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Speech by Minister Jeff Radebe during SONA debate in National Assembly

18 June 2014

Honourable Speaker of the National Assembly
His Excellency President Jacob Zuma
Honourable Deputy President Cyril Ramaphosa
Honourable Members
Distinguished Guests

We have now entered the second phase of our democratic transition. Our focus during this phase will be on placing the economy on a qualitatively different path that eliminates poverty and substantially reduces unemployment, creates sustainable livelihoods and reduces inequality. This is the basis of our programme of radical socio-economic transformation that the President spoke about.

Progress and challenges since 1994

The Twenty Year Review comprehensively identified the substantial progress that has been made since 1994 as well as the challenges that still need to be overcome. It showed unequivocally that South Africa is a much better place in which to live than it was in 1994. However, despite the strides made, the challenges still facing our country are immense. Our economy is still too reliant on exporting mineral resources, is still over-concentrated in a relatively few large companies, and is still largely owned and controlled by a racial minority. As indicated by the President, the National Development Plan provides the blueprint for what we need to do to address these challenges and to achieve our socio-economic transformation objectives.

Global and local economic context

We have to address these challenges in a context in which the global economic recovery from the 2008 financial crisis is still tentative and subject to a number of risks, including geo-political risks, deflation in developed economies, economic performance and on-going weakness in the banking sector of the Euro-zone, and the effects of tapering of quantitative easing in the USA. Developing economies are starting to recover but growth in emerging markets, while relatively better, has slowed. These global conditions present both risks and opportunities for our country. The slowing of the Chinese economy in particular poses risks for commodity prices and South Africa`s commodity exports. On the other hand, the recovery of developed markets and the growth momentum of the African continent present opportunities for growth in the agriculture, manufacturing and services sectors of our economy.

South Africa`s relatively low economic growth rate since 2008, coupled with weak export performance, has weakened fiscal balances and resulted in a growing current account imbalance. By 2013, approximately R700 billion of foreign savings were required to fund the current account deficit. This dependence on foreign savings exposes our economy to significant financial sector risks and increases our exposure to external shocks.

The 2014 first quarter GDP data from Statistics South Africa indicates that our economy contracted in annualised terms by minus 0.6% over the previous quarter, partly as a result of the protracted strike in the platinum mining sector. Inflation is also rising, raising the prospect of a tightening of monetary policy with potentially negative consequences for economic recovery, and the recent rating downgrades will raise our cost of borrowing.

Addressing the problems in the mining sector It is in this context that the President announced important measures to turn the situation around, particularly in the mining sector. These include a process led by the Deputy President to promote social dialogue around resolving our economic challenges; the implementation of the Framework Agreement for a Sustainable Mining Industry which will now be led by our President; and the establishment of an Inter-Ministerial Committee on the Revitalisation of Distressed Mining Communities which the President has asked me to lead.

Working together with mining companies and organised labour, we need to urgently address the intolerable situation where our mines which produce so much wealth are surrounded by human settlements characterised by such squalor and poverty. The relevant municipalities to ensure the rule of law, peace and community stability, improve the delivery of water and sanitation services, ensure regular removal of refuse, repair roads and provide improved lighting in informal settlements in mining areas. In addition, a range of projects are currently being planned and implemented between government and the mining houses to provide more than 30 000 housing units in mining towns. For example, 11 low-cost housing projects are currently planned or underway in the Bojanala Platinum Complex in North West, to provide more than 10 000 units in the Rustenburg Local Municipality, Madibeng Local Municipality and Moses Kotane Local Municipality. Our government is also engaging with the mining houses to ensure broader transformation of the mining sector in line with the commitments identified in the Mining Charter. As part of this process, a comprehensive study aimed at transforming the migrant labour system is under way.

Addressing the causes of workplace conflict The President highlighted that on-going workplace conflict such as we have experienced in the mining sector is impacting negatively on our ability to grow our economy. Workplace conflict and poor industrial relations result from inadequate progress in transforming the apartheid workplace, wage inequality, a lack of pay progression and career pathing for ordinary workers, pressures on incomes of workers due to apartheid settlement patterns, poor communication between management and workers and discrimination based on race. Our government will continue to support change in order to address these root causes of workplace conflict as well as to bolster respect for labour law procedures and to eliminate violence during strike action.

