Transcript of Economic Sectors and Employment cluster briefing presented by Gugile Nkwinti, Minister of Rural Development and Land Reform and Naledi Pandor, Minister of Science and Technology at Imbizo Media Centre, Cape Town, March 2 2010

Panel: Naledi Pandor, Minister of Science and Technology; Ebrahim Patel, Minister of Economic Development; Gugile Nkwinti, Minister of Rural Development and Land Reform; Marthinus van Schalkwyk, Minister of Tourism

Questions and answers

Journalist: I was just taken with the idea of the review of the Land Tenure System and I wondered what you will be looking at. What is wrong with Land Tenure at the moment and what is ineffective about it?

Gugile Nkwinti: The Land Tenure System Reform, I think we have been facing a number of challenges perhaps as land redistribution. Firstly during the first 15 years of our democracy, there was a wave of land reform that was characterised by land restitution through various programmes. There are two main challenges: one is finance and the second one is the capacity of those who receive the land to produce effectively and optimally on the land.

The financial challenge has been worsened by the current problem. We need 82 million hectares transferred - and that is 30% of this land we are talking about - transferred by 2014 and requires R25 billion to achieve and that is not achievable. Yet the question remains that land must be redistributed. We have to look at how best we can reach that balance, because on the one hand you have to restitute these people and on the other hand we have to redistribute with or without that restitution. Now you have many South Africans who do not have land you have very few South Africans and foreigners who own land, it is a recipe for chaos and conflict in the country. We are examining the process, and will engage South Africans on the Land Tenure System.

Journalist: Is it your understanding that you and your Department have the final say on Macro Economic Policy?

Ebrahim Patel: I think it is a very simple answer. Cabinet has the final answers on all these matters.

Journalist: I just want to know with the Sumbandila Satellite, the announcement last week of the Minister that we might be looking in our own rocket launch facilities, whether there has been fallout from the international arena, us being lamped by India and Iran for developing our own facility and how it may have fallen into hands that should not have it.

Naledi Pandor: There hasn't been any fall-out because every country has the right to say we are looking at what we have and whether we should in fact demote all the facilities that we believe may be useful to our further technological advancement and I would be surprised if any country were to challenge South Africa in that regard. We already have nuclear competence in this country and it has never been challenged; it is an acknowledge competence, we work with scientists from countries all over the world so they understand. In fact with Itemba labs we are a first ranked country.

With our nuclear reactor we stand among the most accomplished, so I don't think there will be any call on us before the advent of democracy one of the countries that decided not to have nuclear arms, that decision was taken long ago, the new Government has never gone back on that. In terms of development in the nuclear sector we have competent scientists and we are examining where we take the science and I think we should.

Journalist: Can you give us more details about the companies that have taken up conditional funds from the Independent Development Corporation (IDC) and how far the conditionality goes in terms of capping executive pays. I mean who agreed to that and how much funds have been given out? Also on the Training Lay-off scheme, has it been taken up as much as you hoped or have there been blockages in the system?

Ebrahim Patel: In July last year when we restarted the discussion on the implementation of the framework, the proposal of Training Lay-off were tabled. In August we got in-principle agreement from business, labour, Government and communities to go this route and we identified where we could get the funds. We made an announcement of the agreement in about late September, and most of October we concluded the rules for the fund. In November we opened the pilot project and we identified a couple of sectors who would specifically focus on this. By the end of January we had about 2 200 workers from companies whose application had been approved by the Department of Labour and [it] has gone up a little, we are looking at 2 700 now. Our challenge is to scale that up very significantly beyond the pilot phase and that means reaching large numbers of workers, because even though we have the first sign of economic recovery, due to international recovery, employment recovery lags. We see our big challenge for the period ahead to scale up the training lay off intake.

On the IDC I should distinguish two things as a general arrangement that we now agreed with the business community and organised labour as well as community organisations. Government will be introducing conditionalities to support that it offers to companies that are in distress. Those conditionalities cover four areas.

The first is that there has to be some commitment in respective jobs now, because these would have to be customised to each individual company, in some cases it would be to try to save jobs, in others it may have an opportunity to expand the number of jobs. Secondly it is on seeking to have restraint on executive pay. Third it's to improve localisation of the supplier base of the company concerned, trying to encourage the company far as possible to use local inputs in it production, and fourthly to promote partnership between business and labour social dialogue at the work place. These are all long term investments to get companies out of crisis that is the general arrangement we have in place.

