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Report on the PBF Ministerial briefing by Dep Min Buti Manamela MP, Deputy Minister in the Presidency

23 April 2015

1. Background and objective of the ministerial briefing

A ministerial briefing by the Deputy Minister in the Presidency, Honourable Buti Manamela MP, was hosted by the Progressive Business Forum (PBF) at Sunnyside Park Hotel, Johannesburg, on 23 April 2015.

The PBF is the business programme of the African National Congress with the objective of promoting honest, frank and open discussion between the business community of South Africa and the movement, as the primary policy developer of South Africa. The discussion was facilitated by Daryl Swanepoel, PBF convenor.

The discussion was located in the need for business and government to work together to tackle the tremendous backlogs and inequalities of our country and to deliver at the pace required to achieve the objectives of the National Development Plan (NDP).

The objectives of the ministerial briefing were for the Deputy Minister to offer a holistic view of government’s plans, programmes and actions, first, to facilitate businesses’ strategic planning and positioning. Secondly, interaction with the business community provides a tool to government to get a sense of experiences and perspectives from those on the ground.

The meeting was attended by Deputy Minister in the Presidency, Honourable Buti Manamela, MP; Councillor Willie van der Schyff, Chairperson of the Portfolio Committee for Economic Development in the Johannesburg City Council; Anita Hough, organiser of Sitex; Nelson Sebata, senior manager at Mindworx and consultant to business and government; as well as stakeholders from the PBF, and the South African business community.

2. Summary of ministerial input

This discussion takes place against the backdrop of attacks on foreign nationals, a situation which the majority of South Africans condemn as contrary to South Africa’s democratic principles, and which the ANC refuses to tolerate. Law enforcement agencies were able to reduce the number of incidents and calm the affected areas, having made several arrests.

This spate of violence has highlighted two challenges facing South African communities. First, there are serious problems around illegal trade and criminal activities, including the trafficking of drugs and other illicit goods. This activity is a threat to legitimate South African businesses. However, it cannot be solely attributed to foreign nationals, and anyone involved should be condemned.

Secondly, many South Africans identify the small tuck-shops or spazas run by foreign nationals as a threat to small businesses and employment. Although such shops are not a major threat to small business, the economic frustration of South Africans remains a trigger point for further violence, and cannot simply be ignored.

The reality is that South Africa still struggles with the legacy of apartheid, and the triple threats of poverty, inequality and unemployment. Facing these challenges is central to the government’s activities. In fact, the government is already hard at work implementing the NDP, which aims to deepen South Africa’s economic transformation over the next five years. To achieve this transformation, government needs partners in the business community, including both entrepreneurs and corporate investors in public-private partnerships, to grow the economy and create jobs and opportunities for all.

One priority for transformation is to ensure greater participation in the economy by historically disadvantaged communities. This is already underway through the implementation of the Medium Term Strategy Framework 2014-201, and its comprehensive package of interventions. Young people are a focus, as are rural communities. The latter have historically been unable to access benefits enjoyed by the rest of society. Challenges include issues around land (e.g. access to land and land use), as well as migration and urbanisation.

Investment in the rural areas, particularly in infrastructure, and the championing of land ownership and working the land are strategies that aim to reverse migration and encourage resettlement and further development. This investment in the rural areas is essential to build up a greater farming community, which has declined since 1994, resulting in the need to import food. Investment will also ease the burden of development in urban areas, where there is competition for limited resources, which leads to unemployment and crime.

Another objective of the NDP is to stabilise the labour relations environment, to create a working economy. The business community needs to understand that the well- being of workers is paramount - workers cannot be regarded as commodities. In addition, business must assume part of the responsibility for the labour relations collapse.

In terms of trade, the government is reviewing its procurement strategy, with the aim of local produce forming 70% of government procurement. This aims to shift the economy away from exporting raw materials, to the beneficiation of raw materials, particularly for good, products and commodities required by government. This is not to deny the close trade ties with neighbouring states, from whom South Africa procures electricity, and other goods and services. For example, Sasol has been allowed to access gas fields in neighbouring countries to provide electricity to South African businesses, industries and households. South Africa’s future is intertwined with Africa’s.

