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Presentation to the Portfolio Committee on Trade and Industry

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Title: Presentation to the Portfolio Committee on Trade and Industry


1
Presentation to the Portfolio Committee on Trade
and Industry the dtis 2013/14First Quarter
Report
  • 24 July 2013
  • Director General
  • Lionel October

1
2
Presentation Outline
  • Introduction
  • Strategic Objectives
  • Economic overview
  • Key Achievements
  • Performance assessment
  • Departmental Expenditure versus Budget
  • Audit findings and interventions
  • Key Challenges

2
3
Introduction Global Economic Context
  • Three track growth pattern emerging.
  • Emerging Markets growth strong although
    moderating in China.
  • US recovery gathering momentum.
  • EU recovery remains very weak (UK expected to do
    better than EU average).
  • SA growth performance and forecast very similar
    to Australia both countries are commodity
    export dependent.
  • But Africas growth outlook is strong and SA
    well-positioned to benefit if structural features
    of SA manufacturing sector are addressed.

4
GDP Growth Rates, Forecast 2013-14, IMF
5
Domestic Employment Trends
  • Economy continued to create jobs in Q1 2013 even
    while unemployment rose due to new job seekers
    entering the market.
  • Quarterly Labour Force Survey data is used as
    this reflects informal sector employment better
    than Quarterly Employment Survey.
  • Q1 2012 compared to Q1 2013
  • Modest gains in a range of productive sectors
    such as Agriculture, Mining and Manufacturing.
  • Substantial job losses in Wholesale and Retail
    Trade as impact of constrained household spending
    is felt. Consumer spending remains under
    significant pressure.

6
Domestic Employment Trends, StatsSA
7
Manufacturing Trends Q1 2013
  • Manufacturing sales grew modestly - weak global
    conditions and consumer spending in SA.
  • Merchandise exports subdued - although demand for
    commodities such as coal and platinum have begun
    to recover.
  • Solid Auto exports has helped to sustain
    manufactured export levels.
  • Imports stable - expected to remain weak due to
    the exchange rate.

8
Outlook 2013
  • Global economy
  • Africa, China and US positive, strength of US
    recovery surprising the possibility of
    tapering Quantitative Easing has rattled
    markets.
  • Domestic economy
  • SA manufacturing well positioned to benefit from
    Africas strong growth outlook over medium-term.
  • Designation of sectors - especially supporting
    infrastructure build programme has contributed to
    sectoral optimism and tooling up in sectors
    Capital Goods/Machinery sectors.
  • Growing number of applications for the dtis
    incentives suggest higher level of optimism in
    manufacturing than is commonly assumed.
  • A number of leading business and multilateral
    publications have pointed to the improving and
    positive SA investment environment.

9
Strategic Goals
  • Facilitate transformation of the economy to
    promote industrial development, investment,
    competitiveness and employment creation
  • Build mutually beneficial regional and global
    relations to advance South Africas trade,
    industrial policy and economic development
    objectives
  • Facilitate broad-based economic participation
    through targeted interventions to achieve more
    inclusive growth
  • Create a fair regulatory environment that enables
    investment, trade and enterprise development in
    an equitable and socially responsible manner and
  • Promote a professional, ethical, dynamic,
    competitive and customer-focused working
    environment that ensures effective and efficient
    service delivery.

