the dti Budget Vote Address delivered to the National Council of Provinces (NCOP)

Members of the Select Committee
Deputy Minister Masina
Director-General and officials of the dti and its Council of Trade and Industry Institutions (COTII)
Leaders of organised Business and Labour
Distinguished guests
Ladies and gentlemen

As has been the case with previous Budget vote addresses to this Council, I intend today to concentrate on those aspects of the dti’s work which impact most directly on our interactions with provinces.

the dti’s fundamental task is of course, to contribute to the goals  defined in the National Development Plan of achieving higher levels of inclusive economic growth capable of reducing the triple scourges of unemployment, poverty and inequality. This requires, as we have said previously in this house, that we bring about structural changes within the economy and that we place productive sectors at the heart of a new growth path that also moves us progressively and incrementally towards higher value added activities. At the same time, we need to substantially advance transformation, by bringing more disadvantaged people into  leadership positions in our productive sectors. These two elements together are what we understand as radical economic transformation.

The seventh iteration of our Industrial Policy Action Plan, which I launched earlier this month, seeks to build on and progressively raise the scale and impact of interventions by government to support the reindustrialisation and industrial development of our country. Among other tools identified for stepped up action in the year ahead is the Special Economic Zones programme. Special Economic Zones have been shown through experience in a number of countries to be an important tool to promote industrial investment by offering the benefits of clustering, dedicated infrastructure and supportive incentive programmes. SEZs are also important tools to promote industrial decentralisation to ensure that all potential industrial development is not over concentrated in our existing industrial areas.

As Honourable Members know, prior to the enactment of the Special Economic Zones Act No 16 of 2014, South Africa had only one form of SEZ- the Industrial Development Zones, established under the Manufacturing Development Act no 187 of 1993. IDZs focussed on export orientated industries located around ports and airports and benefitted mainly from duty free entry into Customs controlled areas of inputs needed for further processing in the zone.

I am pleased to be able to report that through our joint efforts we are now seeing a number of IDZs gaining traction and contributing positively to industrial development and job creation.

Between 2002 and 2014, the Coega, East London and Richards Bay IDZs have attracted a total of 54 investors with an estimated investment value of R4, 8 billion. These investments are estimated to have created approximately 73 000 jobs.

As Honourable Members are aware we have more recently proclaimed two more IDZ’s: the first in Saldanha in the Western Cape and the other in the Dube Trade Port in KZN. I am pleased to be able to report that these too have received positive responses from investors.

The Saldana Bay IDZ is engaged in discussions with more than 26 potential investors who are interested in locating in the IDZ, with the majority of these investors focusing on logistics support services, oil and gas contracting and drilling services, and marine and rig building fabrication and repair. Eight of these companies are already in the process of developing and finalising agreements with the IDZ. The Dube Trade-Port has in just a few months attracted investment commitments of over R900 million.  In addition I am pleased to be able to announce that we have now cleared all issues necessary for me to take a proposal to Cabinet to establish an agro-processing and logistics based IDZ at Maluti-a-Phofeng in the Free State.-

I am also pleased to announce that the SEZ Advisory Board has been appointed and will shortly begin work on finalising the SEZ regulations and consider proposals for the designation of new SEZs.

Members will recall that the main aim of the SEZ Act was to allow for the proclamation of a broader range of SEZs, while still allowing for recognition of existing and future potential IDZs. New SEZs could include IDZs, free ports, free trade zones or sector development zones. They will be supported by an incentive package that will include a 15% corporate tax, building allowance, employment incentive and customs controlled territory. We will also offer a stepped up support service to investors. New SEZs will have to be proclaimed by the Minister on advice from the SEZ Board.

As we previously reported, as the SEZ legislation was being processed we provided seed funding to Provinces to undertake feasibility studies and planning work for potential SEZs. We facilitated the establishment of Project Management Units in all Provinces to support the implementation of the proposed SEZs and we have entered into a five year Partnership Agreement with the Chinese Government on an SEZ Capacity Building programme, to train at least 30 government officials across the three spheres of Government. In the coming year, we will proceed with a five point programme to build on this momentum:

  • We will finalise the necessary regulations during the first quarter of the financial year,
  • We will designate new SEZs, with a strong focus on mineral beneficiation based SEZs,
  • We will put more resources into investment promotion and marketing campaigns for all SEZs, and
  • We intend to provide continuous support to Provinces for the development and management of SEZs.

In addition to the SEZ’s, we are also developing a programme for the roll out of Industrial Parks. Industrial Parks will  be defined areas in particular municipalities where infrastructure will be provided and  existing and new companies will receive special incentives.  We are currently working on the details of this programme but are confident that by working together with Provincial departments, provincial development agencies, municipalities and districts, the private sector and development finance institutions, we can roll-out the initial infrastructure construction for one industrial park per province in the coming financial year.

the dti will return next year to this Council to report on the progress of these undertakings we have made today.

