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EDD Annual Report 2014/15: Economic Highlights, Infrastructure Interventions, Institutional Achievements

This presentation highlights the economic highlights, infrastructure interventions, and institutional achievements of the Economic Development Department (EDD) during the 2014/15 annual reporting period. It addresses challenges faced and showcases key interventions and their impact on job creation, GDP growth, investment, and infrastructure development.

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EDD Annual Report 2014/15: Economic Highlights, Infrastructure Interventions, Institutional Achievements

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  1. Economic Development Department2014/15 Annual ReportPresentation to the Portfolio Committee on Economic Development 15-October-2015 Tabled at Portfolio Committee

  2. Introduction The Annual Report of the EDD setting out the details of activities undertaken and performance against the Annual Performance Plan, was tabled in Parliament at the end of September 2015. This presentation highlights a few areas covered in the Report and is not a detailed account of activities.

  3. Context at start and during year • Annual Report period 1 April 2014 to 31 March 2015. • Transition between Administrations • Global context: growth slowed down • China’s demand for resources declined • Investor confidence in SA was still positive • Developed markets growth lackluster • Energy shortages • Impact of industrial action

  4. Context of EDD interventions Faced with these challenges, EDD’s focus in this period was on 8 key interventions: • Infrastructure • Industrialisationand investment • Trade measures • Competition measures • Provincial interventions • Social dialogue • Coordination • Equitable growth

  5. Economic Highlights: Jobs • Jobs grew by 405 000 • Total employment of 15.5 millionby March 2015 • Women’s employment grewby 111 000 (total women in employment 6.8 million) • The number of jobs for youthincreased by 233 000 (total youth jobs: 6.2 million) • Since adoption of the New Growth Path in October 2010, employment grew by 1.8 million

  6. Other economic Highlights • GDP is now R3,8 trillionfor the year and growth rate was 1.6% • Investment grew by R47 billion • Government infrastructure spending wasR254 billion • Agricultural value add grew byR5 billion or 7.5% • Manufacturing value add declined byR1.1 billion or 0.3%

  7. Institutional Highlights • Investment approvals of R11.5 billion • Funding disbursements of R10.9 billion • R5.9 billion in black-empowered and owned companies in 85 transactions • 20 388 jobs supported • R1 billion funding approved • R924 million set aside for youth-owned enterprises over 3 years

  8. Institutional Highlights • By March 2015, PICC monitored infrastructure projects spending had reached R1 trillion • R880 million was received from the Competition Commission for fines and penalties imposed by the Tribunal • 39 mergers with employment and other public interest conditions that were imposed by the Competition Commission • ITAC tariff increases on 9 products • ITAC tariff rebates (reductions) on 7 products

  9. Intervention 1: Infrastructure Maintaining large-scale infrastructure spending boosts growth and jobs • Support for an innovative system: the PICC • 200 000 jobsin PICC-monitored projects • Substantial gains madefor both large projects and at a community level, though much remains to be done. Examples - • 160 000 new housesconnected with electricity • Cities building new bus lanesfor BRT • BRT operational in three citieswith thousands of users • Tshwane every bus has free Wi-Fi, useful to students

  10. Infrastructure Examples of work done by EDD on infrastructure includes: • Operationalisation of the Infrastructure Development Act including appointment of members of governance structures (Secretariat, Manco and Council) • Monitoring 18 Strategic Integrated Projects (SIPs)for Cabinet to provide high-quality, credible information for policy-making • 72 progress reports to Cabinet • Tracks projects worth R1 trillion to monitor spending patterns • EDD convened and provided assistance to PICC Secretariat and Manco meetings, including • meeting packs, documentation and discussion documents on key issues • Identifying key blockages for consideration by the PICC • Developing a records of decisions for Cabinet and follow up of decisions

  11. Infrastructure Examples of work done by EDD on infrastructure includes (cont..): • Completed project on skills for infrastructurewith DHET • After obtaining inputs from relevant departments, EDD drafted a discussion document on how infrastructure supports inclusive growth, with a review of some key trade-offs, opportunities and risks • At Dirco’s Heads of Mission Conferenceon 25 August 2014, the Minister presented a strategic vision on how South Africa’s missions abroad can support domestic economic development through efforts with infrastructure and industrialisation • The focus was on expanding markets for South African products as well as accessing technology and capital from abroad as appropriate • The presentation had reference to the National Infrastructure Plan

  12. Infrastructure • Support for President’s role as champion on infrastructure in the African Unionwhich includes unlocking key corridors, water and energy projects for the continent • The President also engaged with global business at the World Economic Forum meeting in January 2015 in Davos, Switzerland on African infrastructure.

