Chairperson, hon members, ladies and gentlemen, the President often tells us that the priority for this administration is not further debate, diagnosis or lamentation, but rather implementation. It is therefore a pleasure to deliver this Budget Vote speech today in what has been a highly significant month of implementation for the Department of Trade and Industry.
At the beginning of this month, the national Consumer Protection Act came into force. Yesterday we launched the new Companies and Intellectual Property Commission, which will begin to implement the new Companies Act at the beginning of next month. Two weeks earlier we launched the new iteration of the Industrial Policy Action Plan, Ipap, covering the period 2011-12 to 2013-14, and in between we had highly significant engagements with our counterparts - the trade Ministers of Brazil, Russia, India and China - as an integral part of the first Brics summit that South Africa participated in, an event that also saw the signing of a highly significant memorandum of understanding on co-operation between the business organisations of the Brics.
Both the consumer and the companies legislation mark important steps forward in reforming and modernising our commercial law for the benefit of the vast majority of our economic citizens. The consumer commission is already making its presence felt as a key pillar in implementing legislation that, I am convinced, will be of enormous benefit both to consumers and to producers who are struggling against unfair competition from substandard and shoddy goods.
The new Companies Act will provide for a modern, efficient system of company regulation that will reduce red tape and hassle, while simultaneously making necessary regulation more effective. The business rescue provisions in this Act will also allow for the early detection and turnaround of companies in financial distress, which can go a long way towards saving jobs. Together these new laws and the concomitant implementing mechanisms will fundamentally change the landscape on how business is conducted, and how consumers are protected for the better.
As with almost any other significant new initiative, there will, of course, be a number of implementation challenges and teething problems. Our approach has been that once we are satisfied that sufficient consultation and preparation have been undertaken, we will deal with issues as they arise from day-to-day practice, rather than engage in endless debate in the vain hope that further engagement will deliver a perfect plan on paper. We are thus taking up the President's challenge to implement rather than to debate endlessly and lament.
Similarly, we are moving forward with the implementation of Ipap 2, the Industrial Policy Action Plan 2. Last year when we launched the first iteration of our Industrial Policy Action Plan 2 covering the years 2010-11 to 2012-13, we indicated our view that placing the economy on a new, higher and more labour-absorbing growth path required that we address a number of structural factors that underpinned the reality that even when our GDP growth rates had been relatively high, production-driven sectors of the economy had grown at about half the rate of consumption-led activities.
We identified a need to create a more effective financing framework for industrial development; to reform our procurement systems to ensure that a larger proportion of infrastructure spend went to locally manufactured inputs; and to achieve a better alignment with macro policy, trade policy, competition policy, and standards, quality assurance and metrology, among other things.
We indicated last year that Ipap 2 would be a three-year rolling action plan that would be amended, updated and strengthened at the start of each financial year. On 6 April we launched the latest iteration of Ipap which will cover the period 2011-12 to 2013-14. We report in that document, as we did in a session with the portfolio committee, that substantial progress has been achieved in reaching the targets set out in the first iteration of Ipap 2, and we are beginning to see positive outcomes in some areas.
To illustrate this point, firstly, the automotive investment scheme has been completed, leading directly to planned investments by automotive assemblers and component supplier companies of R13 billion - R9 billion by the assemblers and R4 billion by component manufacturers. Together these investments will support the creation of 24 000 jobs. A feature of these investments has been a significant expansion in local component outsourcing by the original equipment manufacturers, which is significant because most of the job creation in the automotive sector will emerge from smaller companies producing components.
Secondly, our programmes have begun to have a positive impact on the clothing industry. Over 200 companies have utilised the clothing and textile competitive programme and the production incentive, resulting in the retention of 40 000 jobs and the creation of 1 100 jobs in firms accessing the production incentive.
Thirdly, in the past year investments of R40 million in the business process services sector led to the creation of 950 new jobs and a further approval of R42 million new investment commitments linked to 806 jobs. Under the Monyetla II Work Readiness Programme, 3 400 recruits are currently being trained, of whom 70% have been guaranteed employment by the business process outsourcing consortium.
Globally, green industries represent an important new growth sector, and we have begun to orientate our efforts towards playing a bigger role in this regard. These efforts have resulted in the revision of building standards that will require higher levels of energy efficiency and mandatory installation of solar water heaters in new buildings.