10
Key Achievements1 April 30 June 2013
10
11
Key Achievements
Industrial Development
SG 1 Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation
Industrial Policy Action Plan (IPAP) 2013/14-2015/16 launched in April 2013 and implementation reports produced. Instruction note for designation of Electrical and Telecom Cable Products published in May 2013 . Joint venture between Iveco SA and Larimar Group on R600 million truck and bus assembly plant under development in Rosslyn. Through the National Tooling Initiative - 87 students completed phase 1 of level 2 apprenticeship programme and 17 students completed Foundation programme. 303 students completed apprenticeship programme for phase 1 Toolmaker apprenticeship programme has been approved by the Quality Council for Trades Occupation (QCTO).
11
12
Key Achievements
Industrial Development
SG 1 Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation
Memorandum of Understanding (MOU) with Foundation for African Business and Consumer Services (FABCOS) to establish a number of Small Scale mills in four provinces (Eastern Cape, Gauteng, KwaZulu-Natal, Free State) To improve competitiveness of the Clothing, Textile, Leather and Footwear (CTLF) sector R1.029 billion was disbursed to 362 clients from the Production Incentive Programme (PIP) R59. 696 million disbursed to 27 companies from Competitiveness Improvement Programme (CIP) Approvals made for R365. 6 million and R1.75 billion from CIP and PIP respectively.
12
13
Key Achievements
Industrial Development
SG 1 Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation
Special Economic Zones (SEZ) Bill has been introduced in Parliament in April and public hearings were received and responded to in Parliament. SEZ Guidelines approved by Minister. The Workplace Challenge Programme (WCP) -13 new companies participating. Business Process Services (BPS) - South Africa named best Offshoring Destination of the Year by the European Outsourcing Association in April 2013.
13
14
Overview of Incentive Schemes Overview of Incentive Schemes Overview of Incentive Schemes
Description Actual Actual
Description Number of firms/projects supported Potential jobs supported
Industrial Financing
MIP 96 3723
AIS 3 14
BPS 1 185 (projected over 3 years)
Film Television 29 -
12i 2 278
CIP 2 374
MCEP 97 28 059 (to be sustained)
15
Overview of Incentive Schemes Overview of Incentive Schemes
Description Actual
Description Number of firms/projects supported
Broadening Participation Broadening Participation
Co-operatives (CIS) 107
BBSDP 344
SPII 5
ISP 3
ADEP 3
Trade, Investment Exports Trade, Investment Exports
EMIA 396
16
Trade, Investment Exports
SG 2 Build mutually beneficial regional global relations to advance South Africas trade, industrial policy economic development objective
National Exporter Development Programme (NEDP) launched in April 2013. The following were achieved 7 National Pavilions (LAAD, ZITF, SIAL, IDEF, Zambia Copperbelt, South Korea Boat Show and Automechanika in Middle East) the World Cup Legacy Exhibition in Doha, Qatar The African Fair in Tokyo, which generated 26 quality trade leads. In the following sectors agro-processing,(Rooibos, Wines and Confectionary) creative industries and home textiles (mohair) The participation of 8 companies at the Tunis-Med Exhibition in Tunisia
17
Trade, Investment Exports
SG 2 Build mutually beneficial regional global relations to advance South Africas trade, industrial policy economic development objective
Facilitated the Nigerian Presidential visit and arranged the Business Forum in May 2013. Facilitated the Business Forum from Benin and participated in the Joint Trade Commission with Kenya. Consultations towards a SA and SACU offer for Tripartite - Free Trade Agreement T-FTA negotiations are in an advanced stage. Technical working Groups, Tripartite Trade Negotiating Forum established Modalities for negotiations agreed The text is being negotiated Member States are to present offers Draft progress report produced on the African Growth and Opportunity Act (AGOA) lobbying activities.
18
Trade, Investment Exports
SG 2 Build mutually beneficial regional global relations to advance South Africas trade, industrial policy economic development objective
Won 1st place for the best foreign pavilion at the Zimbabwe International Trade Fair, April 2013. SA-EU Cheese Agreement ratified. Developed SA position for the Tokyo International Conference on African Development (TICAD). Drafted and circulated terms of reference for Brazil, Russia, India, China and South Africa (BRICS) Joint Trade Study, which has been agreed following consultations with the BRICS partners. First draft of the country chapters expected end of September. The final study will be presented to Trade Ministers at the next summit in Brazil in 2014.
19
Trade, Investment Exports
SG 2 Build mutually beneficial regional global relations to advance South Africas trade, industrial policy economic development objective
Delivered SA Presentation to United Nations Conference on Trade and Development (UNCTAD) expert workshop on domestic support measures for the green economy in Geneva, Switzerland. 42 Government to Government Platforms. 12 Successful Technical and Business missions (Africa Bilateral). Exports of R295 million facilitated. Achieved R12.7 billion pipeline of investment in manufacturing, green economy and resource based sectors. 327 companies trained on exporting during workshops held in Limpopo, Eastern Cape and Mpumalanga Provinces.
20
Broadening Participation
SG 3 Facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth
Broad-Based Black Economic Empowerment Bill adopted by the National Assembly. Launched the partnership between the dti and State Owned Entity Procurement Forum after signing MoA. Launched the Centre for Entrepreneurship hosted by the Ekurhuleni West FET college. Analysis of public comments on revised B-BBEE Codes of Good Practice completed and key issues of the comments presented to the Presidential Advisory Council. The Co-operatives Amendment Bill was adopted by the National Council of Provinces. Business cases for establishment of Co-operatives Development Agency and Tribunal approved by the Minister.