  13. Infrastructure EDD engages pro-actively to unblock projects on behalf of the PICC • Case study: Hobhouse in Mantsopa in the Free State • A site visit was conducted by the PICC • It helped to unblock efforts to finalise a bucket eradication project • The technical quality of the system requires further work • Case study: Ngobi in Moretele in the North West • This is a Presidential Nodal Point Project identified as part of water and sanitation hotspots under SIP 18 by the PICC • The PICC mobilised Eskom to connect electricity to boreholes. • The boreholes have been commissioned and are functional • Case study: Gibson Bay Wind Farm in the Eastern Cape • The wind farm will involve an investment of over R2 billion as part of the renewable energy independent power producer drive • It required authorisation under the Subdivision of Agricultural Land Act • The PICC, with support from DAFF, unblocked the application, enabling the wind farm to go ahead

  14. Infrastructure • Case study: Mokolo Crocodile Water Augmentation Project Phase 2 (MCWAP2) - Conditional National Treasury approval for the increase in the pipeline was obtained. • Case study” Olifants River Water Resource Development Programme (ORWRDP Phase 2) - The directive for ORWRDP Phase 2D and other subsequent phases has been issued to the National Water Resource Infrastructure to implement the project and the Trans-Caledon Tunnel Authority (TCTA ) to provide technical support. • Promoting transformation: the competition probe into cartels operating in the infrastructure space is intended to open the market to new entrants, including bringing black construction companies into the infrastructure mainstream, thus promoting transformation and economic development.

  15. Infrastructure & Investment

  16. Case Study: Infrastructure & local procurement Through the PICC, the department supported efforts to localise the manufacture of components and rolling stock for the National Infrastructure Plan. New and expanded factories directly supplying components for rolling stock infrastructure include: • Thin-film solar experimental plant in Stellenbosch • Wind-towers plant in Coega • Large truck factoryin Coega, with 450 new jobs • Factory to assemble and laminate solar panels in Epping • Truck and bus plantin Pretoria , with 350 new jobs initially • Factory making solar inverters in Cape Town • Majority black-ownedfactory in Blackheath that supplies buses to municipalities • Expansion in locomotive-furbishingcapacity • 200 new jobs in Atlantis in a further wind tower plant

  17. Intervention 2: Industrialisation and Investment • EDD interventions supported the development of opportunities for industrialisation, higher levels of private investment and industrial funding and localisation in the economy. These included - addressing investor meetings and addressing challenges - supporting efforts to maintain high levels of IDC funding - supporting localisation and local procurement - promoting the development of new sectors - unblocking, fast tracking investment • The principal investment institution in the state is the Industrial Development Corporation, whose policy-framework is set by the Ministry. The IDC approved investment projects with private investor partners worth R36,8 billion with the IDC committing R11,5 billion of its resources • sefa’s R1 billion supported the development of small businesses and cooperatives

  18. Infrastructure Examples of work done by EDD on infrastructure includes (cont..): • Cable and Metal Theft, PICC recommendations on cable and metal theft were approved by the PICC Council at its 11th December 2014 meeting. • EDD coordinates and participates in the Presidential Business Work group: Infrastructure Technical Task Team. The work covers the following. a) Create early visibility of government’s infrastructure build programme b) Maintaining & upgrading municipal infrastructure c) Strengthen mechanisms of incorporating and effective execution of developmental targets in programme and project procurement designs • Strengthen / optimise infrastructure procurement systems • Unlock private sector investment in and funding of infrastructure

  19. Case Study: Building renewable energy industry • Minister issued a Directive to the IDC to develop a renewable energy industry • IDC invested R14 billion in solar, wind and renewable projects • During the year: opening of the Kaxu Solar Plant in Pofadder in N Cape • The plant brings 100 MW of solar energy onto the grid • By March 2015, South Africa generated 1 730 MW of energy from the sun, wind and water.

