Strategic focus of Ministry of Economic Development

1
Strategic focus of Ministry of Economic
Development

• Presentation to Portfolio Committee of Economic
  Development
• 19 June 2009

2
Origins of Economic Development Ministry

• New Ministry of Economic Development was
  established by President Zuma on 10th May 2009,
  as part of a reconfigured Cabinet.
• In motivating the new Cabinet structure, the
  President stated that Cabinet has been
  reorganised to achieve better alignment between
  the structure, our electoral mandate and the
  developmental challenges that need to receive
  immediate attention from government
• In line with this, the President announced the
  Economic Development Department has been
  established to focus on economic policy making.

3
Mission of Economic Development Ministry

• In the past, economic policy was made in many
  different sites within the state, sometimes
  unevenly, sometimes at cross purposes
• The call for policy coherence requires one place
  where overarching economic policies are developed
  and co-ordinated, and aligned with the electoral
  mandate of government
• Government is reorganising its economic functions
  to pursue the mandate of realising an economic
  growth path which puts the creation of decent
  work at the centre of economic policy

4
An approach to economic development

• Employment is not the residual outcome of other
  policies but the overarching goal of economic
  policies
• Decent work refers to both the number of jobs as
  well as the quality of the jobs
• To achieve development outcomes, the
  labour-absorption rate, composition, and
  sustainability of the growth path are as
  important as the quantum of growth
• A developmental state plays a key role in
  achieving these outcomes
• The focus of economic policies, as well as their
  outcomes, are therefore directed at equity, the
  reduction of inequalities, decent work, and the
  achievement of balanced, and broad-based
  industrialisation. This requires addressing
  structural economic imbalances

5
Challenges and Opportunities

• The context in which policy is made is very
  different compared to 12 months ago
• A new political mandate endorsed by the
  electorate
• The global economic crisis and the emergence of
  new economic approaches internationally that go
  beyond old orthodoxies
• A domestic recession
• A social pact on responding to the global
  crisis through the Framework agreement between
  government, business, labour and community
  adopted in February 2009
• We confront the reality of serious threats to our
  economy, but also the opportunity and urgent
  necessity, of moving onto an employment-generating
  decent work growth path.

6
Governments electoral mandate

• Electoral mandate identifies 5 priorities, all of
  which have
• linkages to the challenges of economic
  development
• Transformation of the economy to create decent
  work and sustainable livelihoods
• Implementation of a comprehensive rural
  development strategy, agrarian reform, and
  measures to ensure food security
• The provision of universal, affordable education,
  which empowers our people and promotes
  development
• The creation of a national health care system,
  which promotes a healthy nation which is able to
  effectively participate in the developing our
  society
• A comprehensive strategy to fight crime and
  corruption, to secure safe and cohesive
  communities, and make our public sector a
  powerful vehicle for delivery and clean
  governance.

7
Global economic Crisis

• The challenge is to implement this mandate in the
  context of a global and domestic economic crisis
• Recession in many developed economies and a major
  downturn in most developing countries
• Triggered by gross imbalances and inequities in
  the global economic system, the impact of the
  financialisation of economies, ineffectual
  regulation in several of the major economies and
  poor business practices (including excessive and
  inappropriate executive pay schemes)
• While the crisis first appeared in the financial
  sector, it is in fact a deep real economy and
  jobs crisis, which threatens to severely damage
  economies in the developed and developing world.

8
Real economy and employment crisis for SA

• The crisis threatens South Africas industrial
  base
• Worse quarterly economic performance in 25 years
• Manufacturing production fell by 21,6 in April
  2009
• Most industrial subsectors experienced output
  declines, particularly in autos and metals
  machinery
• Labour-intensive sectors (wood products, leather
  and clothing textiles) also declined
• Feb09 manufacturing capacity utilisation
  dropped from 84,6 to 78,6
• Mining production decreased by 12.8 in March
  2009. The decline was driven by Platinum
  (-17,1) and diamonds (-52,2).

9
Real economy and employment crisis for SA

• Increased Insolvencies
• Company liquidations in Q1 2009 increased by
  46,7 (from 687 to 1008)
• Increased job losses
• Quarterly Labour Force Survey indicated that a
  total of 208 000 South Africans lost their jobs
  between Q1 2008 and Q1 2009
• A total of 483 000 new claims were approved by
  the UIF due to unemployment in the 12 months
  ending March09, an increase of 21 year-on-year.
• UIF payments increased by R800m, from R2bn to
  R2,8bn, a rise of 40.
• The Current account (BoP) deficit
• Remained unsustainably high at R170bn 7,4 of
  GDP in 2008 compared to 1,8 in 1998.