21
Broadening Participation
SG 3 Facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth
Youth Enterprise Development Strategy (YEDS) approved by Minister. Support Programme for Industrial Innovation (SPII) 5 new projects approved to the value of R 10.6 million. The National Strategic Framework on Gender and Womens Economic Empowerment presented to the Economic Cluster.
22
Regulation
SG 4 Create a fair regulatory environment that enables investment, trade enterprise development in an equitable socially responsible manner
Policy Framework and Licensing of Business Bill developed and public consultations conducted. Policy Framework and Lotteries Amendment Bill developed and public consultations conducted. Policy framework and National Credit Amendment Bill developed and submitted to Cabinet for approval. Impact Assessment Study on the Liquor Act conducted. Final Policy Framework on Intellectual Property developed.
23
Administration Co-ordination
SG 5 Promote a professional, ethical, dynamic, competitive customer-focused working environment that ensures effective efficient service delivery
Vacancy Rate is at 9.03 -increase due to 16 new posts created from 1 April 2013. Statistics for women in Senior Management Service (SMS) positions is at 43.43 and the people with disability is at 2.6. All creditors payments were processed within 30 days.
24
Key Achievements
Performance Assessment
The following targets were not fully achieved
3 new incubators supported by the Incubators Support Programme (ISP) (target 10) as this is a new programme. Informal Sector Strategy (ISS) reference group inputs incorporated in to draft document. (Target report on internal consultations of draft ISS).
24
25
Departmental expenditure versus budget
26
Summary of Projections vs Expenditure per
programme total dti 30 June 2013
Programme Revised budget 2013/14 R000 YTD projection R'000 YTD expenditure R'000 Variance Variance Available Budget R'000
Programme Revised budget 2013/14 R000 YTD projection R'000 YTD expenditure R'000 Value R'000 Available Budget R'000
Administration 690,529 167,330 152,559 14,771 8.83 537,970
ITED 138,638 30,458 28,871 1,587 5.21 109,767
BPD 968,307 252,700 245,895 6,805 2.69 722,412
IDPD 1,606,074 505,618 487,431 18,187 3.60 1,118,643
CCRD 256,157 121,731 102,909 18,822 15.46 153,248
IDIA 5,543,134 1,224,927 860,850 364,077 29.72 4,682,284
TISA 369,741 102,895 94,885 8,010 7.78 274,856
TOTAL 9,572,580 2,405,659 1,973,402 432,257 17.97 7,599,178
27
Summary of Projections vs Expenditure per
economic classification total dti 30 June 2013
Economic classification Revised budget 2012/13 R'000 YTD projection R'000 YTD expenditure R'000 Variance Variance Available Budget R'000
Economic classification Revised budget 2012/13 R'000 YTD projection R'000 YTD expenditure R'000 Value R'000 Available Budget R'000
Compensation of employees 854,246 190,869 175,896 14,973 7.84 678,350
Goods and services 638,835 158,746 132,655 26,091 16.44 506,180
Payments for Financial Assets 0 0 604 (604) 0.00 (604)
Payment for capital assets 20,177 4,662 353 4,309 92.43 19,824
Transfers subsidies 8,059,322 2,051,382 1,663,894 387,488 18.89 6,395,428
TOTAL 9,572,580 2,405,659 1,973,402 432,257 17.97 7,599,178
NB The expenditure based on the year to date
projections of R2,406 billion, is 82 or R1,973
billion, implying an under-spending of R432
million (18).
28
Year-to-Year comparison of actual
expenditure 2012/13 vs 2013/14
29
Reasons for material expenditure variance
Item description Amount (R000) Reasons for under/(over) expenditure
Compensation of employees 14,973 Under spending due to 125 (9) vacant positions out of 1385 posts, as well as 81 new posts which are still being consulted with DPSA.
Good Services 26,091 Under spending occurred largely on business and advisory consultants due to Late commencement of new projects and delays in finalising some existing projects Final report for the Rail infrastructure Industry Analysis was received late and payment will be made during July 2013.
Capital 4,309 The procurement of hardware and software for the Integrated Electronic Management System (IEMS) could not be finalised due to the cancellation of the bid. The bid was handed over to SITA for re-advertisement.
Transfer subsidies Transfer subsidies Transfer subsidies
CSIR Fibre and Textile Centre of Excellence 1,501 Funds earmarked for the CSIR Fibre and Textile Centre of Excellence could not be disbursed due to delays in the finalisation of the 2013/14 business plan. Payment is anticipated for July 2013.
Centurion Aerospace Village current 3,811 R3.8 million earmarked for the Centurion Aerospace Village could not be disbursed due to an outstanding business plan and Memorandum of Agreement
Industrial Development Corporation CSP 10,000 Payment under the Industrial Development Corporation for the Craft Sector Support Fund (R10 million) could not be made as projected due to an outstanding MoU. The concluding of a new MoU was done late in June 2013 and payment is expected to be made during July 2013.
National Consumer Commission (NCC) 17,477 Payments are made on a monthly basis in line with the NCCs spending pattern
30
Reasons for material expenditure variance
(continued)
Item description Amount (R000) Reasons for under/(over) expenditure
Small Medium Enterprise Development Programme SMEDP (2,551) Over expenditure of R2.5 million under SMEDP is due to more unanticipated claims. It should be noted that although the expenditure is more than the YTD projections it is still within the allocated budget.
