Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698928384059.pdf (South Africa)
Wednesday, 24 May 2023] No 71—2023] FIFTH SESSION, SIXTH PARLIAMENT PARLIAMENT OF THE REPUBLIC OF SOUTH AFRICA _____________________ ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS _____________________ WEDNESDAY, 24 MAY 2023 _____________________ TABLE OF CONTENTS TABLINGS National Assembly and National Council of Provinces 1.

Minister of Justice and Correctional Services ................................................................. 2 National Council of Provinces 1.
Chairperson ..................................................................................................................... 2 COMMITTEE REPORTS National Assembly and National Council of Provinces 1.

Financial Management of Parliament .............................................................................. 3 National Assembly 1.

Finance ........................................................................................................................... 17 1 2.
Finance ........................................................................................................................... 24 3.

Human Settlements ........................................................................................................ 33 4.

Human Settlements ........................................................................................................ 41 National Council of Provinces 1.

2.

3.

4.
Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour ................................................................................................ 49 Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour ................................................................................................ 65 Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour ................................................................................................ 80 Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour ................................................................................................ 99 TABLINGS National Assembly and National Council of Provinces 1.
The Minister of Justice and Correctional Services (a) Revised Annual Performance Plan of the Department of Justice and Constitutional Development for 2023/24.

National Council of Provinces 1.

The Chairperson (a) Consolidated Annual Municipal Performance Report 2020/2021 Financial Year, Mpumalanga Province.

Referred to the Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements for consideration.
COMMITTEE REPORTS National Assembly and National Council of Provinces 2 1.

Report of the Joint Standing Committee on the Financial Management of Parliament on the Parliament of the Republic of South Africa’s 2022/23 Mid- Year Performance, dated 19 May 2023 The Joint Standing Committee on the Financial Management of Parliament having considered the Parliament of the Republic of South Africa’s 2022/23 mid-year performance, reports as follows: 1.
1.1 Introduction Section 4 of the Financial Management of Parliament and Provincial Legislatures Act, No.

10 of 2009 (the FMPPLA) provides for the establishment of an oversight mechanism to maintain oversight of the financial management of Parliament.

The Joint Standing Committee on the Financial Management of Parliament (the Committee) was established in terms of the Joint Rules of Parliament.

The Committee has the powers afforded to parliamentary committees under sections 56 and 69 of the Constitution.
1.2 Section 52 of the FMPPLA requires that the accounting officer must, within 30 days of the end of each quarter, report to the Executive Authority on Parliament’s quarterly performance in respect of the implementation of the Annual Performance Plan (APP).

The Executive Authority in turn, and in terms of section 54 of the FMPPLA, must table each quarterly report five working days of receiving it for the consideration of the oversight mechanism i.e.

the JSC Financial Management of Parliament.


The 2022/23 Quarter 2 report was duly tabled, on 2 November 2022, and referred on 3 November 2022.

1.3 Parliament’s 2022/23 mid-year performance report was tabled on 2 November 2022, and referred to the Committee on 3 November 2022 for consideration in terms of section 54(2) of the FMPPLA.

The senior management team appeared before the Committee in a meeting held on 2 December 2022 where the institution’s performance in the period under review was interrogated.
1.4 This report should be read along with Parliament’s 2019-2024 Strategic Plan, the 2022/23 Annual Performance Plan (APP) and budget, and the Committee’s reports in respect thereof.

1.5 The report comprises three parts: Part A, containing the background to the mid-year performance report; Part B, the summary of the institution’s financial and performance information for the period under review; Part C, containing the Committee’s observations; and Part D, containing the Committee’s recommendations.
1 3 Part A 2.

Background 2.1 Mandate 2.1.1 Parliament derives its mandate from: - - - - Chapter 4 of the Constitution of the Republic of South Africa, No.
108 of 1996, which sets out its composition, powers and functions; the FMPPLA which regulates the institution’s financial management; the Money Bills Amendment Procedure and Related Matters Act, 2009 No 9 of 2009 which provides procedures to amend money bills; and the Powers, Privileges and Immunities of Parliament and Provincial Legislatures Act No 4 of 2004 which defines and declares the national and provincial legislatures’ powers, privileges and immunities.
2.1.2 Section 53 of the FMPPLA provides for Parliament’s mid-year expenditure and performance to be assessed.

Section 53(1) requires that the Secretary to Parliament must submit a report assessing the administration’s performance during the first half of the financial year to the Executive Authority by 31 October each year.
The report must take into account: the monthly financial statements for the first half of the financial year, the past year’s annual report and progress made in addressing challenges identified in that year, and progress made in the implementation of the current year’s annual performance plan.

The Secretary to Parliament should also recommend whether an adjustments budget may be necessary; and whether to revise projections for revenue and expenditure to the extent that this may be necessary.
2.1.3 Section 54 of the FMPPLA requires that the Executive Authority must table the above- mentioned mid-year reports within five days of receiving the reports from the Secretary to Parliament, and that the reports must be referred promptly to the oversight mechanism.

2.2 Mission and vision 2.2.1 Parliament has as its vision to be an activist and responsive people’s Parliament that improves the quality of life of South Africans and ensures enduring equality in our society.
Its mission is to represent the people and to ensure government by the people in fulfilling its constitutional functions of passing laws and overseeing executive action.

To this end, the institution conducts its business in line with the following values: openness, responsiveness, accountability, teamwork, professionalism, and integrity.

2 4 2.3 Strategic Priorities 2.3.1 Parliament has identified only two strategic priorities for the Sixth Parliament, i.e.
to strengthen oversight, and to enhance public involvement in Parliament’s activities.

2.3.2 In order to achieve the above outcome, the Sixth Parliament will: - improve committee oversight work in relation to the budget cycle in particular, through allowing more time in the parliamentary programme for oversight activities and encouraging committees to undertake joint oversight activities.
Joint the need for more time allocated to committee oversight activities, and the possibility of holding joint briefings and meetings; and - improve the effectiveness of public hearings through greater public participation by expanding public education, better dissemination of information, effective use of broadcasting, technology and social media, the use of more official languages, and encouraging committees to undertake joint public hearings.
2.3.3 To aid the above activities, the institution will: - - enhance research and legal support in respect of oversight activities; improve members’ capacity through capacity-building programmes that will empower parliamentarians to be effective and efficient in executing their oversight responsibilities; - improve oversight and accountability through better monitoring, tracking and evaluation in respect of Parliament’s own work, as well as the work of the Executive; - - ensure openness and accessibility through the use of modern technology in respect of social media, tools-of-trade, workflows and automation; and cut costs to allow for operational sustainability.
3 5 Part B 3.

Performance at the end of the first half of 2022/23 3.1 Overview 3.1.1 The mid-year performance report is based on the tabled 2022/23 APP which has been aligned to the Strategic Plan of the Sixth Parliament.

3.1.2 Of the twelve indicators for the year, eleven were measured at the end of the first half of the financial year.

The performance measures, again, focussed on whether parliamentarians were satisfied with the services provided.
Parliamentarians were requested to rate the services provided along five dimensions statistically correlated to client satisfaction.

Table 1 below reflects the outcome of the mid-year client satisfaction survey.
Overall Member Satisfaction Ease of Indicator % Access Timeliness Reliability Fairness Usefulness ICT Services 83,15 81,91 81,42 83,53 N/A Facilities Management Services 76,96 75,78 Capacity Building Services 72,44 72,03 Research Services Content Advice Procedural Advice Legal Advice 78,11 77,48 80,13 80,36 75,71 74,77 75,42 76,59 Committee Support Services 83,77 83,28 Public Participation Support 74,69 74,86 77,03 72,20 78,47 80,38 74,55 76,37 83,68 74,27 76,87 N/A 71,93 N/A 77,89 77,68 80,36 80,18 76,12 76,55 75,44 73,96 83,97 83,25 74,96 74,56 Table 1: Outcome of Member Satisfaction Survey, Mid-Year 2022/23 (Source: Parliament of the RSA) 84,03 77,53 73,25 78,61 79,66 76,06 74,82 84,03 74,57 3.2 Programme-by-programme summary of performance information Paragraphs 3.2.1 to 3.2.22 below provide a summary of Parliament’s performance across programmes Programme 1: Administration 4 6 3.2.1 Programme 1 provides strategic leadership, management and corporate services to Parliament, and comprises the following sub-programmes: Executive Authority, Office of the Secretary, and Corporate and Support Services.
Performance in respect of this programme is illustrated in Table 2, below.
Parliamentary Service Indicator Mid- Year target Digital service Facilities management service % Member satisfaction % Member satisfaction 80% 75% Mid-Year Performance Variance Status Reasons Mitigation for Variance/ +3,15 +1,96 ü ü Useful and reliable service was provided Useful and timeous service was provided 83,15 76,96 Table 2: Programme 1 performance information (Source: Parliament of the RSA) 3.2.2 According to the table above, sub-programmes Digital Services and Facilities Management Service exceeded their targets by 3,15 per cent, and 1,96 per cent respectively.
Key performance trends under this programme are captured in paragraphs 3.2.3 to 3.2.18 below.

ICT 3.2.3 The ICT division is part of the Support Services Branch that provides facilities and support services to Parliament including institutional communication services, human resource management, information communication technology services, institutional support services and Members’ Support services.
Its purpose is to improve the provision, usage and management of ICT solutions and infrastructure to meet the information and communication needs of parliamentarians, staff and the public.

The division provided support services in respect of oversight, legislation, and public participation.
Facilities Management 3.2.4 The Facilities Management division provides security support, household support (transport and hygiene services), SHE support and catering support to various public hearings, oversight visits and parliamentary events.

Parliamentary Communications Service 5 7 3.2.5 The Oversight and Accountability-strategic priority of Parliament is supported by communicating the work of parliamentary committees to internal and external audiences.
Support was provided to, amongst others, 32 oversight visits and committee meeting activities, including public hearings.

Human Resource Management 3.2.6 The institution’s human capital strategy strives to make available reliable capacity and skills to support parliamentarians in the execution of their constitutional mandate.
The key performance indicators of the Human Capital Strategy include organizational realignment, employee engagement levels and the implementation of the Voluntary Early Retirement Dispensation.

3.2.7 In respect of the organisational re-alignment project, the second phase was underway and entailed the micro-analysis and design of business operating models, processes, and positional structures that will effectively enable a macro-functional design.
The following draft job profiles have been designed to support the draft design proposals, and are at various stages of completion: Parliamentary Communication Services (completed); ICT (Completed); Financial Management (In progress); Internal Audit (In progress); Members Support Services (In Progress); and Legislative Support Services (In progress).
3.2.8 In the period under review there were five resignations affecting the Knowledge and Information Service (KIS) division (3), the Parliamentary Budget Office (1) and the Core Business Support (1) division.

This represents a turnover rate of 0.38 per cent compared to the targeted five per cent for the financial year.
3.2.9 The implementation of the Voluntary Early Retirement Dispensation (VERD) within the laws and rules of the respective pension schemes, GEPF and PSOP, is one of the measures Parliament has proposed to manage the cost of compensation for employees in line with the deep budget cuts being implemented by the National Treasury, and in light of the overall fiscal challenges faced by the country.
By the end of the period under review, the institution had developed an implementation toolkit, and introduced the VERD to employees, explaining the eligibility criteria and procedure to follow to should one be interested in the offer.
Programme 2: Legislation and Oversight 3.2.10 Programme 2 provides for support services for the effective functioning of the National Assembly (NA) and the National Council of Provinces (NCOP) including procedural, legal and content advice; information services and record keeping; and secretarial and support services 6 8 for the houses and their committees.

The programme covers the core business of Parliament and focusses on the outputs, activities and inputs related to legislation and oversight functions.
3.2.11 The programme comprises the following sub-programmes: National Assembly (House; Committees); National Council of Provinces (House; Committees); Public Participation and External Relations; Shared Services; Sectoral Parliaments and Joint Business.

3.2.12 According to the table below, all targets under this programme were exceeded.

Key performance trends under this programme are captured in paragraphs 3.2.13 to 3.2.22 below.
Parliamentary Service Indicator Mid- Year target Mid-Year Performance Variance Status Reasons for Variance/ Mitigation of Number annual parliamentary frameworks adopted Programming Service Number of NA programmes adopted of Number NCOP programmes adopted Capacity Building Service Percentage Member Satisfaction Research service % satisfaction Member Content advice service % satisfaction Member Procedural advice service % satisfaction Member Legal service advice % satisfaction Member Committee support service % satisfaction Member 0 0 1 1 1 1 0 0 0 _____ ___ ü ______ ü ______ 70 72,44 +2,24 ü _____ 75% 78,11 +3,11% 75% 80,13 +5,13% 75% 75,71 +0,71% 75% 75,42 +0,42% 75% 83,77 +8,77% ü ü ü ü ü Public participation service % satisfaction Member 75% 74,69 -0,31% x Table 3: Programme 2 performance in formation (Source: Parliament of the RSA) reliable Useful and timeous service provided Timeous, reliable and easy to access service provided Fair and services provided Easy to access and service timeous provided Reliable and timeous services provided Ease of access and of timeousness services must be improved; Communication public needs to strengthened on participation be Plenary Programming 7 9 3.2.13 Programmes are an essential tool in facilitating the coordination of activities of the National Council of Provinces, National Assembly, Provincial Legislatures and South African Local Government Association (SALGA).
The NCOP and NA adopted the second programmes during the 1st half of the financial year.

The programmes outline activities of portfolio and select committees, house and other fora in which the NA and NCOP participate.
Capacity Building 3.2.14 The following capacity building programmes were implemented for parliamentarians: - - University of Johannesburg post-graduate diploma virtual classes for 11 registered Members; virtual classes for the post-graduate diploma were offered by the University of Johannesburg for 11 parliamentarians on the following modules – research; industrial policy; transitional justice; and strategic diplomacy; - the University of Witwatersrand Postgraduate Diploma was implemented for 19 parliamentarians on the following programmes - orientation programme; international relations and diplomacy; and public policy; and - another programme of Masters in Governance and Leadership was offered to 7 parliamentarians.
Committee Support 3.2.15 Committee support is focused on supporting the core mandates of Parliament i.e.

law making, oversight, public participation, co-operative government and inter-governmental relations, international engagement.
In this regard, the support services provided to Members to carry out their constitutional mandate included: - - - the production of fifty 50 Announcement, Tabling and Committee Reports publications; supporting the oversight function of committees through the provision of content and logistical support to committees; the production of legislative reports for reporting in the programming structures; 8 10 - - - - - the production of 373 minutes and 127 reports, most of within the prescribed timeframes; the provision of 12 legal opinions to committees; and 18 legal opinions to the administration; the drafting of 14 contracts and 4 private members’ bills, and 3 committee bills; the provision of litigation support and management services in respect of 111 matters relating to pending litigation; and the provision of legislative processing and programming support in respect of four bills introduced.
Knowledge Management 3.2.16 The Knowledge Management (KM) strategy review and revision incorporated an element of parliamentarians’ and officials’ capacity-building.

This included discussions on portfolio- specific topics aligned to the programme of the houses and committees, and the oversight plan of the Sixth Parliament.
Partnerships are being pursued with Statistics South Africa (StatsSA), the Council for Scientific and Industrial Research (CSIR), the Academy of Science of South Africa (ASSAF), the Human Sciences Research Council (HSRC), the United Nations International Children's Emergency Fund (UNICEF), the University of Venda (UNIVEN), the Public Affairs Research Institute (PARI) and the Department of Military Science at Stellenbosch University.
Public Participation 3.2.17 The Public Education Office, Parliamentary Democracy Offices and the Public Relations Unit together implement interventions focusing on the delivery of public education and information programmes thereby empowering people to participate in parliamentary processes, mobilising public stakeholders, and capitalising on the use of digital and preferred platforms.
3.2.18 In the first Half of the financial year there were there were 496 visitors to the precinct, with virtual tours conducted with the Boland College, Makhanda PCO Back-2-School programme, and Activate.

Public engagement with civil society, public participation working group, the South African Women in Law Association and the disability sector through collaboration with the African Network for Evidence-to-Action on Disability (AfriNEAD).
Partnerships were 9 11 forged with departments of Justice and Constitutional Development, Basic Education and the National School of Government.

Programme 3: Associated Services and Transfers 3.2.19 Programme 3 provides for the facilities and financial support to political parties including leadership, administrative and constituency support.

It also provides for transfer payments to entities in Parliament.
It comprises the following sub-programmes: Members’ Facilities, Leadership, Administrative and Constituency support to political parties; Transfer to the PBO, Legislative Sector Support, and Office Supporting ISDs.

Performance in respect of this programme was not measured.

Members’ Interest 3.2.20 Members must be supported in a manner that is accessible, effortless, accurate and friendly.
It is critical to adopt the appropriate technology solution to enable workflow automation, real time process optimisation, process performance measurement, monitoring and tracking and to give parliamentarians multiple simple ways to engage with staff and each other.

3.2.21 With the disruption resulting from the January 2022 fire the rollout of the online mobile support solution is of even greater priority to ensure parliamentarians can access support and information wherever they are located.
The policies and reports informing facilities provided to parliamentarians are continually being assessed and reviewed to ensure that facilities are aligned to the needs.

3.2.22 The policies and reports informing facilities provided to the members are continually being assessed and reviewed to ensure that facilities are aligned with the Members' needs.
Matters that have been completed and/or initiated in this period include: upgrading of laptops and tablets; salary adjustment processed and paid; and submissions were prepared for remuneration task team.

4.

Financial Performance in the period under review 4.1 Overview 10 12 4.1.1 Table 4 below, illustrates that by the end of the period under review, Parliament had spent 47 percent or R1,304 million of its appropriated budget of R2,757 billion.
It is projected that the full appropriated budget of R2,757,383 will be spent by the end of the 2022/23 financial year.

4.1.2 The spending on direct charges was R110, 915 million or 88 per cent of the second quarter budget of R125, 576 million.

The overspending is the result of budget reductions and the 3 per cent annual increase backdated from 01 April 2022.

There is a projected overspending of R34.1 million at the end of the financial year.
This projected overspending will be a direct charge against the National Revenue Fund in line with section 23(4) of the FMPPLA.
April - September 2022 YTD Expenditure and Available Budget Main Division Annual Actuals % Actuals % Actuals % Budget Budget R’000 st quarter 1 R’000 nd 2 quarter R’000 Year to Date R’000 Available R’000 Administration 776,384 176,033 99.0 160,580 93 336,613 43 439,735 Legislation and Oversight Associated Services 754,117 179,900 98.4 168,677 92 348,577 46 405,540 755,209 181,500 99.3 187,006 100 368,506 49 386,703 Sub-Total 2,285,674 537,433 98.8 516,263 95 1,053,696 46 1,213,978 Direct Charges 471,709 139,418 114.8 110,915 88 250,333 53 221,376 TOTALS 2,757,383 676,851 101.7 627,178 94 1,304,029 47 1,453,354 Table 4: Expenditure across programmes (Source: Parliament of the RSA) 4.1.3 Table 5 below details spending across economic classification.
April to September 2022 YTD Expenditure and Available Budget Economic classification Annual Actuals % Actuals % Actuals % Budget Budget R’000 st 1 quarter R’000 nd 2 quarter R’000 Year to Date R’000 Available R’000 Compensation of Members Compensation of Employees -PARMED 471,709 139,418 115 110,915 88 250,333 53 221,376 88,403 18,578 97 19,703 102 38,281 43 50,122 11 13 Compensation of Employees Goods and Services (APP) Goods and Services (Members’ entitlements) 1,154,541 258,459 99 258,178 99 516,637 45 637,903 359,788 90,787 97 73,123 80 163,910 46 195,878 131,657 35,134 99 33,372 91 68,506 52 63,151 Transfers 518,572 123,805 100 130,398 102 254,203 49 264,369 Capital Expenditure 32,714 10,670 99 1,489 22 12,159 37 20,555 TOTALS 2,757,383 676,851 102 627,178 94 1,304,029 47 1,453,354 Table 5: Spending across economic classification (Source: Parliament of the RSA) 4.1.4 The spending on compensation of members was R110,9 million or 88 per cent of the second quarter budget of R125, 6 million.
There is projected overspending for the financial year of R34,1 million as a result of budget reductions.

The overspending will be a direct charge against the National Revenue Fund in terms of section 23(4) of the FMPPLA.

4.1.5 The spending on compensation of employees stood at 99 per cent or R258,2 million of the second quarter budget of R260,8 million, and indications are that there will be full spending by the end of the financial year.
4.1.6 Spending in respect of the Parliamentary Medical Aid Scheme (Parmed) stood at 102 per cent or R19,703 million of the second quarter budget of R18,762 million.

Indications are that the budget will have been spent in full by the end of the financial year.

4.1.7 The spending on goods and services, which relates to the APP, was at 80 per cent or R73,2 million of the second quarter budget of R91,7 million.

Indications are that the full budget will be spent by the end of the financial year.

Part C 5.
Part C 5.

Observations 5.1 Public Participation 5.1.1 The Committee notes efforts to increase public participation and access to the business of Parliament, however we remain concerned that progress in this regards appears to be slow.

Of concern is that not enough is being done to ensure information about the work of Parliament 12 14 reaches as many citizens as possible despite this being one of the two strategic objectives of the Sixth Parliament.
5.2 Organisational re-alignment 5.2.1 As in the previous year’s mid-year report, Parliament reported that the organisational re- alignment project was progressing as planned, and that phase two was underway.

Little or no progress appears to have been made, and the Committee has to date not been briefed in detail on what the project entails or its implementation plan.
5.3 Filling of critical vacancies 5.3.1 The Committee welcomes the appointment of Mr Xolile George as Secretary to Parliament in the period under review, but remains concerned about other critical vacancies including that of the head of the Parliamentary Protection Service.
5.4 Performance management in respect of Programme 3 5.4.1 The Committee remains concerned that there are no performance indicators under this programme especially given the serious challenges experienced as far as services related to this programme.

While the Committee has noted the explanation that as the matters provided for under this programme relate to ‘inputs’, and not items against which Parliament was required perform, it is unconvinced that performance could not be measured.

Part D 6.
Part D 6.

Recommendations The Executive Authority should provide the Committee with a response to the recommendations below within 30 days of the adoption of this report by the NA and the NCOP.

6.1 Public Participation 13 15 6.1.1 In respect of greater public awareness of the business of Parliament, the Committee was still awaiting a project plan for securing licencing through Independent Communications Authority of South Africa (ICASA).

