Deputy President David Mabuza: Reply to questions in the National Assembly

25 Apr 2018

Deputy President David Mabuza has lauded the positive change in investor sentiments, and urged South Africans to work towards ensuring that this renewed optimism leads to real and inclusive economic growth and job creation for South Africa.

Issues on which the Deputy President briefed Parliament are as follows: international investor confidence in the South African economy, interventions taken to improve the management of State-owned enterprises, the steps taken in ensuring Members of the Executive appear before the National Assembly to deal with government business, as well as the Youth Employment Accord, the strengthening of partnerships with government agencies.

Deputy President replied to questions as follows:

On South Africa's standing as an investment destination

Honourable Coleman, on 23 March 2018, the international ratings agency, Moody’s Investor Services announced that they have maintained South Africa’s investment grade rating.

Just as important, Moody’s changed the outlook on South Africa’s debt from negative to stable.

We view this as a significant shift in the current sentiments of international investors towards us and a vote of investor confidence in the South African Economy.

Moody’s made their decision following meetings with broad sectors of the economy, including government and the private sector. In their announcement, Moody’s said:

“The confirmation of South Africa's ratings reflects Moody's view that the previous weakening of South Africa's institutions will gradually reverse under a more transparent and predictable policy framework.”

This positive investor sentiment reflects a recognition of the hard work which has begun by government to move South Africa’s economy and institutions in the right direction.

Moody’s was clear on acknowledging the gains South Africa has made under the new leadership of the ANC, and I quote:

“The recent change in political leadership appears to have halted the gradual erosion of the strength of South Africa’s institutions”

Madam Speaker, it is clear we have not just halted economic decline, but we also embarked on the path of economic recovery and the restoration of investor confidence in the economy of South Africa.

It must be noted that this is the third consecutive time the South African economy has escaped a downgrade and with a stable outlook Moody’s has affirmed that we are indeed on the right path.

This change in outlook from negative to stable is very important for international investors. Many international investors require that their investments go to ‘investment grade’ investments only. For those investors who may have been worried about their investment in South Africa’s debt, they can now rest easier following the decision by Moody’s.

In fact, since the decision over a month ago the Rand has relied against international currencies such as the US Dollar, Euro and Pound, and has strengthened, thereby reflecting the growing positive sentiment. Although this development is a positive one, it does place our trade-exposed sectors under more pressure.

According to the Rand Merchant Bank Bureau of Economic Research, business confidence index[1] rose 11 points during the first three months of 2018, showing a significant increase in confidence in six years. This means that the confidence and optimism of South Africa’s manufactures, building contractors, retailers, wholesalers and new vehicle dealers has grown.

We are now working to ensure that this renewed optimism leads to real and inclusive economic growth and job creation for South Africa.

Since the announcement by Moody’s we have also seen an increase in the demand for South African government bonds. This reflects the greater confidence from our international and local investors in our economy. Increased demand for South African government bonds is good news, as it translates into lower interest rates for South Africa, both in the public and private sectors. In the end, consumers ultimately benefit. This means less money is needed to service the cost of debt, and more money is available for investment and consumption of goods and services which can drive the economy.

While economic growth exceeded the government’s forecast last year, we can, and should, do even more through the restored investor confidence in our economy. As Africa’s most-industrialized economy there is a huge potential to stimulate economic growth by more direct foreign investment in South Africa.

The positive change in investor sentiments and the stable economic outlook will support and underpin the President’s call for a $100 Billion USD investment over the next five years.

Thank you very much.

On improving governance of State-Owned Enterprises

In the State of the Nation Address, His Excellency President highlighted some of the steps that had been undertaken at the time to address governance failures in State Owned Companies. Amongst others, he mentioned the following:

a. Action has been taken at Eskom to strengthen governance, root out corruption and ensure that work to restore its financial position is implemented as a matter of priority.

b. The Commission of Inquiry into State Capture headed by Deputy Chief Justice, Judge Raymond Zondo, is expected to commence its work soon. This will ensure that the extent and nature of state capture is established, that confidence in public institutions is restored, and that those responsible for any wrongdoing are identified.

