Presentation to the Standing Committee on Appropriations Date : 11 August 2011 Presented by: Director-General Mr Lionel October

Introduction The information presented is based on the 2010/11 Audited Annual Financial Statements The Auditor General SA expressed an unqualified audit opinion on the 201/11 Annual Financial Statements

Overview of expenditure The budget allocation for the 2010/11 financial year was R6,194,208 million as compared to R 6,402,076 million in 2009/10. The expenditure for 2010/11 was R5,796,741 million, i.e. 93,6% of the budget, and in 2009/10, it stood at 97,6 %, i.e. R 6,237,955 million. This spending pattern should be considered in the context of the departmental cost drivers, comprising mainly incentive schemes and transfer payments. Approximately 58% of the expenditure consisted of incentives and 22% of transfers to the departmental agencies. The remaining funds were utilised for operational expenses. The under spending was mainly in the division responsible for Incentive Administration, viz, The Enterprise Organisation division, by 4.09%, which is mainly attributable to the Automotive Investment Scheme (AIS).

Budget vs. expenditure for the 2010/11 financial year – per programme Unspent as % of final appropriation Final Appropriation Actual Expenditure Variance Expenditure as % of final appropriation R’000 Administration 443,251 435,815 7,436 93.3% 0.12% International Trade and Economic Development 125,088 106,949 18,139 87.0% 0.29% Empowerment & Enterprise Development 814,034 801,173 12,861 99.6% 0.21% Industrial Development 1,156,961 1,142,033 14,928 94.38% 0.24% Consumer and Corporate Regulation 195,531 145,021 50,510 96.13% 0.82% The Enterprise Organisation 3,046,652 2,792,994 253,658 82.37% 4.09% Trade and Investment South Africa 353,476 328,582 24,894 99.94% 0.40% Communication & Marketing 59,215 44,174 15,041 100% Total 6,194,208 5,796,741 397,467 6.42%

Budget vs. expenditure for the 2010/11 financial year – economic classification Unspent as % of final appropriation Final Appropriation Actual Expenditure Variance Expenditure as % of final appropriation R’000 Compensation of employees 551,748 514,935 36,813 93.3% 0.59% Goods and services 545,826 474,830 70,996 87.0% 1.15% Interest and rent on land 276 275 1 99.6% 0% Departmental agencies and accounts 872,762 838,980 33,782 96.1% 0.55% Universities & technikons 16,298 14,793 1,505 90.8% 0.02% Foreign governments and international organisations 39,084 36,642 2,442 93.8% 0.04% Public corporations and private enterprises 4,105,170 3,859,334 245,836 94.0% 3.97% Non-profit institutions 37,800 - 100% Households 2,754 1,657 1,097 60.2% Payment for capital assets 20,183 15,189 4,994 75.26% 0.08% Payment for financial assets 2,307 2,306 99.9% Total 6,194,208 5,796,741 397,467 6.42%

Budget vs. expenditure for the 2010/11 financial year – economic classification Unspent as % of final appropriation Final Appropriation Actual Expenditure Variance Expenditure as % of final appropriation R’000 Compensation of Employees 551,748 514,935 36,813 93.3% 0.59% Goods & Services 545,826 474,830 70,996 87.0% 1.15% Interest and rent on land 276 275 1 99.6% 0% Transfers to: 5,073,868 4,789,206 284,662 94.38% 4.60% Departmental agencies 872,762 838,980 33,782 96.13% 0.55% Manufacturing incentives, including: 1,389,176 1,144,261 244,915 82.37% 3.95% **Automotive Production & Development Programme 538,000 294,252 243,748 54.69% 3.94% Programme payments 1,216,984 1,216,225 759 99.94% 0.01% Infrastructure incentives 1,224,374 1,224,337 37 100% Export Incentives 274,636 274,511 125 99.95% Other 95,936 90,892 5,044 94.74% 0.08% Payments for capital assets 20,183 15,189 4,994 75.26% Payment for financial assets 2,307 2,306 0%% Total 6,194,208 5,796,741 397,467 6.42% 6.42 ** Amounts in respect of AIS are already included under the manufacturing incentives