The Committee again requests quarterly updates in this regard.
6.1.2 The Committee again cautions against over-reliance on social and broadcast media for the dissemination of information related to the business of Parliament.

The Committee reiterates its previous recommendations that each quarterly report should include detailed progress reports on how access to Parliament and its business will be increased to ensure that most citizens are able to have their voices heard.
6.2 Organisational re-alignment 6.2.1 The Committee remains concerned about the apparent slow implementation of the organisational re-alignment project, and should receive a detailed briefing/report on the organisational re-alignment project, as well as reasons for the apparent delay in finalising it.

We have also noted that some vacant posts cannot be filled until this process has been finalised.

This places further urgency on ensuring that the process is finalised.
6.3 Filling of critical vacancies 6.3.1 The Committee must be provided with detailed quarterly updates on the slow filling of all vacancies, and specifically those in the senior management of the institution.

The reports should detail all actions taken, and obstacles to fill the posts.
6.4 Performance management in respect of Programme 3 6.4.1 The Committee should be provided with a detailed clarification of how the performance of those responsible for delivering/facilitating the services that fall under programme 3 will be measured.

Report to be considered.

14 16 National Assembly [The following report replaces the report of the Standing Committee on Finance, which was published on page 4 of the Announcements, Tablings and Committee Reports dated, Wednesday, 17 May 2023] 1.
Report of the Standing Committee on Finance on the Financial Matters Amendment Bill [B20B - 2022] (National Assembly- section 75), dated 17 May 2023 The Standing Committee on Finance, having considered the Financial Matters Amendment Bill [B20B - 2022] (National Assembly- section 75) referred to it, reports the Bill, with amendments, as follows: 1.

INTRODUCTION AND BACKGROUND 1.1.

The Financial Matters Amendment Bill (FMAB) was tabled in Parliament by the Minister of Finance on 02 September 2022.
FMAB is an ordinary (section 75 of the Constitution) Bill dealing with the amendment of various pieces of legislation under the finance portfolio.

1.2.
1.2.

The Bill seeks to amendment to following laws: the Associated Institutions Pension Fund Act, 1963; the Temporary Employees Pension Fund Act, 1979; the Military Pensions Act, 1976; the Government Employees Pension Law, 1996; the Financial and Fiscal Commission Act, 1997 (which was later abandoned); the Land and Agricultural Development Bank Act, 2002; the Auditing Profession Act, 2005; and the Auditing Profession Amendment Act, 2021.

1 17 2.

PUBLIC PARTICIPATION 2.1.


SCOF was briefed on this Bill on 15 March 2023 and made a call for submissions thereafter.

On 22 March 2023, the Committee held public hearings which were responded to on 09 May 2023.

2.2.

The Committee received written and oral submissions from the following organisations: the Association for Monitoring and Advocacy of Government Pensions (AMAGP), the Congress of South African Trade Unions (COSATU) and Deloitte (written submission only.).

2.3.
2.3.

The National Treasury reported that it also consulted the Financial and Fiscal Commission, the Government Pensions Administration Agency, the Land and Agriculture Development Bank, and the Independent Regulatory Board for Auditors on the amendments that affected them in the Bill.

3.

OVERVIEW OF THE PROPOSALS IN THE FMAB 3.1.
The Bill seeks to amend to following laws: 3.1.1. the Associated Institutions Pension Fund Act, 1963, and the Temporary Employees Pension Fund Act, 1979, so as to amend certain definitions and other provisions to align these Acts with their administration by the Minister responsible for finance and to update references to other Ministers; 3.1.2. the Military Pensions Act, 1976, so as to provide for the benefits for life partners of members retrospectively; 2 18 3.1.3. the Government Employees Pension Law, 1996, so as to amalgamate the Associated Institutions Pension Fund into the Government Employees Pension Fund; 3.1.4. the Financial and Fiscal Commission Act, 1997, so as to omit the provision for the Chief Executive Officer of the Financial and Fiscal Commission to be its Secretary (this amendment was rejected by the Committee as discussed below); 3.1.5. the Land and Agricultural Development Bank Act, 2002, so as to substitute the definition of Minister and replace the provision for judicial management with business rescue in terms of the Companies Act, 2008; 3.1.6. the Auditing Profession Act, 2005, so as to enable the enforcement committee, upon admissions of guilt, to refer instances of serious improper conduct to the disciplinary committee for sanctioning; and 3.1.7. the Auditing Profession Amendment Act, 2021, so as to provide that acts of improper conduct not dealt with before the effective date of that Amendment Act be dealt with in terms of the Auditing Profession Act, 2005, after its amendment by the Auditing Profession Amendment Act, 2021, with the exception of sanctions (this amendment was abandoned or rejected as discussed later below); and 3.1.8. to provide for matters connected therewith.
4.

LETTER FROM THE MINISTER OF FINANCE 4.1.

The Minister of Finance subsequently addressed a letter to the Committee dated 05/04/2023 to bring two clauses (Clauses 18 and 22) to the attention of the Committee for its consideration during the deliberations.

4.2.
4.2.

On Clause 18 and in relation to the amendments to the Financial and Fiscal Commission (FFC) Act, 1997, the Minister stated that he had been advised that the 3 19 amendment was not necessary as it was covered by a procedure set out in section 76(4)(a) of the Constitution.

He assured the Committee that the FFC had been accordingly advised and asked the Committee to reject the amendment.

4.3.
4.3.

On Clause 22, which proposed to substitute section 23 of the Audit Profession Amendment Act, 2005, dealing with alleged improper conduct, the Minister explained that the Independent Regulatory Board of Auditors (IRBA) had sought advice from senior counsel who advised that the proposed amendment was already covered by the transitional arrangements of the previous Amendment Act.

He again asked the Committee to reject this amendment.

5.

KEY ISSUES RAISED IN THE PUBLIC HEARINGS 5.1.


Some commentators were concerned about the sustainability of the GEPF if merged with the Associated Institutions Pension Fund (AIPF) and the Temporary Employees Pension Fund (TEPF) into the Government Employees Pension Fund (GEPF).

5.2.

Among some of the concerns was that commentators were unable to access any information about the membership numbers or the financial position/financial sustainability or any actuarial evaluation of the AIPF and TEPF.
They decried that such information was not freely available.

They noted that secondary information confirmed that the administration of these two funds was already executed by the Government Pensions Administration Agency (GPAA), which also executes the administration of the GEPF.

They submitted that in the absence of information to inform them on the factors that will either put the GEPF at risk or benefit, it was not possible for them to make any informed comment on the proposed amalgamation.
In this regard, the Committee instructed the National Treasury to make available such required information to the commentators and the Committee.

This information was provided accordingly to all parties.

4 20 5.3.

Some commentators welcomed the Bill, acknowledging that it was an important intervention in addressing the challenges faced by military veterans’ partners in accessing pension benefits when their partners and ex-partners had passed away or during separation.
They noted that the Bill provided for the extension of existing legal requirements to Associated Institutions’ Pension Funds, thus providing the same rights and protections for those fund members.

They said that these interventions were needed to help current and former SANDF members, their partners, and families in their moments of need.

5.4.
5.4.

They further noted that the Bill seeks to address problems experienced in the auditing profession as seen recently where some auditors helped cover up corruption in the firms and SOEs.

5.5.

Some commentators proposed the insertion of a new section in the Bill formalising in law the existing IRBA rule providing for mandatory audit firm rotation (MAFR) and limiting lengths of auditing contracts of firms and SOEs to five years and not renewable thereafter.
NT indicated that amendments to primary legislation to provide for MAFR will be pursued in the next round of APA amendments.

5.6.

Other comments, particularly from Deloitte, sought clarity around the proposed amendments to the powers of the enforcement committee.
NT clarified that the referral to by the enforcement committee to the disciplinary committee will occur in two instances: if the auditor does not/ fails to admit guilt to charges and/or if the enforcement committee believes that the improper conduct of the auditor warrants deregistration or disqualification from registration as an auditor.

5.7.
5.7.

With regards to Clause 21- commentators noted that the authority of the enforcement committee to determine if conduct warranted deregistration or disqualification had not been determined.

NT explained that the authority of the enforcement committee to 5 21 refer a matter to the disciplinary committee for a disciplinary hearing came from the provisions of section 49(1)(b), read with 49(5) of the Audit Profession Act (APA), 2005.
NT said that the referral to the disciplinary committee will occur in instances where a respondent does not/ fails to admit guilt and/or where the committee believes that the improper conduct warrants a sanction contemplated in section 51B(3)(a) (iv) and (v) of the APA, and section 49(1)(b) read with 49(1)(a) of the APA.

5.8.
5.8.

With regards to IRBA’s sanctions framework not having been finalized, thus making it unclear what the quantum of fines levied may be, NT explained that the draft implementation framework can only be finalized once the Minister of Finance has determined the maximum monetary fine and will be published once the Minister has made that determination.

6.

COMMITTEE OBSERVATIONS AND RECOMMENDATIONS 6.1.


The Committee welcomes the amendments to the various pieces of legislation as proposed in the Financial Matters Amendment Bill (B20B- 2022).

The Committee believes that all public comments on the Bill, most of which were clarity seeking, were adequately responded to by NT before the Committee on 09 May 2023 and in writing.

6.2.

The Committee notes the Minister’s letter which asked the Committee to reject clauses 18 and 22.
The Committee agrees with this request and accordingly rejects these clauses for the reasons provided by the Minister of Finance in the letter dated 05/04/2023 discussed above.

7.

CONCLUSION 7.1.

The Committee agrees with amendments proposed in the A list of the Bill as presented to the Committee on 09 May 2023.

6 22 7.2.

The Committee reports the Bill [B20B-2022].

Report to be considered.


7 23 [The following report replaces the report of the Standing Committee on Finance, which was published on page 10 of the Announcements, Tablings and Committee Reports dated, Wednesday, 17 May 2023] 2.
Report of the Standing Committee on Finance on the Municipal Fiscal Powers and Functions Amendment Bill [B21B - 2022] (National Assembly- section 75), dated 17 May 2023 The Standing Committee on Finance, having considered the Municipal Fiscal Powers and Functions Amendment Bill [B21B - 2022] (National Assembly- section 75) referred to it, reports the Bill as follows: 1.

INTRODUCTION AND BACKGROUND 1.1.


The Municipal Fiscal Powers and Functions Amendment Bill (MFPFAB) was tabled in Parliament by the Minister of Finance on 22 September 2022.

MFPFAB is an ordinary (section 75 of the Constitution) Bill dealing with the regulation of the power of municipalities to levy development charges and related issues.

1.2.
1.2.

Among other issues, this Bill seeks to empower the Minister of Finance to make regulations for the effective implementation of matters relating to development charges and to amend the Spatial Planning and Land Use Management Act (SPLUMA), 2013.

2.

PUBLIC PARTICIPATION 2.1.

SCOF was briefed on this Bill on 15 March 2023 and made a call for submissions thereafter.

On 22 March 2023, the Committee held public hearings which were responded to on 09 May 2023.

2.2.
2.2.

On the date of public hearings, the Committee noted that it had received three written submissions, but no stakeholder had requested to make an oral presentation.

The 1 24 submissions were received from Ms. H Vorster, Dr Kenneth Kaunda District Municipality, and the South African Local Government Association (SALGA).

2.3.
In developing these amendments, the National Treasury reported to the Committee that it consulted municipalities, the Financial and Fiscal Commission, the South African Local Government Association, the South African Land Owners Association, the Metropolitan Municipalities and Secondary Cities, the National Department of Rural Development and Land Reform, the National Department of Human Settlement, the National Department of Environment, Forestry and Fisheries, the National Department of Transport, and the South African National Roads Agency SOC LTD. 2.4.
The National Treasury further reported that it received several written comments from these stakeholders (all spheres of government, property owners, non-government institutions and the public).

It said that after analysing these comments, the Bill was refined, where necessary, before it was tabled in Parliament.

The National Treasury also held a feedback session with stakeholders to inform them of the outcome of the public consultation process.

3.

OVERVIEW OF THE PROPOSALS IN THE MFPFAB 3.1.


MFPFAB proposes amendments to the Municipal Fiscal Powers and Functions Act, Act 12 of 2007 (“the Act”), to among other things provide a regime for municipalities to levy development charges.

3.2.

The Bill defines key concepts such as external engineering services, bulk engineering services, link engineering services, internal engineering services and rebate.

3.3.

The Bill consists of 8 main clauses.


Clause 4 of the Bill proposes the insertion of a new chapter, Chapter 3A (with 12 clauses, Clause 9A to 9L) which deals with development charges.

2 25 3.4.

Clause 1 of the Bill seeks to substitute section 1 of the Act and includes new definitions to assist in the interpretation of the Act, and also provide that if there is a conflict between a provision of the Act and other legislation, the provision of the Act prevails.

3.5.
3.5.

Clause 2 proposes the insertion of paragraph (e) in section 2 of the Act to provide for development charges as one of the objects of the Act.

3.6.

Clause 3 proposes the substitution of section 3 of the Act to provide for the application of the Act and for the exclusion in the application of Chapter 2 to development charges, of property rates regulated in terms of the Local Government: Municipal Property Rates Act, 2004 (Act No.
6 of 2004), and municipal base tariffs regulated under the Local Government: Municipal Finance Management Act, 2003 (Act No.

56 of 2003), the Local Government: Municipal Systems Act, 2000 (Act No.

32 of 2000) (‘‘the Municipal Systems Act’’), or sector legislation.

3.7.

Clause 4 proposes the insertion of Chapter 3A, as discussed in 3.3. above.

3.7.1.

Clause 9A provides for a power for municipalities to levy development charges and establishes the basis on which they are calculated.

3.7.2.
3.7.2.

Clause 9B requires each municipality to approve a policy on development charges and specifies the minimum contents of these policies.

3.7.3.

Clause 9C requires a public participation process before a municipality adopts a policy on development charges.

3.7.4.

Clause 9D allows a municipality to adopt and publish by-laws to give effect to the implementation of its development charges.

3.7.5.
3.7.5.

Clause 9E allows a municipality which decides to levy development charges to grant a rebate for, or exempt, a category of applicants or category of land developments through reducing the development charges payable or exempting a category of applicants or a category of land developments from paying 3 26 development charges, where it has set out a criterion for such rebate or exemption in its policy on development charges.

3.7.6.
3.7.6.

Clause 9F provides for engineering services agreements to regulate the terms and conditions of the installation of engineering services.

3.7.7.

Clause 9G permits a municipality to set off the cost of infrastructure installed by an applicant against a development charge.

3.7.8.

Clause 9H deals with the consequences of a municipality not providing infrastructure for which a developer has paid a development charge.

3.7.9.
3.7.9.

Clause 9I provides for instances where bulk and link engineering services are part of internal engineering services.

3.7.10.

Clause 9J provides for a mechanism to resolve a dispute of a person whose rights are affected by a decision regarding development charges.

3.7.11.

Clause 9K provides for the delegation of powers conferred upon a municipality.

3.7.12.

Clause 9L provides for financial misconduct where there is, among other things, a contravention of Chapter 3A.

3.8.
3.8.

Clause 5 proposes the substitution of subsection (1) in section 10 of the Act to extend the Minister’s power to make regulations for the effective implementation of Chapter 3A.

3.9.
3.9.

Clause 6 provides for a Schedule, to amend the SPLUMA, 2013 and also provides for a transitional measure whereby a municipality, which levies development charges in terms of a pre-existing policy or by-law as at the date of coming into effect of the amendments proposed in the Bill, must ensure that it complies with the envisaged Municipal Fiscal Powers and Functions Amendment Act, 2022, within 36 months from the commencement of the said Act.

3.10.
3.10.

Clause 7 proposes the substitution of the long title of the Act to, among other things, refer to development charges.

4 27 3.11.

Clause 8 provides for the short title of the Act and its commencement.

4.

KEY SUBMISSIONS AND RESPONSES BY NATIONAL TREASURY 4.1.

SALGA raised concerns regarding definitions.

It proposed alignment of the definitions between SPLUMA and the MFPFAB, which NT agreed to and effected in the Bill.
Section 1 of SPLUMA was amended by providing additional definitions and these amendments were consulted on with the Department of Land Reform and Rural Development (DALRRD) and were supported.

4.2.

Additional definitions were related to the bulk engineering services and the linked engineering services, and these definitions were portions of what constituted external engineering service.
Other definitions were aligned to those in section 1 of the SPLUMA, such as external engineering service, internal engineering service, and engineering service applicant.

4.3.

The term ‘land-owner’ was replaced with the term ‘applicant’ and the definition was similar to the one contained in SPLUMA.

The Bill no longer referred to 'municipal engineering service,' but to 'engineering service,' and the definition was like the one in SPLUMA.

4.4.
4.4.

There were questions raised on whether the Bill proposed the levying of municipal surcharges or not.

NT clarified that the Bill did not deal with municipal surcharges but the levying of development charges.
It further clarified that municipal surcharges may be levied on fees for municipal services in general, and it had been defined in the principal Act as a charge more than the municipal base tariff that a municipality may impose on fees for a municipal service provided by, or on behalf of, a municipality, in terms of section 229(1)(a) of the Constitution.

4.5.
4.5.

NT further explained that a surcharge had no bearing on the development charges, neither did the development charges have any bearing on the municipal surcharges.

5 28 NT further clarified that municipal councils may levy surcharges for any of the municipal services outlined in Schedules 4 and 5, Part B of the Constitution.

NT further stated that apart from amending section 1 of the Act, the Bill had inserted Chapter 3A, which dealt specifically with development charges.
It said that the rest of the Chapters in the principal Act remained unchanged, adding that development charges could be utilised only for providing infrastructure, whilst surcharges may be utilised at the discretion of the municipality.

4.6.
4.6.

On providing clarity on the status of development charges (whether it is a levy, tax or charge in terms of the Municipal Systems Act as charges and tariffs, or a surcharge), NT responded that the Bill made it clear that a development charge meant a charge levied by a municipality in terms of section 9A(1)(a) and contemplated in section 49 of the SPLUMA which must: 4.6.1.
Contribute towards the cost of the capital infrastructure assets required to meet the increased demand for existing and planned external engineering services; 4.6.2.

Contribute towards the cost of open parks and spaces if the land development application provides for the use of land for residential purposes; or 4.6.3.
With the approval of the Minister, contribute towards the capital infrastructure assets required to meet the increased demand for other engineering services not prescribed in terms of the SPLUMA.

4.7.

NT clarified further that municipal surcharges and taxes had been clearly defined in the original Act (Chapter 2 and 3), including procedures for their application, and they had no bearing on the development charges.
NT further stated that to avoid confusion, the MFPFA Bill in clause 3(2) clearly indicates that Chapters 2 and 3 do not apply to development charges.

As such, the Bill deals with the application and regulation of development charges, and nothing else.

6 29 4.8.

NT agreed with submissions that development charges be recognised as non-trading revenue in the statement of financial performance.
It further clarified that municipalities would account and report on development charges in accordance with existing legislation such as the Municipal Finance Management Act.

In addition, National Treasury would issue circulars/notices to guide municipalities on how they should account and report on development charges.

4.9.

Ms Forster rejected the Amendment Bill, arguing that municipalities were struggling financially, not due to a lack of extra levies, but due to mismanagement and corruption.
She argued that this levy would add to the financial burden already loaded onto municipal customers, and the majority of South Africans would not be able to afford it.

NT did not agree with the concerns raised by Ms Forster, given that development charges were not a new source of revenue for municipalities, as some municipalities were already levying this charge.
NT clarified that the general concept of a development charge was that the urban growth and expansion of new land use development created the need for additional infrastructure services.

These services, which were an essential part of land use development, were a direct cost generated by that development, and should therefore be paid for by the applicant.

4.10.
4.10.

NT further clarified that development charges are based on the ‘benefit principle’ and were therefore payable by individual applicants to fund the provision of infrastructure meant specifically to service their proposed land developments, rather than it being subsidised by the rest of the ratepayers in the municipality through increased rates and tariffs.
NT assured that once enacted the Bill would promote accountability and the predictability that current residents, especially the poor, were not required to subsidise the cost of commercially viable developments.

7 30 5.

COMMITTEE OBSERVATIONS 5.1.


The Committee welcomes the amendments proposed in this Bill which seek to establish clear, fair, and consistent regime for municipalities to recover development charges for all new land development projects that require statutory approvals through the municipal land use planning system.

5.2.
5.2.

The Committee notes that the proposals in the Bill seek to bring about a more standardized, equitable and sustainable framework for financing municipal infrastructure based on the benefit principle, thus enabling applicants to accurately estimate their development cost liabilities and ensure that municipalities can provide the required infrastructure timeously.

5.3.
5.3.

The Committee notes that the benefits of this Bill include the uniformity across municipalities on the application of development charges, which will eliminate any unfair competition or treatment of applicants within and between municipalities.

The Committee further notes that development charges are not new as municipalities already charge these.

However, the Bill seeks to bring the much-needed framework that will ensure coordination and improve the municipal fiscal framework.

5.4.
5.4.

The Committee notes and welcomes the written submissions from stakeholders, and the consultative processes by NT which ensured that when the Bill was presented, there were not too many contentious issues.

The Committee particularly sought to consult with SALGA, as an autonomous association of all the country’s municipalities, and was pleased that it participated in the consultation processes of NT and made written submissions to the Committee which were all responded to by NT.

5.5.
5.5.

The Committee is satisfied that all the issues raised during the public participation process were responded to in detail by NT, with some improvements made in the final Bill, particularly around the issues of definitions between the Bill and SPLUMA.

8 31 5.6.

The Committee notes that the comments made by the Dr Kenneth Kaunda Municipality contained issues of equitable share, which were not relevant to the Bill.

6.

CONCLUSION 6.1.
6.

CONCLUSION 6.1.

The Committee agrees with the amendments proposed in the Bill as reflected in the A list of the Bill.

6.2.

The Committee reports the Bill [B21B-2022].

Report to be considered.

9 32 3.

Report of the Portfolio Committee on Human Settlements on the 2022/23 Second Quarter Financial and Non-Financial Performance of the Department of Human Settlements, 24 May 2023.
The Portfolio Committee on Human Settlements (the Committee), having considered the 2022/23 second quarter report on the expenditure and performance of the Department of Human Settlements (the Department), reports as follows: 1.

Introduction The Committee, considered the 2022/23 second quarter report of the Department on 15 March 2023.