Transforming the economy

In addition to addressing workplace conflict, the President identified other key measures that we will be focusing on over the next five years to jump-start and radically transform the economy, in line with the NDP.

Addressing the electricity constraint to growth We will be addressing the shortage of electricity through the rapid development of a mix of energy sources, without excessive tariff hikes that would harm economic growth and the poor, and in a financially sustainable manner. In order to supplement Eskom`s new electricity generation projects, we will be exploring the potential for base-load Independent Power Producer contributions, building on the successful Independent Power Producer programme for renewable energy.

Building investor confidence

The President indicated that he would be engaging with Business to build investor confidence and to identify and remove obstacles to investment.

Our government will streamline and improve the efficiency of regulatory processes, in areas such as building licences, environmental impact assessments, company registration, tax compliance, work permits for scarce skills, mining licences, water licences and access to municipal infrastructure services.

Investing in infrastructure

We will be continuing to invest in economic, social, and information and communications infrastructure, as spelt out in the National Infrastructure Plan. Infrastructure projects will be used to crowd-in productive investment, through local procurement and by providing affordable quality services to investors. They will also provide employment and other opportunities for women and youth and promote BBBEE.

Diversifying the economy

We will diversify the economy to promote innovation, growth and employment from new opportunities such as the green economy, exports of goods and services to growing African markets and shale and offshore oil and gas.

Developing the productive sectors of the economy Through our industrialisation programme, local procurement and other measures, we will develop and promote job-creating sectors of the economy such as mining, manufacturing, agriculture and tourism. We will increase support for smallholder farmers through developing cooperatives in marketing and enter formal value chains and take advantage of economies of scale. We will also increase support for exploration, development and production in mining and address obstacles to the use of our minerals in manufacturing, including incentivising beneficiation through mining licensing.

Increasing opportunities for young people Young people make up the majority of the unemployed and government will focus on increasing educational, training and work opportunities for them, through on-going improvements to the education and training system and through internships and employment tax incentives, as well as through encouraging and supporting young people to start businesses themselves and become job creators.

Small business development

One of the features of our radical economic transformation programme is the creation of a new Ministry for small business development. Small business must become the major contributor to job creation and the small business sector will play a key role in reducing concentration in the economy and breaking the stranglehold of monopolies.

Increasing competition in the economy

We will also promote greater competition in the economy through strengthening the Competition Act to prevent monopoly pricing on intermediate inputs such as steel and heavy chemicals and wage goods, in order to make local manufacturing more competitive and to support infrastructure investment. The Competition Authorities will be further developed to act against cartels and ensure public interests are adequately protected in mergers and acquisitions.

Improving the implementation of BBBEE and employment equity One of the focus areas of our engagement with Business will be improving the implementation of the amended Broad-based Black Economic Empowerment Act and the Employment Equity Act in order to transform the ownership, management and control of the economy. Our emphasis will be on creating black industrialists in the productive sectors of the economy and developing a patriotic black bourgeoisie.

Improving access to finance

We will be redirecting development finance institutions to provide increased access to affordable lending that supports diversification of the economy, BBBEE, and investment in smaller businesses in the productive sectors of the economy.

Funding the NDP

All of these measures are aimed at supporting an increase in our inclusive economic growth rate to over 5% by 2019, which will in turn generate the resources to fund expanded access to services and improve the quality of life of our people on a sustainable basis. While government will continue with its current counter-cyclical stance within a sustainable fiscal framework over the next five years, our current relatively low growth rate constrains our tax revenues and limits our borrowing capacity.

Because resources are scarce, we must identify the top priorities to enable acceleration of a better life for all, focusing on the main challenges of poverty, unemployment and inequality, and ensure that our plans are aligned to these priorities. As emphasised in the NDP, we must also make better use of our limited resources by improving the efficiency, effectiveness and quality of implementation of our programmes.

Improving the performance of government

In this regard, the Department of Performance Monitoring and Evaluation in the Presidency and the National Treasury are jointly carrying out expenditure reviews in order to identify inefficiencies and poorly performing programmes, so that resources can be redirected to the priorities. The Presidency is also working together with departments to carry out evaluations of major government programmes, with the aim of improving their efficiency, effectiveness and impact. Capacity is being created in the Presidency to carry out thorough socio-economic impact assessments of both new and existing legislation and regulations, in order to ensure alignment with the NDP and reduce the risk of unintended consequences.