In addition to these specific programmes, the dti provides a comprehensive range of targeted interventions to support the raising of competitiveness of our industries, investment, economic transformation, exports, and job creation. These interventions include the Section 12I Tax Allowance Incentive, the Automotive Incentive Scheme (AIS); the Aquaculture Development and Enhancement Programme (ADEP); the Business Process Services programme (BPS); and the Critical Infrastructure Programme (CIP). The uptake of these programmes is spread throughout our nine provinces, for example:

  • The AIS approved just over R1 billion in grants facilitating about R2.7 billion in private sector investment. This supported 50 projects, 35 of which are situated in the Eastern Cape, 6 in Gauteng, 8 in KZN and one in the North West.
  • 12i approved about R5.8 billion to 17 projects: 6 in Gauteng, 3 in the Western Cape, 2 in KZN, 2 in North-West and 1 each in Limpopo and Mpumalanga.
  • ADEP approved grants of R28 million thereby facilitating over R100 million of private sector investment. This supported 11 projects: 4 of which are in the Western Cape, 2 each in the North-West and the Eastern Cape, and 1 in KZN Mpumalanga, and Gauteng.
  • Over R100 million in grant funding was approved under the CIP facilitating an estimated R10, 2 billion of private sector investment. These grants supported 9 projects: 2 each in KZN, Northern Cape, and Gauteng, and 1 each in the Eastern Cape, Western Cape, and Limpopo.  It is projected that 9 385 direct jobs and 4 131 construction jobs will be created. Companies that have been supported include Illovo Sugar SA operating in the manufacturing sector in KZN, Ironveld Smelting in Limpopo, Assmang in Northern Cape and Zendai Development SA in Gauteng.

Chairperson, these are substantive projects but if we are to expand productive economic activities beyond the traditional centres we must act creatively and also link up with the growth sectors that are showing promise in the Provinces with larger economies. I offer just one example.

the dti has supported 137 film productions, including Hollywood blockbusters like Avengers 2 filmed in Gauteng which created 25 000 jobs. Recently, we launched the newly developed R1 million thresh hold South African Emerging Black Film-Makers Incentive Programme. The objective of this programme is to support emerging black filmmakers with the intention to nurture and grow them to take up bigger productions and thus contribute towards employment creation. To my mind, there is no reason why emerging black filmmakers located in all Provinces should not benefit and use the opportunity to develop capacity that would assist in attracting big budget movies throughout the country.

There are many other opportunities and I invite you to work with the dti in bringing this to the attention of your constituencies and to take advantage of the services we offer. For instance there is no reason that firms across all Provinces should not be more actively participating in national and international exhibitions, trade shows and pavilions in different countries to promote market access and showcase South African products and services. For those who are not quite ready to export yet, we have an extensive capacity building initiative called the Global Exporter Passport Initiative.

Chairperson, there has been a concerted effort to enhance access for South African products, especially value-added exports in international markets. Africa remains at the centre of our efforts, where we have been actively championing continent wide industrialisation and an ambitious development integration programme. In this regard, significant progress has been achieved in the Tripartite Free Trade Area (TFTA) negotiations between COMESA, EAC and SADC. The TFTA, which embraces 26 countries with a combined population of 500 -600 million and a combined GDP of $1 trillion will be launched on the 10th of  June 2015 in Egypt. The launch signifies the conclusion of negotiations on the legal instrument and will be followed by a process to finalise negotiations on tariffs and Rules of Origin, the key elements of a functional free trade area. This is an important milestone in the implementation of the development integration agenda in Africa aimed at promoting market integration, based on industrial and infrastructure development.

The TFTA launch will be followed by the launch of the negotiations for a Continental Free Trade Area at the AU Summit here in SA. The CFTA once established will be a market of over 1 billion people and a GDP of US $2 trillion. The African market is crucial for South Africa’s industrialisation and job creation efforts as one of the key destinations for our value-added exports.

Africa will also host the 10th WTO Ministerial Conference on 15-18 December in Kenya. There are many challenges that will confront us and all developing countries in ensuring that the outcome of the MC10 underscores the centrality of development as provided for in the Doha Development mandate, supports the industrial objectives of Africa and includes meaningful disciplines on subsidies in agriculture, particularly those that disadvantage farmers in developing countries.

Chairperson, as you know we have actively campaigned for the extension of AGOA with South Africa included. I am pleased to inform the Council that the US Senate has approved a ten year extension with South Africa included. However, AGOA is renewed with a provision for an out-of-cycle review for South African and other beneficiaries identified by the US Administration, thirty days after the enactment of the legislation.  In other words, AGOA is coming with demands that we accommodate the US for market access, starting with but not limited to poultry. We continue to engage on this issue and I invite the Select Committee to oversee our work on this important issue.

Honourable Members, the new BBBEE Codes of Good Practice came into force on the 1st of May after an 18 month phase in period. The fundamental change is to introduce sub-minimum scores that must be reached in supplier development, skills and ownership, failing which there will be a penalty loss of 1 place on the final scorecard. Together with the Black Industrialists Programme being led by the Deputy Minister, this is designed to strengthen empowerment efforts that lead to black people becoming real players in the productive economy.

Finally, working through the Gambling and Liquor Policy Councils, we have prepared new Policy Papers on Gambling and Liquor Policy which are now out for public consultation before being tabled in Parliament. In Gambling we will focus on combating illegal gambling and strengthening the campaign for responsible gambling. In liquor we will develop programmes to more effectively combat the negative socio-economic impact of drinking.

I want to conclude by thanking the Deputy Minister and the department for their hard work and support and the Select Committee and the NCOP for its diligent work in overseeing our work. Let me assure Honourable Members that we will continue to seek the wisdom and support of this Council in implementing our programmes. .

I thank you.

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