10
Framework for response to crisis

• On February 19 2009, government and social
  partners in Nedlac agreed on a Framework for
  SAs response to the international crisis
• The framework outlines bold, immediate and urgent
  interventions to ensure that the South African
  economy and society are buffered against the full
  impact of the international economic crisis.
  These include
• Maintaining high levels of public investment in
  infrastructure to support private and public job
  preservation and creation
• Deploying macroeconomic policies in combination
  and aggressively, where required, to address the
  economic crisis

11
Framework for response to crisis

• Utilising industrial and trade policies to
  rebuild local industrial capacity and avoid the
  erosion of the country's' manufacturing base
• Utilising a combination of measures on public
  employment, private sector initiatives, including
  training, to avoid massive job loses
• Scaling up social interventions to address the
  jobs challenge and ensure social protection

12
A bold economic vision

• The political mandate and the framework agreement
  together constitute a bold economic vision, which
  aims to put our economy on a new growth path and
  to inspire and mobilise society.
• This vision is being translated into a concrete
  programme which combines short term measures with
  longer term structural interventions to transform
  our economy. These will link
• Immediate measures aimed to protect our economy
  and society in the face of the economic crisis.
  Government, together with our social partners,
  are making progress in implementation of the
  framework agreement with
• Transformative measures to deal with structural
  economic problems. Detailed proposals will be
  developed to deal with these issues, and ensure
  that policies reinforce, rather than contradict
  each other.

13
Strategic Focus of Economic Development Dept (EDD)

• Promoting economic policy development,
  coordination and coherence (alignment)
• in government nationally
• through provincial, rural and local economic
  development
• through the mandates and work of state entities
  responsible for economic regulation and financing
  economic development
• in interactions with business and organised
  labour to develop social consensus on economic
  and development challenges, policies and
  responses
• in our interface with the global economy

14
To achieve this, requires

• Promoting a new approach of integration instead
  of silo based departmental programmes
• Avoiding ad-hoc policy development in many
  different sites within the state policy
  coherence the new focus
• Building coherence in policy through linking
  macro, sector and micro policies
• Creating a Department which assumes new policy
  functions, as well as transferring certain
  existing functions from other Departments
• This is achieved in the context of an evolving
  model of co-operative and effective governance,
  which ensures both horizontal co-operation and
  integration of policy across national
  institutions of government and state, as well as
  vertical co-operation between different spheres
  of government, at national provincial and local
  levels.

15
What type of Department will EDD be?

• A lean, effective Department with a high-level
  policy and technical capacity
• A broad cross-cutting focus across the economy,
  in areas covered not by one, but a range of
  government Departments.
• Strong focus on social dialogue on economic
  development to achieve national cohesion and tap
  into resources of key economic players

16
Processes

• Moving forward, the Ministry has a number of
  short-term priorities
• Establishment of the Department
• Elaboration of a strategic plan and negotiation
  of the 2009/10 and MTEF Budget processes
• Implementation of a short term work programme
  linked to SONA priorities

17
Establishment of the Department

• Formal and legal establishment of the Economic
  Development Department by way of Presidential
  Proclamation the creation of a Budget Vote for
  EDD, and allocation of resources.
• Organisational establishment of the Department
  requires the elaboration of an organisational
  organogram, and the population of the
  organisational structures with appropriate
  people.
• The fulfilment of these legal and organisation
  requirements lays the basis for the effective
  implementation of the Departments mandate.

18
Establishment of the Department

• It is envisaged that the initial phase of
  preparing for the Departments establishment will
  be completed in the next 3 months. This will lay
  the basis for the allocation of an interim budget
  and recruitment of sufficient personnel to staff
  the Departments structures in the establishment
  phase
• To facilitate this, interim arrangements have
  been put in place, with the assistance of the DTI
  and Treasury. We are proceeding with the
  establishment of the Department as a matter of
  urgency

19
Budget process Strategic Plan

• Once the legal requirements are fulfilled, a
  budget vote will be created for EDD.
• A 6 month budget covering October 09 to March
  2010 will be incorporated into the October
  adjustments
• A Strategic Plan and 2010/11 budget will be
  finalised by end September. It is recognised that
  the deadlines which are followed by established
  Departments must be applied more flexibly for a
  new Department such as EDD
• This Strategic Plan and budget is intended to be
  presented to the Portfolio Committee in September.

20
Short term work programme

• Contribute to taking forward economic and
  employment commitments in State of the Nation
  address, and promote a process of social dialogue
  to mobilise support in society
• Facilitate, with other Departments,
  implementation of measures to take forward the
  Framework Agreement
• Continue process of work of alignment with other
  Departments, and effective co-ordination of the
  economic and employment cluster
• Begin a policy engagement to elaborate a national
  framework on economic development and decent
  work.

21
Conclusion

• The new Department is part of a new configuration
  of government that centres on the four
  inter-connected areas of policy-development,
  planning, effective implementation and continuous
  monitoring and evaluation
• Government will be driven by identified
  priorities and will focus effort and energy on
  the realisation of the priorities
• The purpose of the new structure of government
  and the identification of priorities are to
  ensure realisation of the political mandate and
  delivery of quality governance services to the
  population