We now will be looking at each of the applications that come in against the set of criteria, which was approved and reported to President Zuma in December last year. That is the one area on the conditionality, second to that the IDC has already commenced even before we looked at these programmes of supporting companies which are in distress, supporting them through loans and measures that assist them cover two big issues. The one is constrains in credit and the really big one that many companies face is the loss of market.

Journalist: Minister Patel you speak about possibly recapping Khula? Can you give us more detail on that and are you satisfied that those institutions are ready to assist small businesses. Business people have experienced problems and have been quite vocal about it.

Journalist: Minister Patel, I wonder if you can comment on the spat between Arcelor Mittal and Kumba and what affect that is going to have on the company. I know the reports were saying that Minister Davies was going to meet with the respective people, do you know when that meeting is going to take place and what is Government going to tell those companies.

Journalist: Minister Patel, the remuneration is one of the conditionalities, how exactly will you determine that, where is the benchmark? When leaders say someone is earning too much or if bonuses are too much especially if you look at Government?

Ebrahim Patel: I was going to say they should definitely not earn more than Ministers and I realised that will be the big headline tomorrow, you can't even joke in a press conference. Let me start with the Khula question. The challenge we face with Khula is the following. The model on which Khula is based doesn't provide any direct funding to small business, it is really a guarantee scheme that is intended to reduce the risks and therefore to increase if you like the appetite of the commercial banking sector to extend loans to Khula. We don't think we are doing enough and we don't think we have been successful enough in supporting small businesses. So in the conversation with Khula they said we need a new model, a direct funding model that allows them to provide resources directly to companies based on those companies' business plans. So those are all in the process of being finalised within Government and we hope we would be able to make announcements on those as soon as possible.

In respect of Mittal and Kumba, I'm going to leave the comments to Minister Davies but I can make this one comment: for Government what is quite critical in any of these considerations is to get competitively priced steel. It is a key input into our economy and a lot depends on being able to achieve that in our industrialisation plans.

On the remuneration in a marketing economy it's hardly possible to set one firm benchmark, you have diversity of companies, diversity of sectors they are involved in, different levels of complexity of management required to run those enterprises. In a case by case examination when an application comes in for public support there is a whole series of questions that are asked, questions around the viability of the company's business plan, questions about the company's ability to finance from alternative sources, off its own balance sheet, all those things go into the consideration that‘s applied.

We are now adding considerations, and in a particular company if we can see that there is no relationship between the executive remuneration and the underlying performance of the company, that now becomes a formal topic for discussion between the company and Government. So it is in that detail, a lot of this is not going to be the headline making things but it's rolling up our sleeves, getting into the detail, seeing what is the constraint problems and aligning remuneration against performance. For Government it's a sensitive matter: this is public money, its taxpayer's money and it has to be used wisely and we need to be able to show that it's been used appropriately and therefore it can't be a source for financing inappropriate executive pay. That is the message we are trying to put out, it's a message that Governments all over the world are grappling with at the moment, it's a range of ideas floating out of the United States and the European Union that grapples with this issue. Thank you.

Journalist: The Rural Development Programme, what is your vision for it, how many people will it involve and how is it going to work?

Gugile Nkwinti: We have a vision of sustainable, vibrant rural communities, we have a vision like that and we think that vision could be achieved through three phases. The first phase is what we are busy with in terms of the eight pilots now really focussing on meeting basic human needs - water, sanitation, shelter and housing. We are focussing on that but we think the real tests will be the second phase that will overlap with that, which is enterprise development and that is where we are working closely with other ministries and departments like trade and industry (DTI). We are focussing on looking at various forms of cooperatives within these areas where meeting basic human needs can lay a good foundation for that, particularly if we provide the infrastructure like roads, electricity and so on so that we can have that kind of facility to kick start the enterprises that will follow. Thirdly we are looking at agro processing industries in these areas in the rural communities itself, working together with agriculture in particular, that is why we are putting forward this recapitalisation and development of all the farms and also looking at the homestead gardens as the President was saying in his State of the Nation Address.

We are working with universities of technology and further education and training (FET) colleges and the Department of Higher Education and Training on quantifying these issues. We anticipate that by the end of March we will have those details in terms of the variables, how many jobs and how much it will cost. We will report to the public on that once it is done.

Journalist: What was holding up your green paper and you said in an affidavit to the Constitutional Court the week before last that the Communal Land Rights Act (CLARA) is no longer part of your vision and what are the implications of that?

Journalist: In regards to the resuscitation plans for farms. Any indication how many farms you are looking at and how much it will cost? And the debate around willing buyer, willing seller, how we take that debate forward.

Journalist: Since the 2014 target for land reform is not achievable anymore, do you have a new target?

