high levels of manufacturing activity, modern services, expanding trade, cutting-edge technology and a vibrant small business and co-operatives sector. State, social and private capital, as well as resources and capacities in the hands of communities, will be mobilised for this purpose.
To ensure that the benefits of growth are shared by all the focus will be on creating decent jobs and ensuring an improving quality of life for workers. The focus includes programmes to eliminate economic dualism and exclusion; skills development and paying specific attention to industries that involve themselves with marginalised communities; access to microcredit; small-business assistance; land reform; Public Works projects; and the promotion of sustainable livelihoods at community and household levels.
An intensive process through the ANC's national executive committee discussed the type of government structure that would best serve our goals. The ANC wants a structure that would enable us to achieve visible and tangible socioeconomic development within the next five years. It should be a structure which will enable us to implement our policies effectively. These discussions were informed by the ANC's 2009 election manifesto, in which the ANC undertook to focus government on the creation of decent work opportunities and sustainable livelihoods as the primary focus of economic policies in building a more equitable and inclusive economy.
In addition, decent work is the foundation of the fight against poverty and inequality, and its promotion should be the cornerstone of all our efforts. Decent work embraces both the need for more jobs and for better quality jobs. The creation of decent work and sustainable livelihoods will be central to the ANC government's agenda.
With all of these considerations in mind, a new Department of Economic Development has been established to focus on economic policy-making. The Economic Development portfolio will have a strong domestic focus and will address, amongst other things, matters of macro- and microeconomic development planning.
The ANC is therefore committed to addressing the problem of unemployment through practical measures in this year. Therefore, 2011 will be the year of job creation through meaningful economic transformation. It is not enough to say that more and equitable sharing of economic growth will lead to the creation of jobs. We know that South Africa experienced relatively strong economic growth during the 2000s, but we also know that this growth did not address the structural challenges in the economy.
Economic development is at the heart of driving the national project of job creation and our nation-building project of job creation. The New Growth Path indicates that our goal of growing employment by five million new jobs over the coming decade is achievable. It cannot, however, be achieved with only a single policy instrument. It needs a package of interventions that addresses a range of challenges in the economy and that balances competing policy concerns while mitigating unintended consequences.
We need to build on the strengths and successes of our policy interventions in the past, recognise their weaknesses and gaps and address these, and, crucially, seize the moment to forge a common vision to take society forward.
The ANC's policy position on a mixed economy goes to the heart of the structured approach of the New Growth Path in that it broadly addresses all key stakeholders and reflects a realistic assessment of the internal balance of forces.
In conclusion, economic development and growth and the goal of growing employment by five million new jobs over the next decade cannot be achieved with only a single policy instrument. This needs, as I said, a package of interventions that addresses a range of challenges in the economy. We need to build on the strengths and successes of our policy interventions in the past, recognise their weaknesses and gaps, and address these.
This includes macroeconomic considerations entailing more active monetary policy interventions to achieve the growth and jobs targets. Macroeconomics involves targeted measures to control inflationary pressures and support competitiveness and increased equity, which, in turn, makes the macroeconomic strategy sustainable and viable. It includes reforms in policies on skills, competition, industry, small business, the labour market, rural development, and trade policy. The ANC supports Budget Vote No 28: Economic Development. Thank you. [Applause.]
Hon Chairperson, the outcomes of the strategic plan, as set out by the department, require a pro-employment route that absorbs large numbers of people into the economy by focusing on labour-absorbing industries and reducing the carbon-emission footprint. Doing this will stimulate the green economy, which, in turn, will lead to more jobs.
As we speak, this debate, in essence, is about jobs. The unemployment rate for the first quarter of 2011 stands at 25% using the strict definition, and at close to 36% using the expanded definition.
During the past financial crisis, the South African economy shed more than one million jobs, real jobs. More than a third of our adult population is currently unemployed. These are the realities that we have to contend with.
After I listened to the hogwash that the hon Maine got off his chest, I thought, maybe I must for the moment leave my formal speech and speak about something more interesting, and this is once again to break down the word "jobs". [Interjections.] You don't need to be a scientific specialist to know that you start with the letter "j". There is only one "J" at the moment that is dictating the current debate in South Africa, and that is Julius. [Laughter.] [Interjections.] Now we heard some hon member very recently refer to this Malema phenomenon ... [Interjections.] ... that is creating all this uncertainty and investors that don't want to come and invest. I can continue with that, but the reality is: the Malema phenomenon is not good news for the South African economy. The second letter of jobs is the "o", for opportunities, Minister. We need to grab those opportunities. There is a window of opportunity for the green economy to get a footprint in Africa and the world, and to use our resources to the best of our people's ability.