As part of the SONA implementation process, the following steps have been taken:

In respect of Eskom, a new board has been appointed; an acting CEO and CFO to strengthen governance. Diciplianry action has been taken against at least eight senior managers to start the process of rooting out corruption and to stabalise its financial position.

As action in terms of these interventions was intensifying, we have had some of these individuals opting to resign from their positions before discplinary hearing could even sit to determine their guilt.

The process of appointing a fulltime CEO and CFO is almost complete. The issues pertaining to coal supplies to some of its power stations is receiving attention.

All Boards of the State Owned Companies (SOC) are in the process of being reviewed and strengthened. At Denel, changes have been effected with the announcement of a new interim Board. So is the intervention at PRASA.

Boards of SOCs have been directed to focus on addressing all governance failures that have impacted negatively on performance.

In addition boards will prioritise the recovery of stolen funds and undertake a review of all contracts to identify those that may have been improperly awarded.

Where there are criminal offences, charges must be brought against individuals through the relevant authorities to ensure that those involved are brought to book.

The instances of maladministration and corruption at State Owned Companies identified by reports from the office of the Public Protector, including Parliamentary inquiries, have assisted a great deal in highlighting the extent of the problem and the Executive take these issues seriously.

In instances where forensic and criminal investigations had already been conducted, steps have been taken to ensure that individuals identified by these investigation at both the Board and Executive level, are removed from their positions through due process, including suspensions and institution of disciplinary hearings.

The President will establish an SOC Council and will announce its mandate in due course.

This is work in progress. Every week the relevant Ministers will be taking action to strengthen governance, accountability, transparency and improve the performance and financial stability of SOCs as has been indicated below, sooner rather than later, the dependence by SOCs on the fiscus must be totally removed. In fact commercially owned SOCs should be paying a dividend to Government, we undertake to keep honourable members fully briefed as this programme of reform unfolds.

Thank you very much.

On Progress in implementing the Youth Employment Accord

Honourable Madella, high youth unemployment is a challenge for South Africa. It imposes serious costs on our democracy. This calls for better ways to harness the energy, the creativity and the flair of our young people to fully participate in the economy.

Some of the interventions that government together with social partners has undertaken, is coming up with the Youth Employment Accord. This is a pillar of our efforts to get youth into the labour market and into the economy.

The Accord establishes commitments in key areas such as education and training, work exposure and employment, as well as the promotion of youth entrepreneurship and cooperatives.

With regards to our commitment on education and training, TVET college enrolments have increased 6% since 2013. This contributes in producing skills that our economy needs right now, as well as in terms of skills for the future to respond to the growth of the economy and changes in its structure.

In addition to the increase in enrolment, there have been significant efforts to improve the alignment of TVET curricula with industry needs.

The signing of Memorandum of Understanding (MoUs) between RCL Food & Milling and Ehlanzeni TVET College as well as between Sasol and Gert Sibande TVET College in 2016/17 are steps in the right direction. We would also like to see more companies that are in and around TVET colleges support the ‘Adopt-a-TVET College’ initiative of the Human Resource Development Council.

The number of students graduating from universities has also increased by 6%, with an upward trend in the number of science, engineering and technology graduates. This is encouraging as we prepare young people for the fourth industrial revolution, and the economy of the future.

Another notable improvement is with regards to SETAs, which have prioritised work placement efforts. As a result, 40 000 TVET learners and 30 000 University of Technology students were successfully placed between 2013 and 2016.

In terms of work exposure and employment, we have had 18% increase in the number of young people employed on contract positions in national government departments. The number of permanent jobs taken by youth at provincial level has also increased by 9% as well.

The Department of Labour offers public employment services through its labour centres; this includes work registrations, employment counselling and employment placements. To date, about 60% of workers registered and 75% of the workers who underwent counselling and found employment through these centres are youth.

