Hon Chairperson, members of the portfolio committee, Members of Parliament, Ministers, Deputy Ministers, director-general, officials of the Department of Trade and Industry, DTI, and officials from the Council of Trade and Industry Institutions, COTII, leaders of business and labour, distinguished guests, and ladies and gentlemen, it is common knowledge that the term of this administration has coincided with the most severe global economic crisis since the 1930s.
When we took office in 2009, the South African economy moved into recession, which cost us close to a million jobs. Sir, 200 000 of these, or 20%, were in manufacturing, a sector which contributes only 14% to the GDP, meaning that the impact of the recession was disproportionately severe in manufacturing.
This reality, highlighted by the global economic crisis, put into sharp relief the necessity to redouble our efforts to transform a number of long- standing structural imbalances and weaknesses in our economy in order to place it on a new sustainable and productive sector-led growth path.
Guided by the resolutions adopted at the ANC's 52nd National Conference in Polokwane and the manifesto in terms of which we were elected in 2009, this administration tabled the New Growth Path, within which the Industrial Policy Action Plan, Ipap, was identified as the manufacturing job driver. Ipap has become the centrepiece of the Department of Trade and Industry's work, with all our actions being co-ordinated with or aligned to it.
Over the course of this administration we have institutionalised the tabling at the start of each financial year of a new iteration of Ipap, covering action plans over that financial year and two outer years. Ipap has moved far beyond vision statements or diagnostics. Its main feature is the identification of action plans with defined frameworks and identified responsibilities for implementation by various entities. Key action plans have been developed after consultation with industry players.
Last month we released the 5th iteration of Ipap, covering this government's last full financial year in office. Accordingly, we highlighted a number of key lessons we have drawn from our efforts over the past five years, as well as identified the broad direction we believe a higher impact industrial policy would need to traverse in the future.
One of our major conclusions is that where government has acted purposefully to implement programmes developed in consultation with industry players, businesses and labour, concrete positive results have been achieved. Among our most significant achievements has been the finalisation of the transition from the Motor Industry Development Programme, MIDP, to the Automotive Production and Development Programme, APDP, which now includes the heavy, medium and commercial vehicle segments of the automotive sector, as well as a programme under discussion and in development for electric vehicles.
Providing incentives to promote competitiveness and localisation in this important sector of the South African economy has contributed to production volumes increasing to 539 424 units, with exports reaching 277 893 units in 2012. Furthermore, this change in focus in incentive, to support and encourage deepened local component manufacturing, has resulted in 128 projects supporting or sustaining 57 197 jobs.
As a sign of confidence in the steps we have taken and in the future of this sector in South Africa, private investments of nearly R16 billion have been secured. These have included both new investors and new lines of operation by existing investors. Among the new investors in the sector we have welcomed the First Automobile Works of China which is constructing a truck plant in Coega and the Beijing Automotive Works which is building a taxi assembly line and distribution centre. Examples of existing investors' expanding their operations include Toyota's Africa taxi, Quantum Ses'fikile, assembly line in Durban. We've also seen important new investments by long established regional equipment manufacturers such as Mercedes Benz, BMW, Ford and General Motors.
The clothing, textiles, leather and footwear industry experienced a remarkable turnaround, directly attributable to a radical change in our incentive programme, which occurred when we introduced the Clothing and Textiles Competitiveness Programme, CTCP. Sir, 12 205 new permanent jobs have been created in companies benefiting from this programme. A pleasing new development has been that local retailers have committed themselves to local procurement in support of manufacturing companies. Over 469 companies were assisted under the CTCP, with R1,5 billion's worth of applications approved. Approximately 49 000 existing jobs are being retained through the support of the CTCP.
The roll-out of the Renewable Energy Independent Power Producer Procurement Programme has underpinned significant investments in renewable energy. Significant investments in wind tower manufacturing and solar power plants have been made, including investments by DCD, which invested R300 million, Mainstream Renewable Power, R4,6 billion and SunEdison, R2,6 billion.
Chairperson, in 2009 we said that the threat of de-industrialisation loomed large and we had to confront this danger with interventions to promote industrialisation in a systematic and sustainable manner. We also said that the infrastructure roll-out, which is our main countercyclical response, must be a tool of industrial development.
