Minister Patel tables Department of Trade, Industry and Competition Revised Budget Vote 2020/2021
Extracts from Minister Patel’s Address to the National Assembly
During the first Budget Vote under the new Administration in July last year, Deputy Ministers Gina, Majola and I laid out a six-point programme of work for the dtic over the next five years.
Before the onset of the Covid-19 pandemic, we had made solid progress in each of these areas, despite significant economic headwinds.
Covid-19 period and impact
All of those actions had at a time of slowing growth and global trade tensions, increased the resilience of our economy by rebuilding our industrial base and restoring our trade position.
And then Covid-19 struck.
Today’s session thus takes place in very different circumstances from last year’s Budget Vote, here and elsewhere in the world. The pandemic and its economic fallout have been described by leading economists as unprecedented in our generation. Projections are that it may result in
the worst global recession since WWII (World Bank, 8 June 2020)
the worst UK recession in 300 years (Bank of England, May 2020)
China experiencing its slowest annual growth since the death of Mao Zedong in 1976 (IMF April 2020 data; Bloomberg April 2020, dtic calculation)
the highest US unemployment since the Great Depression (US Bureau of Labor Statistics, May 2020).
South Africa is now in the grip of the pandemic, with a surge in cases and a devastating impact on communities, firms and workers. Both lives and livelihoods are being lost.
In the weeks before our lockdown started, some businesses were already closing because their global supply-chains were disrupted. As the scale of the pandemic became clearer and governments across the world introduced lockdowns to limit movement and save lives and flatten the curve of infection, demand for goods and services dramatically decreased, creating a toxic cocktail that is devastating people’s lives across the world.
But South Africans are resilient and in spite of the difficult hand we have been dealt, citizens, firms and government have responded in a way that has mitigated the risks and protected those vulnerable to the impact of the Coronavirus.
When global supply-chains broke down and we could not buy ventilators and PPEs elsewhere in the world, we needed to show our resilience by falling back on our own enterprise and innovation.
We scaled up the local manufacture of basic COVID-19 supplies, quickly ramping up production of medical-grade masks from 6m to 13m units a month. These companies included locally-owned ones and local workers produced the masks.
This week, the first units of a locally-made ventilator machine, a CPAP, is being assembled at factories, with 20 000 units that will be produced in record time, led by capable teams drawing in some of South Africa’s best science capabilities.
I previously briefed the Portfolio Committee on the wide range of measures we have taken to deal with the crisis, from support to businesses through funding, to securing scarce medical goods.
As an example, we issued regulations and directions to fight price hikes during the pandemic and thus far the Competition Commission has levied stiff penalties on 28 firms to a value of more than R16 million. Our intention was to ensure that no-one was able to exploit the crisis to profit from other people’s pain and suffering and add to further pressure to domestic budgets.
The lesson is that when confronted with a challenge, we found the will, the innovation and the industrial capacity to do the job. We proved as South Africans that we can be resilient.
Now we must recognise the historical moment and the opportunity it provide. We must build even greater resilience by making “strategic localisation” a major domestic policy goal.
The way ahead and commitments
As a result of the impact of Covid-19 we must carry out our responsibilities within an even more constrained environment and faced with a triple whammy:
The dtic Budget has been cut quite substantially with R1,8 billion taken off as a result of the need by the state to reprioritise resources;
agencies who rely in part on income from the public or their investment holdings have had sharp reductions in their income and resources;
While at the same time the needs of firms and workers have grown as a result of the damage caused by the pandemic.
There are no easy answers and we are faced by what some call a ‘perfect storm’. Yet it is precisely in this most difficult moment that we as South Africans will need to find our resilient core.
To repair the damage of Covid-19 and reconstruct the economy to create more jobs, bring more young people into entrepreneurship and increase economic inclusion, we need to think boldly and implement smartly.