This report provides a reflection on the expenditure and non-financial performance of the Department by the end of the second quarter of the 2022/23 financial year.
It also provides the Committee’s key deliberations, observations, and recommendations.

Those are based on the documents presented to the Portfolio Committee by the Department, the Adjusted Estimates of National Expenditure (AENE) and section 32 report published by National Treasury.

2.
2.

An overview of the overall expenditure: Second Quarter Over the medium term, the Department would continue to focus on developing integrated human settlements; upgrading informal settlements; and creating an enabling environment for affordable housing by continually reviewing policy and implementation programmes; and strengthening support to provinces and municipalities to implement human settlements programmes.
Expenditure was expected to increase from R33.5 billion in 2022/23 to R38.1 billion in 2025/26 at an average annual rate of 4.4%.

Transfers to provinces, municipalities and public entities that implement human settlements programmes constituted an estimated 96.1% (R104.7 billion) of the Department’s budget.
These comprise allocations such as the Human Settlements Development Grant (HSDG), the Urban Settlements Development Grant (USDG), the Informal Settlements Upgrading Partnership Grant (ISUPG) and transfers to public entities, and were expected to increase at an average annual rate of 3.9%, from R32.5 billion in 2022/23 to R36.5 billion in 2025/26.

2.1 Developing integrated human settlements One of the Department’s objectives was to create inclusive communities within an improved spatial landscape.
As such, over the MTEF period, the Department planned to finalize 11 integrated plans in priority 1 33 development areas that were intended to advance spatial transformation and deliver integrated human settlements projects.

The medium‐term target was to deliver 180 000 fully subsidized houses and issue 388 104 title deeds to beneficiaries from low‐income households.

Spending for these activities was within the Integrated Human Settlements Planning and Development programme’s allocation of R73.5 billion.
The programme’s budget increased at an average annual rate of 5.1 percent, from R22.1 billion in 2022/23 to R25.6 billion in 2025/26.
An additional R2.2 billion was allocated through the USDG for: The Lufhereng integrated urban development project in Johannesburg, a mixed‐use residential housing development that aims to promote spatial integration and provide affordable rental housing units; and the Avoca Node project, which aimed to create an enabling environment for private sector‐led housing developments in the in eThekwini municipality.
These were the only projects approved to access the budget facility in the human settlements sector.

Transfers to the grant were made in the Integrated Human Settlements Planning and Development programme.

From 2023/24 the Department would be taking over the implementation of the emergency housing programme.

As a result, the provincial emergency housing grant and the municipal emergency housing grant ends.
This adjustment would increase expenditure on payments for capital assets from R15.3 million in 2022/23 to R575.9 million in 2025/26.

2.2 Upgrading informal settlements The Department assists provinces and municipalities with comprehensive planning for the upgrading of informal settlements.

This involves providing secure tenure, safe and reliable water and sanitation and adequate access to social services.
Related work was completed in phases, with phases 1 to 3 comprising the provision of secure tenure and basic services such as water, sanitation, lighting and refuse removal.

Community participation in the upgrading process is a key pillar in the programme as beneficiaries are encouraged to find adequate upgrading solutions that are specific to their communities.
To upgrade a targeted 900 informal settlements to phase 3 across the country, provincial and municipal spending through the ISUPG was expected to amount to R27.2 billion over the medium term.

A further R120 million over the period ahead was expected to ensure that provinces and municipalities deliver 60 000 serviced sites per year through the national upgrading support programme.
The Department intended to hire consultants to augment capacity for the upgrading of informal settlements and the provision of affordable rental housing.

Spending for this was within the Department’s budget for consultants, which was expected to increase at an average annual rate of 7.3%, from R188.8 million in 2022/23 to R233.5 million in 2025/26.
2.3 Facilitating affordable housing 2 34 Affordable housing broadly constituted the provision of rental and social housing programmes, and instruments to provide housing finance to traditionally unserved segments of the population.

These were critical components in the creation of a functional residential property market.
The Department aimed to increase the supply of rental and social housing stock, and assist low‐income and middle‐income households that earned above the qualifying threshold to receive state‐subsidized housing but below the threshold to secure a home loan.

Accordingly, the Department planned to build 10 800 rental housing units and disbursed 12 000 finance‐linked individual subsidies over the following 3 years.
As a result, spending in the Rental and Social Housing programme was expected to be R3.1 billion and spending in the Affordable Housing programme was expected to be R1.9 billion.

3.

Performance per program 3.1 Programme 1 (Administration) The following was programme performance: • Target: 35% implementation of the approved internal audit plan – 35% implementation of the approved internal audit plan.
• Target: 100% execution of the approved anti-fraud and corruption implementation plan - 80% Execution of the approved anti-fraud and corruption implementation plan.

The Financial disclosure system was inaccessible due migration from Oracle server to Cloud environment.

• Target: 47% implementation of the approved Risk Management Implementation Plan - 47% implementation of the approved Risk Management Implementation Plan.
• Target: 100% implementation of the Human Resource Implementation Plan - 75% implementation of the Human Resource Implementation Plan.

Misalignment of OPSC submission dates and the HR Implementation Plan dates.

• Target: 55% implementation of the approved annual ICT plan - 55% implementation of the approved annual ICT plan.

• Target: 50% implementation of the approved communication plan - 40% implementation of the approved communication plan.

Media Tours and Media Builds as planned did not occur.
• Target: 2021/22 unqualified audit opinion with no material findings - 2021/22 unqualified audit opinion with no material findings.

• Target: 1 quarterly assessment conducted on Human Settlements Development Grant (HSDG) - 1 quarterly assessment conducted on HSDG.

• Target: 1 quarterly assessment conducted on Human Settlements Grant (USDG) - 1 quarterly assessment conducted on USDG.
3 35 3.2 Programme 2 (Integrated Human Settlements Planning and Development) The following was the programme performance: • Target: 1 report on integrated implementation programmes for priority development areas completed per year - 1 report on integrated implementation programmes for priority development areas completed per year.
• Target: 1 report on the total human settlements allocation in PDAs - 1 report on the total human settlements allocation in PDAs was completed however the evidence in line with the content of the report was not submitted.

The information on USDG was insufficient to determine its allocation in PDAs due to USDG not captured in the HSS.
• Target: 1 analysis reports completed on land acquired during 2014-2019 within PDA’s rezoned - 1 analysis reports completed on land acquired during 2014-2019 within PDA’s rezoned, however there was no land rezoned.

Lack of adequate budgetary provision for land rezoning or preparation by Provinces, Municipalities and the Housing Development Agency (HDA).

• Target: 2022/23 National Human Settlements Development Plan developed - 2023/24 National Human Settlements Development Plan not developed.
The target was achieved but there was an error on the Annual Performance Plan (APP) which indicated 2023/24 instead of 2022/23.

• Target: Consultation on Policy Foundation for Housing and Human Settlements developed - Consultation on Policy Foundation for housing and Human Settlements developed.

• Target: 1st draft Procurement Policy for housing and Human Settlements developed – 1st draft Procurement Policy for housing and Human Settlements developed.
• Target: Consultation report on the Draft policy programme - Consultation report on the Draft policy programme was achieved.

• Target: Consultation report on the Draft Rent to Buy Policy Programme - Consultation report on the Draft Rent to Buy Policy Programme was achieved.

• Target: Consultation report on the Draft Small Scale Rental Policy Programme - Consultation report on the Draft Small Scale Rental Policy Programme was achieved.
• Target: Consultation report on the Draft Reformed Social Housing Policy Programme - Consultation report on the Draft Reformed Social Housing Policy Programme was achieved.

• Target: Consultation report on the Draft Consumer Education Policy Programme - Consultation report on the Draft Consumer Education Policy Programme was achieved.

• Target: Consultation report on Norms and standards for Affordable Housing - Consultation report on Norms and standards for Affordable Housing was achieved.
4 36 • Target: Consultation report on the Draft Employer Assisted Housing Policy Programme - Consultation report on the Draft Employer Assisted Housing Policy Programme was achieved.

• Target: 1 report on entities performance monitored - 1 report on entities performance monitored.

• Target: 1 Monitoring report on the set aside for the designated groups - Report on the set aside for designated groups developed partially monitored.
Verification not completed due to PPPFA reports received late from Provinces, Metros and Entities.

• Target: 1 Report on projects monitored as per approved business plans - 1 Report on projects monitored as per approved business plans.

• Target: 1 Report on blocked projects monitored - 1 Report on blocked projects monitored.

• Target: 1 Report on the monitoring of MTSF Sector Indicators - 1 Report on the monitoring of MTSF Sector Indicators.
• Target: 1 report on intergovernmental relations programmes implemented - 1 report on intergovernmental relations programmes implemented.

3.4 Programme 3 (Informal Settlements) The following was programme performance: • Target: Monitor and report progress of informal settlements upgrading projects in 9 Provinces and 8 Metros - Monitor and report progress of informal settlements upgrading projects in 9 Provinces and 8 Metros was achieved.
3.5 Programme 4 (Rental and Social Housing) The following was programme performance: • Target: Draft National Rental Housing plan developed - Draft National Rental Housing plan was developed however it was not presented to Management and other external Structures.

3.6 Programme 5 (Affordable Housing) The following was programme performance: • Target: Report on consultation with Minerals Council of South Africa - Consultation with Minerals Council of South Africa was partially done.
• Target: 1 quarterly Report on title deeds registered - 1 quarterly Report on title deeds registered was achieved.

• Target: Analysis Report on blocked projects developed - Analysis Report on blocked projects developed, however it was not approved.

5 37 • Target: 1 quarterly Report on the number of job opportunities created – 1 quarterly Report on the number of job opportunities partially achieved.
Portfolio of Evidence (POE) to verify the figures provided was not submitted by provinces, Metros and SHRA.

4.

Committee observations and recommendations The Portfolio Committee raised the following with the Department in respect of the second quarterly report for 2022/23: 4.1 Observation: Noted there was a number of jobs created through human settlements initiatives.

However, details on the number and nature of jobs created was not provided to the Committee.
Recommendation: Provide the Committee with a detailed report on the number and nature of jobs that have been created through human settlements initiatives.

4.2 Observation: Concerned about the impact of re-allocation of funds, from non-performing to performing provinces, on citizens who expected service delivery.

It was not clear if re-allocated funds resulted in improved service delivery by receiving provinces.
Recommendation: Present to the Committee a plan to address the impact of re-allocating funds from non- performing to performing provinces.

This presentation should include an assurance that receiving provinces spend these funds on service delivery.

This must be presented to the Committee within a month.

4.3 Observation: Concerned about the backlog in the eradication of mud houses and asbestos roofing.
The Committee also note the report by Western Cape Department of Infrastructure that there was zero performance on eradicating mud houses.

Recommendation: Present to the Committee an implementation plan address the backlog of mud houses and asbestos roofing.

Provide necessary assistance to the Western Cape Department of Infrastructure to improve performance.

This implementation plan must be presented to the Committee within a month.

4.4.
4.4.

Observation: Concerned about a lack of plan to assist underperformance by provinces in relation to the MTSF targets.

The Committee acknowledged that there were continuous meetings between the national Department and provinces to address this issue.

However, there was still no concrete and widely accepted plan to address the issue.

Recommendation: Present a recovery plan to address underperformance in provinces.

This plan must be presented to the Committee within three months.
6 38 4.5 Observation: Concerned about the continuous underperformance of ISUPG and USDG grants by Metros, affecting people on the ground.

The problem was compounded by procurement challenges and political instability due to coalition governments.

Recommendation: Provide assistance to provinces to improve performance.

Put in place interventions to ensure improved performance.

Adequately deal with procurement challenges in all provinces.
Funds to the City of Mangaung, Johannesburg and Tshwane should be withheld until they accountability to the Committee.

4.6 Observation: That the ideals of the Priority Development Areas (PDAs) programme were not achieved because of the land planning issues.

The Committee, wanted to understand the process of land acquisition, particularly for serviced stands.

Recommendation: Present a plan to address issues associated with the implementation of PDAs programme.
The Planning Directorate in the Department and the Housing Development Agency (HDA) should develop a plan to resolve issues affecting the implementation of PDAs.

Present to the Committee the process of land acquisition and zoning to Committee within a month.

4.7 Observation: Noted the presentation on blocked projects and title deeds.

However, the progress on unblocking of blocked project was not presented to the Committee.

Recommendation: Present a plan to unblock blocked projects to the Committee.
This must be done within three months.

4.8 Observation: Noted the presentation on title deeds.

However, the Committee observed that land planning challenges hampered the issuance of title deeds.

Recommendation: Improve land planning and rezoning processes to fast-track the issuance of title deeds.

4.9 Observation: Concerned about the non-compliance with the policy on payment of service providers within 30 days.

Recommendation: Ensure that invoices are paid within the prescribed 30 days.
Address all challenges associated with non-compliance.

4.10 Observation: Noted the quantitative delivery of houses.

However, the Committee was concerned about the lack integration of houses.

Recommendation: Ensure that houses are provided in a sustainable and an integrated human settlements approach.

Ensure compliance with human settlements policy and programmes (Human Settlements Code) 7 39 in the delivery of human settlements.

Fast-track the review of the Housing Act into the Human Settlements Act.
4.11 Observation: Noted initiatives by the Department to empower women, youth, and people with disabilities.

However, there was no detailed report on how these groups would be empowered.

Recommendation: Present to the Committee a detailed report on how these groups would be empowered through human settlements initiatives.

This must be presented to the Committee within three months.
4.12 Observation: Concerned about a number of acting positions, in top management, which was affecting the performance of the Department and provinces.

The acting position of the Director-General (DG) was of a particular concern.

Recommendation: Ensure the finalization of the appointment of the DG.

Vacant posts in top management must be filled by individuals with relevant qualifications and experience.

Report to be considered.

8 40 4.


Report of the Portfolio Committee on Human Settlements on the 2022/23 Third Quarter Financial and Non-Financial Performance of the Department of Human Settlements, 24 May 2023.

The Portfolio Committee on Human Settlements (the Committee), having considered the 2022/23 third quarter report on the expenditure and performance of the Department of Human Settlements (the Department), reports as follows: 1.
Introduction The Committee, considered the 2022/23 third quarter report of the Department on 15 March 2023.

This report provides a reflection on the expenditure and non-financial performance of the Department by the end of the second quarter of the 2022/23 financial year.

It also provides the Committee’s key deliberations, observations, and recommendations.
Those are based on the documents presented to the Portfolio Committee by the Department, the Adjusted Estimates of National Expenditure (AENE) and section 32 report published by National Treasury.

2.
2.

An overview of the overall expenditure: Third Quarter Over the medium term, the Department would continue to focus on developing integrated human settlements; upgrading informal settlements; and creating an enabling environment for affordable housing by continually reviewing policy and implementation programmes; and strengthening support to provinces and municipalities to implement human settlements programmes.
Expenditure was expected to increase from R33.5 billion in 2022/23 to R38.1 billion in 2025/26 at an average annual rate of 4.4%.

Transfers to provinces, municipalities and public entities that implement human settlements programmes constitute an estimated 96.1% (R104.7 billion) of the Department’s budget.
These comprise allocations such as the Human Settlements Development Grant (HSDG), the Urban Settlements Development Grant (USDG), the Informal Settlements Upgrading Partnership Grant (ISUPG) and transfers to public entities, and were expected to increase at an average annual rate of 3.9%, from R32.5 billion in 2022/23 to R36.5 billion in 2025/26.

1 41 2.1 Developing integrated human settlements One of the Department’s objectives was to create inclusive communities within an improved spatial landscape.
As such, over the MTEF period, the Department planned to finalize 11 integrated plans in priority development areas that were intended to advance spatial transformation and deliver integrated human settlements projects.

The medium‐term target was to deliver 180 000 fully subsidized houses and issue 388 104 title deeds to beneficiaries from low‐income households.

Spending for these activities was within the Integrated Human Settlements Planning and Development programme’s allocation of R73.5 billion.
The programme’s budget increased at an average annual rate of 5.1%, from R22.1 billion in 2022/23 to R25.6 billion in 2025/26.
An additional R2.2 billion was allocated through the USDG for: The Lufhereng integrated urban development project in Johannesburg, a mixed‐use residential housing development that aimed to promote spatial integration and provide affordable rental housing units; and the Avoca Node project, which aimed to create an enabling environment for private sector‐led housing developments in the in eThekwini municipality.
These were the only projects approved to access the budget facility in the human settlements sector.

Transfers to the grant were made in the Integrated Human Settlements Planning and Development programme.

From 2023/24 the Department would be taking over the implementation of the Emergency Housing Programme.

As a result, the Provincial Emergency Housing Grant and the Municipal Emergency Housing Grant ended.
This adjustment would increase expenditure on payments for capital assets from R15.3 million in 2022/23 to R575.9 million in 2025/26.

2.2 Upgrading informal settlements The Department assists provinces and municipalities with comprehensive planning for the upgrading of informal settlements.

This involves providing secure tenure, safe and reliable water and sanitation and adequate access to social services.
Related work was completed in phases, with phases 1 to 3 comprising the provision of secure tenure and basic services such as water, sanitation, lighting and refuse removal.

Community participation in the upgrading process is a key pillar in the programme as beneficiaries are encouraged to find adequate upgrading solutions that are specific to their communities.
To upgrade a targeted 900 informal settlements to phase 3 across the country, provincial and municipal spending through the ISUPG was expected to amount to R27.2 billion over the medium term.

A further R120 million over the period ahead was expected to ensure that provinces and municipalities deliver 60 000 serviced sites per year through the national upgrading support programme.
The Department intended to hire consultants to augment capacity for the upgrading of informal settlements and the provision of affordable rental housing.

Spending 2 42 for this was within the Department’s budget for consultants, which was expected to increase at an average annual rate of 7.3%, from R188.8 million in 2022/23 to R233.5 million in 2025/26.
2.3 Facilitating affordable housing Affordable housing broadly constituted the provision of rental and social housing programmes, and instruments to provide housing finance to traditionally unserved segments of the population.

These were critical components in the creation of a functional residential property market.
The Department aimed to increase the supply of rental and social housing stock, and assist low‐income and middle‐income households that earned above the qualifying threshold to receive state‐subsidized housing but below the threshold to secure a home loan.

Accordingly, the Department planned to build 10 800 rental housing units and disburse 12 000 finance‐linked individual subsidies over 3 years.
As a result, spending in the Rental and Social Housing programme was expected to be R3.1 billion and spending in the Affordable Housing programme was expected to be R1.9 billion.

3.Performance per program 3.1 Programme 1 (Administration) The following was programme performance: • Target: 55% implementation of the approved internal audit plan - 61% implementation of the approved internal audit plan.

6% implementation of the approved internal audit plan.
• Target: 100% Execution of the approved anti-fraud and corruption implementation plan - 100% execution of the approved anti-fraud and corruption implementation plan.

• Target: 64% implementation of the approved Risk Management Implementation Plan - 53% implementation of the approved Risk Management Implementation Plan.

11% enterprise-wide risk register and Operational risk register.
• Target: 100% implementation of the Human Resource Implementation Plan – 100% implementation of the Human Resource Implementation Plan was achieved.

• Target: 75% implementation of the approved annual ICT plan - 75% implementation of the approved annual ICT plan was achieved.

• Target: 75% implementation of the approved communication plan - 75% implementation of the approved communication plan.
• Target: 1 quarterly assessment conducted on Human Settlements Development Grant (HSDG) - 1 quarterly assessment conducted on HSDG.

• Target: 1 quarterly assessment conducted on Urban Settlements Development Grant (USDG) - 1 quarterly assessment conducted on USDG.

• Target: 1 quarterly financial performance analysis conducted on ISUPG for Provinces - 1 quarterly financial performance analysis conducted on ISUPG for Provinces.
3 43 • Target: Human Settlements Grants Framework drafts developed - Human Settlements Grants Framework drafts developed.

3.2 Programme 2 (Integrated Human Settlements Planning and Development) The following was programme performance: • Target: SEIAS report on the Draft Rent to Buy Policy Programme – SEIAS report on the Draft Rent to Buy Policy Programme was achieved.
• Target: SEIAS report on the Draft Small Scale Rental Policy Programme - SEIAS report on the Draft Small Scale Rental Policy Programme was achieved.

• Target: SEAIS report on the Draft Social Housing Policy Programme - SEAIS report on the Draft Social Housing Policy Programme was achieved.

• Target: SEIAS report on Draft Consumer Education Policy Programme - SEIAS report on Draft Consumer Education Policy Programme was achieved.
• Target: Consultation on Norms and Standards for Affordable Housing - Consultation on Norms and Standards for Affordable Housing was achieved.

• Target: SEIAS report on Draft Employer Assisted Housing Policy Programme - SEIAS report on Draft Employer Assisted Housing Policy Programme was achieved.

• Target: 3 Inception Reports developed - 2 Inception Reports developed.

There were delays attributable to the procurement of service providers.
• Target: 1 report on entities performance monitored - 1 report on entities performance monitored.

• Target: 1 Monitoring report on the set aside for the designated groups - 1 Monitoring report on the set aside for the designated groups.

There were delays in the finalization of verification.

The reports did not have the MAAA numbers which enable the unit to do CSD verification.
• Target: 1 Report on projects monitored as per approved business plans - 1 Report on projects monitored as per approved business plans.

• Target: 1 Report on blocked projects monitored - 1 Report on blocked projects monitored.

• Target: 1 Report on the monitoring of MTSF Sector Indicators - 1 Report on the monitoring of MTSF Sector Indicators was achieved.
• Target: Draft Evaluation study completed: Implementation evaluation of the Operational Capital Programme (OPSCAP) - Draft Evaluation study not completed: Implementation evaluation of the OPSCAP.

However, Inception report was completed.

Delays in the implementation of procurement plan.

• Target: 1 report on intergovernmental relations programmes implemented - 1 report on intergovernmental relations programmes was achieved.
4 44 3.3 Programme 3 (Informal Settlements) The following was programme performance: • Target: Support provided to 9 Provinces for planning in the upgrading of informal settlements - Support provided to 9 Provinces for planning in the upgrading of informal settlements was achieved.

• Target: Monitor and report progress of informal settlements upgrading projects in 9 Provinces and 8 Metros - Informal settlements upgrading projects in 9 Provinces and 8 Metros monitored.
3.4 Programme 4 (Rental and Social Housing) The following was programme performance: • Target: Consultation on the Draft National Rental Housing Plan - Consultations on the Draft National Rental Housing Plan was conducted.