Accordingly, we have sought to strengthen our procurement system to support increasing local industrial production. In this regard we can point to the designation of sectors for local procurement under the Preferential Procurement Policy Framework Act as introducing a sea change in industrial development in South Africa. The first wave of designations has already seen significant new investments in sectors such as transport and capital equipment, and companies are actively "tooling up" to ensure that they are positioned to take up the opportunities which arise from the infrastructure programme.
Sectors already designated include railway rolling stock; power pylons; bus bodies; textiles, clothing, leather and footwear, particularly workwear; canned vegetables; furniture; certain pharmaceuticals, particularly oral solid dosages; and set-top boxes.
Furthermore, localisation is now fully entrenched in a number of key procurement programmes, such as renewable energy generation and fleet procurement processes of state-owned companies.
Moving ahead, work has already begun on assessments of sectors and products for designation, including valves, manual and pneumatic actuators, power and telecommunication cables, and components of solar water heaters.
In addition to the strategic use of localisation in government procurement, the Department of Trade and Industry has also used a variety of incentives to support and encourage investment in manufacturing and value-added services. A case in point is the Manufacturing Competitiveness Enhancement Programme, MCEP. Grants to 214 enterprises have been approved, at a value of R1,35 billion. Sir, 41 626 jobs are expected to be retained as a result, with a total investment outcome of R5,37 billion.
I am pleased to report that MCEP is currently operating on an average two- month turnaround time. Considering the large numbers of applications and the amounts of funding involved, this is an excellent rate and the feedback I am receiving from a range of firms is very positive indeed.
Through the 12i tax incentive we have supported 26 projects involving investments valued at R32,6 billion and creating or sustaining 3 326 jobs over the past four years.
Additionally, we can report that the European Outsourcing Association awarded South Africa its prestigious Offshoring Destination of the Year Award a few weeks ago. Over the past three years, we have seen investments in business process services to a value of R1,3 billion, supporting 4 500 new jobs.
At the beginning of this administration we identified the film industry as having significant potential. Our efforts to work with the industry to unlock this potential have resulted in an impressive roster of locally shot blockbuster films. There are a number of things outside that show you some of the ones that have been shot in South Africa. I recently had the opportunity to see some of the rough cuts of the film Mandela: Long Walk to Freedom, which is a film that we have been supporting. I can report that we in the Department of Trade and Industry are proud to have been associated with supporting what I have no doubt will be one of the most important films ever produced in South Africa. [Applause.]
Chairperson, I believe that our record speaks to what can be achieved by industrial policy, and it also shows that we have laid a basis for strengthening our efforts to reindustrialise our economy in the future. As the current iteration of Ipap argues, industrial development in the future will need to be built on six pillars. These are, firstly, the beneficiation of mineral products, and this is something that is fundamental to our future progress; secondly, regional economic development and industrial integration; thirdly, the steady roll-out of the infrastructure development programme; fourthly, the development of new export markets; fifthly, local procurement and supplier development; and lastly, partnerships with Brics countries.
We believe that what we need in the future is a higher impact industrial policy and not a lighter touch programme, as has been called for by some of our critics.
South African history does not, however, allow us to grow the economy, and to industrialise and develop, without addressing the legacy of disadvantage, discrimination and underdevelopment which was left to us by apartheid. But while one element of economic transformation and broadening participation is about redressing the injustices of apartheid, it is also important to recognise that there are sound socioeconomic reasons for aspiring to a more inclusive economic model.
The Department of Trade and Industry considers entrepreneurship, co- operatives and SMME development as not only central to addressing injustices of the past, but also key to our efforts to ensure a more vibrant and effective productive economy. In other words, by broadening economic participation to include participants who were excluded in the past, we develop a stronger entrepreneurial base for the future.
It is for that reason that all of our SMME support programmes were reviewed in 2009 to identify ways to improve outputs and impacts. One outcome of this exercise was that we decided to prioritise incubation programmes based on evidence both in South Africa and elsewhere. The programmes, which seek actively to support productive small, medium and micro enterprises, SMMEs, in their start-up phase and to mentor them as they develop, dramatically improve survival chances for this sector. In line with this new priority and to leverage private investment, the Department of Trade and Industry introduced the Incubation Support Programme in September 2012, with the aim of contributing to the establishment of 250 incubators by 2015-16.