The industrial age is not over, but it will be profoundly re-shaped by digital technologies, greener industries and industrial agility. South Africa must find its niche in this new environment.
There can be no return to the ‘old normal’. And nor should there be. It was not fit for future purpose. Established industries, though critical in our economy, will not be able to create the millions of jobs required.
To prepare for the post-COVID world, we will strengthen efforts around reconstruction and recovery, including broader pacts with workers and businesses, focused on saving as many firms and jobs; identifying new opportunities; embracing digital technologies to recover and change; addressing economic inclusion with greater urgency.
As a first step, every directorate of the dtic and every agency will prioritise saving firms and jobs, and report on a monthly basis on their impact. Wherever possible, the dtic institutions will be asked to reallocate resources to this goal. Work will be reorganised to support the District Development Model, to get more bang for each rand we spend. We will streamline approval processes for funding from IDC, NEF and DTIC so that we avoid duplication; and consider a common back-office for smaller dtic agencies, covering some finance, ICT and human resource functions. With a smaller budget, we must draw on resources of social partners and use non-fiscal means to achieve public goals, such as competition market inquiries and the equity equivalent programme.
Building on the solid progress of last year, but adapting our strategy in light of the historical moment created by the pandemic, each of the 6 priority programme areas will now be recalibrated to save lives and protect livelihoods:
First, to strengthen economic dynamism, we will complete two new Master plans: one for furniture which employs 65 000 people in SA with potential for many more small-scale artisans; plus another for the steel industry, the foundation of our industrialisation, employing nearly 250 000 people. But the Department’s mandate is not only to produce new Masterplans; more importantly is to ensure implementation, which will be the focus of masterplans for autos, clothing, sugar and poultry.
Second, to help pivot the economy from its reliance on imports, to greater levels of local manufacture, we will finalise at least three new agreements on localisation and supplier development, following discussions with CEOs at:
Fast food producers
Food and consumer goods manufacturers
CTFL retailers and manufacturers.
This is partnership in action.
Third in the area of trade: to provide trade support to local firms, both in the domestic market and for exports, we will complete talks with the EU on trade access; strengthen the actions against illegal imports – Smugglers beware – we will crack down further on customs fraud on imported goods, building on early successes by SARS; and seek agreement to enable the AfCFTA to commence trade by the start of 2021.
South Africa is well-positioned to become a major supplier of industrial goods and value-added services to the continent. A combined push from the IDC and ECIC can contribute to this. We will develop tangible targets to guide the work of South Africa’s Foreign Economic Representatives stationed at embassies, focused on export promotion and investment enhancement. Economic diplomacy is essential to building resilience.
Fourth, on investment: we will focus on consolidating the presence of firms who have existing operations and help those who made investment pledges, to bring projects to fruition. New areas for investment include deepening our production of PPEs, medical equipment and pharmaceuticals.
Fifth, on transformation: our efforts will go to providing non-financial support to black industrialists to complement the funding; and over the next 5 years, we will mobilise or commit very large sums in funding for Black industrialists and firms. Women-empowered businesses and worker empowerment must become a stronger focus. Transformation includes addressing high levels of economic concentration and helping to build stronger, agile small and medium businesses.
Sixth, on SEZs: national government will play a stronger role in improved governance, advocacy and mobilising investment. The special unit at the IDC and DBSA will assist provinces to use the R4 billion budget over the next three years more effectively on SEZs and industrial parks. We must nurture township and rural enterprises, and diversify the economic centres across our country.
Covid-19 has exposed the fragility in the global economy.
The quest for competitiveness must be balanced with the need to nurture economic resilience, the ability of economies to respond to risks that an open and integrated world present: be they to digital systems, or from climate change, or to food security or the spillover of trade wars raging elsewhere, or indeed from pandemics.
Africa must grasp this opportunity to redefine its role in the world – to break from the post-colonial history as simply a supplier of raw materials and this crisis must provide the jolt for our efforts to industrialise.