3.5 Programme 5 (Affordable Housing) The following was programme performance: • Target: 6 draft affordable housing programme agreements for mining communities developed - 2 draft affordable housing programme agreements for mining communities developed.
There was limited capacity in the Unit to achieve the targets.

• Target: 1 quarterly report on title deeds registered - 1 quarterly report on title deeds registered for five provinces.

Ending of PDF contracts in Eastern Cape and North West resulted in no reporting from the provinces.

The sole official responsible for titling in North West has resigned.

The official responsible for titling in Free State was on leave and did not report.
• Target: Diagnostic Report on blocked projects developed - Diagnostic Report on blocked projects was developed.

• Target:1 quarterly report on the number of job opportunities created - 1 quarterly report on the number of job opportunities created partially achieved.

Signed report was outstanding.

4.


Committee observations and recommendations The Portfolio Committee raised the following with the Department in respect of the third quarterly report for 2022/23: 4.1 Observation: Noted there was a number of jobs created through human settlements initiatives.

However, details on the number and nature of jobs created was not provided to the Committee.
5 45 Recommendation: Provide the Committee with a detailed report on the number and nature of jobs that have been created through human settlements initiatives.

4.2 Observation: Concerned about the impact of re-allocation of funds, from non-performing to performing provinces, on citizens who expected service delivery.

It was not clear if re-allocated funds resulted in improved service delivery by receiving provinces.
Recommendation: Present to the Committee a plan to address the impact of re-allocating funds from non- performing to performing provinces.

This presentation should include an assurance that receiving provinces spend these funds on service delivery.

This must be presented to the Committee within a month.

4.3 Observation: Concerned about the backlog in the eradication of mud houses and asbestos roofing.
The Committee also note the report by Western Cape Department of Infrastructure that there was zero performance on eradicating mud houses.

Recommendation: Present to the Committee an implementation plan address the backlog of mud houses and asbestos roofing.

Provide necessary assistance to the Western Cape Department of Infrastructure to improve performance.

This implementation plan must be presented to the Committee within a month.

4.4.
4.4.

Observation: Concerned about a lack of plan to assist underperformance by provinces in relation to the MTSF targets.

The Committee acknowledged that there were continuous meetings between the national Department and provinces to address this issue.

However, there was still no concrete and widely accepted plan to address the issue.

Recommendation: Present a recovery plan to address underperformance in provinces.

This plan must be presented to the Committee within three months.
4.5 Observation: Concerned about the continuous underperformance of ISUPG and USDG grants by Metros, affecting people on the ground.

The problem was compounded by procurement challenges and political instability due to coalition governments.

Recommendation: Provide assistance to provinces to improve performance.

Put in place interventions to ensure improved performance.

Adequately deal with procurement challenges in all provinces.
Funds to the City of Mangaung, Johannesburg and Tshwane should be withheld until they accountability to the Committee.

4.6 Observation: That the ideals of the Priority Development Areas (PDAs) programme were not achieved because of the land planning issues.

The Committee, wanted to understand the process of land acquisition, particularly for serviced stands.

6 46 Recommendation: Present a plan to address issues associated with the implementation of PDAs programme.
The Planning Directorate in the Department and the Housing Development Agency (HDA) should develop a plan to resolve issues affecting the implementation of PDAs.

Present to the Committee the process of land acquisition and zoning to Committee within a month.

4.7 Observation: Noted the presentation on blocked projects and title deeds.

However, the progress on unblocking of blocked project was not presented to the Committee.

Recommendation: Present a plan to unblock blocked projects to the Committee.
This must be done within three months.

4.8 Observation: Noted the presentation on title deeds.

However, the Committee observed that land planning challenges hampered the issuance of title deeds.

Recommendation: Improve land planning and rezoning processes to fast-track the issuance of title deeds.

4.9 Observation: Concerned about the non-compliance with the policy on payment of service providers within 30 days.

Recommendation: Ensure that invoices are paid within the prescribed 30 days.
Address all challenges associated with non-compliance.

4.10 Observation: Noted the quantitative delivery of houses.

However, the Committee was concerned about the lack integration of houses.

Recommendation: Ensure that houses are provided in a sustainable and an integrated human settlements approach.

Ensure compliance with human settlements policy and programmes (Human Settlements Code) in the delivery of human settlements.

Fast-track the review of the Housing Act into the Human Settlements Act.
4.11 Observation: Noted initiatives by the Department to empower women, youth, and people with disabilities.

However, there was no detailed report on how these groups would be empowered.

Recommendation: Present to the Committee a detailed report on how these groups would be empowered through human settlements initiatives.

This must be presented to the Committee within three months.
4.12 Observation: Concerned about a number of acting positions, in top management, which was affecting the performance of the Department and provinces.

The acting position of the Director-General (DG) was of a particular concern.

7 47 Recommendation: Ensure the finalization of the appointment of the DG.

Vacant posts in top management must be filled by individuals with relevant qualifications and experience.

Report to be considered.

8 48 National Council of Provinces 1.


REPORT OF THE SELECT COMMITTEE ON TRADE AND INDUSTRY, ECONOMIC DEVELOPMENT, SMALL BUSINESS DEVELOPMENT, TOURISM, EMPLOYMENT AND LABOUR ON BUDGET VOTE 36, STRATEGIC PLAN, 2022/2023 ANNUAL PERFORMANCE PLAN OF THE DEPARTMENT OF SMALL BUSINESS DEVELOPMENT, SMALL ENTERPRISE AGENCY (SEFA) AND SMALL ENTERPRISE DEVELOPMENT (SEDA) 23 MAY 2023 1.
Introduction Report of the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour (Committee) on revised 2020-25 Strategic Plan and Annual Performance Plan 2020/25 of the Department of Small Business Development – Budget Vote No 36, Small Enterprise Finance Agency and Small Development Finance Agency.
The Committee having considered Budget Vote: 36 and Annual Performance Plan 2020/2025, budget and Annual Performance Plans of the Department of Small Business Development and its entities Small Enterprise Development Agency (Seda) and Small Enterprise Finance Agency (Sefa) for 2023-24 financial year, and reports on a committee meeting with the department on 02 May 2023 where the Department outlined the Budget and Spending Plans; reports as follow: Both the global and domestic economies remain fragile as, large inflationary pressures, supply chain disruptions, and the Russia-Ukraine War have an effect to the global business environment.
The South African economy remains trapped into low growth point, and economic activity in South Africa, is primarily centered in three provinces (Gauteng, Western Cape and Kwa-Zulu Natal).

Unemployment remains high, at around 32,7 percent and youth unemployment exceeds 50 percent.

Efforts to grow and expand SMMEs, are expected to play an essential role to contribute to a new growth 1 49 trajectory advocated in the Economic Reconstruction and Recovery Plan (ERRP).
A healthy small business sector is one of the prerequisite to have a growing economy with high employment opportunities.

This would need better engagement by development partners to enhance the business environment for the benefit of SMMEs and Cooperatives.

The growth of the South African economy is largely depended on the growth and expansion of businesses, and the attraction of both domestic and foreign investment.
Further, investment in skills remains pivotal to getting the economy moving, a point emphasised by the World Bank in various reports.

The national electricity supply remains a crisis, and securing electricity supply remain a major risk to the economy, industries and commerce.

Further, clean and safe drinking water, efficient freight transport for goods to reach global markets, also add to these challenges, as all these factors affect the functioning of the economy.
The SMMEs and Co-operatives are particularly hit hard by the power outages as many of them cannot afford alternative power sources.

In response to the devastating impact of loadshedding, the Small Business Development Portfolio has worked on an energy relief package for SMMEs and Co-operatives to alleviate the devastating impact of loadshedding on small businesses and Co-operatives.
Other upside economic risk factors include higher oil prices, higher wage demands and policy uncertainty due to global and domestic policy developments.

Economic Policies remain under pressure as fiscal and monetary policies remain restrictive.

The spending plans of the Department and its entities must be viewed against the context outline above.
The Committee noted the key priorities informing the 2023 Annual Performance Plan of the department which consists of five Game-Changers namely: Game Charger 1: New Economy Start-up: The intervention is aimed at creating a more enabling support ecosystem for high tech and energy start-ups.
The strategy is expected to create synergy among the different policy and strategy initiatives in the country as well as identify and address gaps in various polices further providing guidance in creating an enabling environment for the development of entrepreneurship and star-ups.
Game changer 2: Township and Rural Economic Development: The aim of this Burning Platform is to redirect Broad-based Black Economic Empowerment (B-BBEE) resources and Enterprise and Supplier 2 50 Development (ESD) accelerator funding towards SMMEs located in South African townships and rural areas.

The Department of Small Business Development intends to engage the private sector to raise awareness regarding the support of private sector towards the development and growth of township and rural enterprises.
Game changer 3: Refuelled Incubator / Accelerator Programme: This programme will primarily extend the existing network of incubators for start-ups and accelerators for scale-ups in terms of the tiered small business support model.

The Incubation and Digital Hub support programme is committed to building an ecosystem of enhanced sector-focused support service centres to produce high-performance entrepreneurs.
The focus is to offer support through existing incubation centres and digital hubs towards growth by upscaling and exposing beneficiary businesses to refuelled support offerings that allow varied programs drawn from existing incubation support programmes, packaged together towards the attainment of their full potential through collaborations.
Game changer 4: A Recapitalised SMME Funding Package: Four interventions are proposed as part of this package: A Recapitalised Khula Credit Guarantee (KCG); a Micro Finance Intermediary Franchise Programme; a significantly up-scaled Direct Lending Programme; and Tailored Blended Finance.

The DSBD to implement the SMMEs and Co-operatives Funding Policy to accelerate the achievement of the objectives of Game Changer 4.
This Game Changer is going to be achieved by introducing targeted funding instruments linked to business development lifecycle including Micro Finance Intermediary Programme (MFIP).
The Department of Small Business Development will focus on implementing the recommendations of the World Bank diagnostic review pertaining to the Khula Credit Guarantee (KCG) to address identified shortcomings with a view to: • • • • make the guarantee more responsive, raise more capital, remove access to finance barriers in the form of collateral requirements, and make SMMEs lending more attractive by mitigating the credit risk through KCG.
Game Changer 5: Supplier Development Partnership Programme: The programme is aimed at leveraging the commitment of corporates and large firms to on-boarding and supporting new suppliers.

3 51 The Department has set itself 25 targets for the 2023/24 financial year.

In the previous years, the Department’s performance on its set targets was as follows: • 2018/19 – 62.1 per cent; • 2019/20 – 67 per cent; • 2020/21 – 86 per cent; and • 2021/22 – 60 per cent.
Based on the past performance, the Department has set targets that it did not fully achieve.

It was only during the Covid-19 hard lockdown that the Department managed to perform better on the targets that were set.

The Department consistently meet its target of paying suppliers within 30-days, however, it seems reluctant to seriously engage national and provincial departments that consistently fail to pay SMMEs on time.
The number of invoices older than 30 days and not paid by national and provincial departments at the end of March 2022 amounted to 67 862 with a Rand value of R 6.1 billion.

This is nearly three times the R2.5 billion budget of the Department for the 2023/24 financial year.

The Department has commenced with the process of reviewing Business Act (No.71) of 1991 and the National Small Enterprise Act, 1996 (Act No.
102 of 1996) as amended in 1993 and intends to introduce an amendment Bill to Parliament in the third quarter of 2023/24 financial year.

The Businesses Act provides for the issuing of trade licenses and permits by Municipalities to both formal and informal businesses who want to operate in their geographic jurisdiction.
The Businesses Act provides a very broad policy and legislative framework without sufficient guidelines or a framework to ensure policy coherence and similarity across all the Municipalities.

This has also resulted in uneven implementation across the country, with effective implementation in highly resourced Municipalities and Metros, while poorest Municipalities have ineffective systems and procedures thus contributing to increased red tape.
The Act was originally intended to regulate the licensing of certain categories of businesses, and the schedule of regulated sectors has not been updated since 1991, creating a vacuum and confusion as to which sectors are regulated or not.

The Committee noted the merger challenges faced by the Department in establishing a one-stop shop agency for small businesses and Co-operatives.
It was reported that Department will finalise the incorporation of Sefa and the Co-operative Banks Development Agency (CBDA) into Seda in 2023/24.

4 52 The Committee emphasised that in order to fully implement the NDP, ERRP, and the Re-Imagined Industrial Strategy, government would need to tackle regional finance gaps to support SMMEs and Cooperatives located in provinces and regions that are lagging behind in terms of economic development.
The Department would need to leverage the current public funding and financing facilities to crowd-in private sector financing.

Further, there is a need to increase support of High Growth-Tech companies.

Partnership with private sector and industry players in science and technology remains a challenge.

In addition, the Department should work in a strategic way to improve supplier development programmes that big corporates offer to SMMEs.
Supplier development programmes should be much more than social responsibility programme.

Must extend to the sustainability of SMMEs.

It was underscored that many SMMEs lack the financial, operational, and strategic structures that are common in larger businesses.

Most are affected by the lack of liquidity and cash-flow management challenges.

The resources should be effectively and efficiently allocated as the Impact results remain a challenge.

2.
Overview of the MTEF budget Table 1: Overall Budget of the Department for the 2022/23-2023/24 Programme R million Budget Adjusted Appropriation Nominal Rand change Real Rand change Nominal % Real % change change 2022/23 2023/24 2022/23-2023/24 2022/23-2023/24 Programme1:Administration 127,9 138,4 10,5 4,0 8,21% 3,15% Programme 2:Sector and Market Development 120,7 163,8 43,1 35,4 35,71% 29,37% Programme 3: Development Finance 1 317,1 1 349,6 32,5 - 30,5 2,47% -2,32% Programme 4: Enterprise Development 967,1 922,9 - 44,2 - 87,3 -4,57% TOTAL 2 532,8 2 574,7 41,9 - 78,4 1,65% -9,03% -3,09% Adapted from: National Treasury’s Estimates of National Expenditure (2023) 5 53 Programme 1: Administration, is allocated R138, 433 million to continue putting systems and capacity in place.
Programme One (Administration) has an allocation of R443 million over the medium term broken down into four sub-programmes: Ministry has R89.7 million (20.2%), Departmental Management (ODG) has R116.3 million (26.2%), Corporate Services has R90 million (20.3%), and Financial Management R147.1 million (33.2%).
To maintain a sound performance planning, reporting and monitoring system, the Department will continue to implement the Strategic Planning, Monitoring and Reporting Framework and Standard Operating Procedure (SOP).

With regard to compensation of employees an average budget growth rate over MTEF is 12 percent due to an increase in the establishment from 211 posts to 357 posts following the approval of an organisational structure in September 2022.
In terms of Goods and Services an average budget growth rate over MTEF is 13.9 percent largely to reprioritisations form transfer payments to Goods and services amounting to R186.5 million for IMED (R60m), SMME exposure (R87m), Cannabis (22m), Proudly SA R6.6m) and Ombudsman (R10.9), An average budget growth or reduction rate over MTEF on Capital Assets is 13.3 percent and transfers 2 percent.

Programme 2: Sector and Market Development.


The purpose of the programme is to facilitate and increase access to markets for SMMEs through business information, product development support and value chain integration is allocated R163, 781 million, to drive our work around value chain localisation.
An amount of R525.4 has been allocated over the medium-term with four subprogrammes: An allocation of R17.7 million (3.4%) is made to Sector and Market Development Management sub- programme; R75.1 million (14.3%) to Business Intelligence and Knowledge Management sub- programme, R24.4 million (4.1%) to Ease of Doing Business, and R406.9 million (77.8%) to Access to Market Support sub-programme.
Programme 3: Development Finance is allocated R1,3 billion; much of which gets transferred to the Small Enterprise Finance Agency (Sefa) for their various SMME and Co-operatives financial products.
The Department in concluding the implementation of the Sixth Administration priorities, the revised MTSF targets were to ensure that at least 50 per cent of national and provincial DFI financing is dedicated to SMMEs and Co-operatives through the establishment of the SMMEs and Co-operatives Funding Policy by March 2021/22 financial year, 100 000 competitive small businesses and Co- operatives supported.by 2024 and 10 000 youth business start-ups supported per annum.
Programme 6 54 Three (Development Finance) has an allocation of R4.194 billion over the medium-term with four sub- programmes: To facilitate and increase access to markets for SMMEs through business information, product development support and value chain integration R7.3 million (0.2%) is allocated to Development Finance Management, R18.2 million (0.4%) is allocated to Model Funding Collaboration, R4.105 billion (97.9%) to Blended Finance Support, and R62.9 million (1.5%) to Business Viability.
Programme 4: Enterprise Development is allocated R922 929 000, much of which will be transferred to the Small Enterprise Development Agency (Seda) for their enterprise development and incubation support work.

In the revised 2019-24 MTSF, one of the impacts is to reduce unemployment to between 20 per cent to 24 per cent, economic growth of between 2 per cent to 3 per cent and increase the level of investment to 23 per cent of GDP.
One intervention to realise the impact is to create a conducive environment that enables national priority sectors to support industrialisation and localisation, leading to increased exports, employment and youth, women and PWDs-owned SMMEs and Co-operatives participation.
Programme Four (Enterprise Development) has an allocation of R2.914 billion with three sub-programmes of the Programme: R7.2 million (0.3%) for Enterprise Development Management, R2.787 billion (95.7%) for Enterprise and Supplier Development, and R119.5 million (4.1%) for SMME Competitive.

TAL 3.

Legislative and Policy Mandates The following is the legislative and policy mandate that the DSBD is directly responsible for implementing, managing or overseeing: • Business Act, 1991 (Act No.

71 of 1991).
71 of 1991).

To repeal or amend certain laws regarding the licensing and carrying on of businesses, and shop hours; to make certain new provisions regarding such licensing and carrying on of businesses; and to provide for matters connected therewith.

• National Small Enterprise Act, 1996 (Act No.

102 of 1996), as amended.

To develop, support and promote small enterprises to ensure their growth and sustainability.
Seda provides non- financial business development and support services for small enterprises, in partnership with other role-players in the small business development environment 7 55 • Section 3 (d) of the Industrial Development Corporation Act, 1940 (Act No.

22 of 1940 (IDC Act).

To provide access to finance to Survivalist, Micro, Small and Medium businesses throughout South Africa.

Sefa supports the development of sustainable SMMEs through the provision of finance.
• Co-operative Development Act, 2005 (Act No.

14 of 2005) as amended.

To provide for the formation and registration of Co-operatives; the establishment of a Co-operatives Advisory Board; the winding up of Co-operatives; the repeal of Act 91 of 1981; and matters connected therewith.

• Co-operatives Development Policy for South Africa (2004).

To create an enabling environment for Co-operative enterprises which reduces the disparities between urban and rural businesses and is conducive to entrepreneurship.
To promote the development of economically sustainable Co-operatives that will significantly contribute to the country’s economic growth.

To increase the number and variety of economic enterprises operating in the formal economy.

Further to increase the competitiveness of the Co-operative sector so that it is better able to take advantage of opportunities emerging in national, African and international markets.
To encourage persons and groups who subscribe to the values of self-reliance and self-help, and who choose to work together in democratically controlled enterprises and to register Co- operatives in terms of this Act.

To enable such Co-operative enterprises to register and acquire a legal status separate from their members.
To promote greater participation by black persons, especially those in rural areas, women, and Persons with Disabilities (PWDs) and youth in the formation of and management of Co-operatives.

To establish a legislative framework that will preserve the Co-operative as a distinct legal entity.

To facilitate the provision of support programmes that target Co-operatives, specifically those that create employment or benefit disadvantaged groups.

• Co-operative Amendment Act, 2013 (Act No.

6 of 2013.
6 of 2013.

To provide for the establishment, composition and functions of the Co-operatives Tribunal; to ensure compliance with the principles of intergovernmental relations; to provide for intergovernmental relations within the Co-operatives sector; and to provide for the substitution of the long title and the Preamble 4.
Public Entities 8 56 4.1 Small Enterprise Development Agency (Seda) The objectives of Seda is to provide non-financial business development and support services for small enterprises, in partnership with other role-players in the small business development environment.

This Annual Performance Plan indicate that some SMME’s are still suffering from Covid -19 losses, floods and indeed loadshedding.
It is within such challenges that the Board, towards the end of 2022 convened the board strategy review to reflect on the strategy implementation and the road that lay ahead in realising the outcomes set in the strategic plan.

During this reflection the organisation took stock of the gains made in the achievement of the MTEF targets and ERRP goals which are aligned to the Minister’s contract.
The organisation noted that it’s on course to achieve targets set to increase the number of competitive small businesses based in township and rural areas.

The goal of increasing incubation centres and digital hubs to 100 by 2024 has already been achieved, the new focus will be on improving governance, independent sustainability and returns on investments in these incubators.
It was reported that Seda analysed previous year’s performance, current performance trends, enablers that are required for the organisation to excel including the challenges that are needed to overcome the last year of the 6th administration.

Among key considerations was the game changers that were proposed by the Minister of Small Business Development which are geared to improve the livelihood of small businesses in South Africa.
The game changers prioritised support offered to township and rural based SMMEs and Cooperatives, refuelling incubators and accelerators, amplifying supplier development encouraging and supporting youth entrepreneurship and addressing responding with agility on the issues of financial and non- financial support.

The organisation developed its own game changers which are aligned to those developed during the portfolio strategy session.
These includes market access and supplier development partnership, entrepreneurship mobilisation, township and rural economic development, pre-investment and post-investment business development support programme, district ecosystem facilitation, refuelled incubator/accelerator, SMMEs participation in catalytic projects programme and smart systems and technology programme.

In pursuing these adequate human and financial resources are required.
9 57 Table 2: shows Small Enterprise Development Agency budget allocation per programme The table shows an increase of 0.64 per cent which is far below the inflation rate and this required the review of the planned target and to reduce some.

Seda is unable to expand and meet the SMME’s demand due to the financial resource limitations.
4.2 Small Enterprise Finance Agency (Sefa) Small Enterprise Finance Agency’s (Sefa’s) 2023 Corporate Annual Performance Plan (APP), which was tabled in Parliament on 14 April 2023 outlined that Sefa provides financial products and services to qualifying small medium and micro-enterprises (SMMEs) and cooperatives, as defined in the National Small Business Act No.

of 1996 and amended in 2004, through a hybrid of wholesale and direct lending channels.
It was reported that Sefa continued to pursue its primary objective of contributing towards job creation and economic growth by providing financial and non-financial support to small, medium, and micro enterprises (SMMEs) and co-operatives, even though faced with challenging global and domestic environment.
The entity’s advanced that its integrated approach and programme of action aligns with the National Integrated Small Enterprise Development (NISED) Masterplan, which outlines the outcomes and outputs needed to accelerate small enterprise development and growth.