The other area of work which continues to make a meaningful contribution is Expanded Public Works Programme (EPWP). Almost two million youth opportunities have been created through EPWP since 2013, and a further 150 000 young people have been recruited through other supporting programmes.

We will be thinking of ways that the EPWP’s impact can be further enhanced and more meaningful work experiences can be provided. For example, unemployed graduates with a background in public administration could be employed in public schools as administrative assistants, giving them relevant work experience while allowing teachers to focus more on teaching and less on administration.

Honourable Members,

The social partners agreed that certain sectors, especially new industries, should be youth-focused sectors. This includes youth target set-asides in the green economy, the infrastructure sector and the business process services sector.

If we look at public infrastructure in areas such as water and sanitation and the higher education build programme, we find that youth now make up the majority of the employed in a third of all these projects. Further agreements on Solar Water Heater installation are to be concluded with certain municipalities.

The IDC has approved more than R3.5 billion for youth enterprises since the signing of the Accord; over R898 million was disbursed by Small Enterprises Finance Agency (SEFA) for youth owned enterprises, supporting a total of 44,140 SMMEs; the National Empowerment Fund has disbursed over R160 million to youth businesses; and the Gauteng Provincial government has set aside 10% of its procurement budget for youth owned suppliers.

These numbers give a sense of the scope of our support for youth business and youth entrepreneurship.

We continue to look at ways in which development finance Institutions, the private sector, business incubators and other stakeholders can work more effectively to support youth-owned businesses in the whole process from first inspiration to full commercialisation.

Mentoring can be enhanced, the cost of borrowing can be reduced, and we will explore the youth-orientation of the Black Industrialists Programme.

The Youth Job Creation Initiative, launched in 2012, has placed over 35 000 learners and successfully provided learnerships and internships.

The Youth Employment Services (YES) Initiative is also a positive initiative aimed at creating 1 million paid internships for young people over the next three years. We will continue to work with the private sector to find further ways to address the youth jobs crisis. Social partners must place more emphasis on coordinated and sector-specific interventions.

In order to address the challenges around coordination of youth employment and empowerment programmes, we have developed an implementation framework that, amongst others, includes the establishment of a joint-implementation committee to drive the implementation of the Youth Employment Accord. It also seeks to identify new areas of collaboration with social partners in order to develop youth development programmes that are sector specific.

Thank you very much.

On engagement between the National Executive and Parliament

Honourable Member, it seems to me that this question is based on an underlying assumption that Members of the Executive are somehow reluctant to appear before the National Assembly to deal with their Parliamentary responsibilities.

At the outset, it is important to deal with any perception that suggests that Members of the Executive are not fulfilling their expected responsibilities and obligations in this esteemed House.

As a matter of course, Parliament must hold the Executive accountable on a range of matters pertaining to the work of government. As a voice of ordinary people, Parliament must be respected to ensure that the work of the Executive is subjected to scrutiny and necessary accountability measures.

The Executive takes this responsibility seriously. That is why we respond to questions sent to the Executive and make it a point that we appear before this House to account.

This does not suggest that there are no concerns from the Honourable Members. Where concerns have been raised, we are committed to ensuring that corrective measures are implemented to maximize the participation of the Executive in all parliamentary processes as expected.

We have taken practical measures to deal with the problem of non-attendance of parliamentary programmes by members of the executive. Among other key measures:

 We have streamlined communication to ensure that where Ministers are unable to attend, such should be communicated to Presiding Officers way in advance so that alternative arrangements could be made

We have introduced a roster on the attendance of parliamentary sessions by the Members of the Executive

 We intend appointing three Members of the Executive to assist with monitoring the attendance of parliamentary sessions by the Ministers

 We are introducing monitoring and tracking mechanisms to ensure that Members of the Executive respond timeously to parliamentary questions. In this regard, we send proactive reminders to ensure that Ministers deal with outstanding parliamentary questions

 It is therefore expected that there will be great improvement in the future.