Then we come to the letter "b" of jobs. It stands for best practices. Hon Minister, I'm not so sure that in terms of the exchange rate, we are exactly on the right track. Maybe, hon Minister, you could give us more guidance in terms of your feelings and analysis of the exchange rate and, specifically, to grow the economy. We also need to have a very, very serious debate about localisation and what we can do to improve the quality of our people's lives. But best practice must also include leadership, and the problem with the ANC is a lack of leadership. [Interjections.]
Coming then to the letter "s" of the word jobs, "s" stands for strategic thinking. If we don't change the situation around of what I call the golden triangle of Johannesburg, Cape Town and Durban, we are not going to succeed in growing the economy of this country. We must have a serious debate about how we are going to achieve this. Unfortunately, I'm constrained by time, and that is a very long debate. To achieve that, we must build on the issue of what we can do with the infrastructure.
The last point on strategic thinking is our education system - on many levels. The reality is that only 7 000 matriculants passed maths ... [Time expired.]
Hon Chair, hon chair of the select committee, hon Minister of Economic Development Patel, hon Deputy Minister Enoch Godongwana, hon MECs and hon members, kindly accept our greetings from the Eastern Cape. Overcoming poverty is not a task of charity; it is an act of justice. Like slavery and apartheid, poverty is not natural. It is manmade and can be overcome and eradicated by the actions of human beings.
Poverty and underdevelopment remain our greatest challenge. It is the task of this government, and the Department of Economic Development in particular, to address these challenges to overcome poverty through decisive action, and to set our nation on a path towards sustainable economic growth.
The destabilising effects of the global economic crisis that the hon Godongwana spoke about recently, are ongoing, particularly in the developing economies. The economic imbalances brought into focus by the global economic crisis are increasingly translated into popular uprisings, a fact leaders around the world should be taking note of. The heightened global awareness of the devastating effects of climate change has challenged practitioners across the spectrum to take a relook at their relationship with nature. The relevance of these global trends to our own situation is acute. Firstly, failure to construct a clear strategy for entrenching a developmental state that defeats dualism and underdevelopment could result in growing alienation and distance between government and the masses of our people. This could pose a serious threat to the state.
Secondly, South Africa now boasts the worst income disparity in the world. The Gini coefficient increased from 0,64 to 0,69 in the first decade of democracy, and awareness of inequality in the distribution and scale of economic opportunities and disparities in the rate of economic participation is growing, particularly here in the Western Cape.
Thirdly, our provincial economy in the Eastern Cape is dominated by export- led automotive-sector manufacturing and by the tertiary sector. This makes our economy especially vulnerable to international market fluctuations.
Finally, the geographic location and socioeconomic status of the province make it particularly susceptible to climate change. These challenges, if coherently addressed, present opportunities to develop new labour- absorptive industries in the production sector, particularly aligned with the green economy and the New Growth Path.
It is important that our strategies take heed of the changing world economy. In this respect, it is notable that Chinese interest in investing in the manufacturing sector in the Eastern Cape, particularly in the East London industrial development zone, is increasing. In exploiting these opportunities, it is possible for the province to reshape its economy.
Much has been said about the challenges facing the national and provincial economies, both in this House and in the media in general. Those that have an impact on our future plans are mentioned here. They are the carbon intensity of our economy fuels climate change; the decline in the manufacturing base; possible deindustrialisation in some sectors, particularly the textile sector; ageing economic infrastructure; slow progress in reversing socioeconomic deficits, particularly in respect of employment creation, poverty reduction and population density; chronic underinvestment in the public sector and economic infrastructure and logistics; and the global recession and an unfavourable environment for exporters.
Over the Medium-Term Expenditure Framework period, we are supported in our commitment to addressing these issues by the recent pronouncement on the Department of Trade and Industry's R9 billion jobs fund, the Industrial Development Co-operation's allocation of R10 billion to finance investment in areas of high job potential, and the renewal of tax incentives for manufacturing investment.
With our partners in government and the private sector, we intend to systematically address these challenges through a process of focused economic and environmental analysis and the mobilisation of resources. As a province, we are committed to putting the right people in the right places to do the right things to sustain a high-quality, professional and enabling service in terms of the core programmes.
All our public entities have been tasked with adjusting their strategies and targets to reflect the new approach of leveraging government's share of the economy to enhance employment and growth in the context of sustainable resource utilisation. We will ensure closer collaboration, integration and alignment of the two core programmes in pursuit of the provincial green agenda.
To address these unacceptable disparities defining the provincial economy, we will champion the new integrated Wild Coast development initiative to address the myriad of challenges and to unlock the abundant possibilities in this neglected region.