To date 13 projects have been approved under the scheme, with a total project value of R373 million, in sectors such as renewable energy, information and communications technology, agroprocessing, chemicals, mining, and clothing and textiles. Currently, the Small Enterprise Development Agency Technology Programme has 42 incubation centres in all nine provinces in sectors such as biotechnology, mining, agroprocessing, construction, jewellery, automotives, metals and renewable energy. To date, 376 new enterprises have been created as a result of these efforts. Furthermore, 2 247 SMMEs were supported, 28% of which are owned by women, and 2 161 jobs were created as a result. We will in future also encourage universities and science councils to host incubators. These incubators will be used to develop hi-tech and high-growth sectors.
Since 2009 we have made steady but important progress in ensuring that the co-operatives sector receives the attention that the potential of this sector deserves. We have reviewed the Co-operatives Act, and yesterday the National Council of Provinces approved the new amending Bill which, when it is signed into law, will allow us to establish a co-operatives development agency to provide more focused development support for co-operatives, and will also allow the establishment of the co-operatives tribunal. [Applause.] Another feature of the Bill is that it will recognise an apex body to represent the interests of co-operatives, both in South Africa and in international contexts.
Hon members will be well aware of the efforts the Department of Trade and Industry has made over time to increase the participation of black people in the economy. In line with the changing landscape, new black economic empowerment legislation and a proposed new amendment to the Codes of Good Practice were introduced in 2012. The BEE Bill, which is before the portfolio committee, seeks to confront fronting. It will establish a BEE commission to deal with complex fronting and thus enhance compliance with the legislation.
The Codes of Good Practice have been revised to incentivise stronger performance in enterprise development and supplier development. These will be the key features of broad-based black economic empowerment. The shift to enterprise development and supplier development is intended to support stronger symbiotic relationships between black-owned enterprises and large companies in key value-chains in the economy. We hope that it will help to ensure that big business plays a role in developing viable suppliers that will be able to take on opportunities in both domestic and international markets.
The Department of Trade and Industry views women's empowerment as one of its priorities, and we are in the process of developing a national strategic framework on women's economic empowerment. This aspect of our work has been led by our champion Deputy Minister, Elizabeth Thabethe, and she will develop this point in her input a bit later on.
In 2009 we said that industrial policy requires a supportive regulatory environment to foster more competitive and dynamic industries and businesses, and to prevent harmful market domination and abuse and the exploitation of consumers. Consequently, business regulation and the protection of vulnerable consumers has over the past four years been another focus of attention.
A key outcome has been the establishment of the Companies and Intellectual Property Commission, CIPC. We took the decision, which I now think has been vindicated, to go ahead with the roll-out of the new Companies Act, despite reservations in some quarters. The new Companies Act gives South Africa a forward-looking regulatory framework that provides for simple, easy company registration. It gives us enhanced governance and clarity on disclosure standards for business, and it provides measures to assist companies facing economic difficulties.
The innovative business rescue provisions have already shown their mettle as a tool to save otherwise viable enterprises that are facing cash flow problems from the previously inevitable fate of liquidation. Sir, 945 companies, including close corporations, have been assisted through this scheme, and 6 624 jobs have been saved as a result.
We have also introduced other important legislative changes. They include the Intellectual Property Laws Amendment Bill to protect indigenous knowledge.
They also include key reforms to the operation of the national lottery. We have responded to the criticisms and suggestions which were made in wide consultation, and Cabinet recently approved the new Lotteries Policy Framework and Lotteries Amendment Bill which is now out for public consultation. In addition, we have introduced regulations and a directive to improve the accessibility of lottery funds by needy communities and causes, to improve governance structures on lottery matters, and to ensure optimal distribution of lottery funds for development purposes.
The Consumer Protection Act was finalised and implemented during this administration. I am pleased to report that, despite some initial teething problems, there is now overwhelming support for the work of the National Consumer Commission, especially in poorer communities where the worst abuses of consumer rights have been uncovered.
As we look beyond South Africa and our immediate challenges, we must not lose sight of the changing global economy. This administration foresaw the importance of broadening development integration in Africa, as well as the importance of the emerging new global powerhouses, such as China, India and Brazil.