By partnering with business, labour, and civil society, the NISED Masterplan presents a coordination tool and repository of action steps to be taken by numerous actors within government and society to drive SMME growth and performance.
Sefa's business and funding activities are aligned with the key activities of a development finance institution (DFI), which include playing a catalytic role to attract other industry players, funding gaps in the market, supporting government policies in multiple industries, and providing risk funding that combines both grants/subsidies and loans.
To give effect to its role as DFI, the entity aims to address market failure in the provision of finance to SMMEs and co-operatives; support and fund sustainable 10 58 businesses; and prioritise funding to qualifying business ventures within the services, manufacturing, primary agriculture, construction, mining services and processing, and green industries sectors.
Some of their key initiatives for the upcoming year include recapitalising Khula Credit Guarantee as a funding mechanism for previously disadvantaged entrepreneurs, developing a network of microfinance intermediaries, strengthening the focus of the Direct Lending Programme, providing pre-investment and post-investment support, enhancing the blended finance approach, and engaging major corporates through a public-private partnership platform.
In addition, work to stabilise and strengthen the Sefa property portfolio will continue.

Sefa is committed to achieving its desired impact of sustainable small, medium, micro, and co-operative enterprises, increased job creation and economic participation, ownership, and access to resources and opportunities, prioritising women, youth, and persons with disability (PWDs).
The entity believes that by implementing the strategies outlined in the spending plans will be able to make a meaningful impact in the SMME and co-operative sectors and contribute to the overall economic growth of the country The Annual Performance Plans identify the performance indicators and targets that the institution will seek to achieve in the upcoming budget year.
Some Sefa’s key indicators and annual targets for the 2023/24, include broadening access to finance firstly through direct and wholesale lending credit guarantee scheme, micro finance scheme, products and services, as indicated in the following tables.

Table 3: Broadening Access to Finance for the 2023/24 financial year Output Indicators Value of approvals and Disbursements Approvals to SMMEs and cooperatives (R’000) Disbursements to SMMEs and Cooperatives (R’000) No.
of jobs and SMMEs Number of SMMEs and co-operatives financed Number of jobs facilitated and sustained Disbursements to designated groups Black-owned enterprises (R’000) Women-owned enterprises (R’000) Amount R2 339 752 R2 346 589 93 671 120 022 R1 642 613 R938 636 11 59 Youth-owned enterprises (R’000) R703 977 Enterprises owned by entrepreneurs with disabilities (R’000) R164 261 Township-based enterprises (R’000) Enterprises located in rural towns and villages (R’000) R586 647 R938 636 Source: Sefa (2023) For the Credit Guarantee Scheme Sefa plans to achieve the following; Table 2: Credit Guarantee scheme targets for the 2023/24 financial year Output Indicators Amount Value of approvals and Disbursements Approvals to SMMEs and cooperatives (R’000) Disbursements to SMMEs and Cooperatives (R’000) Number of jobs and SMMEs Number of SMMEs and co-operatives financed Number of jobs facilitated and sustained Disbursements to designated groups Black-owned enterprises (R’000) Women-owned enterprises (R’000) Youth-owned enterprises (R’000) Enterprises owned by entrepreneurs with disabilities (R’000) Township-based enterprises (R’000) Enterprises located in rural towns and villages (R’000) Source: Sefa (2023) 5.
Engagement from Committee and Department R275 000 R376 750 686 8 744 R263 725 R150 700 R113 025 R26 373 R94 188 R150 700 • The Department indicated that it is aware of the capacity constraints in Local Economic Development (LED) Units in local municipalities.
Over the medium term in collaboration with municipalities including SALGA, the Department of Cooperative and Traditional Affairs and 12 60 National School of Government (NSG) will formulate a strategy and action plan to tackle capacity requirements in relation to LED Units.
• With regard to the perception of merger delays between Sefa, Seda and Co-operative Banks Development Agency (CBDA) due to internal conflicts, the Department indicated that, a joint business operation forum has been established which consist of technical committees led by the Director-General inclusive of the Chief Executive Officers.

There are work streams that are driving the work towards merger.
The Department indicated that there is a need for the promulgation of new legislation that will create this new agency.

Currently, the Department is in the process for review the legislation to accelerate the process, and the business case has been approved.

• The Committee indicated that after September 2023, Parliament will not be in a position to process the new bills.
• The Department reported that the new comprehensive small business strategy will tackle issues that affect SMMEs across the industries in the economy.

• The Committee acknowledged the work of the Department to realise the objective set out in the NDP, however it emphasised that more work still needs to be done.

Further, the Department was urged to enhance its monitoring capacity and capability to track spending against the set strategic policy priorities.
• The Committee appreciated the significant role played by the Department relating to the Cannabis industry.

It was urged that the Department must protect and promote local businesses to benefit from the Cannabis industry, in particular local businesses in Lusikisiki area.

In the main the Cannabis industry should support growth of regional economies, and improve growth of local businesses and improve rural incomes.
• On the issue of Cannabis industry, Seda responded that they work close with the Eastern Cape Provincial government, and form part of the meetings that takes place with industry players, and critical stakeholders.

• The Department has set aside funding to support rural economies.

As part of the broader SMMEs and Cooperatives support programme, Seda has created in incubators in Amathole, OR Tambo and Buffalo City to support local economic development.
Traditional leaders have been drafted in to support the programme.

13 61 • Regarding international market access in Limpopo province, the Department indicated that it has supported some of the SMMEs originating from Tzaneen, Vhembe, and Sekhukhune and from the Polokwane community.

Further, in relation to international market, Seda has visited SMMEs to check the quality of products produced to ensure that they meet the international standards required before they exposed them to international trade.
Seda has established more than 40 incubators over the past three to four years with limited funding.

Out of the 12 incubators some are linked with the mining in Mpumalanga Province, Agriculture in the Northern Cape and Cannabis in the Eastern Cape.

• The Department indicated that the report will be submitted to the Select Committee on the number of SMMEs and Co-operatives supported by them on quarterly and annual bases.
• With regard to the loss experienced by Small Enterprise Finance Agency in the past financial year, the challenges faced by Sefa was the expectation to fund those business that are very risky, that cannot be supported by the banks.

The inherent nature of DFIs is to close the gap because banks are very strict in terms of financing SMMEs.

It is important to assess the approach based on the performance of the business.
The Department has reported that it has raised the concern with National Treasury at some stage that expectations with regard to entities supporting businesses in rural areas and in townships must not be too exclusive to what the banks are doing.

• The measurements in terms of the performance of the entity is very important, in the past few years before Covid-19 pandemic started, the Department has not invested in new businesses and most of the funds have been allocated to supporting existing businesses.
The Department spent R300 million on Covid -19 response, R200 million on riots and over R50 million on floods relief.

The Department reported that it is trying its best to save existing jobs.

• The Department indicated that new funding had to be invested in startup businesses, especially those businesses that will be creating new jobs in future.
• The losses at Sefa are informed by the instruction from the Department, to request Sefa to implement a payment holiday and this had an effect in the balance sheet of Sefa.

Some of those investments resulted in Sefa not being able to recover money from the SMMEs.

• The Committee noted that the department has requested Sefa to implement a business turnaround intervention where they can assist with business viability.
This instrument aim to assist existing businesses that are suffering losses; those businesses that are not expected to pay immediately 14 62 and where they need to operate for a particular period to recover and start making money, before they start paying back the money owed.
• With regard to the spending in support of Cooperatives entities, the National Youth Development Agency and the Department of Agriculture made addition contributions with the latter investing R100000, and the Department of Small Business Development contributing R330 000 derived from the Cooperatives Incentives Scheme.

The Department in collaboration with Seda will embark on a post investment programme to support Spaza shops.
• The Department confirmed that all businesses that were visited during the oversight for floods disaster have been paid in full.

Currently, the Department indicated that it would need extra funding to other projects that might come up, unless the National Treasury could provide additional funding.

6.

Recommendations The global and domestic economies are fragile, and the South African economy is trapped in a low growth point.
Compounded with Covid-19 pandemic it impacted on small enterprises, and it appears that the targets set in the National Development Plan (NDP) in relating SMMEs will not be realised, unless government in partnership with the private sector set bold measures designed to improve the support of SMMEs.

i.
i.

By the end of the 2023 financial year, the Minister working through the Department, should finalise the review and legislation development of the National Small Enterprise Act (1996), the National Small Business Amendment Act (2004) and the Business Act (1991), and submit such envisaged Acts (Bills) to Parliament for consideration.

ii.
ii.

Over the 2023 medium term, the Minister should establish capacity and capability within the Department to support and promote initiatives to Ease of Doing Business across the country.

Further, it should formulate an action plan in collaboration with other spheres of government’s agencies responsible for supporting SMMEs and Cooperative to accelerate nation-wide Ease of Doing Business Initiative.

iii.

Growth and support of SMMEs and Cooperatives remains high on the government policy agenda.
Further, closing the financing gap experienced by SMMEs and Cooperatives, particular in provinces 15 63 and regions that are lagging behind in terms of economic development, should be prioritised.
The Committee reiterate that the Minister should continue to engage the Minister of Finance to consider allocating additional resources over the 2023 medium term to the Department to scale-up funding and financing to bolster growth and expansion of SMMEs and Cooperatives across the country, and closing the rural and urban financing gap.

Report to be considered 16 64 2.


REPORT OF THE SELECT COMMITTEE ON TRADE AND INDUSTRY, ECONOMIC DEVELOPMENT, SMALL BUSINESS DEVELOPMENT, TOURISM, EMPLOYMENT AND LABOUR ON BUDGET VOTE 38, STRATEGIC PLAN, 2022/2023 ANNUAL PERFORMANCE PLAN OF THE DEPARTMENT OF TOURISM AND SOUTH AFRICAN TOURISM, 23 MAY 2023.
Report of the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour (Committee) on Budget Vote and Annual Performance Plan 2023/24 of the Department of Tourism – Budget Vote No 38 and the South African Tourism (SA Tourism), dated 18 April 2023.
The Committee having considered Budget Vote: 38 and the Annual Performance Plan 2023/2024 of the Department of Tourism and and the South African Tourism (SA Tourism), reports that the committee met with the department on 18 April 2023, wherein the Department and entity outlined the Budget and Spending Plans.

1.

Introduction The Committee noted the continued importance of the tourism industry to the overall economy.
The Department and its tourism agency -SA Tourism - through their spending plans have recognised that tourism industry is an essential economic sector globally and locally.

The tourism industry has the potential to contribute significantly to realise an inclusive economic growth agenda.

The Committee identified that the spending plans of the Department and its entity recognise the significance of sustainability of tourism and the digital transformation of the industry.
More work needs to be done to fully benefit from the strategic spending plans taking into account the demands of the industry as result of Covid-19.

Both global and domestic uncertainties would have an impact to the growth of the tourism industries.

The Committee is alive to the intervention measures taken by government to reposition the tourism industry through the Tourism Sector Recovery Plan (TSRP).
1 65 In terms of constitutional requirements, the tourism industry remains a concurrent functional area that cuts across the three spheres of government (national, provincial and local).

The Department further oversees the functional operation of South Africa Tourism, which consumes the bulk of the departmental budget.
The 2023 Estimates of National Expenditure articulates that the Tourism Act (2014) mandates South African Tourism to market South Africa internationally and domestically as a preferred tourism and business events destination and monitor and evaluate the performance of the tourism sector.

Tourism is largely driven by the private sector, hence partnership initiatives to bolster tourism growth and transformation remains critical to spur inclusive economic growth.
It is important that collaborative efforts in terms of resource allocation and distribution should reach all provinces and regions, and partnerships with the private sector should be enhanced.

Both the spending plans of the Department and its tourism agency, underscore the need for coordinated responses across government, and to work closely with the private sector.

The key challenge is to align provincial and local government tourism development strategies and action plans with the national action plans.
The Committee believes if the District Development Model is effectively implemented could address some of the issues faced by provincial and local governments in terms of implementing tourism development plans.
It was emphasised that most of the strategic priorities outlined in the TSRP such as Implement norms and standards for safe operation across the tourism value chain to enable safe travel and rebuild traveller confidence; Stimulate domestic demand through targeted initiatives and campaigns; Strengthening the supply-side through resource mobilisation and investment facilitation.
Including strategic priorities namely; Support for the protection of core tourism infrastructure and assets; Execute a global marketing programme to reignite international demand; Tourism regional integration; and Review the tourism policy to provide enhanced support for sector growth and development, would need inter sector and intra sector collaboration and coordination.

Safety in the industry remains a challenge.


It was reported that the Department working closer in a collaborative manner with the South African Police Service to strengthen and enhance safety measures in the tourism industry.

2 66 The Department highlighted that the 2023 Spending Plans are aligned to TSRP, which is aligned to the Economic Reconstruction and Recovery Plan (ERRP), and the National Development Plan (NDP).
Going ahead, it was emphasised that the Department need to accelerate the implementation of the implementation of Tourism Equity Fund (TEF).

The TEF must respond to both the transformative policy consideration, and holistic growth of the tourism industry.

It was highlighted that the implementation of the Tourism Transformation Fund, an initiative implemented through partnership with the National Empowerment Fund (NEF), should be improved and enhanced.
The Committee emphasised a need to leverage spending to attract private investment to spur growth of the industry.

Thus spending should be directional to be more inclusive taking sustainability, arts and cultural tourism policy issues.

The Committee noted the partnership between the Department and the Development Bank of Southern Africa to fast track implementation of the tourism development programmes.

It was reported that currently there are 23 projects on the implementation stage.

2.
2.

Policy Priorities for 2023/24 The tourism sector must deliver on three of the Sustainable Development Goals (SDGs), namely SDG 8 on ‘Decent Work and Economic Growth’, SDG 12 on ‘Responsible Consumption and Production’ and SDG 14 on ‘Life below Water’.

The sector also has a direct impact on efforts to achieve other SD Goals, such as eradicating poverty, advancing gender equality and protecting the environment.
The value of the sector finds further reflection in Agenda 2063, with tourism recognised as one of the priority areas towards creating transformed economies on the Continent through inclusive growth and sustainable development.

At the national level, the National Development Plan (NDP) recognises tourism as one of the main drivers of employment and economic growth and envisages the promotion of South Africa as a major tourist and business event destination.
This vision finds further expression in Priority 1 ‘Building a capable, ethical and developmental State’; Priority 2 ‘Economic Transformation and Job creation’; and Priority 7 ‘A better Africa and world’ of Government’s 2019-2024 Medium-Term Strategic Framework (MTSF) and is closely aligned with the work of the Department of Tourism.

Over the medium term, the Department will focus on: • Protect and reignite the demand for tourism to ensure tourism’s contribution to economic growth.
3 67 • Enhance and maintain core tourism assets and infrastructure and thereby create work opportunities.

• Support historically disadvantaged tourism enterprises.

• Implement spatial planning and infrastructure projects to build capacity in the township and rural economies.

The Department’s medium-term focus areas are in line with the pronouncements of the 2023 State of the Nation Address (SONA).
The SONA continues to prioritise the following issues identified in 2022: • Support to SMMEs towards recovery of the tourism sector and its growth.

R715 million has been prioritised over the medium term towards tourism sector support.

• R944.8 million has been prioritised over the medium term to enhance tourism assets and infrastructure projects.

• R4.2 billion will be transferred to South African Tourism over the medium term to reignite demand for tourism in both domestic and international markets.
The Department has also allocated R82.7 million over the MTEF period to fund operational expenditure within the Enterprise Development and Transformation sub-programme in the Tourism Sector Support Services programme.

This will be to provide developmental support to enterprises while establishing a channel of emerging operators within the tourism sector.
The Department aims to implement spatial planning and infrastructure projects over the MTEF period to build capacity in township and rural economies, and is working to maintain infrastructure on properties managed by South African National Parks.

These initiatives garner support for community‐based projects and ultimately contribute to tourism development and work opportunities in rural areas.
These projects are primarily funded through the Working for Tourism programme, which forms part of the expanded public works programme, to enable the creation of a targeted 12 399 work opportunities over the medium term.

4 68 3.

Overview of the Departmental spending The Department’s main budget allocation decreased to R2 502.4 billion compared to the final allocation of R2 537.8 billion in the 2021/22 financial year.
An amount of R381.5 million was allocated to fund Compensation of Employees, an increase from the R337.5 million allocation of the previous year.

An amount of R550.4 million was budgeted for Goods and Services; R1 565.6 billion for Transfers and Subsidies; and R4.8 million for the payment of Capital Assets for the 2022/23 financial year.

In support of transformation, the Department prioritised an amount of R540 million over the medium term to establish the Tourism Equity Fund (TEF).
The fund was aimed at supporting commercially viable black-owned enterprises to acquire shares in tourism enterprises, promote the visibility of small, medium and micro enterprises (SMMEs), and facilitate the development of community assets and ownership patterns.

However, the fund did not take off as planned due to an interdict brought against the Department by AfriForum.
In April 2021, an order of the High Court against the Department interdicted the processing or making of any payment pursuant to any application for funding from the TEF, pending a review of the Fund’s criteria.

Consequently, the roll-out of the TEF continues to be suspended, pending confirmation of the validity of the criteria of the Fund.

4.

2023 Medium Term Spending Outlook Over the medium term the Department receives a total budget of R7.9 billion.
Transfers to South African Tourism account for an estimated 53.3 per cent (R4.2 billion) of this amount over this period.

Expenditure is expected to increase at an average annual rate of 3.3 per cent, from R2 502.4 billion in 2022/23 to R2 637.2 billion in 2024/25.

The Department’s 2023/24 budget allocation amounts to R2 524.2 billion, of which R374.5 million is allocated to fund Compensation of Employees.
An amount of R564.5 million is budgeted for Goods and Services, R1 581.8 billion for Transfers and Subsidies and R3.5 million for the payment of Capital Assets.
5 69 The table below reflects the allocation of funds per programme: Table 1: Overall Budget Allocation 2022/23 – 2025/26 Tourism Budget Nominal Real Nominal Real % Rand Rand % change Change Change change R million 2022/23 2023/24 2024/25 2025/26 2022/23 – 2023/24 2022/23 – 2023/24 Administration 330.2 324.9 338.4 355.1 -5.3 -20.5 -1.61% -6.20% Tourism 1 417.5 1 435.2 1 499.8 1 567.0 17.7 -49.3 1.25% -3.48% Research, Policy and International Relations Destination 395.6 401.1 415.6 433.4 5.5 -13.2 1.39% -3.35% Development Tourism 359.1 363.0 383.4 399.6 3.9 -13.1 1.09% -3.64% Sector Support Services TOTAL 2 502.4 2 524.2 2 637.2 2 755.1 21.8 -96.1 0.87% -3.84% Source: 2023/24 Estimates of National Expenditure, National Treasury Table 1 indicates that the overall budget allocation to the Department increases by 0.87% in nominal terms when compared to the budget of R2 502.4 billion in 2022/23 to R2 524.2 billion in 2023/24.
The Department organises its expenditure under four programmes, these are: 4.1 Programme 1: Administration: The purpose of this programme is to provide strategic leadership, management and support services to the Department.

The Programme is allocated R324.9 million in the 2023/24 financial year, which equates to 12.9 per cent of the overall departmental budget.

The budget allocation for Programme 1 decreases by 6.2 per cent in real terms from R330.2 million in 2022/23 to R324.9 million in 2023/24.
Of this amount, R169.1 million (52%) is for Compensation of Employees.

All the sub-programmes, in real terms, see a decrease in allocation for the financial year.

Sub- 6 70 programme 1, Ministry, experiences a significant decrease in allocation, by 11.93 per cent in real terms.

The major cost driver, Corporate Management, sees the second biggest reduction by 6.42 per cent, reducing its allocation from R185.4 million to R182 million for the 2023/24 financial year.
4.2 Programme 2: Tourism Research, Policy and International Relations: The purpose of this programme is to enhance the strategic policy environment, monitor the tourism sector’s performance and enable stakeholder relations.

The Programme receives a budget allocation of R1 435.2 billion for 2023/24, of which R1 344.7 billion is transferred to South African Tourism (SAT).

This represents 93.7 per cent of the Programme’s budget allocation.
The remaining allocation available for this Programme is R90.6 million, of which R60.8 million (67.1%) is allocated to Compensation of Employees.

This leaves the programme with just about R29.8 million for the rest of its projects/programmes.

Some of the projects under this programme include research partnerships with universities, policy development and evaluation, international relationship management through bilateral agreements and memberships at various fora.
The the budget allocation for Programme 2 increases by 1.2 per cent in nominal terms from R1 417.5 billion in 2022/23 to R1 435.2 billion in 2023/24.

However, in real terms, it declines by 3.48 per cent.

The main cost driver for this sub-programme is the transfer to the Department’s entity, South African Tourism (SAT), which has, in nominal terms, increased by 1.17 per cent.

The Entity is mandated to promote the country as both a leisure and business events destination.
4.3 Programme 3: Destination Development: The purpose of the programme is to facilitate and coordinate tourism destination development.

The budget for this Programme is R401.1 million for 2023/24, the bulk of which, i.e.

R334.8 million (83.5%), is allocated to the Working for Tourism sub- programme.

A total of R339.9 million is allocated to Goods and Services for the programme.
The programme objectives is to Implement five destination enhancement and route development projects over the medium term to diversify tourism offerings and enhance visitor experience in identified priority areas such as facilitating the implementation of developed tourism concepts in eThekwini metro, and OR Tambo, Pixley Ka Seme and Namakwa districts; implementing the budget resort network and brand concept; managing a pipeline of nationally prioritised greenfield and brownfield tourism investment opportunities.
7 71 The programme also support destination enhancement initiatives over the medium term by implementing infrastructure maintenance programmes in 18 national parks; implementing infrastructure maintenance and beautification programmes in four provincial state‐owned attractions and support the implementation of 30 community‐based tourism projects.

Lastly it creates 12 399 work opportunities through Working for Tourism projects over the medium term.
The budget allocation for Programme 3 increases by 1.4 per cent, in nominal terms, from R395.6 million in 2022/23 to R401.1 million in 2023/24.