  20. Industrialisation and Investment • Facilitated, fast-tracked and/or unblocked 13 investment initiatives • Sectors included forestry, agro-processing, biofuels, pulp and paper, chemicals, textiles, construction, green energy and steel • Unblocking included: • securing land and finalising lease agreements • facilitating access to financing • mobilising trade measures • addressing energy challenges • helping secure pricing that promotes local manufacturing • supporting with social dialogue • measures to deal with illegal imports • fast tracking administrative processes to save jobs

  21. Industrialisation and Investment Examples of Unblocking • Potato processing industry: The potato processing industry was destabilised by a surge in imports. EDD facilitated interaction with ITAC to fast-track consideration of an application for increased duty. Based on the evidence before it, ITAC decided to increase the duty. The IDC offered a loan to a processing company in the Eastern Cape to expand production to supply Spur. The result was an expansion of local productive capacity. 2. Nestle complained of water and electricity cutsin Babelegi near Tshwane as a result of cable theft, which led to R47 million losses in the period from January to 5 March 2014. EDD convened a meeting of COGTA, the dti and Eskom in July 2014 to discuss the challenges. As a result of the intervention, mitigation measures were put in place in the area, including better policing of hot spots.

  22. Industrialisation and Investment Examples of Unblocking • Fast-tracked the competition process for the buy-out by Lewis Furniture of 68 Beares Furnishers (the Lewis offer to purchase was time bound). The intervention avoided the liquidation of these stores and resulted in the saving of 393 jobs, with the potential for the creation of 126 additional jobs • EDD’s intervention facilitated the decision by the Ekurhuleni Metro Municipality to provide the required energy for the construction of a R350 million plant by Mpact to recycle plastic bottles • Pulp United Company – Resolved a dispute between the IDC and the uMhlathuze municipality on the price for the purchase of municipal land. This resulted in the IDC taking a decision to do a feasibility study for an investment in a pulp factory valued at US$250 million

  23. Industrialisation and Investment Examples of Unblocking • Hall Longmore, a steel pipe company in KZN, complained that Greytown water treatment works was in the process of procuring steel pipes from a Chinese Company. EDD held discussions with ArcelorMittal South Africa (AMSA) who provided raw steel at a discounted price to Hall Longmore. In order to provide a competitive pricing, Hall Longmore also reduced their profit margins and consequently secured the order to manufacture locally • Subsequent to the successful sales of Lodox Machines to the Gauteng Provincial Department of Health, EDD assisted Lodox in finding markets in the other Provinces. EDD introduced Lodox to the KZN Department of Health. Four Lodox Scanners were sold to the Provincial Department of Health in KZN. This initiative has leveraged South African medical technology developed through the commercialisation of an IDC project

  24. Industrialisation and Investment • The Minister engaged with companies in the labour-intensive clothing and textiles industry to ascertain the impact of government programmesand identify additional requirements • Engagements took place with both employers and workers at Trade Core Investments Apparel (TCIA), Colibri, Peter Blond, Impahla Clothing and House of Monatic • It sought to identify the impact of IDC and government supportin the sector, as well as export opportunities and import penetration • Investment and incentive support by government and its agencies was R5,1 billion in the sector over the past five years • Action on illegal imports was highlighted – in three years, government confiscated R1,8 billion in clothing and textiles imported illegally into SA

  25. Industrialisation and Investment • The Minister launched the development of a R25-million design centreat TCIA in Cape Town, part of a focus on improving fashion innovation in South Africa • EDD obtained a legal opinion on the pricing of mineral products under the MPRDA amendments, which entailed a Ministerial level meeting with legal advisors as well as engagement with DMR, the dti and NT • EDD drafted a report for the Presidency on migrant labour in the platinum beltand how it relates to workplace conflict, in collaboration with TIPS and SWOP • Numerous engagements had taken place Steel, Finance, Tourism, Agro-processing, Retail, Telecommunications and other sectorsin order stabilise sectors where required, attract investment, promote industrialisation and localisation, etc. • Minister addressed global investors in Davos, London, New York, Indonesia to share the South African infrastructure and investment narrative

