1 GPG B-BBEE Champions Forum Reflection on the State of the Nation Address (SONA) Parktonian Hotel All Suite 17 February 2017
2 Table of Content Problem statement Nine Points PlanGovernment partnership with Private Sector Planned Investment projects Government position on Transformation Radical Transformation and Current status Clear Instructions to Government and Officials Property Sector Mining Sector Land Issue Women empowerment Corruption SA Trade and partners Humble request for Inclusive Economy Thank you
3 Problem statement for the CountryIn this 23rd year of our freedom, our mission remains the quest for a united, democratic, non-sexist, non-racial and prosperous South Africa. Guided by the National Development Plan, we are building a South Africa that must be free from poverty, inequality and unemployment. While the global economic environment remains uncertain, indications are that we have entered a period of recovery. We anticipate an economic growth rate of 1.3 per cent in 2017 following an estimated 0.5 per cent in 2016. However, the economy is still not growing fast enough to create the jobs we need. There are some of our people, including youth, who have not worked for years.
4 Nine Point Plan It is for this reason that we decided to focus on a few key areas packaged as the Nine Point Plan to reignite growth so that the economy can create much-needed jobs. The focus areas include: industrialisation, mining and beneficiation, Agriculture and agro Processing, energy, SMMEs, managing work place conflict, attracting investments, growing the oceans economy and tourism. We also added cross-cutting areas such as science and technology; Water and sanitation Infrastructure; Transport Infrastructure; and Broadband Rollout.
5 Government Partnership with Private SectorThe interaction that we started last year between government, business and labour, known as the CEO Initiative, has been most helpful. We were able to address some domestic challenges together. Our labour market environment is also showing signs of stability, due to cooperation by social partners. Unity in action was also demonstrated again with the conclusion of the agreement on the National Minimum Wage and on measures to stabilise labour relations.
6 Planned Investment ProjectsOn road infrastructure, Sanral has started with the planning phase of the 4.5 billion rand project to upgrade the current Moloto road. Sakha umgwaqo kanye nololiwe ku Moloto Road ukuze kuphephe izimpilo zabantu ngoba izingozi sezithathe imiphefumulo eminingi kuleyandawo. Work is continuing to ensure energy security. Renewable energy forms an important part of our energy mix, which also includes electricity generation from gas, nuclear, solar, wind, hydro and coal. Government is working hard to ensure reliable bulk water supply in the various areas of the country to support economic growth whilst increasing access to vulnerable and rural municipalities. We continue to build modern schools replacing mud structures and other inappropriate buildings through the Accelerated Schools Infrastructure delivery Initiative, (ASIDI). This gives our children dignity.
7 Planned Investment ProjectsDuring 2016, South Africa also signed a co-operation agreement with the People’s Republic of China to build the Moloto Rail Development Corridor. In 2014 we launched the Operation Phakisa Big Fast results methodology in the ocean economy, health, education and mining sectors. The purpose was to find a few key projects where we could unlock growth in implementing the NDP. The South African Navy also participates in the Phakisa project and is preparing to host the government garage concept for all state-owned vessels in Simon’s Town, including the maintenance and repair of government-owned vessels, through the newly established South African Navy/ARMSCOR/Denel partnership.
8 Planned Investment ProjectsWe had identified tourism as a key job driver. We are thus pleased that our tourist arrival numbers for the period January to November 2016 increased to nine million, an increase of just over one million arrivals from This represents a thirteen percent growth in tourist arrivals. The Department of Social Development is building new public treatment centres in provinces where there are no such facilities, in the Northern Cape, North West, Limpopo, Free State and the Eastern Cape. On Investment promotion, Government has established InvestSA, an investment One Stop Shop nationally and will open provincial centres in KwaZulu-Natal, Gauteng and the Western Cape. The message is clear to the affected government departments. There must be no undue delays and no unnecessary red tape. From issuing licences to visas, we should make it easy to do business in South Africa.
9 Government Position on Transformation“The objective of our struggle in South Africa, as set out in the Freedom Charter, encompasses economic emancipation. It is inconceivable for liberation to have meaning without a return of the wealth of the country to the people as a whole. “To allow the existing economic forces to retain their interests intact is to feed the roots of racial supremacy and exploitation, and does not represent even the shadow of liberation.
