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    The Future of South African Economy from the mirror of 2016

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    The Future of South African Economy from the mirror of 2016

    A Review of Economic Development in 2016

    2016 was a challenging year for economic development globally and domestically but significant progress was also registered in South Africa. The economy avoided going into a recession in part through the collective action of business, labour and communities working with government, though growth remained very modest.

    It was a year when all rating agencies were focusing on South Africa, with prospects of a downgrade that would have increased the cost of borrowing. By year-end, the country maintained its investment-grade rating.

    The Economic Development Department played a major role in ensuring a co-ordinated infrastructure investment programme and in expanding the levels of development finance in the economy, rallying stakeholders around certain policy and programmes that will have major impact on our economy, as well as ensuring that government respond in an informed and more aligned manner across the three spheres to the challenges of the economy.

    A mid-term review of the New Growth Path jobs drivers was completed for Parliament’s Portfolio Committee on Economic Development, which indicated that more than 2 million new jobs had been created in the period since the adoption of the NGP in 2010.

    Key highlights in the work of the Ministry included the innovative and extensive public interest conditions attached to a number of mergers including AB InBev’s takeover of SAB Miller, Coca-Cola and Edcon; the actions in the steel industry including the tough competition settlement with Arcelor Mittal and the reparation agreement with the seven largest construction companies; the expansion of investment by the Industrial Development Corporation and the agreement to co-invest in a new auto plant in Nelson Mandela Bay; and the increased investment in the National Infrastructure Plan, projected at R987 billion over the next three years.

    Economic transformation was a key theme in 2016 and we made significant strides in opening the economy to new black-owned companies and expanding levels of youth entrepreneurship.

    The Ministry of Economic Development is responsible for the work of the Economic Development Department (EDD), the International Trade Administration Commission (ITAC), the Competition Commission, the Competition Tribunal and the work of the Secretariat and Technical Unit of the Presidential infrastructure Coordinating Commission (PICC). Highlights of the work of the Ministry and its agencies are reported below.

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    PICC Press Release 11 Oct 2016

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    Major participants in the South African construction industry reach transformative agreement with the government

    SAFCEC and the Government of South Africa announced today that seven listed construction companies reached agreement with Government on a program of initiatives that will accelerate transformation in the industry. A seventh company will advise shortly whether it will join the agreement.

    The agreement was reached with companies with a combined construction revenue of approximately R45 billion, comprising of WBHO, Aveng, Murray & Roberts, Group Five, Basil Read, Raubex and Stefanutti Stocks.

    Six of the seven companies have signed the agreement today and the seventh company will advise within the next week.

    The agreement has three elements:

    1. Financial contribution for development projects

    The seven companies will collectively contribute R1,5 billion over 12 years to a fund, which will be established for socio-economic development. The objective of the fund will be the development, enhancement and transformation of the industry, as well as the promotion of social infrastructure for all South Africans. The fund will be co-managed by industry representatives and Government, with the administration of the Fund carried out by an entity designated by the National Treasury. For the avoidance of doubt, this voluntary contribution is in addition to the R1, 4 billion penalty imposed by the competition authorities on companies in the sector in 2013.

    Initiatives to be supported by the fund will include financial support for young trainee artisans and engineers from disadvantaged backgrounds, support for the teaching of maths and science education at public schools, funding for social infrastructure and the development and promotion of construction companies owned and managed by black people. It also includes funding the appointment of professionals to provide the Government with engineering, project management and other services to strengthen its capacity to deliver the public infrastructure so desperately needed through, amongst others, the secondment to state departments, municipalities and entities, of skilled personnel from organisations operating in South Africa.

    This financial contribution is in addition to existing annual socio-economic development investment spend by these companies.

    2. Transformational commitments in the sector

    In addition to existing enterprise development programmes, each of the companies will undertake further transformation initiatives, with two models. Firstly, that the companies become fully transformed (with at least 40% of equity in the hands of black South Africans – the “equity model”); or secondly, that they commit to initiatives that will result in each of the construction companies mentoring up to three emerging black-owned enterprises so that they develop the necessary skills, systems, status and quantity of work to be able to sustain a cumulative combined annual revenue equal to at least 25% of each of the mentor companies’ annual revenue by 2023 (the “partner model”). The referenced revenue is from civil and building works delivered in South Africa and should all companies elect to utilise the partner model, it would result in partner black-owned companies with a combined turnover in excess of R9 billion an annum within seven years.