  26. Industrialisation: IDC Investment EDD provided oversight and strategic guidance to the IDC during the year through engagements with Board, management and potential investors

  27. Industrialisation: IDC Investment IDC highlights in the past year, in tough circumstances

  28. Industrialisation: IDC Provincial Investment • IDC investments are situated across South Africa, providing local jobs and supporting local economies. • Of the R9.7 billion funding approvals within South Africa, 46% went to transactions in targeted provinces. • The funding allocated to these provinces also accounted for 42% of jobs IDC expects to create/save. • Of the priority provinces, the Eastern Cape is the largest beneficiary in terms of number of projects, with 19 projects that are worth R50 million and above, across 9 sectors.

  29. Examples of IDC projects • Case study: Greening the Manufacturing Sector • Since 2011, the IDC has worked with an enterprise that produces sports and leisure wear for an international brand. The company is South Africa’s first carbon-neutral clothing company. It has increased its employment from 190 to 431 in the past three years. • In the 2014/15 financial year the IDC approved a R2-million facility to be utilised for asset and working capital for the establishment of new manufacturing lines.

  30. Examples of IDC projects • Case study: Chic Shoes - The Minister conducted a site visit to Chic Shoes, a major shoe factory, and opened its new premises on 16 September 2014, as part of the EDD’s work to support job creation and evaluate the impact of government measures. - The company was started by a black woman in 2004 and now employs 300 workers, with plans to expand to over 500 in the coming two years. - It has received support from the IDC as well as a competitiveness grant

  31. Industrialisation: sefaInvestment case study • EDD provided oversight of sefa for the year under review sefa highlights

  32. Industrialisation: sefaInvestment case study sefa highlights

  33. Intervention 3: Trade measures Using trade measuresto back South African manufacturers in tougher global conditions, through trade remedies, tariffs, rebates and policy measures to promote inputs with a developmental impact/local use of national inputs

  34. Trade measures Examples of work done by EDD on trade measures • A paper on South Africa’s trade flows over the last few years focusing on manufacturing sectorsbroadly and catalytic converters in particular was produced. The paper highlights, amongst others, that South Africa is the third largest exporter of catalytic converters in the world and in 2012 sustained thousands of direct and indirect jobs.

  35. Intervention 3: Trade measures Trade measure highlights

  36. Trade measures • 2 anti dumping duties finalised and imposed: • Soda ash • FrozenChicken • 2 Duties maintained after sunset review: • Gypsum plasterboard • Wire rope and cables • 9 tariff increases benefitting: • Sugar • Heat exchange units • Enamels • Wire products • A3 and A4 paper • Paper and paper board coated in plastic • Coated fine paper • Coated wire • Coil springs • 1 safeguard duty imposed: • Potato chips • 7 rebates imposed including: • Components for florescent lamps • Cranberry juice concentrate for fruit juice • Upholster furniture fabric • Components for dust masks • Chemicals for washing preparations • Fabric for slippers • Chemicals for water purification

  37. Intervention 4: Competition measures Challenging monopolies and cartels in the economy through competition measures to improve the dynamism of local industries and prevent abuse of market dominance

  38. Intervention 4: Competition measures Competitionmeasure highlights

  39. Oversight of Funds • Walmart Supplier Development Fund • Afgri Fund • Agro Processing Competitiveness Fund

  40. Examples of Competition measures • During the financial year 395 mergers were notified. • The Commission imposed conditions on 43 cases, of which 39 addressed public interest issues • The total number of jobs saved amounted 5 340. • Case Study1: The Retail Beverage Company and Dairybelle’sYogart/ UHT Milk Business • Public interest: Behavioural and employment • Continue to provide distribution services • Moratorium on retrenchments and obligation to provide training

  41. Examples of Competition measures • Case Study 2:Mergence Africa Property Investment Trust and Redefine Properties • Public interest: Small business • Removal of exclusivity clause in lease agreement in: • Meadow Point Shopping Centre • Protea Point Shopping Centre • Dobson Point Shopping Centre • Pimville Square Shopping Centre • Kudube Shopping Centre