The NDP stresses that building the capacitprerequisite for successful implementation of government policies. Over the next five years we will therefore be implementing measures to strengthen coordination, accountability and performance management in government. We will also improve recruitment and skills development, strengthen procurement and supply chain management and put in place measures to reduce the risk of corruption in procurement.

Honourable Members, over the next five years we will be focusing on forging a disciplined, people-centred and professional public service; empowering citizens to play a greater role in development; and building an ethical public service. In order to create stability in top management and in the political-administrative interface, an administrative head of the public service will be put in place in the Presidency.

We will be introducing an enhanced focus on implementation-level planning, problem-solving, and continuous improvement. For example, we are working with the Malaysian Government to implement its Big Fast Results methodology, which involves bringing key stakeholders together in a "laboratory` for intensive planning at a practical and detailed level, setting targets which are made public, rigorous monitoring of progress with implementation and making the results public. Using this methodology, the Government of Malaysia was able to register impressive results within a short period.

We will be starting with two pilot projects, one in the economic sector, led by the Minister of Environmental Affairs, and one in the health sector, led by the Minister of Health. The economic sector laboratory will focus on the ocean economy. Our analysis indicates that there is massive untapped economic potential related to our oceans, in the areas of marine transport and manufacturing, offshore oil and gas exploration, aquaculture and marine protection services and governance. It is estimated that unlocking the economic potential of our oceans can contribute up to R177 billion to GDP by 2033 compared to R54 billion in 2010. This sector has the potential to employ 1 million people by 2033 compared with 316 000 in 2010. The health sector laboratory will focus on bringing about sustained improvements in the quality of care provided in Primary Health Care Clinics. The laboratory will be undertaken in collaboration with provinces, districts and clinic managers with the aim of producing a detailed plan for improving service delivery in public sector clinics in all provinces, including indicators, targets and timeframes; and a guideline for clinic managers to develop and sustain these improvements. This is one of the many reforms we are implementing as part of the National Health Insurance initiative.

National departments responsible for concurrent functions will be required to play a stronger monitoring and support role with regard to the quality of services provided at provincial level. As indicated by the President, national and provincial departments of local government will improve their monitoring and support roles at municipal level.

There will be a focus on ensuring that municipalities provide and properly maintain an adequate core set of basic services including water, sanitation, electricity, municipal roads, refuse removal and traffic lights. Providing low-cost and affordable housing opportunities closer to work opportunities, upgrading of informal settlements, and improving public transport will also be priority areas.

Implementing the NDP

Government has been implementing the NDP since its adoption in September 2012. The Annual Performance Plans of national departments for the 2014/2015 financial year, which were submitted to this House recently, reflect an alignment to the NDP.

The Presidency has been working with national departments and the provincial and local spheres of government to develop the Medium Term Strategic Framework or MTSF for 2014 to 2019, as the first detailed five year implementation plan for the NDP. To emphasise how serious government is about implementing the NDP, and to ensure that the work of all departments ibeen amended to require departments to submit their draft strategic plans and annual performance plans to the Presidency. We will be checking the departments` plans to ensure that they reflect their relevant responsibilities and targets for implementing the NDP, as set out in the MTSF. The MTSF was approved in principle at the recent Cabinet Lekgotla and we are currently refining it before making it public in the next few weeks.

The role of Parliament in monitoring implementation of the NDP As Honourable Members are aware, Departments are required to submit their strategic and annual performance plans to Parliament and to account to Parliament regarding their performance, which is audited by the Auditor General. Parliament therefore has a critical oversight role to ensure departments` plans and actions move us towards the vision of the NDP. I would like to commit the Presidency to collaborating with Parliament in this regard by sharing our planning, monitoring and evaluation information.

In conclusion, the NDP is not just a plan for government, but for the whole country. It is a peoples` plan which has been adopted by the majority of our people and stakeholders. We are therefore calling on all South Africans to rally behind the implementation of the plan, including labour, business and civil society.

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