We have also met the target set out in Ipap 2 to complete the first stage of the complex work to reconfigure the regulatory framework for public procurement. A new framework of regulations developed by a task team that included the National Treasury and the Departments of Trade and Industry and Economic Development has been adopted by Cabinet, and we await promulgation in the near future of the regulations by the National Treasury. These very significant amendments will allow for the designation of sectors for local procurement, alignment with broad-based black economic empowerment codes and to provide for simultaneous account to be afforded to important cost considerations. The Department of Trade and Industry has developed a sector designation methodology, and research is currently being undertaken with a view to incrementally designating sectors. The implementation of these regulations will represent a significant step forward in supporting local production and will, we are confident, result in growing businesses including a number of new small businesses. The growth of local business should also result in employment growth.
I want to thank my colleagues the Ministers of Finance and of Economic Development for the collegial way we were able to work together on this important development.
The introduction of new localisation and supplier development criteria within state-owned enterprises will similarly encourage new processes and systems to improve and leverage of local procurement. That 90 of 100 locomotives procured by Transnet will be produced in South Africa is a signal of the very significant impact that local procurement policy can deliver, particularly as government rolls out its infrastructure development projects. That 72% of a R4,2 billion antiretroviral tender was awarded to local manufacturers at a substantially reduced cost is another example of what can be achieved. As local manufacturers gear up to new opportunities, advancing and reforming industrial finance become critical. In line with the Ipap 2 objectives, the Industrial Development Corporation, IDC, has reviewed its business model and balance sheet and identified about R100 billion over the next five years for investment in the New Growth Path and Ipap 2 sectors.
Going forward, the 2011-12 to 2013-14 Industrial Policy Action Plan envisages creating 43 000 direct and 86 000 indirect jobs following the implementation of carefully identified transversal and sector-specific interventions. A feature of the latest iteration, like the first, is that actions are tied to timeframes measured in quarters from the date of implementation. Ipap 2 then is not a wish list. It is an action plan which, like any other, will require sustained and focused work and perseverance if we are to succeed. Progress must be measured internally within government and reported to Parliament and bodies like Nedlac. We remain committed to regularly reporting on progress as well as on challenges which we may face.
Of course our ability to achieve our goals will depend also on the external environment - on factors which, by definition, are beyond our control. In this regard it is important to note that the recovery from the global economic crisis has been slow. We may be on a faster track in terms of recovering from the global crisis, but our own GDP growth in 2010 was only 2,8%, following a decline of 1,8% in 2009, although we are now projected to rise to a higher level of growth of 3,4% this year.
Manufacturers have expressed concern to the Department of Trade and Industry that the continual appreciation of the real effective exchange rate to the highest levels on record in 2010, arising from massive short- term capital inflows in the context of a large current account deficit, represents a significant barrier to South African exports.
Notwithstanding these environmental conditions, the Department of Trade and Industry continues to be confident that there are significant opportunities for job creation both in value-added productive sectors in general and through small enterprise development in particular. My colleague Deputy Minister Thabethe, who is deployed in this area, will speak about some of our achievements and challenges here, but I would like to make just one point. We have established an advisory group to look at areas where we could potentially achieve greater impact in our SMME - small, medium and micro enterprise - support programmes. This was motivated by a sense that we are not making sufficient headway in realising the potential of enterprise development.
An early conclusion is that one of the areas of greatest potential success - and this is also borne out by international experience - is incubation programmes. The problem we face in South Africa is that we have between 30 and 40 recognised incubation projects, whereas Brazil has 4 000. Ramping ourselves up will be a major challenge and one in which government cannot achieve the necessary results on its own. We will, accordingly, be seeking more active partnerships with business and are looking at ways to tweak broad-based black economic empowerment programmes, as well as direct small, medium and micro enterprise support programmes to develop the necessary synergies. In this connection, I am pleased to indicate that the Small Enterprise Development Agency, Seda, is planning to roll out support for 250 incubation schemes over the next 5 years, as the first phase towards a target of establishing 1 000 small business incubators.
Regarding economic empowerment more generally, the black economic empowerment codes of good practice were promulgated four years ago, and we are now in a better position to assess their impact. The presidential advisory council has made several policy recommendations to allow for greater participation by black people in productive activities and to tackle what is now emerging as increasingly complex practices of fronting. To this end, the Department of Trade and Industry and the presidential advisory council are focusing on reviewing the codes and possibly amending the Act. This could entail, amongst other things, refinements to ensure greater policy coherence in the application of black economic empowerment across government and to strengthen access to procurement opportunities through the new and approved Preferential Procurement Policy Framework Act regulations. We are also looking at ways to strengthen our efforts to combat the fraudulent practice of fronting.