The main cost driver under this programme, at R334.8 million, is the Working for Tourism expanded public works programme.

This sub-programme entails various skills development programmes and tourism projects.

Through these, the Department plans to create 12 399 work opportunities over the medium term.
This is an increase of work opportunities, from the previous indication of 12 370, which is evidenced by the increased budget allocation of the sub- programme by 2.16 per cent in real terms.

A substantive decrease in allocation is experienced in sub-programme 1, Destination Development Management, by 62.19 per cent in nominal terms.
The decrease in this sub-programmes’ allocation appears to be an ongoing trend, as its allocation was decreased by 18.67 per cent, in real terms, in the previous financial year.

Some of the activities under this sub-programme include destination enhancement initiatives at tourism sites and supporting South African National Parks sites through infrastructure maintenance programmes.

These projects are critical for destination attractiveness, bringing in revenue to destinations and creating employment.
4.4 Programme 4: Tourism Sector Support Services: The purpose of this programme is to enhance transformation, increase skill levels and support the development of the sector to ensure that South Africa is a competitive tourism destination.

The Programme is allocated R363 million for the 2023/24 financial year.

This includes Compensation of Employees with a budget allocation of R83.4 million and the Tourism Incentive Programme (TIP) with a budget allocation of R243.1 million.
The projects within TIP include tourism market access, tourism grading support, tourism destination development and energy-efficient projects.

The TIP consumes 66.9 per cent of the total Programme budget whilst the Enterprise Development and Transformation sub-programme consumes 13.8 per cent.

8 72 5.

The programme objectives entail the following: • Accelerate transformation in the tourism sector by implementing the Tourism Equity Fund and the green tourism incentive programme over the medium term.
• Stimulate growth in domestic tourism by implementing four domestic tourism awareness programmes over the medium term.

• Encourage inclusive economic growth in the tourism sector by increasing the participation of SMMEs through incubation programmes to provide business support and development in areas such as technology, tour operations and food services over the medium term.
• Implement initiatives in each year of the medium term to increase the participation of women in the tourism sector by facilitating the United Nations Women in Tourism pilot programme in Limpopo’s Vhembe and Mopani districts.

• Enhance visitor service and experience over the medium term by implementing the service excellence standard, focusing on identified improvement initiatives and structured support.
• Facilitate skills development by implementing five capacity‐building programmes across the sector over the medium term.

The budget allocation for Programme 4 increases by 1.1 per cent, in nominal terms, from R359.1 million in 2022/23 to R363 million in 2023/24.

The Tourism Incentive Programme sub-programme, at R243.1 million, is the main cost driver in this programme.
This programme aims to incentivise priority areas, including providing market access support, tourism grading support, implementation of energy efficiency initiatives and funding of transformation initiatives in the tourism sector towards unlocking capital investment by black tourism entrepreneurs.

Initiatives which are in line with the Department’s strategic priorities towards economic transformation and job creation, responsible tourism and transformation of the sector.
Allocation to this sub-programme decreases by 4.55 per cent in real terms.

9 73 6.

South African Tourism The South African Tourism presented their Annual Performance Plan for 2023 financial year.
In terms of the legislative mandate the South African Tourism (SA Tourism) Board is a Schedule 3A public entity established in terms of Section 9 of the Tourism Act, Act 3 of 2014 In terms of impact on policy mandates, SAT reported that the Economic Reconstruction and Recovery Plan (ERRP), which came into operation in October 2020, is the country’s plan for the overall recovery of the economy following the impact of the COVID-19 pandemic.
Support for tourism recovery and growth is one of the eight priority interventions in the ERRP, emphasizing reigniting demand, rejuvenating supply and building enabling capability across the tourism sector.

Following the ERRP, the Tourism Sector Recovery Plan (TSRP) was adopted by Cabinet in April 2021.

The role for SA Tourism as per the TSRP is to stimulate domestic demand through targeted initiatives and campaigns and to execute a global marketing programme to reignite international demand.
SA Tourism’s policy mandate and in particular this Annual Performance Plan, has been aligned to the implementation requirements of the TSRP.

The committee notes the South African Tourism partnerships with the tourism industry and developed a Marketing Prioritisation and Investment Framework (MPIF) that focuses on identifying markets, optimizing marketing investments across the identified target markets and distributing resources to help meet the set objectives.
The South African Tourism’s budget allocation was increased from R1 275.9 billion to R1 455.6 billion in the 2022/23 financial year.

This resulted in an increase of the Entity’s marketing budget and activities from R909.4 million in 2021/22 to R1 072.6 billion in 2022/23.

The Entity continued in its efforts to increase both international and domestic travel, post the COVID-19 pandemic.
International arrivals showed robust performance in January-September 2022, with arrivals reaching 63 per cent of pre-pandemic levels in the first nine months of the year.

For this period, the majority of arrivals into the country were from Africa Land at 2.8 million; followed by Europe at 571 536 and the Americas at 226 047.

Overall international arrivals into the country were 3.9 million, an increase of 164.7 per cent over the same time in 2021.
10 74 The UNWTO forecasts global recovery to 2019 levels for the sector beyond 2024.

The Entity is faced with the task of reaching 14.8 million international arrivals by 2030.

Overall, domestic travel reached 23.9 million trips, 138.6 per cent over the same period in 2021.

About 6 million of these trips were for holiday purposes and 10.3 million were for visiting friends and relatives (VFR) trips.
While domestic tourism continues to be key for recovery and growth, the constrained local economy continues to pose a risk to the disposable income of potential travellers.

South African Tourism, through the Tourism Act (No.

3 of 2014), is mandated to market South Africa internationally and domestically as a preferred tourism and business events destination, ensure that tourist facilities and services are of the highest standard and monitor and evaluate the performance of the tourism sector.
Over the medium term, the Entity will focus on efforts to bid to host events such as business meetings, conferences and exhibitions in rural areas and (small) towns to boost the tourism industry in six focal sectors: mining and minerals, manufacturing, travel and tourism, agriculture, finance, and wholesale and retail trade.

For this work, R303 million is allocated for research and R278 million for analytics.
The Entity also plans to support bids to host 380 international and regional business events over the period ahead through an additional allocation of R303 million.

Ensuring that visitors enjoy their experience is a key component of the Entity’s work, and part of SAT’s revitalisation plan entails assuring that tourism establishments are of a high standard.
As such, the number of graded establishments is expected to increase from 5 355 in 2022/23 to 5 805 in 2025/26 at a projected cost of R168.5 million over the medium term.

The Entity is set to derive 94.9 per cent (R4.4 billion) of its revenue over the period ahead through transfers from the Department and the remainder through voluntary levies collected from the private sector, income from grading fees, exhibitions and interest from investments.

11 75 7.
11 75 7.

Budget Allocation 2023/24 The Entity’s 2023/24 budget allocation is R1 474.8 billion, R246.2 million of which is allocated to fund Compensation of Employees.

An amount of R1 218.2 billion is budgeted for Goods and Services and R10.4 million for Depreciation.
The Entity receives 94.9 per cent (R4.4 billion) of its projected revenue over the MTEF period from transfers from the Department of Tourism, with the other revenue generated from tourism marketing levies, grading income, interest from investments and sundry income (from exhibitions such as Africa’s Travel Indaba).
The table below reflects the allocation of funds per programme: Overall Budget Allocation 2022/23 – 2025/26 SA Tourism Budget Nominal Real Nominal Real % R million Rand Rand % Change Change Change change Programme 2022/23 2023/24 2024/25 2025/26 2022/23 – 2023/24 2022/23 – 2023/24 154.8 161.7 169.0 177.1 6.9 -0.7 4.46% -0.42% Administration Business 84.6 88.4 92.4 96.8 3.8 -0.3 4.49% -0.39% Enablement Leisure Tourism Marketing Business Events Visitor Experience 1 072.6 1 074.7 1 122.9 1 172.3 2.1 -48.1 0.20% -4.48% 92.2 96.4 100.7 105.5 4.2 -0.3 4.56% -0.33% 51.4 53.7 56.1 58.8 2.3 -0.2 4.47% -0.41% TOTAL 1 455.6 1 474.9 1 541.1 1 610.5 19.3 -49.6 1.33% -3.41% Source: 2023 Estimates of National Expenditure, National Treasury 12 76 The table indicates the expenditure estimates for each programme for the years 2022/23 to 2025/26.
For the 2023/24 financial year the budget allocations per programme are as follows: • Programme 1: Administration is R161.7 million.

• Programme 2: Business Enablement is R88.4 million.

• Programme 3: Leisure Tourism Marketing is R1 074.7 billion.

This programme is the main cost driver for the Entity, as it gives effect to its core mandate, which entails marketing initiatives both locally and internationally.

• Programme 4: Business Events is R96.4 million.


• Programme 5: Visitor Experience is R53.7 million.

The overall budget allocation to the Entity increases by 1.33% in nominal terms from R1 455.6 billion in 2022/23 to R1 474.9 billion in 2023/24.

However, in real terms, it declines by 3.41 per cent.

In real terms, all the programmes experience a decline in allocation, with Programme 3 (Leisure Tourism Marketing) being the hardest hit at -4.48 per cent.
This programme entails one of the core elements of the Entity’s mandate, which is marketing to source markets.

A decrease in budget allocation will likely affect the number of marketing initiatives and campaigns targeted at both international and domestic tourism markets.

8.

Observations i.

The Committee recognises the role of Tourism in terms of generating foreign exchange, including boosting local economic development.
Further, Tourism plays a significant role in terms of job creation, and its potential to boost rural incomes, and stimulating growth and expansion of businesses.

ii.

Further, the Committee highlighted a need to aggressively invest in infrastructure such as roads, energy, water and sanitation and ICT infrastructure to support growth of tourism industry across the country.

iii.
iii.

The Committee emphasised that at all levels of government there is a need for a co-ordinated way in implementing development projects.

There is a need for an integrated tourism action plan to accelerate implementation of tourism infrastructure.

13 77 iv.

The Committee underscored a need to leverage public spending to attract private sector investment to tackle transformation objectives, and expansion of the tourism industry in both urban and rural economies.
v. The Committee highlighted the need to lift cultural tourism, and open opportunities in wildlife tourism to contribute to the great of rural economies including small towns and local communities.

Collaborative initiatives between the Ministry of Tourism and other Ministries responsible for Arts, Cultural, and Environment should be build and enhanced to support growth of the tourism industry.

vi.
vi.

Further, the Committee identified a need for the Department of Tourism to establish a robust monitoring and evaluation mechanism to monitor the implementation of Tourism Sector Recovery Plan.

Spending tracking should cover funds allocated to each strategic focus area.

vii.
vii.

The Committee notes the concern raised by the Industry players about the need to strengthen the resilience of the tourism economy, to address structural weaknesses, accelerate economic transformation, and encouraging more sustainable models of tourism development, and improving competitiveness.

viii.

It was further noted that overall, the South African economy is not performing as expected.
Although domestic economic performance mirrors the global economic picture, which is dominated with high inflation, geopolitical conflicts (Russia-Ukraine war) and with national reserve banks increasing interest rates with direct impact to consumer spending.

In South Africa, the electricity crisis has impacted on the overall economy, and this also finds expression to the overall performance of SMMEs in the tourism industry.

ix.
ix.

The concern was raised that the current economic situation marked by high inflation, will have an effect to domestic tourism.

Reduced household disposable income will have an effect on expenditure including tourism related expenditure.

x.

In terms of the high crime rate in South Africa, this has also impacted on tourism safety.

However, coordination with the South African Police Service remains a challenge.
Resource allocation, and partnerships with the private sector, need to be enhanced to tackle tourism safety.

xi.

There is a need for the Department to develop a tourism investment, attraction and promotion strategy to boost capital formation in the tourism industry, and contribute to economic transformation.

14 78 xii.
14 78 xii.

The public investment in the tourism industry should be taken in light of boosting employment, and increasing investment in the tourism industry (capital formation covering both public and private) expressing domestic and foreign investment in the industry.

xiii.

The major goal for the Department and its agency is to increase domestic and international tourist arrivals including an increase in tourist spend.
The Committee recognised the decision taken by the Minister to dissolve the Board of SA Tourism.

It was highlighted that the governance issues presented a reputational and operational risk for the agency.

This has the potential to affect organisational health, thus inhibiting the agency to meet its operational goals.

9.

Policy Recommendations i.

Investments should reach rural communities, exploit and build cultural and heritage assets, and sporting events including wildlife.
To this end, the Committee recommended that over the 2023 medium term, the Minister through the support of the Department, should craft an action plan that will incorporate arts, culture, sport, wildlife and gaming as critical components to tourism industry.

The action plan should emphasise collaboration with the ministers responsible for arts, cultural, sport and environment.

ii.
ii.

The Committee reiterated that the Minister through the Department, needs to fast track the review and development of the Tourism White Paper, 1996; the Tourism Act, 2014; the National Tourism Sector Strategy, 2016, and the National Grading System.

This will assist to provide policy and strategic direction to grow and expand tourism taking into account new developments such as sustainability consideration, and digitalisation policy consideration, over the medium term.

iii.
iii.

The Committee recommends that the Minister before the end of the 2023 medium term, with the support of the Department, apart from existing funds, should create a dedicated Tourism Development Fund to support the tourism industry with a specific focus on regions lagging behind in terms of economic development.

Further, private sector financing should be leveraged to broaden access to funding and financing for SMMEs in the tourism industry.

To this end, the role of National Treasury is essential.
Report to be considered 15 79 3.

POLICY ASSESSMENT AND RECOMMENDATION REPORT OF THE SELECT COMMITTEE ON TRADE AND INDUSTRY, ECONOMIC DEVELOPMENT, SMALL BUSINESS DEVELOPMENT, TOURISM, EMPLOYMENT AND LABOUR ON BUDGET VOTE 39, STRATEGIC PLAN, 2023/2024 ANNUAL PERFORMANCE PLAN OF THE DEPARTMENT OF TRADE, INDUSTRY AND COMPETITION, 23 MAY 2023.

1.
Background The Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism and Employment and Labour (the Select Committee), having considered the request of the National Council of Provinces to analyse and report on the Strategic Plans, Annual Performance Plans and budget allocations of the Department of Trade, Industry and Competition (the Department), tabled by the Minister of Trade, Industry and Competition (the Minister), and in terms of the Public Finance Management Act of 1999 (PFMA), as well as the Money Bills Amendment Procedure and Related Matters Act, 2009, reports on its Policy Assessment and Recommendation Report as follows: 2.
Committee Process The Select Committee considered the Strategic Plans for the 2023 medium term period and the Annual Performance Plan of the Department of Trade, Industry and Competition (the Department) on 9 May 2023.

The Committee has further considered the adequacy of financial resources deployed for the implementation of the plans.

3.
3.

Introduction Recent past government economic policy strategy documents have underscored that global uncertainties and an uneven domestic recovery will weigh on the economic outlook over the medium term.

Economic growth, low investment, job creation remains key risks in the South African economy.

2023 SONA, including the 2023 Budget Review highlighted that the main 1 80 focus of government is to revive economic growth and create jobs.

So far the economy is not performing as expected.


Previous government policy strategy documents have highlighted that persistent structural constraints remain a challenge for South Africa economic growth prospects.

Over the medium term, 2023 Budget Review, including reports by the World Bank and the South African Reserve Banks underscored a need for South Africa to accelerate major economic reforms in order to create necessary jobs and encourage investment over the medium term.
South Africa is one of the biggest economies in Africa.

The Committee highlighted that in terms of distribution of resources, jobs and opportunities are concentrated in three main provinces, Gauteng (Johannesburg), Western Cape (Cape Town), and KwaZulu Natal (Durban).

There is a need for government to close the gap in terms of economic growth, investment and employment.

In addition, rural economies need urgent interventions to increase rural economies and incomes.
Further, Covid-19 has exposed the vulnerability of the South African economy, even though the government implemented a stimulus economic package to support lives and livelihoods, cushion businesses and save jobs.

Too many households remain vulnerable.

Securing electricity supply remain a major risk to the overall commerce, economy as these have been hard hit.

Further, clean and safe drinking water, efficient freight transport for goods to reach global markets, remains a concern.
Further constraining the South Africa economic growth trajectory, is the deterioration of the global economy with its high inflationary pressure resulting to monetary policy tightening aimed at containing high inflation across a range of advanced economies and emerging markets.

In addition, there are major uncertainties relating to energy and food market disruptions caused by the Russia-Ukraine conflict, US-China trade wars, and intensity of geo- political risks.
It was highlighted that South Africa’s structural economic constraints, including unreliable electricity, high levels of market concentration, inefficiencies in network industries and the high cost of doing business; limit the rate at which the economy can grow and create jobs.

2 81 It was underscored that cutting red tape and supporting small businesses, remains a priority.

However, execution remains a challenge.


Investing in small business remains high on government policy agenda, not only for businesses in urban economies, but also for rural and township economies.

The growth of the South African economy is largely dependent on the growth and expansion of businesses, and attraction of both domestic and foreign investment.

The 2023 Budget Review highlighted that gross fixed-capital formation grew in the third quarter of 2022, led by the public sector.
Total investment remains R59.9 billion below pre- pandemic levels – with private investment accounting for R50.7 billion of the shortfall.

Further, investment in skills remains pivotal to getting the economy moving (point emphasised by the World Bank in various reports) It was reported that consistent with forecast downgrade, South Africa’s international trade in 2022 registered a surplus of R193 billion, down from R432 billion in the previous year.
The exports that kept the trade balance positive included rapid growth in coal exports, which expanded 121 percent in 2022, as compared to the previous year, followed by iron and steel (16 percent) and vehicles (12 percent).

It was highlighted that trade opportunities both in the African continent and the global village should be used strategical to support the economy, and further access global talent to boost skills base, and access new markets.
It was advanced that the African Continental Free Trade Area (AfCFTA) if implemented successful, will present good growth opportunities for South Africa and the African region.

4.
4.

Overview of the Legislative and Policy Mandate of the Department The aim of the Department is to foster a dynamic industrial, globally competitive South African economy, characterised by meaningful economic transformation, inclusive growth and development, decent employment and equity, built on the full potential of all citizens.
Apart from the Constitution of the Republic, the legislative framework which informs the work of the department constituted by the following legislative Acts: • Companies Act (2008); • Manufacturing Development Act (1993); • Broad‐Based Black Economic Empowerment Act (2003); • Consumer Protection Act (2008); • Industrial Development Corporation Act (1940); 3 82 • Competition Act (1998), as amended; • International Trade Administration Act (2002).
The Department has 16 public entities over which it performs oversight, namely: • Companies and Intellectual Properties Commission (CIPC); • Export Credit Insurance Corporation (ECIC); • National Consumer Commission (NCC); • National Consumer Tribunal (NCT); • Companies Tribunal (CT); • National Credit Regulator (NCR); • National Empowerment Fund (NEF); • National Gambling Board (NGB); • National Lotteries Commission (NLC); • National Metrology Institute of South Africa (NMISA); • The International Trade Administration Commission (ITAC); • National Regulator for Compulsory Specifications (NRCS); • South African Bureau of Standards (SABS); • South African National Accreditation System (SANAS); • The Competition Commission (CC); • The Competition Tribunal (CT); • The Industrial Development Corporation (IDC); Of the 16 public entities reporting to the Department, three are self-funded, namely – Companies and Intellectual Properties Commission (CIPC); National Empowerment Fund (NEF) and National Lotteries Commission (NLC).
The Department further makes transfers to the Industrial Development Corporation (IDC) which administers some of the incentives.

The Department’s vision is to support the development of a dynamic, industrialised South African economy, characterised by meaningful economic transformation, inclusive growth and development, decent employment and equity.

Further, the Department aims to build South African citizens to realise their full potential.
4 83 Updates to institutional policies and strategies It was reported that the Department’s industrial strategy is designed to promote industrialisation to propel higher levels of growth and investment.

Simultaneously, it has to overcome the core socio-economic challenges such as deep levels of inequality and joblessness.

These changes all require disruptive and far-reaching structural changes in long standing economic systems.
At the same time, the profound changes wrought by the Covid-19 pandemic, slower international trade growth and heightened tensions amongst major economies is deeply changing the context of industrial policy.
The Economic Reconstruction and Recovery Programme (ERRP) resulted in the formulation of the re-imagined industrial policy which also builds on various national key strategic economic policy documents such as the National Development Plan, the New Growth Path Framework and the Industrial Policy Action Plans.
The re-imagined industrial policy seeks to deepen the domestic market by growing employment, increasing outcomes and undertaking other measures to improve equity and income distribution, and to widen the market for South African goods and services through a stronger focus on exports to the region and other rapidly growing economies.
The three apex outcomes introduced by the Department in its 2023 spending plan to consolidate the efforts of all programmes and entities cover the following areas: • Industrialisation to promote jobs and rising incomes; • Transformation to build an inclusive economy and • A capable state to ensure improved impact of public policies.
The three apex outcomes have six underlying pillars that reflect the core aims of the re- imagined industrial strategy: • To combine growth with transformation; • To boost local production; • To grow exports and expand African trade; • To increase investment; • To establish a more reliable and low-cost energy system while greening the overall economy and to grow employment.

The 2023 Budget Review stressed that firms remain under strain given challenging domestic business conditions.
Gross fixed-capital formation is estimated to slow to 1.3 per cent in 2023 as weaker global demand and tighter global financial conditions constrain foreign investment.

5 84 The electricity crisis will weigh on investment decisions and reduce profitability through lost production and increased operating costs.

Transport freight and logistics operations, delays in the rollout of infrastructure through the independent power producer programmes will affect the overall performance of the economy.
The Department’s strategic policy direction should be mindful of the policy sentiment outline in the 2023 Budget Review.

The 2023 Budget Review indicates that widespread criminal activity poses a threat to economic growth and national security.

In addition, a deterioration of the fiscal outlook due to unfunded spending pressures or the materialisation of contingent liabilities could increase borrowing costs, and crowd out both private and public investment.
Investment in water, roads, port and energy infrastructure is pivotal to the recovery and growth of the economy.

The Committee emphasised that provincial and municipal capital spending should be scaled up.

Lack of capital spending at both provincial and local government would have a direct impact to the success of the Special Economic Zones and Industrial Parks.

Local government capacity and capability would need to be geared-up.
This would need crucial investment facilitation and cluster-oriented management capabilities.

5.

