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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. Thank you