Transfer of legislation and agencies’ strategic plans Presentation to the Portfolio Committee 1 June 2010

Presentation outline Establishment of EDD Transfer of agencies to EDD Tabling of agency strategic plans EDD strategic oversight approach Engagements with agencies to date Development Finance Institutions Economic Regulatory Bodies Actions flowing out of engagements Oversight action plan Concluding remarks 2

Establishment of EDD EDD established following the announcement of the new Cabinet President Zuma on 10 May 2009: “A new department of Economic Development has been established to focus on economic policy-making.” President Zuma SONA 3 June 2009: “The creation of decent work will be at the centre of our economic policies” President Zuma in Budget Vote speech 24 June 2009: “The Economic Development portfolio will have a strong domestic focus and will address, amongst others, matters of macro and micro-economic development planning.” 3

Transfer of agencies to EDD Realignment of responsibilities in government and between departments Ministers of Economic Development and of Trade and Industry identified six agencies to be transferred Development Finance Institutions: IDC, Khula, samaf Economic Regulatory Bodies: Competition Commission, Competition Tribunal and International Trade Administration Commission On 10 December 2009 Minister for the Public Service and Administration determined that the oversight functions relating to certain entities should be transferred from the dti to EDD Transfer made subject to the transfer of the affected legal instruments 4

Transfer of legal instruments Transfer of legislation effected by means of a proclamation in terms of section 97 of the Constitution Proclamation transfers administration of legislation and the powers and functions entrusted by the legislation from one member of Cabinet to another President Zuma signed proclamations transferring the following legislation from the Minister of Trade and Industry to the Minister of Economic Development – Industrial Development Corporation Act, 1940 (18 February) Competition Act, 1998 (18 February) International Trade Administration Act, 2002, excluding item 2 of Schedule 2 (29 May) Khula and SAMAF do not have founding legislation therefore no proclamation is required 5

Tabling of agency strategic plans Money Bills Amendment Procedure Act required tabling of strategic plans of all departments and their entities by March 2010 Requested Speaker to permit postponement of tabling of entity strategic plans Requested time to engage agencies on their operations and plans Two agencies requested postponement to allow Board processes to be completed This letter was referred to the Economic Development Portfolio Committee by the Speaker High-level evaluation of the draft strategic plans has commenced and initial engagements held 6

EDD strategic oversight approach Fact finding engagements – to inform agencies’ 2010/11 to 2012/13 strategic plans Formal reviews – to inform agencies’ 2011/12 to 2013/14 strategic plans Discussions on new strategic direction – to inform agencies’ operations and strategic plans 7

EDD strategic oversight approach High-level briefings on operations Discussion on government’s strategic priorities and realignment of agencies where appropriate Setting agencies’ key targets Better coordination between agencies Operations and effectiveness review Organisational structure review Financial performance review Governance review 8

Engagements with agencies to date Fact finding engagements and in some cases also strategic direction: IDC (6 meetings) Khula (1 meeting) samaf (1 meeting) Competition Commission (6 meetings) Competition Tribunal (2 meetings) ITAC (2 meetings) 9

Development Finance Institutions Economic Development Department (EDD) Industrial Development Corporation (IDC) Khula Enterprise Finance (Khula) South African Micro-Finance Apex Fund (SAMAF) Oversight from 1 April 2010 through the Investment for Economic Development sub-programme 10

Industrial Development Corporation (IDC) IDC is a state-owned development finance institution, established in 1940 by an Act of Parliament (Industrial Development Corporation Act, 1940 (Act No. 22 of 1940)) IDC was established to spearhead the development of domestic industrial capacity, especially in light of the shortages of manufactured goods experienced as a result of the disruption of trade between Europe and South Africa during the Second World War Over the 70 years of the IDC’s existence, the Corporation’s role and focus have changed over time 11

Khula Enterprise Finance Ltd Khula was established in 1996 following policy framework in the White Paper on National Strategy for SMME support (Notice 213 of 1995) Khula was established in terms of the Companies Act, as a public company to address the financing needs of small business Khula operates as a wholesale Development Finance Institution that works through a network of partners that supplies funding to Small and Medium Enterprises (SMEs) 12