Gugile Nkwinti: Let me start with the new target, no we don't, we don't have enough information to make a scientific targeting. We balance between recapitalising the ones we have already taken hold of, we've got quite a lot of those. We have agreed with the portfolio committee that we will target 200. But we will deal with all the farms we acquired since 1994. Between October/November during the adjustment period and the end of this financial year we restructured the budget for land reform by taking 25% of that budget for recapitalisation and development. Now that amounted to R254 million, that is what we are working on. We are working in partnership with the Minister of Finance, Minister of Agriculture, Fisheries and Forestry and with the Land Bank.

We are working on those farms which could have been auctioned by Land Bank but of course we provided a guarantee for those amounting to R207 million, so that is why those farms remain with the Land Bank, they have not been auctioned. That is another aspect of the challenge you are referring to with regards to how many farms, the number is still with the Land Bank but we are designing and using a model of really dealing with these farms. Moving forward, to also include this model with the recapitalisation and development.

Willing buyer, willing seller, we think that is beyond our reach, we don't have R72 billion between now and 2014 and we don't want to target now because we want to balance development and acquisition of farms rather than chasing the hectares. We want to balance between the number of hectares we get and the extent to which we are able to use those hectares to produce food and so on.

The other one is CLARA; yes we haven't challenged the decision of the High Court declaring some aspects of CLARA as being unconstitutional. CLARA has been with us for some six years now but it has not yet been implemented because of the challenges that relate to its rejection in particular by traditional leaders, there is this question of a survey of the land which again the Department has been of the view that it's too expensive. Some traditional communities have said no, we don't want to survey our lands and then give title deeds we want it to remain communal land. We don't want to challenge that because it's too costly and unnecessary because we are going through the Green Paper process and we will put forward some suggestions including surveying communal land for land use management but without giving titles to individuals. So we would like to focus on that direction rather than talking about titles at this moment because if we talk about titles we might be putting ourselves in a similar situation which has resulted in us not being able to use that law over the last five or six years.

The Green Paper which is the last question, there are two sections of the Green Paper, the first one is the Land Tenure Systems Reform - it is a very important aspect of the Green Paper - and the second thing that is outstanding is the detail around the recapitalisation and development because there we have to work on what is appropriate institutions that would support the recapitalisation and development process. We have met with several farmers and associations to look at how we can form partnerships which will link up with this kind of institution. Those are the two sections of the Green Paper that are responsible for us not being able to put it forward at this stage.

The deadline we put in at the Lekgotla was 31st of May.

Journalist: My question going to Minister Nkwinti. It was reported that the Land Claims Commission which is processing the claims by the victims of farms removals has a shortfall of R300 billionn and already was actually looking to get another R16 billion but it has only been given R5.2 billion. I just want to know if that problem has been solved and how are you planning to rectify that?

Journalist: I was just wondering can the Minister can you give us an idea of how much land is in foreign hands and also how you will deal with this problem?

Journalist: Minister van Schalkwyk, have you got the latest tourism figures, how badly have we been hit by the recession and are you hoping that the World Cup in June will offset that? Will the increased numbers of tourists coming not offset whatever losses we might have had?
And then to Minister Nkwinti, in terms of beneficiaries who are unable to use their farms, the use it lose it policy, is it still in place and how many people are losing their farms?

Journalist: Also for Minister van Schalkwyk, pretty much the same issue. Tourism was supposed to be the thing that would try to make 2010 work for us, it was going to have long terms benefits, people were going to come and find out what a great country we were and that's how we will get back all the billions we've spent. But MATCH is already giving back rooms by the truck load. How worried are you that the international, intercontinental tourism is going to be a serious disappointment and have you got anything in train now to try and boost that between now and the actual beginning of the Cup?

Gugile Nkwinti: Just remember that when we started with the land claims process I think a period of 10 years had been given to complete the process. How many years now, its 15 years and we are not close to completing the process except for in the Western Cape. In the Western Cape we could finish this in 18 months, it's possible but the rest of the country, it's not that easy at all. The huge sums of money which are required, particularly in sugarcane, forestry, timber and other plantations which take a chunk of the money that is required to buy this land. So you have to also look at how you balance the hectares with the rands.

You also have to balance between the people, who always tend to take Government to court and so and once the court has charged, we prioritise those. These are tension areas that relate to restitution, it's not just the amount of money, but also the transfer of hectares of land. Parliament has picked up on the imbalance, about a year ago, saying to the Director-General we see the rands are moving but where are the hectares. It's because of this factor; you have to look at how you balance that out as well. So that's part of the big challenge with restitution and also systems and so on, trying to plan up the systems making sure that we are more efficient in how we handle those things. I think these are institutional and financial challenges, we are working on those things to plan up so we can be more effective even using the rands that we have.