Negotiations for a tripartite free trade agreement, TFTA, between the Southern African Development Community, SADC, the East African Community, EAC, and the Common Market for Eastern and Southern Africa, Comesa, are progressing and on track. But we have said that our efforts in this regard must be complemented by the promotion of both infrastructure development and co-operation, in order to transform productive sectors and industrialise our continent.
I am pleased to say the themes that we have been championing from the start of this administration are now finding an important echo on the African continent, as was evidenced, for example, by the discussions that took place last week during the World Economic Forum here in Cape Town.
Infrastructure development has focused on the North-South Corridor, with significant progress in upgrading road links. Projects have been identified for rail, border post and port developments.
The TFTA will combine the markets of 26 countries, with a population of nearly 600 million people and a combined GDP of US$1 trillion. In summary, this is a key initiative that will provide market scale that could launch a sizeable part of the continent onto a new trajectory of industrial development. The TFTA is also envisaged as part of a bigger project, a continent-wide free trade agreement, FTA, which will create a market with a combined GDP of US$2,6 trillion.
Chairperson, the election of Roberto Azevedo of Brazil as the next Director- General of the World Trade Organisation, WTO, creates an important new opportunity to advance a multilateral trade agenda informed by the mandate agreed to at the 2001 Doha Ministerial Conference to place the needs and interests of developing countries at the heart of the work programme of the WTO. We know Mr Azevedo well and actively supported his candidature, particularly after the elimination of the African Union-endorsed candidate in the first round. We congratulate Mr Azevedo and look forward to building a strong working partnership with him in advancing the WTO's work.
South Africa's participation in the Brics group is a significant component of our diversification strategy, as it provides important opportunities to build South Africa's domestic manufacturing base, enhance value-added exports, promote technology sharing, support small business development, and expand trade and investment opportunities.
It is for that reason that a key priority for us is to develop a work programme that will promote more value-added exports among the Brics members. We are pleased to announce that Brics trade ministers, at their meeting in eThekwini in March, accepted a proposal from us that we would co- ordinate a study to identify the way forward in the promotion of value- added trade.
In the coming year we will focus on strengthening South Africa's relations with Brics as well as with other fast-growing emerging economies. In addition to that, the national export plan which we adopted recently will shift to the implementation phase as we seek to develop a new layer of emerging exporters to lead South Africa's export diversification.
In conclusion, are all these efforts bearing fruit or are the pessimists right? Let me just say that in one week last month I participated in three key investment announcements - by Procter and Gamble in Gauteng, Johnson Controls in East London, and Tellumat in Atlantis. The investment announcements by these three companies in one week alone amounted to R2,4 billion. In fact, from 2010-11 the Department of Trade and Industry has facilitated investments with a total value of R125,5 billion. At the end of the 2012-13 financial year in March, the department had an investment pipeline to a value of R53,5 billion, with the potential to create 20 000 jobs.
However, of greater significance than the value of these investments is the strong vote of confidence in the South African economy that the companies in these value-added sectors have provided. These are not investments that were made on the spur of the moment; the companies involved have rigorously assessed the South African market, considered the potential risks, and compared South Africa to other potential investment destinations. After considering all of these factors, these companies and many more like them have chosen to invest and step up their role in South Africa, and create jobs in the productive economy of this country.
These investors know that we have challenges, but they are not put off by our challenges. They recognise that Africa is the next growth frontier, and that South Africa, as the most industrialised country on the African continent, is of key strategic importance. They have accepted the necessity for broad-based black economic empowerment, they have accepted that they need to be active in addressing the skills challenges in their own enterprises as well as in the country as a whole, and they have not been put off by our industrialisation or localisation programmes. In fact, many of them have embraced these challenges and our initiatives as necessary developments that will lead to a stronger economy.
In closing, I do not believe that we could have made these advances without the support of people in the Department of Trade and Industry - its family and its institutions. I am proud of what we have achieved with the staff, which has a much more diverse profile than the Department of Trade and Industry had in 1994. This new profile, much more reflective of the demographics of South Africa, is emerging as a source of strength that will lead us into the future.
I want to thank, for the support I've received, my colleagues the Deputy Ministers, the director-general, the deputy directors-general, the heads of the different Council of Trade and Industry Institutions, my ministerial colleagues in the cluster, and everybody who has worked in our office. I commend the Budget Vote of the Department of Trade and Industry to this Parliament. Thank you.