Enterprise Investment Programme (EIP) (3,980) Over expenditure of R3.9 million under EIP is due to additional claims received and paid than anticipated. It should be noted that although the expenditure is more than the YTD projections it is still within the allocated budget.
Manufacturing Competitiveness Enhancement Programme MCEP 317,887 R317.9 million under the Manufacturing Competitiveness Enhancement Programme could not be disbursed as a result of claiming procedures that were not yet in place.
Business Process Services Incentive (6,329) Over expenditure of R6.3 million under BPSI is due to 2 more claims received and paid than anticipated. It should be noted that although the expenditure is higher than the YTD projections it was still within the allocated budget.
Film Television Production Incentive (5,775) Over expenditure of R5.8 million under the Film and Television Production Incentive is due to 3 additional claims received and paid than anticipated. It should be noted that although the expenditure is higher than the YTD projections it is still within the allocated budget.
Automotive Production Development Programme 55,269 R55 million earmarked under the Automotive Production and Development Programme could not be disbursed due to fewer claims received and paid than anticipated.
31
Reasons for material expenditure variance
(continued)
Item description Amount (R000) Reasons for under/(over) expenditure
EMIA (7,193) Over expenditure of R7 million under EMIA is due to 12 more claims received and paid than anticipated. It should be noted that although the expenditure is higher than the YTD projections it is still within the allocated budget.
Black Business Supplier Development Programme (BBSDP) (20,870) Over expenditure of R20.8 million under BBSDP is due to 23 more claims received and paid than anticipated. It should be noted that although the expenditure is higher than the YTD projections it is still within the allocated budget.
Co-operatives Incentive Scheme (CIS) (5,988) Over expenditure of R5.9 million is due to 8 more claims received and paid than anticipated. It should be noted that although the expenditure is higher than the YTD projections it is still within the allocated budget.
Critical Infrastructure Programme (CIP) 33,000 Funds earmarked under the Critical Infrastructure Programme could not be disbursed due to the introduction of a new requirement, which requires auditors verification reports before clients submit claims.
32
Interventions to address AG Audit Findings
33
Interventions to address AG Audit Findingscont
Finding Management interventions
Material misstatements in financial statements subsequently corrected No management intervention was required for the 2012/13 financial year. The department is commended by AGSA in the preliminary report for submitting financial statements that were free of material misstatements
Employees performed remunerative work without the relevant approvals A circular on remunerative work circulated to all staff. All staff required to obtain approval for remunerative work. Awareness-raising presentations are being made to divisions to ensure proper understanding and compliance.
34
contInterventions to address AG Audit Findings
Finding Management interventions
Goods and services with a transaction value below R500k procured without obtaining the required price quotations The Accounting Officer did not take steps to prevent irregular and fruitless and wasteful expenditure These relate to transactions where three quotations could not be obtained and the delegations of authority did not specifically provide for these deviations. The delegations have been amended to provide for these deviations. Irregular expenditure is being monitored monthly. An independent exercise is also performed on all expenditure to ensure completeness of reporting of irregular expenditure. Regular refresher sessions on the requirements for procurement for the staff have been implemented including communication via financial circulars Quarterly memoranda were issued to DDGs to take appropriate disciplinary action against any official who makes or permits irregular expenditure.
35
contInterventions to address AG Audit Findings
Finding Management interventions
Proper control systems to safeguard and maintain assets not implemented. This related to exact locations of the assets not being reflected in the asset register, for which the current transversal system has limitations. The department has implemented an asset management system parallel to Logis. Monthly reconciliations between the financial systems and the asset register are being performed. Bi-annual asset verifications will be performed by Finance staff during August 2013 and January 2014. Officials will sign off during the bi-annual verifications sign off already implemented and will remain going forward.   Going forward monthly asset verifications will be performed by each Division as recommended by the AGs office. The SCM Policy is in the process of being revised to make provision for the monthly verification of assets by relevant divisions. It is anticipated that this process will be implemented with effect from 1 September 2013.
36
Key Challenges
  • Outlook for EU economies remains very poor now
    includes Germany, France and UK.
  • SA exports to EU still not recovered to pre-GFC
    levels
  • Emerging protectionism in EU e.g. Citrus Black
    Spot
  • Imports from the EU growing rapidly and
    undermining domestic production in key sectors
    such as Poultry
  • Domestic demand remains quite weak household
    indebtedness suggests consumption-led recovery
    unlikely in short-term.
  • Global uncertainty is making Rand volatile
    current level suggests overshooting and Rand has
    already begun recovering making it difficult for
    manufacturers to plan investments and export
    contracts.
  • Competitiveness of manufacturers is being
    addressed but firms are still not proactive
    enough in export markets.

37
  • Thank You

37
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