We will implement vigorously the provincial industrial development strategy, focusing in particular on the auto, green, agro-processing, petrochemical, manufacturing and tourism sectors. We will address challenges in respect of the funding and mandate of the industrial development zones, and lobby for the redirection of provincial resources towards small-town development. We will work to decrease the province's dependence on imports and create much-needed jobs. Efforts will include engaging industry players to facilitate the revitalisation of the industrial parks in Butterworth, Fort Jackson and Dimbaza, and the progressive development of the Science and Technology Park at the East London industrial development zone.
We will also launch a provincial industrial jobs stimulus programme, which will boost our efforts to establish a low-carbon economy. The programme will give fiscal and programmatic content to the provincial industrial development strategy and give concrete expression to government's New Growth Path. It also responds directly to the President's call to make jobs the number one priority for 2011. The programme includes a fund to be administered in partnership with business and organised labour, and R50 million has been allocated for the fund this year. We will be creating an expected 5 000 jobs in terms of the Industrial Policy Action Plan 2, Ipap 2, and in terms of the provincial industrial development strategy- aligned sectors such as the green, renewal, nonautomotive and agro- processing sectors.
Management of our protected areas and the fauna and flora within them will receive heightened attention in 2011. We intend to move rapidly towards popularising the notion of sustainable green economic activity, with the emphasis on supporting research and development of green technologies for commercial and domestic applications.
Faced with increasing numbers of species and habitants under threat, efforts are to be increased to combat environmental crime. This requires the department to improve its regulatory and compliance regime and to augment this by urgently implementing strategies to mitigate the effects of climate change.
To that end, we will lead efforts to develop climate change mitigation and adaptation technologies, explore and develop alternative energy resources, and guide and foster behavioural change. In conclusion, we need to create new growth engines and new job opportunities. Thank you. [Time expired.] [Applause.]
I know that we have had a very long day. Can we just refuse to fall asleep, because then we will get exposed. Please, let us just resist that temptation.
Hon House Chairperson, hon Minister and Deputy Minister in the House, my colleagues, many goals have indeed been set by the government over the past decade to improve the South African economy. Every year we look forward to being the pioneers of a new economic approach and ways to effectively deal with the enormous socioeconomic and environmental problems facing the economy.
We support all efforts and commend the department's attempts to pursue a more aggressive economic policy, with the state intervening to address the structural constraints on our economy.
A steady growth path for the South African economy is long overdue. For too long we have lived under the illusion that our economy was sound, while our unemployment rate remained one of the highest in the world. As long as this prevails, it widens our gross inequalities, and the natural wealth of our country becomes unsustainably depleted.
In 2003, some European countries were even subsidising cattle at R19 per head. Less than five years ago, the UN's Dollar-a-Day campaign was geared up to feed starving families in Africa. The sad reality is that in our country there are families who survive on less than R15 per day.
Hon Minister, I think it is time that we in this department have a holistic approach to job creation and transform the economy of South Africa, so that the people in this country who need to benefit do benefit.
This department must be willing to address both market and government failures in order to create sustainable economic growth for the poor and previously disadvantaged communities. Job creation must be a primary indicator, but competitiveness and export ability must also increase.
We therefore welcome Minister of Economic Development Ebrahim Patel's move to deal with jobs growth in South Africa. There is also a dire need to make a wage subsidy aimed at incentivising youth employment available.
One of the biggest challenges facing our economy is the rate at which technology is advancing and changing the face of global economic development. If we do not rise to meet these changes, we will certainly be left behind and be subjected to severe limitations in dealing with the challenges of the millennium. We support this Budget Vote. I thank you.
Chairperson, hon Minister, Deputy Minister, MECs, former colleague Dorothy Mahlangu and hon members, I think that we should look at the overall strategy here and the fact that the department is newly established. Being newly established, it only has four programmes and just over half a billion rands to do its job, not forgetting that we have actually been working in an economy that is structurally flawed and that has been perpetuated by the former apartheid government, some members of which are sitting here today.
The fact that we lost a million jobs last year should be taken in context, because it was a secondary effect of the financial crisis that emanated from the United States where free-market fundamentalism is practised.
South Africa managed to withstand many of the financial storms because of the policies the ANC has put in place. We lost those jobs because of the second round of those effects on jobs. The idea that we have lost jobs because the ANC, or rather, the government, is living under an illusion, hon Gunda, is very disingenuous. This is because when we took over as the ANC there was growth and that growth led to the creation of more than 3,5 million jobs. So, you are living under an illusion, hon Gunda.