    3. Integrity Commitment by CEOs

    This involves the seven companies, as leading companies in the industry and Government, committing to business practices that are based on integrity, transparency and fair competition. As part of the agreement, each company has signed a declaration to promote ethical and legal operations, free of collusion or corruption and to confirm that they will expose, confront and eradicate any sign of wrong-doing in the industry.

    The agreement provides a framework for settlement of claims by the industry regulator, the CIDB as well as civil claims by public entities against companies arising from the investigations by the competition commission for a period up to 2010, which were brought before the Competition Tribunal in 2013.

    Welcoming the agreement today, the chairperson of the Management Committee of the Presidential Infrastructure Coordinating Commission (PICC) Minister Gugile Nkwinti hailed it as a new beginning in the relationship.

    “The success of government’s infrastructure programme requires strong internal capacity in the sector and competitive prices. Through the transformation commitments in the Agreement, we can rebuild the relationship with the companies concerned and work in partnership in future,” Minister Nkwinti said.

    SAFCEC CEO, Webster Mfebe said “As an industry we are committed to strengthen our partnership with Government for the benefit of all, and especially to encourage and support economic growth through the development of the economic assets of our country. This arrangement also demonstrates the commitment to a transformed, transparent and ethical industry, which has a major role to play in delivering much needed infrastructure to the economy of South Africa. We believe this partnership will reinforce the framework for a more sustainable and competitive industry and is set to advance the social and economic welfare of all South Africans.”

    The parties will address a number of legal, regulatory and administrative requirements that have to be met to ensure the agreement is capable of implementation. It is expected that the Fund will be launched in the next financial year and will become operational shortly thereafter.

    The arrangement agreed will focus on transforming the industry through:

    • Increasing investment in the sector to promote development, education and upliftment opportunities for all, especially for those who were previously disadvantaged;
    • Creating employment and entrepreneurial opportunities, especially for young South Africans;
    • Promoting and supporting black-owned construction companies and small business development and assisting them to be competitive and sustainable;
    • Identifying opportunities for South African companies in infrastructure projects elsewhere on the African continent; and
    • Building deeper partnerships with regulators and other key stakeholders such as Government and organised labour.

    In conclusion, the Government and the companies confirm their partnership in promoting the industry’s sustainability, transformation, efficiency, adaptability, development and competitiveness. The two parties to the arrangement also wish to express their commitment to create a sector that will result in improved employment for all, the delivery of competitive prices and quality goods and services and the empowerment of black participants in the industry


    Enquires: Tshwanelo Rakaibe
    Presidential Infrastructure Coordinating Commission: Researcher
    012 396 5623/ 071 484 5025
    TRakaibe at economic.gov.za

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    Press release | Minister welcomes action against collusion and price-fixing in the steel industry

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    Minister welcomes action against collusion and price-fixing in the steel industry.

    The Minister of Economic Development, Ebrahim Patel, today welcomed the announcement of a R1,5 billion fine payable by ArcelorMittal, the country's largest steel-maker, for price-fixing and collusion in the steel industry.

    This is the largest single fine imposed against a single company thus far by the competition authorities. The company also undertook, as part of the settlement with the authorities, to invest R4,6 billion in new capital spending to upgrade its plants and improve its competitiveness. The settlement further provides for a pricing mechanism that will cap the company's margin on flat steel products for a period of five years.

    "The action by the competition authorities is part of a crackdown against abuse of market power and price-fixing that undermine the performance of the economy, imposes unnecessary costs on downstream factories and damages local jobs," Minister Patel said.

    "South Africa's competitiveness and industrial performance require an efficient basic steel supplier industry. High levels of concentration together with collusion undermine our national goals. Companies collude because they believe they can get away with it. Over the past seven years, the competition authorities have focused on collusion and abuse of market dominance involving key input costs in the economy, such as steel-making, fertilisers, construction and telecommunications and well as important basic goods such as bread, poultry and flour," he said.