However, any shifts in procurement require a commitment from government to pay its providers of goods and services. Late and even non-payment of suppliers has led to the collapse of small businesses, which is at odds with government’s policy of developing small and microbusinesses in South Africa. The situation is exacerbated by government’s expectation of small businesses to continue creating employment, paying salaries and paying tax. The Presidency is taking this issue seriously: Minister Geoff Radebe and his unit are looking into this problem, with the aim of proposing punitive measures for late payments. Furthermore, the annual performance plans of each department will be assessed by the Department of Planning, Monitoring and Evaluation, and made public. Part of this report will indicate whether departments have paid their suppliers within 30 days. Unfortunately, indications are that many departments are in the red.

Government thus has a commitment to build up business in South Africa in order to transform the economy. Progress is being made, which can be improved by a concomitant commitment from business to help to unlock South Africa’s potential.

3. Discussion

3.1 Immigration

Enquiries

  • How can the government ensure security from illegal immigrants, while allowing foreign nationals to contribute to the economy of South Africa?
  • Why do foreign nationals appear to be outside the law, for instance, in terms of paying taxes, paying UIF, and maintaining health and safety measures, yet South African businesses are penalised when not keeping to the law?
  • How many South Africans are living and working in other African countries, and how are they treated?

Response

The government is concerned about lack of control over border crossings, and an inter-ministerial committee has been set up to consider immigration issues. However, there are already progressive laws in place regarding refugees and foreign nationals, which need to be implemented correctly to avoid illegal immigration.

The government also has policies in place regarding the employment of foreign nationals. Labour laws must be implemented, whether a worker is a foreign national or not. Foreign nationals are required to have a legal work permit, with the duration clearly stipulated. Those who continue to operate outside the law, employing foreign nationals cheaply and illegally, must take some responsibility for the social unrest that occurs as a result.

Just as employment laws are applicable to foreign nationals, so too are the laws regarding the running of a business. Unfortunately, many small foreign owned businesses operating in the townships do not obey these laws. However, South Africans are responsible for aiding and abetting these illegal business owners, for example, by providing them with land and allowing them to rent premises, and are guilty as well.

Immigration is the topic of an inter-ministerial committee which is to produce a plan of action on how to deal with challenges around foreign nationals, including attacks and illegal business practices.

3.2 Rural and agricultural development

Enquiries

  • How is the educational system preparing South Africans for life as farmers, to grow the agricultural sector?
  • Would a programme of land redistribution not be more effective than land restitution in terms of encouraging farming, instead of returning land to non-farmers?
  • If a minimum wage is demanded for farm workers, why is there not a minimum price for farm produce?

Response
Along with the ANC, many South Africans are champions of land ownership, as expressed in the Freedom Charter. However, this championing is not always associated with an actual desire to work the land. In fact, young people of all races prefer to migrate to the cities, attracted by lifestyle and job opportunities. The question is how to reverse the youth migration and make it attractive to remain on the land. The answer may lie in technological development.

3.3 Youth development

Enquiries

  • How can South African youth be taught to be entrepreneurs?
  • What information is available to youth in informal settlements and rural areas regarding skills training?

Response

The National Youth Policy aims to teach young people two things: our history, and entrepreneurship skills. Growing a culture of entrepreneurship, however, requires mentorship and guidance, whether from the home, or from other mentors, as well as formal education.

Unfortunately, young people, encouraged by their parents, tend to believe that their only option is to go to university in order to get an office job or professional position, rather than start a business. In addition, skills based work, for example, welding, plumbing, farming, and bricklaying, needs to be seen as a viable profession. Unfortunately, many youth are not willing to do such work, seeing it as the domain only of poor foreign nationals. The government is therefore encouraging young people to go to TVET and FET colleges, to learn skills and trades to create successful businesses, and hence to grow the economy.

The government has also put in place around 20 strategic infrastructure projects, including building dams and houses, and developing power stations, as well as maintenance programmes, and skills are needed for these projects: This is the direction in which the government is pushing the economy. Information on possibilities and opportunities the government is providing is accessible via social media, to target the youth in particular.

3.4 Small business

Enquiries

  • Why is government’s encouragement of small business development not trickling down to the municipal level?
  • How can small businesses achieve the same access to land, funding, and other resources, as big businesses?

Response
Small business development and investment continues to be a focus on municipal level. However, there are processes to be followed, including appropriate applications and public comment and objections, which apply to both small and larger businesses alike.

There are government and other entities available to help small businesses access resources, including the IDC, CEFA, and the PBF.

3.5 Exploiting natural resources

  • Mining sector

Enquiry

What is government doing about the lack of transformation in mining houses, including ownership, labour, and involvement in communities?