Reasons for under spending Item Amount unspent Unspent as % of final appropriation Reasons R’000 Automotive Production & Development Programme 243,748 3.94% The Automotive Investment Scheme (AIS) was launched in May 2010. The AIS Adjudication Committee was established in December 2010 and the first meeting was held on 6 December 2010. 53 Projects have been approved by the Adjudication Committee with the total concession amount of R1,861 billion as on 31 March 2011. R293,918 million was paid during the first quarter of the new financial year. Goods & Services 70,996 1.15% Outstanding foreign mission accounts from DIRCO. The account for March 2011 was only received on 19 May 2011 and charged against the budget for 2011/12 Postponement of the SACU Tripartite Summit from February to June 2011 Payments for funds earmarked for variation orders for a building currently occupied by CIPC could not materialise pending their move to new premises Cost savings initiatives on venues and facilities as well as on travel contributed to the saving Compensation of Employees 36,813 0.59% Vacancies Departmental agencies 33,782 0.55% Delays in the establishment of the National Consumer Commission and the Companies and Intellectual Property Commission.

Vacancy report Baseline vacancies as at 01.04.11 Baseline vacancy reduction Baseline vacancies as at 01.04.11 253 Baseline vacancy rate as at 01.04.2011 18.2% Baseline vacancies as at 30.06.2011 184 Baseline vacancy rate as at 30.6.2011 13.2% Recruitment efforts 2010/11 Quarter 4 (1.1.11 – 31.3.11) Quarters 1 - 4 2011/12 Quarter 1 (1.4.11 – 30.6.11) Posts filled through appointments 19 138 42 Posts filled through promotions 29 97 27 Total recruitment efforts * 48 235 69 * Excludes posts additional to the establishment

Interventions to ensure reduction of vacancy rate: Clean up of establishment to identify redundant posts to be redesigned in order to create posts in line with new priorities, eg IPAP2. Resulted in old untriggered vacancies being abolished and new vacancies being created and triggered for filling. Directives were issued in terms of turn around times for advertising and filling of positions to be concluded in a three month period. Non compliance resulting in posts being abolished or redesigned for new posts needed. Improved monitoring and reporting on vacancies through focus session held to review progress made per position. Reporting done monthly to Chief Operating Officers, Deputy Director-Generals and Director-General. Improvement of recruitment turn around times through: Providing additional capacity to Recruitment Office Outsourcing of recruitment processes

Summary of key achievements for the 2010/11 Financial Year

Key Achievements for 2010/11 FY Industrial Development: Industrial financing Launched the 12i Tax allowance for investment in new manufacturing assets and Training of staff - 2 applications received Automotive Investment Scheme (AIS) launched and finalised leading to investment commitments of R13bn from assemblers and component suppliers, supporting 24,000 jobs in the sector. Large increases in levels of volumes and localisation Rollout of the Clothing Textile Competitive Programme (CTCP) and Production Incentive (PI) with 106 and 94 companies benefiting under the CTCP and PI respectively R40 million investments made and 950 jobs created. R42 million new investment commitments approved linked to 806 jobs. 3,400 are currently being trained under the Monyetla II Programme – 70% guaranteed employment by BPO consortium Improved the performance of incentive programmes by submitting amended guidelines for BPS & EIP

Key Achievements for 2010/11 FY Industrial Development Procurement Agreement by National Treasury, Economic Development Department and the dti to process amendments to PPPFA regulations to designate sectors for local production and alignment with B-BBEE codes. Amendments await promulgation by National Treasury the dti has developed a sector designation methodology and is compiling necessary research to designate a range of sectors Trade Early warning system developed by South African Bureau of Standards (SABS) identifying technical barriers to trade for exporters launched and distributed to exporters on a monthly basis Africa Regional Development Developed concept note on areas of cooperation towards a SACU regional industrial policy. This was warmly received by SACU member states. Engagements are currently underway to finalise joint projects Investment announcements of R13 billion from OEMs amounted to R13 demonstrate massive support for the new government programme and for South Africa as an automotive manufacturing destination R9 billion investment commitments by Ford, General Motors, Volkswagen (VW) and the Bavarian Motor Works (BMW) A further R4 billion in assembly has been announced in the automotives components industry; which will support over 4 000 direct jobs in vehicle assembly and a further 20 000 direct jobs in components The VWSA announcement means an injection of R560m into its operations; which may double production from 60 000 to 120 000 units in 2010. Local content on Polo and Polo Vivo models is currently 40% and VWSA has committed to reach 70% local content by the end of 2010

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