Honourable Members, as we implement these improvement measures, it is also worth pointing out that it is incumbent upon Parliament to enforce its constitutionally defined role and powers. The expectation on the side of the Executive, is that this is respected in line with obligations placed on each and every one of us, to promote and protect the virtues of our Constitution.

Ultimately, we all want the relationship between Parliament and the Executive to be harmonious. We want it to be focused on an agenda of advancing the interest of the electorate in a manner that is interdependent and reinforcing. Our energies must be focused on producing concrete outcomes that place the interest and development of the people at the centre. That should be our pre-occupation.

Thank you very much.

On social compact to impact on poverty, unemployment and inequality

The broad framework for building strong partnerships lies in the National Development Plan (NDP) and the Vision 2030. The social contract envisaged here will help propel South Africa onto a higher developmental trajectory as well as build a more cohesive and equitable society.

During his inaugural State of the Nation Address, President Ramaphosa outlined our overall vision on partnerships and social dialogue to achieve our goals of building a more inclusive economy that will help to create decent work opportunities on a scale that will have impact on poverty, inequality and unemployment.

Our implementation plans entail a number of elements, and I wish to share a few of these with this august House.

Firstly, the President recently announced the appointment of investment envoys who will be able to take the positive sentiment towards South Africa and encourage investors to invest in our economy and by bringing their money into our fixed investment opportunities, building factories, investing in mines and promoting infrastructure. These envoys will work closely with local and foreign investors.

Secondly, to fund infrastructure development and speed-up implementation, we have made changes to boards of some state-owned companies to restore market confidence and improve governance, drawing on expertise available within the wider business community. In the coming year, the country will spend more than a quarter trillion rand to bring new schools, healthcare facilities, water infrastructure, fibre-optic cables, energy, transport and education facilities and housing on-stream.

To obtain more from these high levels of investment, we need greater coordination within the state as well as with our social partners. The Minister of Economic Development and the Presidential Infrastructure Coordination Council has commenced discussions with key financial institutions, banks and insurance companies, to unlock financial resources which can be channelled to projects that can yield high social and economic returns.

Thirdly, to boost local production, we are working with manufacturers and are engaging both state-owned companies and private sector retailers to boost local procurement. The discussions will be focusing on ways to increase the opportunities for all South African based manufacturing and agriculture operations, which includes small business and black-owned and youth-empowered enterprises.

Consumers and trade unions can be key to the success of this initiatives as we shift from importing all that we need into becoming a nation of manufacturers, farmers and miners.

Fourthly, to address the high levels of economic inclusion, we are pursuing measures to open up sectors for small businesses and black South Africans. Together, small and medium businesses support more than 60% of all employment in South Africa. Small business, especially small black businesses must be given every opportunity to succeed. One of the initiatives to this end, are proposed changes to the Competition Act to address high levels of economic concentration.

Fifthly, to build inclusivity, Government announced a range of initiatives during the SONA debate, including greater levels of industrial funding, progress with implementation of a basic wage floor in the country through a national minimum wage, consideration of greater worker participation in company governance arrangements and improved payment of small business suppliers within 30 days.

The President will in due course be providing further details on the broader accord to underpin economic recovery and shift the economy onto a new growth path that is characterized by high levels of growth but as important, a different more inclusive model of growth.

Fortunately for South Africa, social dialogue is embedded in the psyche of our nation and there is enabling institutional infrastructure deepen dialogue on matters of national priority.

Let us also recall that in his inaugural State of the Nation Address, President Ramaphosa called on the nation to mobilise and build partnerships for jobs, investments, youth employment, optimising the partnership between government and all sectors of society.

These partnerships will culminate in various Summits where the role and contribution of each of the social partners will be articulated in detail. Steps have been taken to lay the groundwork for the Jobs Summit and the President will be engaging with leaders of business, labour and community to concretise plans for that Jobs Summit before the end of the month. Details on the Jobs Summit will be announced in due course.

Thank you very much.

Issued by The Presidency, 25 April 2018