Is that a point of order? [Interjections.]
No, Chair. We would like to ask if the member will take a question. [Interjections.]
No, I am the one to determine that. Hon member, are you prepared to take a question?
I would like to finish my speech first, and then I can take a question.
Fine, he is not prepared to take a question.
The department has four programmes, which are: administration, economic development, policy development and economic dialogue. The major part of this budget falls under economic policy and co- ordination. The concern with that, hon Minister and Deputy Minister, is that most of the funds are being transferred to agencies, and you know that the problem with agencies is that they have not been effective for some time. We would remember that there was a report that was commissioned by the National Treasury on development finance institutions, DFIs. I hope that that report will not be chucked aside, because the restructuring of DFIs is important, so that they fit into the New Growth Path we envisage.
We also have the state-owned enterprises. It is important that state-owned enterprises are harnessed into the New Growth Path, so that we do not depend on foreign capital to fund our projects. Domestic savings in South Africa are very low. If domestic savings in South Africa remain very low, we will at some stage be compelled to go and borrow funds outside. Key to this economic dialogue programme is that the department intends to have a dialogue with society, labour, and other stakeholders.
We must encourage citizens, even me and you, to save, because when we save there is more money in the country, there is more money for investment and, as such, we depend less on foreign investment.
However, I would like to come to what the hon Lees said, that the International Monetary Fund has said that the 6,3% growth wouldn't be achieved. If you remember, hon Lees, during the financial crisis, the IMF predicted world economic growth, or rather, changes within a month many a time, because they were not sure of their theory. In any model, be it economic or scientific, there is always an error of parallax, which means that the model itself is flawed. So, we should not actually believe what the IMF says - that the growth in the country is going to be as low as they think. But we should actually take cognisance of the fact that with any prediction, with any model, we should leave room for the error of parallax.
Because we are looking at export-dominated economic growth, there are a lot of debates about the exchange rate, and these debates have been going on for many years. We know that as long as there are trade imbalances with other countries, and interest rate differentials between our trading partners are lower, there will be capital inflow into the country. Therefore, we cannot, from time to time, try to combat the strength of the currency, because in that way we would be playing into the hands of the free market and, as such, losing a lot of money trying to fight the exchange rate that has come to be stable. However, what we need is a less volatile rand exchange rate, a rate that is more or less stable. We don't know what the rate of exchange should be, because there are people who say that the rand must be weaker, while others say that it must be stronger. It just depends on which side of the equation you stand, because if you are a manufacturer you would like the rand to be weaker. But if you are an importer, you would like the rand to be stronger. So that debate has been raging for a long time and we need to find the middle ground where we can grow our economy without having this hindrance of the exchange rate and the rand-dollar situation. [Laughter.]
The hon Lees believes that this department was stillborn. I think that, in the first place, if this department was stillborn we would not be debating this budget today. Secondly, there would not be the New Growth Path. Thirdly, he would not have attended the economic summit that he attended last week at the Birchwood Hotel in Johannesburg.
In the two years that this department has been in existence it has managed to deliver the New Growth Path, and has managed, according to strategic objectives, to have at least the first conference on the economy. This conference will now be held on a yearly basis. Therefore, hon Lees, I think you were a bit economical with the truth there.
Hon Sinclair, regarding the Malema issue, you know that in terms of investment, when investors come to the country, they do not specifically look at individuals; they look at the whole setup in the country. Now, the fact that Malema can say whatever he wants to say shows how democratic South Africa is. It is not like the apartheid days when you could not say anything you wanted to say. This gives investors confidence that they can come to South Africa because there is political stability and a proper financial infrastructure. [Interjections.]
What investors look at as well when they draw up a contract is that there are institutions to make sure that the contract can be enforced, and in South Africa we have a proper judicial system that ensures that contracts are enforced. Those are things that investors look at. Regarding the Malema issue actually, on the other hand, they might not be attracted to South Africa because they know that there is political instability.
We had a meeting with the IMF, as finance yesterday, and they expressed their sincere gratitude that South Africa was doing very well as far as its policies were concerned: the macroeconomic policy, the microeconomic policy, and also the fiscal policies were doing quite well. Thank you, Chairperson. [Time expired.] [Applause.]
Chairperson, may I start by saying that I am struck by the high level of convergence of thinking on so many key issues in promoting the economic goals of this nation. There are some common themes, and I would like to identify eight areas in the contributions that I think sum up the growing consensus across party lines about what is necessary.
To begin with, there is clearly a significant need to focus on infrastructure. The hon Winde raised the examples of energy, of transport, of water and of ports. Not only does investment in these areas create jobs, but the resultant physical infrastructure is absolutely critical to sustain job creation. So, we have to get that right, and that is a very big part of the focus of this government.