10 Radical Transformation and Current StatusWhat do we mean by radical socio-economic transformation? We mean fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female, as defined by the governing party which makes policy for the democratic government. Twenty two years into our freedom and democracy, the majority of black people are still economically disempowered. They are dissatisfied with the economic gains from liberation. The gap between the annual average household incomes of African-headed households and their white counterparts remains shockingly huge. White households earn at least five times more than black households, according to Statistics SA. The situation with regards to the ownership of the economy also mirrors that of household incomes. Only ten percent of the top one hundred companies on the Johannesburg Stock Exchange are owned by black South Africans, directly-achieved principally, through the black empowerment codes, according to the National Empowerment Fund.
11 Radical Transformation and Current StatusThe pace of transformation in the workplace, the implementation of affirmative action policies as required by the Employment Equity Act, also remains very slow. In terms of the 2015/16 information submitted to the Employment Equity Commission, the representation of whites at top management level amounted to 72 percent whilst African representation was at 10 percent. The representation of Coloureds stood at 4.5% and Indians 8.7%. The report further provides that white South Africans, in particular males, are afforded higher levels of recruitment, promotion and training opportunities as compared, to the designated groups. At the level of gender at senior management level, males remain dominant at 67.6% and females at 32.4% percent. The skewed nature of ownership and leadership patterns needs to be corrected. There can be no sustainability in any economy if the majority is excluded in this manner. In my discussions with the business community, they accepted these transformation imperatives.
12 Clear Instructions to Government and officialsToday we are starting a new chapter of radical socio-economic transformation. We are saying that we should move beyond words, to practical programmes. The state will play a role in the economy to drive that transformation. In this regard, Government will utilise to the maximum, the strategic levers that are available to the state. This includes legislation, regulations, licensing, budget and procurement as well as Broad-based Black Economic Empowerment Charters to influence the behaviour of the private sector and drive transformation. The State spends five hundred billion rand a year buying goods and services. Added to this is the nine hundred billion rand infrastructure budget. Those budgets must be used to achieve economic transformation. As a start, the new regulations making it compulsory for big contractors to subcontract 30 percent of business to black owned enterprises have been finalised and were gazetted on the 20th of January.
13 Clear Instructions to Government and officialsThrough such regulations and programmes, government will be able to use the state buying power to empower small enterprises, rural and township enterprises, designated groups and to promote local industrial development. Two key challenges we face is the high levels of concentration in the economy as well as the collusion and cartels, which squeeze out small players and hamper the entry of young entrepreneurs and black industrialists. The competition authorities have done excellent work to uncover the cartels and punish them for breaking the law. Last year I signed into law a provision to criminalize the cartels and collusion and it came into effect on 1 May. It carries jail sentences of up to 10 years. We are now stepping up our actions to deal with the other challenge, namely economic concentration, where a small grouping controls most of a market.
14 Clear Instructions to Government and officialsDuring this year, the Department of Economic Development will bring legislation to Cabinet that will seek to amend the Competition Act. It will among others address the need to have a more inclusive economy and to de-concentrate the high levels of ownership and control we see in many sectors. We will then table the legislation for consideration by parliament. In this way, we seek to open up the economy to new players, give black South Africans opportunities in the economy and indeed help to make the economy more dynamic, competitive and inclusive. This is our vision of radical economic transformation.
15 Property Sector Government is actively involved in the property sector, having provided more than four million houses since 1994. This sector in our country is valued at approximately seven trillion rand, with the subsidised sector being valued at one point five trillion rand. However, less than five percent of the sector is owned or managed by Black people and Africans in particular. A draft Property Practitioners Bill will be published by the Department of Human Settlements for public comment with the purpose of establishing a more inclusive, representative sector, towards radical economic transformation. Among key priorities this year, Government will also address the increasing delays and backlogs in registration and issuing of title deeds to beneficiaries of housing projects funded by the capital subsidy.
16 Property Sector We reiterate that radical economic transformation should mean moving beyond share ownership schemes only. We would like to see black people involved directly in business, owning factories. The development of the Black Industrialists programme is thus critical. The programme has from inception supported more than 22 entrepreneurs. Government has further opportunities in the property maintenance projects of the Department of Public Works. The Department will invest approximately one hundred million rand this year on critical capital and maintenance programmes to modernise harbours. They will also continue generating revenue from letting state owned harbours and coastline properties, which will benefit black owned SMMEs. Government will also continue to pursue policies that seek to broaden the participation of black people and SMMEs, including those owned by women and the youth, in the Information and Communication Technologies (ICT) sector.
17 Mining and Beneficiation SectorMining has always been the backbone of our economy and an important foreign exchange earner. We welcome the recovery in commodity prices which has resulted in an upswing in mining output. This augurs well for the industry. The Mining Charter is currently being reviewed. The Charter seeks to recognise the internationally accepted right of the state to exercise sovereignty over all the mineral and petroleum resources within the Republic. It is also aimed at helping the country to de-racialise the ownership of the mining industry. This will help ensure the sustainability of this industry. We trust that discussions between government and business on the Charter will yield results so that the process can be finalised.