Co-operatives offer great potential as an accessible form of economic organisation involving many people in productive activity and job creation. In the past year, 100 new small-scale co-operatives with approximately 500 new job opportunities were established, utilising support facilities of the Department of Trade and Industry.
This, however, is not sufficient, and we will shortly be introducing a Co- operatives Amendment Bill as well as a co-operative strategy to strengthen our programmes and address a number of evident shortcomings. Fundamentally these will seek to put in place co-operative-specific institutions, including a co-operative development agency, a co-operative tribunal, a co- operative advisory council and a co-operative academy. The new strategy is a product of extensive engagement with stakeholders in Nedlac and also a product of discussion with the Department of Higher Education and Training, which is working towards the establishment of a co-operative academy.
Our trade and investment programme is an important pillar in our overall strategies to support growth and the drive for decent jobs. A trade policy and strategy framework was completed and adopted last year. Promoting closer mutually beneficial ties as well as developmental regional integration in Africa and Southern Africa remains our top priority.
We have also taken into account the seismic shifts that are taking place in the world economy that have seen developing countries like Brazil, Russia, India and China emerging as new centres of global economic growth and increasingly new sources of investment and exports. By joining Bric, South Africa will be consolidating its already strong economic links with these economies. Our association with Bric will enhance co-operation and co- ordination and strengthen our collective voice in global fora.
We have just returned from our first Brics summit, which outlined a number of new initiatives to strengthen mutually beneficial relations between developing countries. South Africa will commit to working energetically to build on existing trade and investment flows, while encouraging greater inward investment and more exports of higher value-added, employment- generating goods and services.
As far as investment promotion is concerned, we are now involved in target initiatives with China, India, Russia, Brazil, Japan, Spain, Germany, France, the UK, the USA and countries of the Middle East. We anticipate that this work will translate, over the next three years, into an investment pipeline of projects valued at R115 billion. This is a realistic target, taking into account the results for the past year, which show R28,9 billion in investments resulting in 13 000 jobs. We are aware that the issuing of business permits has been a matter of concern, and an interdepartmental task team headed at deputy director-general level is being established to fast-track the processing of business permits.
Another major development will be our hosting of the SADC-Comesa-EAC - Southern African Development Community-Common Market for Eastern and Southern Africa-East African Community - summit later this year. This is expected to formally launch negotiations for a trilateral grand free-trade agreement, FTA, between the three economic communities. The trilateral FTA will create a sizeable regional market, comprising 26 countries with a combined GDP of US$624 billion and a population of between 500 and 700 million people. A larger, more integrated and growing regional market will enhance foreign investment and intra-African trade.
At the multilateral level, renewed efforts to conclude the Doha Development Round this year appear to have come up against major, and perhaps even fatal, obstacles. These arise, in our view, from efforts to place new demands in the areas of industrial tariffs and services on emerging economies without any indication of meaningful reciprocity. These unfair and unreasonable demands threaten to undermine the delicate balances achieved in processes to date; balances which, in fact, we have argued are already tilted against developing countries. We are therefore of the view that any further imbalances threaten to fundamentally invert the developmental mandate that launched the Doha Round. We remain convinced that the only kind of multilateral agreement worth supporting must be one that deals with imbalances and inequities that disadvantage developing countries, and South Africa will therefore continue to add its voice to those who insist that the developmental mandate must remain at the centre of the negotiations.
This year South Africa will host COP 17 - the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change - an important milestone in the ongoing climate change negotiations. It is increasingly clear to us that the trade aspects of these negotiations will need to be addressed. In particular, we need to ensure that a proper balance is found between making adjustments to avoid catastrophic climate change and securing the space for development.
To come back to the regulatory tasks of the Department of Trade and Industry, I am glad to report that a review of the lotteries policy framework is under way, and we anticipate that amendments will be introduced to the Lotteries Act. The Gambling Review Commission has completed its work, and a report has been finalised which will be tabled in Parliament as soon as further deliberations on this report are concluded. Coupled with this process, regulations have been published to limit advertising of gambling activities and to address illegal interactive gambling.
The Intellectual Property Laws Amendment Bill for the protection of indigenous knowledge systems is before the portfolio committee.