The second aspect is the need to unblock the obstacles to jobs and to investment. The hon Mahlangu raised some very clear, very concrete examples of where we are perhaps not getting the balance right and where the level of foot-dragging is inconsistent with the urgency of our national jobs goals.
The third area seems to me to be the need to seize opportunities that are consistent with the New Growth Path. Many different speakers raised ideas and made suggestions or reflected on their provincial experiences. We heard examples from the Eastern Cape, from Gauteng, from the Western Cape, and others. In some cases, it was about the green economy. In others, it was high-level business services, such as the oil and gas service sector, that is a crucial opportunity for the West Coast.
The fourth area is that of beneficiation: using our natural resource base as a comparative advantage that we have in many cases. We do not have Turkey's advantage: it is located next door to Europe. We do not have China's advantage: it has a consumer base of 1,3 billion people. However, we have one very significant advantage: the world's biggest non-energy mineral base, considerable agricultural resources and other natural resources such as wind and sun. We have to use economic policy increasingly to play to our strengths, not to copy the strengths of others, but to see the indigenous opportunities.
Now MEC Mahlangu raised the example of the cost of inputs into the furniture industry. Similarly, we can use examples of the cost of steel on the downstream industry. These are all instances where, working together with provinces, with investors, and using competition policy or new investment opportunities, we can unlock the opportunities that are there waiting for us in the economy.
The fifth area is that of localisation. The hon Sinclair raised this issue, and we have just made a very significant amendment to our Preferential Procurement Regulations to enable a new model that places local manufacturing capability at the centre of what we want to do. Now, it is not an invitation to local entrepreneurs to fleece the state. We still have to have competition in the domestic economy. We must try wherever possible not to have a single supplier, and there are tools that are available to us to try to ensure that.
However, it is absolutely vital, if we are going to spend this trillion rand over the next four years on infrastructure development, that we have a legacy. That legacy has to be a strong industrial base, making the manufactured inputs, the components, the rail tracks, the carriages, the turbines, and then exporting those to the rest of the African continent and to other developing countries.
The sixth aspect is the importance of research and development. It is not only wealthy, advanced economies that need to invest in research and development. Precisely when you want more jobs, you need to identify how you can do that, and a research and development advantage - a new technology, a new technique, a new way of doing things - often does that.
The seventh area is the role of government. The hon Gunda says that part of the role of the department and, by extension, government, is to address not just issues of market failure, but also issues of public sector failure. That is important. We have to make sure that the economy works in a co- ordinated way. The old, stale debates about state versus market are gone. It is really about how to integrate state and market. The point that the hon Winde raised, I think, is worth repeating, because I agree with what he says. He says jobs need growth, and then he says government needs to steer that growth in the right direction. It is that steering role of government that constitutes the developmental state. That is the essence of the policy of this government. We want jobs-rich growth; not just any growth, but jobs-rich growth that assists us to meet our developmental goals. I think that is important - that we have so many areas of agreement.
In the limited time I have available, I should make the point that our policy is not export-led growth. It is to use the opportunities of exports to beneficiate more of what we currently export in raw form. This is so that even the exports are more jobs-rich.
When you export raw material, you create only digging jobs; mining jobs. When you export finished goods, embodied in that product is a range of services: the science and technology of the nation, the labour power of your factory workers, the supplier sectors, transport and others, all of which collaborate in making that product. So, I think, it is critical for us that we see opportunities with exports, but that we also exploit the opportunities in the domestic market.
Finally, I think that if there was a contribution that was consistently disappointing it was that of the hon Lees. I would encourage the hon member to read the Constitution of the Republic of South Africa, the New Growth Path, the Labour Relations Act, and China's numerous five-year development plans. His contribution indicates that the member, perhaps distracted by other priorities, has not had an opportunity to read these documents. He is unfamiliar with them.
I do wish to state, in conclusion, that I found the tone of the debate, in general, to be high, and I really appreciate the many useful suggestions and ideas that hon members have made.
It is the birthday of the Deputy Minister of Economic Development. I am sure, on behalf of everybody here, you would want to wish him a very, very happy birthday, and assist him to get to the airport in time to dash back to his family so that he can spend at least some hours of his birthday with them. Thank you very much. [Applause.]
Thank you very much, hon Minister. Let me take this opportunity on behalf of the National Council of Provinces, and the Chairperson and the Deputy Chair of the Council, members of this House and special delegates who have participated in the debate to wish the Deputy Minister a happy birthday.
Debate concluded.