18 Mining and Beneficiation SectorWe will continue to pursue direct state involvement in mining. The Mining Company of South Africa Bill will be presented to Cabinet and Parliament during the year. The Minerals and Petroleum Resources Development Amendment Bill was sent back to Parliament so that issues relating to the public consultation process undertaken by Provincial legislatures can be addressed.
19 The Land issue It will be difficult if not impossible, to achieve true reconciliation until the land question is resolved. Only eight million hectares of arable land have been transferred to black people, which is only 9.8 percent of the 82 million hectares of arable land in South Africa. There has also been a 19 percent decline in households involved in agriculture from 2,9million in 2011 to 2,3 million households in 2016. We had stated our intention of using the Expropriation Act to pursue land reform and land redistribution, in line with the Constitution. I have now decided to refer the Bill back to Parliament
20 The Land issue We trust that Parliament will be able to move with speed in meeting the requirements so that the law can be finalised to effect transformation. The Constitutional Court found that the public consultation process facilitated by the National Council of Provinces and some Provincial Legislatures, did not meet the standard set in the Constitution. Going forward, government will continue to implement other programmes such as the Strengthening of Relatives Rights programme, also known as the programme. In this programme, the farm workers join together into a legal entity and together with the farm owner a new company is established and the workers and the owner become joint owners. To date 13 proposals have already been approved benefiting 921 farm dweller households at a value of R631 million. We applaud farmers and farm workers for this innovation.
21 The Land issue Most importantly, we appeal to land claimants to accept land instead of financial compensation. Over 90% of claims are currently settled through financial compensation which does not help the process at all. It perpetuates dispossession. It also undermines economic empowerment. Government has committed itself to support black smallholder farmers. I received a memorandum from the African Farmers Association of South Africa who say the year 2017 must be the year of the commercialisation of the black small holder farmers. Indeed, Government will implement a commercialisation support programme for 450 black smallholder farmers.
22 Women Empowerment We encourage more women to consider farming.Furthermore, the Industrial Development Corporation and the Land Bank availed funding of about five hundred million rand to distressed farmers to manage their credit facilities and support with soft loans. We will continue to mainstream the empowerment of women in all government programmes. Government will continue to prioritise women’s access to economic opportunities and, in particular, to business financing and credit.
23 Fight against CorruptionThe fight against corruption continues. Within the National Prosecuting Authority, the Asset Forfeiture Unit completed three hundred and eighty nine forfeiture cases to the value of three hundred and forty nine million rand. They obtained three hundred and twenty six freezing orders to the value of seven hundred and seventy nine million rand. A total of 13 million rand was recovered in cases where government officials were involved in corruption and other related offences in the past year.
24 SA Trade and Partners Furthermore, trade with our traditional partners in the west remains a significant contributor to our economy. We will continue to partner with the United States and work together on issues of mutual interest such as the full renewal of AGOA. We value our relationship with the People’s Republic of China. China is one of South Africa’s most important and key strategic partners. We recognise the PRC ‘as the sole Government and Authority representing the whole of China’. South Africa reiterates its position and commitment to the ‘One China Policy’ and we consider Taiwan as an integral part of the PRC. At continental partnership level, the Joint Africa-EU Strategy remains an important long-term framework for continued cooperation.
25 SA Trade and Partners The Economic Partnership agreement with the EU came into force in September 2016 thus providing new market access opportunities for South African products. Almost all South African products, about 99% will have preferential market access in the EU. About 96% of the products will enter the EU market without being subjected to customs duties or quantitative restrictions. The Southern African Customs Union Mercosur Preferential Trade Agreement has also entered into force, providing preferential access to over one thousand tariff lines. This is an agreement that promotes South-South trade.
26 SA Trade and Partners We are also pleased with agreements with our BRICS partners in the field of agriculture. We will implement off take agreements on the export of pulses, mangos and pork to India. We will also export twenty thousand tons of beef to China per year for a period of 10 years. We will continue to pursue the reform of the international system because the current configuration undermines the ability of developing countries to contribute and benefit meaningfully.
27 Humble Request for Inclusive EconomyLet us unite in driving radical economic transformation for the good of our country. “Working together as fellow South Africans, we have it within our power to transform this country into the land of plenty for all, where the nightmare of apartheid will just be a faint memory of the past.“
28 Thank You