  42. Examples of Competition measures • Two search and seizure operations undertaken against companies for colluding to divide markets - Unilever and Sime Derby Hudson and Knight, for allocating markets for food oils and fats; and two panel beaters in collaboration with a vehicle accident assessment centre. • In Phase II of the construction investigation, a further settlement was reached with Harding Allison for colluding on a private-sector project in KwaZulu Natal

  43. An outcome of Competition measures The Afgri agreement • Agreement was reached with Afgri as part of the Competition Commission’s review of a takeover by Agrigroupe, a foreign investor • The agreement required Afgri to undertake a variety of support measures for small farmers • Since April 2014 Afgri has: • Spent R9,8 million on training to 68 farming entities consisting of 170 people. • On-lent R14 million to 13 entities from the Land Bank to smallholder farmers (Afgri assumes risk on the loans) • Provided 40% discount on storage to 213 farmers who stored under ten tonnes of grain • Purchased 14% of its poultry from smallholder farmers, to whom it provides extension and veterinary services as well as technical, feed and management support

  44. Intervention 5: Working with provinces Working with provinces to enhance their capacity and increase their impact on local economies Highlights

  45. Working with provinces EDD developed an integrated approach to supporting small business support across government to guide the work of agencies reporting to the Minister • It worked closely with sefa and the IDC to hold roadshows in every province • The roadshows enabled SMMEs to engage with sefa, seda, IDC, provincial DFIs and local business chambersto understand their products • Roadshows were held in Mpumalanga, the Western Cape and Polokwane, and at the ABSIO Youth Economic Indaba (Milpark) • The Minister participated in the roadshow in Delft, where he also met with Women in Constructionto discuss opportunities arising out of the National Infrastructure Plan • A small business toolkit was produced by EDD and printed for a first-phase pilot • The Minister convened a small business conference on 7 April 2014 that brought together hundreds of new or small entrepreneurs to engage with public agencies • The Minister opened the Shanduka Black Umbrella Enterprise Development Awards, which facilitate private support for SMMEs, in Cape Town on 9 April 2014

  46. Case Study Working with Provinces • Deputy Minister engagements with provinces and municipalities • Areas of work included: • Economic development frameworks • Alignment of provincial and local economic development priorities to NDP • Social accords • Unblocking constraints to economic development at provincial and local levels. • EDD hosted a conference on “Aligning Economic Planning and Development across the state”. It: • re-emphasised need for integrated economic development planning • agreed on framework to ensure that national policies, strategies and plans find expression at provincial and local level Deputy Minister Madala Masuku, visits Bloemfontein Oct 2014

  47. Intervention 6: Social Dialogue Supporting social dialogue to strengthen support for national priorities and build a broad consensus in addressing key challenges

  48. Social Dialogue: Social Accords • EDD has contributed to monitoring and implementation • EDD completed its Draft Annual Report on the Progress towards the Implementation of the Green Economy Accord. • The report showed significant progress in achieving government targets on the Green Economy Accord, including. • By March 2015 the IDC had provided funding to the Green Energy Sector of R14bn, facilitating the creation of an additional 7 733 jobs • Approximately 500 000 Solar Water Geysers had been rolled out since the start of the SWH programme – the majority of which were low pressure systems • Designation of SWG of 70% local contentwas done in August 2014

  49. Social Dialogue • EDD contributed to monitoring and implementation of the Youth Employment Accord, including: • Briefing provinces on progress of the Youth Employment Accord and explaining how they can provide information required for monitoring • EDD successfully organised the report back in the Western Cape on for the Presidential Youth Indaba,with over 400 delegates attending • In addition, a report on the implementation of the other social accords for the fourth quarter 2013/14 was completed.

  50. Social Dialogue: Cluster • Case Study - facilitating funding and operations to create jobs • EDD facilitated funding for and sits on the steering committee of the Western Cape Furniture Cluster, which brings together small furniture producers to improve training and productivity.   • The Western Cape Furniture Quarterly Cluster Initiative Steering Committee Meeting was held on 24 June 2014.  • The Cluster manages a training programme. Phase 1 commenced in June 2014 with a total of 147 people from 19 companies. It focused on compliance training which included Occupational Health & Safety and Employment Equity. • The major output of the cluster process will be provision of on-the-job skills training in the furniture industry for 200 workers.

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