Budget Policy Area The Department will continue to develop and implement various sectoral master plans over the MTEF period.

These key components of the Re-Imagined Industrial Strategy, which presents a multi-pronged approach to industrial development, with an emphasis on building partnerships with the private sector to secure investment to create jobs.
Over the period ahead, this entails focussing on supporting the implementation of key interventions outlined by the ERRP, particularly by providing industrial finance, developing industrial infrastructure and enhancing competitiveness and localisation.

According to the 2023 National Treasury Estimates of National Expenditure, the Department’s total expenditure is expected to increase at an average annual rate of 0.5 percent, from R10.9 billion in 2022/23 to R11.1 billion in 2025/26.
Spending in the Incentives Programme, mainly to disburse funds for industrial financial assistance, is expected to increase at an average annual rate of 3.2 percent, from R5.3 billion in 2022/23 to R5.8 billion in 2025/26.

Allocations to the programme account for an estimated 51.1 percent (R16.9 billion) of the Department’s expenditure over the MTEF period.
The Transformation and Competition Programme’s baseline is expected to decrease at an average annual rate of 6 85 17.3 percent due to the Social Employment Fund for the Presidential Employment Initiative not being extended beyond 2023/24.

Providing industrial finance In support of the ERRP, initiatives in the Incentives Programme are aimed at growing sustainable and competitive enterprises through providing direct or indirect industrial financing.
Over the next three years, the Department will continue to provide financial support to the Automotive Incentive Scheme, the Black Industrialists Programme, the Agro-Processing Support Scheme, the Strategic Partnership Programme and the Aquaculture Development and Enhancement Programme.

Allocations to the Manufacturing Incentives sub-programme account for an estimated 51 percent (R8.8 billion) of the Incentives programme’s budget over the medium term.
The Department will also provide financial assistance or support to 300 clothing and textile firms through the clothing and textiles competitiveness programme, which has a budget of R1.8 billion over the period ahead in the Sectors programme.

Through these incentive programmes, the department expects to leverage R83 billion in private sector investment.
A further R728.8 million over the medium term is reprioritised, mainly from the Department’s operational budget, as it implements the new energy vehicle roadmap.

The roadmap is intended to enhance the transitioning of the automotive industry in South Africa from internal combustion engines to electric motors, in line with global trends.
Developing industrial infrastructure A critical part of the economic reconstruction and recovery plan includes interventions to catalyse investment through infrastructure development.

This includes subsidising bulk infrastructure and top structures (factories) in special economic zones, and rolling out infrastructure to revitalise a targeted 16 industrial parks over the medium term.
These subsidies are provided mainly through the Infrastructure Investment Support subprogramme in the Incentives programme, with R4.5 billion over the MTEF period allocated for special economic zones, R443.4 million for industrial parks and R372.7 million for critical bulk infrastructure such as water, electricity and sewerage connections.
Enhancing industrial competitiveness and localisation 7 86 The department aims to enhance industrial competitiveness at firm and sector level through conditions on financial incentives and local procurement policies that encourage industry to use local products.

This entails disbursing funds to technical institutions such as the Proudly South African campaign to support sectoral work on master plans and projects that aim to improve industrialisation and competitiveness, and increase localisation.
Through collaboration between government, business and labour, these policy interventions are aimed at building local industrial capacity for the domestic and export markets.

Expenditure for this work is within allocations amounting to R2.5 billion over the medium term in the Industrial Competitiveness sub-programme in the Sectors programme.

A further R30 million over the period ahead is allocated to the South African Bureau of Standards for local content verifications.

6.
6.

Changes to the Department’s Strategic Outcomes The Department in previous APPs targeted inputs and activities that would have a beneficial outcome and impact on jobs, industrial output, exports, and investment.

This was done because many external factors driving the outcomes were outside the control or influence of the Department and the entities within its portfolio.
The Department highlighted that a focus on inputs/ activities can distort resource allocation, it also limits accountability on the impact of the use of public resources.

To address both these concerns, a new high impact based and outcome focussed approach was developed.
For the 2023/24 financial, building on progress made since 2019, the Department’s APP has a significant new element – meaningful outputs that more closely track to the three outcomes to measure success of the Department and its entities’ work.

The new approach focusses on meaningful outputs (referred to targets).
It was reported that the 10 core targets represent the real impact the Department aims to achieve in the economy, and measure crucial indicators like local output, job creation and the performance of black industrialists.
While all the Department’s targets are important, the following core targets are the apex priorities, and all programmes are expected to contribute to the achievement of the following essential outputs: 8 87 R200 billion R40 billion R700 billion R300 billion R25 billion In investment pledges In additional local In manufacturing In manufacturing In exports to Global secured across the output committed to exports exports to other Business Services state R40 billion achieved 1 million African countries (GBS) 100 000 23 000 20 000 In Black Industrialist Jobs supported or Jobs to be created Jobs in black Additional workers Output achieved covered by Master industrialists firms with shares in their Plans companies These 10 core outputs are part of 45 output and targets which have been clustered into the following 12 functional focus areas: 1.
2.

Investment Industrial production 3.

Exports 4.

Industrial support 5.

Transformation 6.

Jobs 7.

Energy 8.

Green Economy targets 9.

Stakeholder engagement and impacts 10.

Addressing crime 11.

Red tape and state capability targets 12.
Improving the capacity and responsiveness of the state and social partnership The 45 outputs have been divided into four types, mainly: • 10 Core Targets – Measure the performance and transformation of the economy and reflect some of the ultimate objectives the Department trying to achieve; • 13 Programmatic Targets- Help achieve the aims of the core targets, but directly measure the impact of specific activities, such as providing industrial finance; • 15 Enabling Targets- Enable the achievement of Programmatic targets by creating the systems and environment that make Departmental activities work and • 7 Contextual Responsive Targets- Often involve work outside of core programmes and are designed to respond to pressing needs in the economy and to encourage the Department to be flexible and agile in its work.
The new approach: • Plans for results and impact; and not for audit outcomes; • Sets out the sensitivities, co-dependencies or external factors that may affect outputs; • Is ambitious and will require a break in the Department’s traditional ways of working; • Requires that some existing activities be discontinued or reduced to refocus resources; 9 88 • Ensures that the Departmental plans and functions account for the economic returns against public resources invested in pursuit of those goals; • Requires active engagement not just about what has been achieved (or not), but about what we are doing, what we are learning, how we are responding when we miss targets, and about the quality of the decision-making and resource allocation.
To enhance the delivery, a number of internal refinements of functions and resources will be made: • Staffing: re-assignment of human resources and provision of specialists for identified core outputs; • Skills needs: focus on skills in key areas e.g.
project management, monitoring, financial evaluation; • Vacancies: 25 percent of critical vacancies to be filled per quarter, based on new skills required; • Funding: Re-prioritisation of the funding through shifting and virements of the budget to the core programme; • ICT: Automation of manual customer-facing systems and provision of reliable internet capability; • Programmes: consolidate from 10 to 9 programmes; • Accommodation: a new Ops Centre as the implementation coordinating space for managers; • Systems: Reduced bureaucracy on staffing and finance.
Role of Programmes Of the nine Programmes, six are core drivers of the targets, namely the Trade, Investment/Spatial Industrial Development; Sectors; Incentives; Exports, and Competition/ Transformation.

It was highlighted that the integrated approach requires that each functional policy programme contributes outside its traditional core area.
For example, the Trade branch will not focus only on negotiation and administration of trade agreements, but will also have a mandate to contribute to jobs, investment, community outreach and writing up of case studies of impact of trade policies on the lives of South Africans.

The Sector Programme’s targets will be reviewed to shift the programme from notionally a ‘coordinating role’, to a programme of more active 10 89 front-line company support across different sectors.
Two Programmes provide essential support services to the core programmes: Administration; and Research.

They provide overall coordination, external stakeholder management, monitoring and evaluation, human resource enabling, financial management, ICT, legal, office facilities and fit-for-purpose research, all to be provided in innovative ways to support the new targets.
In addition, the Administration Programme, through the Office of the Director General provides oversight support on all entities that report to the Ministry.

7.
7.

Departmental Spending Over 2023 Medium Term Source: 2023 Estimates of National Expenditure Of the total budget of R10,9 billion for the 2023/24 financial year, approximately R1,7 billion (16,0 percent of the total budget) is the operational budget of the Department (compensation of employees, and goods and services), and a bulk of the budget R9,16 billion (83,9 percent of the total budget) is allocated to transfers and subsidies to departmental entities and private enterprises, among others.
While R15,7 million (0,1 per cent) of the budget is allocated to payments for capital assets (machinery and software).

Of the operational budget, a large proportion is allocated for compensation of employees (R1,06 billion or 61,1 percent of the operational budget or 9,8 per cent of the Department’s total budget).
It should be noted that the compensation of employees’ budget will decrease by 1,4 percent between the 2022/23 and the 2023/24 financial years due to the estimated reduction in the number of employees from 1 325 employees to 1 300 employees.

In the medium term (2024/25 11 90 and 2025/26 financial years), the compensation of employees’ budget is expected to increase to R1,08 billion in 2024/25 with 1 243 employees and R1,13 billion in 2025/26 with 1 264 employees.
For the 2023/24 financial year, the Department has made significant changes to its targets and some changes to its programmes.
The changes to the Programme names is reflected as follows: Programmes (2022/23) Programme 2: Trade Policy Programme 3: Spatial Industrial Development New Programme Names (2023/24) Trade Investment Spatial and Industrial Development Sectors Programme 4: Industrial Policy Programme 5: Consumer and Corporate Regulation Division Regulation Incentives Programme 6: Industrial Financing Export Programme 7: Trade and Investment South Africa (Combined with previous Programme Programme 8: Invest South Africa 3) Transformation and Competition Research Programme 9: Competition Policy Programme 10: Economic Research The purpose of Programme 1: Administration is to provide strategic leadership, management and support services to the Department.
The programme accounts for 7.7 percent of the total budget with an allocation of R840.3 million, resulting in a R23.7 million decrease from the previous financial year.

In the 2022/23 financial year, the programme had set itself 26 indicators/targets, for the 2023/24 financial year these targets have been reduced to four.
In terms of Programme 2: Trade is to build an equitable global trading system that facilitates development by strengthening trade and investment with key economies and fostering African development, including regional and continental integration and development and cooperation in line with the African Union Agenda 2063.

The programme accounts for 2.2 percent of the total budget and receives an allocation of R244.2 million for the 2023/24 financial year.
The purpose of Programme 3: Investment and Spatial Industrial Development is to support foreign direct investment flows and promote domestic investment by providing a one-stop shop for investment promotion, investor facilitation and aftercare support for investors as well as increase participation in industrialisation.
For the 2023/24 financial year, this programme received an allocation of R168.6 million which is 1.5 percent of the total budget and is an increase of R8.4 million from the previous financial year.

12 91 The purpose of Programme 4: Sectors is to design and implement policies, strategies and programmes to strengthen the ability of manufacturing and other sectors of the economy to create decent jobs, promote inclusion and increase value addition and competitiveness, in both domestic and export markets.
For the 2023/24 financial year, this programme received an allocation of R1.72 billion which accounts for 15.7 percent of the total budget.

Programme 5: Regulation is to develop and implement coherent, predictable and transparent regulatory solutions that facilitate easy access to redress and efficient regulation for economic citizens.

For the 2023/24 financial year, this programme received an allocation of R359.6 million which is 3.3 percent of the total budget.
This is an increase of R15.8 million from the 2022/23 financial year.

Programme 6: Incentives seeks to stimulate and support the development of sustainable and competitive enterprises, through the efficient provision of effective and accessible incentive measures that support national priorities.

This programme captures the core mandate of the Department and receives the largest allocation of R5.4 billion accounting for 49.4 percent of the total budget.
This R74.4 million increase from the previous financial year and is attributed to expected increases in spending in the Incentives Programme, mainly to disburse funds for industrial financial assistance.

Programme 7: Exports, seeks to increase export capacity and support direct investment flows, through targeted strategies, and an effectively managed network of foreign trade and investment offices.
The programme has been allocated R244.2 million for the 2023/24 financial year which account for 3.7 percent of the total budget.

This allocation is a decrease of R77.7 million from the previous financial year.

The decrease is as a result of the Presidential initiative - Social Employment Fund, not being extended beyond the 2023/24 financial year and was part of the COVID-19 ERRP interventions.
Programme 8: Transformation and Competition seeks to develop and roll out policy interventions that promote transformation and competition issues through effective economic planning, aligned investment and development policy tools.

The allocation for the 2023/24 financial year is R1.7 billion which accounts for 15.8 percent of the total budget and is the second largest programme of the Department according to budget allocation.
13 92 Programme 9: Research, seeks to undertake economic research, contribute to development of trade and industrial policies and guide policy, legislative and strategy processes to facilitate inclusive growth.

For the 2023/24 financial year, this programme received an allocation of R60.4 million and accounts for 0.55 percent of the total budget, this is an increase of R9.8 million from the previous financial year.

8.
Transfers to entities Summary of Departmental Transfers to Entities Entities Companies Tribunal Competition Commission Competition Tribunal Export Credit Insurance Corporation of South Africa International Trade Administration Commission National Consumer Commission National Consumer Tribunal National Credit Regulator National Gambling Board National Metrology Institute of South Africa: Operations 2019/20 (R'000) 17 352 295 438 36 172 233 511 2020/21 (R'000) 20 752 302 586 32 342 162 710 2021/22 (R'000) 20 313 439 550 36 970 208 078 2022/23 (R'000) 24 529 449 518 42 286 150 000 2023/24 (R'000) National Regulator for Compulsory Specifications South African Bureau of Standards South African National Accreditation System Industrial Development Corporation Regional Industrial Development Sector programmes Industrial financing Social employment fund Tirisano construction fund trust Downstream steel competitiveness fund Source: National Treasury industry – 838 399 700 000 – 61 250 35 000 – 637 029 892 000 – 36 279 29 449 – 487 363 1 997 500 800 000 46 222 37 727 15 000 599 483 – 861 566 64 375 39 550 21 000 564 050 – 787 941 53 750 39 939 The Department has 16
 entities, of which, three are self-funded, these are the Companies and Intellectual Property Commission (CIPC), the National Empowerment Fund (NEF), and the National Lotteries Commission (NLC).
Transfers to most of the entities will not increase during 14 93 the financial year compared to the previous financial year.
Entities whose transfers will increase include National Consumer Commission (24 per cent increase), Export Credit Insurance Corporation of South Africa (15 percent increase), Companies Tribunal (15 percent increase), International Trade Administration Commission (12 per cent increase), South African Bureau of Standards (5 percent increase), and National Regulator for Compulsory Specifications (5 percent increase).

9.
9.

Issues Arising from Engagement The following are the key issues raised by Members and responses from the Department during deliberations: i.

The Committee welcomes the Department’s new approach and revised APP, particularly how it translates to outputs.

ii.
ii.

In response to concerns by Members that the focus on outputs would compromise audit compliance, the Minister indicated that previously, in order to meet audit targets the outputs were simplified (SMART targets) and focussed on factors that were within the control of the Department.

This was done at the expense of output which are impacted by external factors.
The revised way of work takes some degree of risk, however, it was noted that there is a strong connection between what is happening in the economy and the work of the Department.

Outputs could no longer only focus factors within the control of the Department and its internal environment just meet performance targets.

This old way of working usually compromised impact for the attainment of targets.
However, the Minister expressed confidence that this better framework would enhance impact and performance whilst not compromising audit compliance.

iii.

Members raised concerns regarding the high number of acting positions, particularly in senior administration.

iv.

Members raised concerns that the temporary ban on scrap metal exports had no impact on reducing theft and vandalism of public infrastructure and queried the interventions the Department had in place to address this.
In response to concerns raised by Members regarding the impact of the temporary scrap metal ban, it was reported that the Department is constantly monitoring its effectiveness however noted that export permits granted prior to the application of the ban were not cancelled.

15 94 v. Members raised concerns that with 12 months left in the Sixth Administration, the degree to which the new framework of working and revised APP would be carried forward by the next administration.

vi.
vi.

In response to concerns from Members regarding interventions with the European Union (EU) stringent regulations on citrus imported from South Africa and the Department’s interventions in this regard.

It was reported that the new measures require South African farmers to apply extreme cold treatment to all Europe-bound oranges and to keep fruits at temperatures of 2 degrees or lower for 25 days.
This has damaging implications for cold storage costs for citrus farmers and is meant to address phyto- sanitary and new plant health and safety requirements.

South Africa has continuously argued that regulation is inappropriately applied and unjustifiable.

The Department highlighted the success of South African citrus exports which has grown to be the second largest global exporter of citrus, of which approximately 40 percent is destined for the EU.
The Department reported that South African’s government approach for a resolution on the matter is to intensify bilateral engagements with the EU at various levels: o Political: The President met with the EU Council President in July 2022 and with the Spanish Prime Minister in October 2022.
DTIC and DALRRD Ministers also raised it with their EU counterparts, including at the 15th SA-EU Ministerial Political Dialogue Partnership held in January 2023. o Legal: A WTO dispute settlement process was initiated in July 2022 by way of a letter to the EU requesting formal WTO consultations.

Formal WTO Consultations were held in September 2022.

The next step is a request by South Africa for the establishment of a dispute settlement panel in the WTO if an amicable solution can’t be found.
o Technical: Meetings during 2022 and 2023 of SA-EU agriculture and trade technical officials.

vii.

Members raised serious concerns regarding the lack of progress regarding SEZs and Industrial Parks, in particular, the Nkomazi SEZ in Mpumalanga which has seen little progress to date.

viii.

In respect of the SEZ’s, the Department submitted that this has highlighted the weaknesses in the SEZ model.
Currently, spatial industrial development interventions are a provincial responsibility with limited managerial input from national government.

This approach has not yielded the desired results.

In addressing this, the Department 16 95 introduced a new approach wherein business plans for SEZ’s are rechecked, proper governance arrangements are put in place and there is more is being done by provinces and municipalities to co-fund the SEZ’s as well as investment by the private sector.
Announcements will be made by the Minister in the coming weeks regarding the SEZ’s that will be prioritized for the 2023/24 financial year.

ix.

In response to queries from Members regarding the Energy Action Plan, the Department responded that its work would support that of the Energy Minister and Output 23 (Investor Facilitation) was aligned to the energy initiatives and the 2023 State of the Nation Address policy priorities.
Work is being done to unlock opportunity for job creation and localizing job opportunities as the country builds new energy infrastructure.

Furthermore, the Department is working towards facilitating investment in energy and is working towards the creation of a one-stop-shop for private energy producers to assist them in managing regulatory challenges and improving energy efficiency.

x.
x.

Members raised concerns regarding the ongoing changes to the organisational structure of the Department and the high potential for anxiety this can create for personnel.

xi.

The Department submitted that measures in place to assist small businesses in respect of red tape and are working in conjunction with the Department of Small Business Development in this regard and working with vulnerable small businesses- criteria in this regard will be announced shortly.

xii.
xii.

In respect of economic diplomacy and navigating the complexities of a polarizing world, particularly in relation to the Russia-Ukraine conflict, it was highlighted that South Africa remains committed to the non-alignment global affairs mission.

Further, AfCTA present trade opportunities within the African region.

xiii.
xiii.

The Department reported that the Companies Amendment Bill will be processed for Cabinet, and focussed on ease of doing business, indicators on wage differentials and where necessary, measures to combat money laundering and terrorism.
The amendments will further give effect to the President’s Zondo Commission Report: “The recommendation to amend the Companies Act so as to permit applications for a director to be declared delinquent to be brought after two years is accepted and will form part of the review of the Companies Act” xv.

The Department reported that as part of the Re-Imagined Industrial Strategy, localisation is key and must be rooted in building dynamic firms and an inclusive 17 96 economy.
A localisation social compact was reached at NEDLAC that identified a number of key value chains, where opportunities exist.

Sector Master Plans developed and implemented in partnership with business and unions contain details on how actions plans will be executed.

xiv.

In relation to AGOA, the Department reported that South Africa remains a beneficiary country under African Growth and Opportunities Act (AGOA) and also under the Generalised System of Preferences (GSP).
The two programs provide duty-free quota- free access into the US market.

South Africa, together with other AGOA-eligible countries are lobbying US Congress to consider renewing AGOA beyond 2025 for another 10 years.

South Africa will be hosting the AGOA Forum later this year.
The Forum will bring together Ministers from Africa AGOA-beneficiary countries, the US Trade Representative and other high-level US Administration officials, Members of US Congress, private sector, civil society and organised labour.

The programme will include, among others, a “Made in Africa” trade exhibition aimed at showcasing the industrial capacity of countries in the continent to major US buyers.

xv.
xv.

South Africa’s exports enter the United States market under three regimes: most favoured nation (MFN) clause of the World Trade Organisation (WTO), AGOA and GSP: o South Africa’s AGOA exports equalled US$2 billion in 2021, up from US$1.2 billion in 2020 and US$1.2 billion in 2019.
The share of AGOA exports in total SA exports to the US experienced a downward trend: 31 percent in 2013; 16 percent in 2019; 10 percent in 2020, and then increased to 13 percent in 2021. o South Africa’s GSP exports equalled US$625 billion in 2021, down from US$714 billion in 2020 and US$755 billion in 2019.
The share of GSP exports in total SA exports to the US also experienced a downward trend: 13 percent in 2013; 10 percent in 2019; 6 percent in 2020 and 4 percent in 2021. o South Africa’s MFN exports enter the US under terms no more favourable that those accorded by the US to all other WTO members.

These exports from SA equalled US$12.7 billion in 2021, up from US$9.3 billion in 2020 and US$5.6 billion in 2019.
The share of MFN exports in total SA exports to the US enjoyed an upward trend: 56 percent in 2013; 74 percent in 2019; and remained at 83 percent in 2020 and in 2021.

18 97 10.

Recommendations Following the engagements with the Department, the Committee proposed the following recommendations to the Minister to be implemented over the 2023 medium term: i.

Committee emphasised that organisational health and capability is critical in the execution of government strategic economic policies.
By the end of the 2023 financial year, the Minister through the Department, should design and execute a plan that would ensure that critical posts are filled.

ii.
ii.

Over the 2023 medium term, the Committee urged the Minister with the support of Minister of Finance in collaboration with the Minister Cooperative and Traditional Affairs, that it should establish the National Regional Economic Development Fund to support economic growth, investment, enterprise development and employment in provinces that lag behind in terms of economic development.

iii.