Response

The year 2015 marks the final year of the implementation of the Mining Charter, in which stakeholders in the sector made commitments to transformation. On aggregate, unfortunately, the mining industry has failed to meet these commitments over the past decade, particularly in terms of ownership, control, and community development. The question is whether the mining sector will face punitive measures for this failure, and, more importantly, whether the central government has capacity to monitor the implementation of such laws. If the commitment to the Mining Charter had been implemented and correctly monitored, Marikana situations could have been averted.

  • Gas resources

Enquiry

What is government policy on the exploitation of the gas deposits in the Karoo, taking into account environmental issues, as well as the potential for growth in GDP and employment creation?

Response

The government is aware of the potential of shale gas to the country’s economy. However, there continue to be legislative and policy uncertainties which need to be resolved before any implementation can take place. There is progress in this arena, through Operation Pakisa, which is exploring ways to unlock the economy in a variety of areas.

  • Provision of alternative energy resources

Enquiry

Does the government have a plan to incentivise business and households to make use of alternative energy?

Response

These programmes already exist. For example, the Department of Energy and Eskom have a subsidy programme to encourage households to put in solar geysers, as well as a youth service programme, which focuses on putting in energy-saving lighting. Importantly, these programmes can only succeed through commitment on both individual and community levels.

3.6 Corruption, policing and justice

Enquiries

  • What plans or strategies does the government have to stabilise the administration of the Justice Cluster?
  • What is the government doing to combat corruption and nepotism, which appear to be acceptable behaviour?

Response

Government is committed to exposing corruption and criminal behaviour, and will ensure that the proper legal procedures are followed. It is also the responsibility of individuals to contribute to the fight against injustice and corruption, for example, by not offering bribes, by reporting crime, and by the police responding to crime. The government is also implementing a new Monitoring and Evaluation system to curb corruption within departments.

4. Potential impact on economy

The implementation of the NDP is a central thrust of government economic activity, covering all areas of the economy, including rural development, entrepreneurship, public private partnerships, mining, agriculture, and small business development. However, South Africa continues to face serious challenges which threaten to undermine economic growth.

One particular challenge is the lack of transformation across the economy. For example, the Johannesburg Stock Exchange has only 3 % black ownership, which speaks to non-compliance with BBBEEE codes regarding collective ownership and redistribution. Another example of poor transformation and compliance is in the mineral resources sector, particularly mining, which is at the heart of transformation of the country. As long as there is no commitment on the part of business to implement laws around transformation, there will be no progress in the South African economy.

This transformation cannot, however, simply be seen in racial terms - instead, it is an issue of the predominance of foreign interest owning the South African mining sector. This means that the proceeds of mining operations exit the country, with no development of the communities around the mines, and no investment in the productive economy.

This is perhaps why government does not perceive foreign-owned small businesses such as tuck-shops a threat to the economy, citing evidence of the contribution of such small businesses or foreign labour to the economy. However, small business owners feel abandoned by government, and hence angry and resentful, feelings which have fuelled recent attacks on foreigners, which, in turn, have led to negative responses from other African countries, including Nigeria. Government argues that it is doing all in its power to normalise the situation and penalise criminal elements involved: however, unless these frustrations are dealt with effectively, attacks on foreign nationals will continue.

A further challenge to the economy is the crisis of youth unemployment, with about 3.4 million young people currently unemployed. Interventions into this problem are required, with the government focussing on skills training so that the youth can be absorbed into and contribute to the economy. The need to build a culture of entrepreneurship is essential to capacitate youth to become creators of work. With an entrepreneurship rate of about 7 % and falling, interventions are a dire necessity.

Unless government and its partners in the business community cannot overturn South Africa’s legacy of apartheid, and the triple threats of poverty, inequality and unemployment, the promised economic transformation will not take place.

5. Concluding observations

South Africa is now 21 years into its economic dispensation: turning 21 means becoming an adult with the associated responsibilities, and concerns for the future. Relegating this responsibility solely to the government, however, will not enable the country to grow to its full potential. The government does indeed have a responsibility to provide South Africans with their minimum requirements, such as food, shelter, water, and education. However, instead of being based on hand outs from government, a successful South Africa is also the responsibility of individuals, communities, and the business sector. This cooperation means improving the basic quality of life of all South Africans, by providing citizens with the tools to create a better life for themselves, skills, opportunities and employment. Such a successful South Africa is one in which all contribute to building the country.

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