    "Our resolve is clear: we want to promote investment-led economic growth, not collusion-induced economic stagnation. South Africa is open for business and the message we want to send is that we will act against conduct that damages competition and jobs," Minister Patel said.

    “This can be a boost for small business and for new investors,” he said.

    "We look forward to seeing more competitive prices and will be monitoring price increases through the committee set up under the International Trade Administration Act, drawing on the information available from the company's customers. We will not hesitate to act against any further abuse of market power in the steel industry should this be necessary. We have recently brought into effect the provisions in the Competition Act that criminalise collusion and impose jail terms of up to ten years on directors and employees found guilty thereof," Minister Patel said.

    For more information, please contact Dr Molefe Pule at 082 523 6775 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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    Press release | Passing away of Kumaran Naidoo

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    Announcement: passing away of senior civil servant Kumaran Naidoo.

    It is with sadness that we have to inform social partners and the public that Kumaran Naidoo, a senior civil servant, has passed away in the early hours of this morning, following a period in hospital.

    Kumaran Naidoo served the public and the government of South Africa with great distinction.

    He was employed as a Group Chief Financial Officer (Deputy Director General level) in the Department of Trade and Industry from which position he was seconded to support the Economic Development Department.

    Over the past year, he served as acting Director General of the Economic Development Department, where he provided leadership and support in the work of the Department and Ministry on jobs, youth empowerment, social dialogue, industrial funding and competition issues.

    He was actively involved in anti-apartheid struggles and campaigns in KwaZulu Natal in the 1980s and his family was hounded by the security police because of his activities.

    He completed his B.Com degree at the University of KwaZuluNatal.

    During an illustrious career, he turned around the Legal Aid Board (now Legal Aid SA), worked for the dti, served as Chief of Staff for a period in the Economic Development Ministry and as Chief Executive Officer of a micro-finance public agency SAMAF, where he prepared the groundwork for it to amalgamate to form the Small Enterprise Finance Agency.

    He served on the board of the Richards Bay Industrial Development Zone as a representative of the dti, where he played a key role to enable the Zone to prepare itself for new investors.

    During his year at EDD as acting Director General, he improved the department’s systems and oversaw the completion of the Annual Performance Plan for 2015/16, where he worked closely with Minister Patel and Deputy Minister Masuku.

    He is survived by his partner, a son, a daughter, his mother, four siblings and his grand-daughter.

    We remember a friend, a colleague and a fighter for social justice.

    The funeral will take place between 15:00 and 16:00 on 13 April 2016 at Hall 2 at the Clare Estate Crematorium.

    Hamba kahle Kumaran Naidoo.

    Statement jointly issued by Minister Ebrahim Patel (Economic Development) and Minister Rob Davies (Trade & Industry).12 April 2016.

    For further information, contact Dr Molefe Pule at 082-5236775 or Mr Vish Naidoo at 082-567 4153

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Latest News

Economic Development Department employees have pledged their commitment to the fight against corruption. Corruption in both the private and public sector has a detrimental effect on government's effort to deliver effective services to the people.  In signing the declaration, employees declare: 'I know, I act, I stop corruption - Fighting corruption is everyone's business.'

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Profiles of people impacted by our industrial investment and infrastructure build programme

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Scam Alert
All Service Providers and Businesses

The Economic Development Department wishes to advise members of the public, particularly those in business, to be alert to a scam utilizing the logo of the Economic Development Department. The fraudsters involved send unsuspecting business operators a Request for Quotations for the provision of Solar Panels.

As the Economic Development Department, we wish to state that we do not have such a project, and therefore beware that the Request for Quotation is not from the Economic Development Department.

Please confirm any request you receive with our Supply Chain Management division on these details 012 394 3579. Report these fraudulent activities to the SAPS or call the Anti Corruption hotline 0800 701 701 or SMS to 39772 or send an email to fraud@economic.gov.za.

Broadway Sweets Factory vist | 9 June 2016
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