The land in foreign hands, the quantities we can give at some point. But what we know is that at the rate we are purchasing land as Government, whether its restitution or land redistribution, foreigners are buying land three times more than Government in the country. That is partly why we have to look at the system in South Africa, it's inevitable. Because at some point we will end up not having land as a country. So we will look at the quantities and at some point we will actually make this information available.

Use it or lose it will work now, with the recapitalisation and development where the strategic partnerships will form with farmers, whether active or retired. Because our view is that give them a chance, establish a clear system of managing these farms, provide necessary support and those who do not want to work the land, take them out. There is not going to be any compromise on that part. The only thing we thought we should strengthen is the support now that does not refer to those people who got land through restitution but those who got land through Land Redistribution. If they don't use that land, we will take it. Just think about it we always talk about people not using the land, a lot of money. We have not talked about the revenue which the State has lost because 5.9 million hectares' farms which were active and acquiring revenue for the State were handed over to people and more than 90% of those are not functional, they are not productive and therefore the State loses revenue. So we cannot afford to go on like that, we then say agricultural sector production as a proportion of gross domestic product (GDP) is going down. Part of the reason is that a lot of land has been given to people that are not using it, no country can afford that.

Marthinus van Schalkwyk: Let me just do it briefly and combine the two questions. Last year the global tourism industry was hit quiet hard, we ended up with negative growth globally: minus 4%. In South Africa we still ended up in positive territory but after seeing four years of record growth year after year, double-digit growth, we ended up with single-digit growth last year. But we are still outperforming our direct competitive, and that is even before the World Cup.

Now what we expect to do this year is to achieve what many people said four to five years ago was impossible to achieve. This year. South Africa will receive 10 million foreign tourists, and that in our view is a major achievement, we can't rest on our laurels. Historically we have relied on leisure tourism as basically the backbone of our tourism industry and it is quite clear that we must diversify if we want to continue the kind of growth that we want. So business and convention tourism is absolutely vital to us and it makes up 6% of our tourism arrival figures, foreign arrivals at the moment. We want to increase that considerably, we want to be within a few years one of the top ten long haul convention destinations in the world, and to do that we will have to professionalise our approach. What I am discussing with the industry at the moment is a national bid instrument initiative, if not fully at least partly Government funded. We would also like to launch, with the help of the private sector, a National Convention Bureau to ensure that we stop Johannesburg, Cape Town, Durban undermining each other just to get events to host and we should do that in the competitive world outside as a country and I think all of us will benefit.

In another area we had the Sport and Mega Event Tourism conference last week; it's a giant wake-up call. At the moment 10% of our foreign arrivals are linked to sporting events, the previous two ministers, Minister Patel referred to how well we have done in that regard. We have built up an enviable reputation but we have this entire infrastructure to use after 2010 and we have to roll out the post 2010 plan and from our side we already have our eye on post 2010. Because on the 12th of July that show will leave South Africa and we will have to continue to build this industry. On the World Cup itself, it's a 100 days from today, the President is in London addressing the media. We have no doubt that it will go well with arrivals for the FIFA World Cup, the expectations are anything between 300 000 to 450 000 foreign arrivals. In terms of people watching the World Cup, 34 billion people globally, it's a lot of people. In terms of the releasing of the rooms, bring them back into the market, the industry tells me its normal practice, that's why they have the escape clauses in the contracts. But we are keeping a close eye on it. I have no doubt we have enough accommodation so from that point of view we are ready.

On the pricing issue I announced last week that we will in two to three weeks from now present the country with a proper report, Grant Thornton is doing the investigation on the pricing issue. It's very anecdotal all the rumours that we are hearing. I haven't seen a general trend of pricing in the accommodation sector but it's important that we have facts that we base our discussions on. On airline prices are before the Competition Board at the moment, but people should also shop around. I had a meeting with some of the airlines last week. We always knew that we are a long haul destination; it will be more expensive from some of the source markets. But people can come here from Europe, Emirates Air - 3 500 Euro, that's the whole package and that's affordable. So I think we should be very careful on the pricing issue, not to use anecdotes and present that as a general trend.

Journalist: (inaudible)

Marthinus van Schalkwyk: Any country other than South Africa, that's how it's measured internationally as well.

Issued by Government Communications on behalf of the Economic Sectors and Employment cluster, March 2 2010

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