South African Micro-Finance Apex Fund (samaf) samaf was established as a trading entity on 1 April 2006 samaf does not lend directly but through networks of micro-lenders and development finance cooperatives The mandate of samaf is to - Regulate certain micro-finance intermediaries (MFIs) Provide financing for MFIs Build the capacity of MFIs 13

DFIs key facts IDC Khula samaf Transfers from EDD R69.7m R82.1m Staff R69.7m R82.1m Staff 700 100 61 Offices 13 12 10 14

EDD oversight criteria for DFIs Alignment to government’s strategic imperatives including IPAP and new Growth Path Efficiency Cost (reducing ratio of operational costs to disbursements) Turnaround times Effectiveness Do they reach target enterprises Jobs impact in the economy Industrialisation New enterprise development Governance Board effectiveness Financial controls 15

Some issues raised in initial engagements IDC Review loan and equity portfolio to ensure it complies with strategic criteria Improve impact of lending and equity on jobs and industrialisation Improve uptake of distress funding Improve available funding Khula Reach more small businesses and improve impact of financial support Address ratio of overhead costs to lending Consider cost-effectiveness of establishment of direct lending infrastructure SAMAF Reach more micro-enterprises and improve impact of financial support 16

Economic Regulatory Bodies Economic Development Department (EDD) Competition Commission Competition Tribunal International Trade Administration Commission (ITAC) Oversight from 1 April 2010 through the Competitiveness and Trade for Decent Work sub-programme 17

Competition Commission The Competition Commission is mandated by the Competition Act 89 of 1998 to: Prosecute anti-competitive conduct Control mergers to prevent market concentration Advocate for pro-competitive legislation, policy and behaviour 18

Competition Tribunal Established on 1 September 1999 in terms of the Competition Act 89 of 1998 The Tribunal is an adjudicative body and hears referrals from the Competition Commission, consumers, firms and trade unions Hears cases of mergers and prohibited practices (cartels, anti-competitive practices, abuse of dominance) 19

ITAC ITAC established in terms of the International Trade Administration Act, 2002 ITAC’s mandate is to establish an efficient and effective system for the administration of international trade ITAC advises the Minister on policy, regulations and investigations on : import tariffs trade remedies (anti-dumping duties, countervailing duties and safeguards) import and export control measures It administers industry rebates and drawbacks and permits MIDP, TCIDP duty credits/drawbacks and verifications Import and export permits It conducts inspections iro certain functions 20

ERBs key facts Competition Commission Competition Tribunal ITAC Transfers from EDD R88.8m R13.6m R64.3m Staff 138 (including 11 graduate trainees) 14 132 Offices 1 21

EDD oversight criteria for ERBs Alignment to government’s strategic imperatives including IPAP and new Growth Path Efficiency Cost (operational costs per process completed) Turnaround times (rate of completion of processes) Effectiveness To what extent does the agency’s work benefit SA consumers and companies Economic impact of the agency’s work 22

Some issues raised in initial engagements Competition Commission Support prioritising of investigations Procedures to reduce time delays Competition Tribunal Improve the time taken to complete cases ITAC Benchmark current performance iro administrative actions and reduce time taken to conclude investigations Strengthen investigative capacity Greater focus to trade remedies 23

Actions flowing out of engagements Develop a new baseline of performance, establishing the time taken to complete decision-making Link agency priorities with government’s strategic priorities, particularly employment and IPAP Improve the funding levels available for industrial support Avoid duplication between agencies and improve coordination Review of Industrial Finance options Task team to investigate ways of shortening of the Competition litigation process and limiting frivolous and vexatious litigation EDD/dti Forum on Trade to be established 24

Oversight action plan Ensuring better coordination between agencies 1st quarter High-level briefings on operations Discussion on government’s strategic priorities and realignment of agencies where appropriate Setting agencies’ key targets Tabling of agency revised strategic plans 2nd quarter Operations and effectiveness review Organisational structure review Financial performance review Governance review 25

Concluding remarks Legal handover of agencies has been completed Engagements between EDD and agencies held In some instances, an initial discussion on operations In others, strategic issues have been raised Complete work to focus on government’s strategic priorities EDD building its capacity to exercise oversight over the agencies EDD will build on positive initial engagements and will develop policy positions that will be shared with the Portfolio Committee Committee requested to evaluate the outcomes and development impact of the work of the agencies 26

Thank you