The Minister should over the medium term ensure that all planned SEZs in other provinces are operational.
To this end, the Committee would expect the Minister to submit annually a mid-term progress report in relation to the implementation of the SEZs.

iv.

Over the 2023 medium term, the Minister in collaboration with other spheres of government must design strategy and action plans that would spur regional economic growth by creating investment-friendly conditions and streamlining regulations to accelerate investments.
v. The Committee reiterate that Research, Development and Innovation remains a pivotal element in efforts to boost productivity and competitiveness of the economy.

Over the medium term, the Minister, working jointly with the Minister responsible for Science and Innovation, should develop an action plan with necessary funding requirements to boost investment in research, development and innovation in the provinces, in particular those which are lagging in terms of economic development.
The Committee expects the receipt of the report by the end of the 2023/24 financial year.

Report to be considered.

19 98 4.

POLICY ASSESSMENT AND RECOMMENDATION REPORT OF THE SELECT COMMITTEE ON TRADE AND INDUSTRY, ECONOMIC DEVELOPMENT, SMALL BUSINESS DEVELOPMENT, TOURISM, EMPLOYMENT AND LABOUR ON BUDGET VOTE 31: EMPLOYMENT AND LABOUR, 23 MAY 2023.
The Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour, having considered the budgets of the Department Strategic Plans and the 2023/24 Annual Performance Plans which were presented on 25 April 2023, reports as follows: 1.

Introduction Unemployment, inequality and poverty remain key risks that need to be addressed, as it is noted that young people and women, including people with disabilities, are the groups most at risk.
The National Development Plan (NDP) recognises job creation as a key driver for accelerated growth and a higher standard of living.

The NDP has certain targets, including a reduction in the unemployment rate to 14 per cent by 2020 and 6 per cent by 2030.

There is a correlation between low economic growth rate experienced by the South African economy and high level of unemployment.
As noted by various government strategy policy documents including reports by global institutions such as IMF, OECD, as well as South Africa’s Central Bank, South Africa entered the Covid-19 phase with pre-existing economic and social risks, such as low economic growth, low investment, high budget deficit, and high debt-to-GDP ratio.
In 2022, the Financial Fiscal Commission highlighted that to realise some of the NDP’s goals, workforce capabilities need to improve, bargaining and labour relations should be stabilised, a move away from resource-intensive to more energy-efficient labour-absorptive industries should be promoted and industries with high potential for job creation should be supported.
The 2023 Budget Review highlighted that the inadequate supply of electricity remains the most significant constraint to production, investment, and employment.

In addition, disruptions to and underinvestment in freight and logistics networks are eroding competitiveness.

Rising 1 99 inflation has also put a strain on household spending and increased the cost of living.
Furthermore, global growth is expected to slow down in 2023, and central banks are responding to high inflation through increased interest rates.

To address unemployment and poverty, South Africa needs much higher economic growth, which requires a continued commitment to a macroeconomic framework that encourages investment, accelerated progress on reforms, and improved state capability.
In view of this global economic background, the Department has set a goal to eradicate poverty and decrease inequality in the medium term.

To support and achieve this vision, the Department will prioritise efforts to improve safety and fairness in the workplace, provide assistance to job seekers, regulate workplaces, and participate in international collaborations like the BRICS group of countries to influence the future of work and safeguard workers’ rights.
The Department has been allocated a budget of R12.1 billion for the upcoming period, which includes R96.9 million for cost-of-living adjustments.

To support the additional mandate (employment component) of the Department, in the upcoming fiscal year of 2023/24, the Department will be granted R372.2 million to sustain the pathway management network, a presidential employment initiative.
The network's primary objective is to generate employment prospects, promote easier entry to suitable education and training programs, help young individuals make informed decisions regarding learning and employment opportunities, and pinpoint the hindrances to accessing the job market.

2.
Governance and Spending The Department administers the following pieces of legislation: • Labour Relations Act, 66 of 1995 (LRA, as amended; • Basic Conditions of Employment Act, 75 of 1997 (BCEA), as amended; • Employment Equity Act, 55 of 1998 (EEA), as amended; • Unemployment Insurance Act, 30 of 2001, as amended (UIA); • Occupational Health and Safety Act, 85 of 1993 (OHSA); • Compensation for Occupational Injuries and Diseases, Act 130 of 1993 (COIDA; • National Economic Development and Labour Council Act, 35 of 1994 (NEDLAC); 2 100 • Employment Services Act 4 of 2014 Skills Development Act 97 of 1998 Sections 24– 26; • Unemployment Insurance Contributions Act, 4 of 2002; and • National Minimum Wage Act, Act 9 of 2018.
The Department reported that over the medium term it will continue to focus of the following policy priorities: • Priority 1: A capable, ethical and Developmental State; • Priority 2: Economical transformation and job creation; • Priority 3: Education, skills and health; • Priority 4: Consolidating the social wage through reliable and basic services; • Priority 6: Social cohesion and safer communities; • Priority 7: A better Africa and a better world; The Department delivers its legislative and policy mandate through core functional policy priorities constituted around crucial policy functional areas namely; Programme 2: Inspection and Enforcement Services; Programme 3: Public Employment Services and Programme 4: Labour and Industrial Relations.
Programme 1: Administration providing overall core administrative support to enable the three functional policy areas to realise their legislative and policy functional requirements.

The Department further play oversight role over the following entities: Commission for Conciliation, Mediation and Arbitration (CCMA); NEDLAC; Productivity of South Africa (PSA); UIF; CF; and Supported Employment Shelter (SEE).
3 101 Table 1: Medium Term Spending Source: 2023 National Treasury Estimates of National Expenditure In the 2023 Estimates of National Expenditure, the Department provided an overview of expenditure outlining the following priorities: Increasing safety and fairness in the workplace Through its advocacy programmes, which include 12 seminars and 6 conferences over the medium term, the Department plans to increase its national footprint by ensuring compliance with employment law.
This is expected to improve fairness in the workplace, especially for young people, people with disabilities and women, and transition workers from the informal to the formal economy.

To ensure compliance with the law and occupational health and safety standards, the Department plans to conduct 894 312 employer inspections over the period ahead.
The implementation of the case management system in 2022/23 is expected to ensure that the Department’s business processes are fully modernised, which will lead to, among other things, more focused inspections.

Over the medium term, the Department plans to improve and strengthen its enforcement function.
This entails ensuring that 65 per cent of employers who fail to comply with served notices are issued with fines and/or penalties and are referred for 4 102 prosecution within 30 calendar days, and that 95 per cent of noncompliant employers are served with legal notices within 14 calendar days.

Spending for these activities is within the Inspection and Enforcement Services programme, which is allocated 16.4 per cent (R2 billion) of the Department’s budget over the medium term.
Spending in the programme increases at an average annual rate of 4.9 per cent, from R614.9 million in 2022/23 to R709.2 million in 2025/26.

Providing support to work seekers Facilitating access to decent employment is central to the Department’s work and is primarily funded through the Public Employment Services programme.

Over the medium term, it plans to register 2.9 million work seekers, provide counselling to 780 000 work seekers and place 195 000 work seekers in registered employment opportunities.
In 2022/23, the Department drafted the South African national employment policy in partnership with the International Labour Organisation.

The purpose of the policy is to determine a sustainable approach to employment growth.

In line with the policy, the Department plans to establish an employment war room over the medium term.

The purpose of this intervention is to bring together government Departments, business experts, and labour and community organisations.
The Department will also focus on implementing an accessible framework for active labour market policies that supports work seekers by, among other things, digitising applications for vacancies and providing employment counselling through the Employment Services of South Africa system.

This is expected to be done in collaboration with private employment agencies with the aim of facilitating viable pathways to employment.
The Employment Services of South Africa online application, has been developed and was to go live on 1 April 2023.

Limited data and internet access are still hindrances to work seekers.

In addition, all youth employment centres that were built in 2022/23 will have free Wi‐Fi.

Internet connectivity will also enable work seekers to access other tools that assist youth to better understand their career aspirations and build capacity.
In 2022/23, the Department drafted the new national migration policy and proposed amendments to the Employment Services Act (2014).

A strong focus over the MTEF period will be on the rapid implementation of these amendments, which is expected to provide more 5 103 employment opportunities for young South Africans, particularly in the hospitality, tourism and agriculture sectors.

Regulating the workplace The Department plans to conduct an annual review of the national minimum wage over the medium term.
This will include the development of monitoring mechanisms to measure its impact on the economy, collective bargaining, the reduction of income differentials, and proposed adjustments.

The Commission for Conciliation, Mediation and Arbitration spearheads the Department’s efforts in this regard and is set to receive an estimated 77.6 per cent (R3.3 billion) of the Labour Policy and Industrial Relations programme’s allocation over the medium term.
Shaping the future of work and protecting workers’ rights Over the period ahead, South Africa’s key engagement in multinational platforms includes assuming the presidency of the BRICS group of countries for 2023.

The Department hopes to use this platform, as well as the ministerial meeting on labour and employment in September 2023, to shape the future of work and protect the rights of workers in new forms of employment.
The following priorities are expected to be deliberated on in the BRICS forum: • building sustainable enterprises, including new forms of employment; increasing productivity; • promoting labour rights and decreasing decent work deficits in the context of economic recovery after the COVID‐19 pandemic; and • ensuring universal social protection and minimum basic income; and promoting decent work by closing skills gaps in the informal economy.
For this purpose, the Department has budgeted R15 million in the Labour Policy and Industrial Relations programme.

The purpose of Programme 1: Administration programme is to provide strategic leadership, management and support to the Department.
The key outputs in the Annual Performance Plan (APP) for this programme for the 2023/24 financial year include the following: • Percentage of vacant funded posts maintained (7 percent or less per quarter) 6 104 • Improve the Information Security status of the Department per annum (100 percent implementation of Roadmap Phase 1) • Ensure functionality of ethics structures and adequate capacity per annum (Rollout of Ethics Management Plan for the year) • Percentage of corruption/ fraud cases finalised by Department through investigations within six months of receipt (75 percent) • Percentage of consequence management cases related to corruption cases finalised by Employment Relations (ER) through investigation within 90 days (80 percent) Programme 1: Administration will provide support services to the different Branches of the Department in order to achieve the outputs.
The Department reported that although the capacity is limited, there should be other innovative ways of ensuring that sufficient support is provided.

The experience and lessons learnt from the Covid-19 pandemic has exposed ICT to the urgent need to be more agile in dealing with ICT needs by the clients and the need to have electronic media as the cornerstone of delivering services as well as communication within the Department.
The Covid-19 pandemic has accelerated the need for digitisation of the departmental processes and ICT should be provided with resources to enable it to take the Department to greater heights.

The Administration programme allocation over MTEF has increased with baseline growth at annual average of 4.5 percent over the MTEF period.

In order for the programme to continue providing management support services towards the core functions of the Department, reprioritisation on major line items has been effected.
Over the MTEF period, the budget allocation increased from R1.075 billion in first year, R1.132 billion in second year and R1.195 billion in the outer year.

Programme 1: Administration’s overall budgets declined by 6,85 percent real decrease in 2023/24 financial period, thus less than R 25,2 million in nominal terms will be spent on this function when compared with the previous financial period.
The purpose of Programme 2: Inspection and Enforcement Services is to realise decent work by regulating non-employment and employment conditions through inspection and enforcement to achieve compliance with all labour market policies.
According to the 2023 APP, key deliverables under this programme include the following: • Conducting 298 332 compliance inspections 7 105 • Serving 95 percent of noncompliant employers inspected with a notice in terms of relevant employment law within 14 calendar days of inspection • Referring for prosecution 65% of employers who fail to comply with a served notice within 30 working days • Increasing awareness of employment law through formal advocacy sessions at 4 seminars and 2 conferences.
The allocated budget for the Branch to implement its Programmes, is R650.552m, R679.241m and R709.157m respectively, over the medium-term.

Overall, there is an R 5,2 million increase in real terms or 0.85-percentage change in real terms in the budget allocation for the Inspection and Enforcement Services (IES) programme for the financial period 2023/24 compared with the 2022/23 period.

Just five of the six sub-programmes in the IES branch saw a decrease in real terms.
The increase in Sub-programme 4: Compliance, Monitoring and Enforcement Services in budget allocation will impact the effectiveness of the Department’s objectives to protect vulnerable workers through the inspection and enforcement of labour legislation.

Spending for these activities is within the Inspection and Enforcement Services programme, which is allocated 16.4 per cent (R2 billion) of the Department’s budget over the medium term.
Spending in the programme increases at an average annual rate of 4.9 per cent, from R614.9 million in 2022/23 to R709.2 million in 2025/26.

The purpose of Programme 3: Public Employment Services is assist companies and workers to adjust to the changing labour market conditions.
According to the 2023 APP, key objectives within this programme for the year include: • Registering 900 000 work seekers on the Employment Services South Africa (ESSA) website by 31 March 2024; • Registering 110 000 work opportunities on the Employment Services of South Africa database system by 31 March 2024; • Filling 60 000 registered employment opportunities by 31 March 2024; • Conclude 24 partnership agreements with various stakeholders by 31 March 2024 The Department receives R372.2 million in 2023/24 to continue the Pathway Management Network, which is a presidential employment initiative.
The Department has a collaborative 8 106 agreement with the Presidency (through the Project Management Office – PMO), National Youth Development Agency (NYDA) and the Government Technical Advisory Centre (GTAC).

This is on the establishment and operationalisation of the Pathway Management Network as a central component of the Presidential Youth Employment Intervention through the Presidential Youth Employment Fund, to facilitate and expedite youth employment creation.
The network is expected to create opportunities for employment, support increased access to relevant education and training interventions, assist young people in making choices about learning and/or earning, and identify barriers to entry in the labour market.

More than 1 million young people are expected to be actively involved in the network over the next 2 years, with the aim of creating 255 000 job opportunities by 2024/25.
Different components of the network will be scaled up over the medium term, such as the Innovation Fund, with the introduction of new partners.

It was reported that spending for these activities is within the Public Employment Services programme, which is allocated 21.3 per cent (R2.4 billion) of the department’s budget over the medium term.
Spending in the programme is set to decrease at an average annual rate of 10.4 per cent, from R1 020.826 million in 2023/24 to R725.628 million in 2025/26, as a result of allocations for the presidential employment initiative not continuing over the MTEF period.
The Public Employment Services programme is allocated R2.4 billion over the MTEF period including transfers to Public Entities, in order to implement Employment Services Programmes towards achieving set targets and support the departmental commitment to create decent working conditions.

The spending focus over medium term expenditure framework period for Public Employment Services is contributing to employment creation mainly, youth employment.
The expenditure on Public Employment Services programme has increased by an annual average of 0,6 percent from 2019/20 financial year to 2021/22 financial year.

The annual average increase on Compensation of Employees is 3,5 percent during the mention period.

Although the overall average increase on the expenditure is 0,6, the goods and services spending has declined by annual average of 4,6 percent.

The spending on transfer and subsidies has also declined by annual average of 3,6 percent.
The purpose of Programme 4; Labour and Industrial Relations is to facilitate the establishment of an equitable and sound labour relations environment.
According to the 2023 APP, key objectives within Programme 4 include the following: 9 107 • Improve employment equity implementation and compliance monitoring mechanisms in the labour market by: • Publishing the 2022/2023 employment equity annual report and public register by 30 June 2023; and • Developing the 2023/2024 employment equity annual report and public register by 31 March 2024.
• Extend protection to vulnerable workers by publishing national minimum wages for all sectors • Promote sound labour relations and centralised collective bargaining through the extension of collective agreements and registration of qualifying labour organisations by 31 March 2024 • Monitor and evaluate the impact of labour legislation to promote an evidence-based labour policy framework through the production of research and labour market trend reports by 31 March 2024.
Under Programme 4, the Department intends to carry out a yearly assessment of the national minimum wage in the foreseeable future.

This evaluation will involve establishing surveillance tools to gauge its effect on the economy, negotiations among groups, minimising income inequalities, and suggested modifications.
The Commission for Conciliation, Mediation and Arbitration (CCMA) is leading the department's endeavour’s in resolving employer-employee disputes and is expected to obtain about 77.6 percent (R3.3 billion) of the allocation for the Labour Policy and Industrial Relations program during the medium term.
A total of R1.3 billion was allocated to the Labour Policy and Industrial Relations programme during the 2023/24 financial year, which is a decrease of 6,89 percent in real terms when compared to the previous financial year.

The Commission for Conciliation, Mediation and Arbitration (CCMA) received the largest share of the programme budget at R1 billion.
However, only Sub-programme 5: Employment Standards and Sub-programme 10: National Economic Development and Labour Council (NEDLAC) budget allocation increased in real terms when comparing 2023/24 a with the previous financial year.

The work of the Department should embed the Economic Reconstruction and Recovery Plan including the Re-Imagined Industrial Strategy.
The World Banks Report, Africa Pulse 10 108 emphasised that the social insurance and labour market programmes if implemented effectively also contribute to economic resilience by also protecting informal workers.

This is the area that the Department need to pay attention to.

Further, it is advanced that social protection programmes should continue building the resilience of poor and vulnerable households by supporting them in investing in productive assets and human capital.
Choosing the right mix of social protection instruments (from cash transfers to public works to productive economic inclusion measures) will be paramount.

3.

Issues from the Engagements i.

The Department indicated that the Labour Migration Policy has gone through a public participation process and it is anticipated to go to NEDLAC in May/June of 2023 and is expected to go back to Cabinet in August of 2023. ii.
In responding to concerns regarding the extent of performance evaluation of the Inspection Services Directorate, the Department advanced that in terms of its 2023 APP, the Directorate has a target number of inspections for the year.
The work is furthermore quality assured through a case management system where the work of an inspector is overseen by a designated supervisor who provides oversight from planning to execution to ensure that relevant notices as prescribed by statutory requirements are issued within the assigned timeframes.

There is furthermore a portfolio of evidence for every case with an inspection report for every inspection.

iii.
iii.

The Department reported that in terms of consequence management there were currently 10 officials on suspension related to Unemployment Insurance Fund (UIF) fraud cases in Gauteng.

It was reported that out of the 486 corruption cases across the Department 26 had been referred to the South African Police Services (SAPS) and others had been recommended for disciplinary action.
In terms of corruption cases, the Department reported that in Quarter 3 of the 2022/23 financial year, the breakdown was as follows: Western Cape – Northern Cape Limpopo- 44 Mpumalanga- 15 cases – 31 cases cases 33 cases Free State- 5 KwaZulu Natal Eastern Cape – North West- 18 cases – 146 cases 8 cases cases Gauteng- 184 Head Office- 2 cases cases 11 109 iv.

The Department noted that Programme 1: Administration was the most effected by budget reductions for the 2023/24 financial year.
However, it was reported that there will be additional capacity built into investigations cases within risk management to ensure timely completion of the cases either by being referred to the external law enforcement agencies or simple completion within the Department.

Budget reductions in other Programmes has resulted in the Department working in partnership with other government departments and entities to consolidate resources to conduct a number of coordinated inspections.
The Department further advanced that it has entered into a number of Memorandum of Understandings (MOU’s) both internal- at wide employment and labour portfolio level; and externally to alleviate limited resources and it does not anticipate that the budget reduction will have an impact on service.

v. The Department noted concerns raised regarding the long queues at Labour Centres and advanced that this was the unintended consequence of load shedding which resulted in the interruption of service.
It was reported that the UIF has approved an increase of staff allocation to 4 000 to assist clients with services as well as deploying resources to improve the queue management system to boost capacity.

The UIF further intend to invest in Wi-Fi routers so that clients may utilise the self-help option in an effort to reduce queue numbers.

vi.

It was highlighted that delays in processing of claims need to be enhanced.
The Department indicated it was working with Department of Home Affairs to improve the process.

vii.

Regarding the oversight over entities that report to the Department, it was reported that each entity has a board that are responsible for providing oversight over the respective entities.

When transfers are made, entities sign a Service Level Agreement (SLA) as a basis for transfer.
The Committee emphasised that the Department needs to play an active oversight role of the Compensation Fund, including scaling up support to the Supported Employment Enterprises.

viii.

The Department confirmed that it has conducted a number of inspections on farms and that more collaborative work with the Department of Agriculture and Rural Development, will enhance the inspection services.

ix.
ix.

The Committee recognised efforts and outcomes associated with government’s attempts to stimulate employment through numerous public employment interventions.

However, the impact of the interventions has not yet changed the macro-level picture of unemployment.

Public-private sector collaboration efforts should be scaled up to change the current 12 110 unemployment situation.

Further, structural reforms identified in previous government economic strategy documents should be rapidly implemented.

x.
x.

Committee emphasised the need to reignite growth and job creation.

It was underscored that there is a need to advance reforms that address Eskom and other SOEs’ difficulties, strengthen competition and governance, and increase employment initiatives (emphasise on innovation).

Further, it should boost and enhance the growth and expansion of the SMMEs in the economy.

4.

Recommendations i.

The performance environment of the Supported Employment Enterprises (SEEs) remains a challenge.
Over the medium term both the Minister of Finance (through National Treasury) and the Minister, through the Department, should explore alternative funding and financing resources to support the growth and expansion of the SEEs.

For the past financial years, the Committee has raised the significant transformative role that SEE play to create work opportunities for the physical disabled community.
The Committee reiterates that the Minister, working closely with the Ministers of Finance, and of Trade, Industry and Competition, and of Higher Education, Training, Science and Innovation including the Minister of Small Business Development; should formulate policy, funding and financing action plans to ensure that business operations of the Supported Employment Enterprises (SEEs) are sustainable.

The action plans should be submitted to the Committee by the end of 2023 financial year.

ii.
ii.

Over the 2023 medium term budget process, the Minister should engage the Minister of Finance to consider additional resource allocation to scale-up spending in labour market intervention programmes to address unemployment, poverty and inequality.

iii.

It should be recognised that labour market intervention programmes cannot be solely placed in the public sector.
Government should work together with the private sector, and post-secondary institutions to identify how to leverage labour and product markets.

The Committee underscored the need for the Department to scale up the coordination of the employment programme.

It would require the Department to co- ordinate the implementation of the employment programme created through the development programmes such as the Jobs Fund.
Over the 2023 medium term, the Minister through the Department should consider establishing a policy, monitoring, 13 111 evaluation and reporting unit to coordinate and provide strategic management of employment creation programmes across government and the private sector.

Report to be considered.

14 112