The Cabinet Lekgotla met in January 2006 at a time when there is broad agreement that the economy continues to improve its performance in key areas. The macro-economic fundamentals are in place and the Accelerated and Shared Growth Initiative for South Africa (ASGI-SA) is set to drive the economy to a higher rate of growth that will optimize broad-based impact. ASGI-SA will seek, at the very least, to halve unemployment and poverty by 2014.

In short, ASGI-SA is a programme of targeted interventions that will stimulate ‘business unusual’. To this end, the Economic and Investment Cluster utilised ASGI-SA as a framework for identifying priorities that it will focus its attention on in 2006. This has resulted in the identification of strategic interventions, currently numbering twenty-seven projects. These interventions will have a high impact on economic development and will be achieved though intensive coordination across the Cluster Departments.

The identification of projects was also informed by other Government policies achieving alignment with the MERS, the MTSF and the MTEF. The previous year’s programme of action was also taken into account when formulating the Cluster’s approach, with incomplete projects being absorbed into the 2006 programme or into Department’s programmes.

The emphasis of the Cluster’s approach is on improved coordination, strengthened implementation, better monitoring, sharper planning and greater accountability. It is believed that this approach will ensure that the Cluster fulfils its role in the delivery of targeted growth.

The Cluster has introduced dedicated Focus Groups to ensure strengthened implementation of the programme of action. The twenty-seven projects are distributed across five Focus Groups, each co-chaired by two Cluster Departments.

The Focus Groups are:

• Macro-Economic Focus Group (Treasury and Presidency)
• Industrial Strategy Focus Group (Department of Trade and Industry and Department of Science and Technology)
• Public Investment Focus Group (Department of Transport and Department of Water Affairs and Forestry)
• Equity and Development Focus Group (Department of Public Enterprises and Department of Provincial and Local Government)
• Skills Focus Group (Department of Education and Department of Labour)

Although each of the projects within the

Focus Groups will have lead Departments, they will also include inter-Departmental task teams. The task teams will enable a division of labour within projects, a broadening of accountability and ensure effective implementation coordination.

The focus of this briefing will be on the Macro-Economy, Industrial Policy, and Public Investment. The Cluster also devised interventions aimed at Skills, the Second Economy, and Sector Investment Strategies, much of which will be covered in other briefings later this week.

The Cluster Projects will be addressed by each of focus group themes.

Within modeling and scenario planning National Treasury will be engaging in modeling the impact of interventions across the economy with the objective of highlighting gaps and necessary interventions.

IS

The dti will be finalising the National Industrial Policy Framework that will include a Regional Development Strategy and focus on strengthening competition regulation. The Policy will focus on unlocking South African industrial development in a sustainable manner through identifying strategic industrial interventions.

The Department of Communications will be leading a project to bring down the costs of ICT. This project will dovetail with Sentech’s infrastructure project. The project will focus on creating an enabling policy and regulatory environment and remove Telkom’s Monopoly in the fixed line network. This will have the effect of reducing telecommunication prices to internationally competitive levels and assist in the achievement of universal service.

One of the Sector Investment Strategies that is perceived as having massive potential for job creation is Business Process Outsourcing and Offshoring (BPO & O) sector. This project, led by the dti, will hinge on the development of customised incentives, a marketing strategy and skills development programme that together will stimulate growth of the industry. The BPO & O project will include a specific focus on creating job opportunities in five poor rural nodes.

DEAT and the dti will together lead a programme to accelerate the growth of tourism. This strategy, aimed at job creation and earning more foreign exchange will be based on an improved marketing strategy, an airlift strategy, customised incentives, improved data collection, improved tourist safety and security, enhanced product offering, business development aimed at SMMEs and improved tourist public transport. The effect of this strategy will be the removal of constraints to growth of this labour intensive sector.

In terms of public investment, which includes expenditure of R370 billion over the MTEF period, the Cluster has chosen three major infrastructure spend projects to champion with three supporting initiatives.

The three infrastructure spend projects include the development of Olifants River System with the construction of the De Hoop Dam. Led by DWAF, this year will see the completion of site preparations and dam construction with the diversion of the Steelport River. The impact of the project will be to supply water for mining development and social needs in Sekhukhuni area.

The second Infrastructure spend will be focused on the development of the Durban – Gauteng Corridor. The corridor will aim to develop an integrated freight system between DBN and JHB for all modes of transport. Led by DOT, the project will, during the course of 2006/7, establish a stakeholder Committee, complete a logistics plan and feasibility study. The project will also develop relevant MOUs with provinces/metros that are to fall within the corridor.

The final infrastructure spend that the Public Investment focus group of the Cluster will focus on will be the roll-out of the Sentech Wireless Broadband Network under the auspices of the DOC. During 2006/7, the Cluster is hoping to achieve the complete rollout of a wireless broadband network. The roll-out will accelerate the delivery of communication universal access, including providing cost-effective connectivity that supports government e-health and e-education services.

As a support project to infrastructure spend, DEAT will be undertaking a review of Environmental Impact Assessment legislation. The aim of the project is to get Cluster input into the promulgation of new Environmental Assessment Regulations. This will assist in the development of appropriate environmental impact management tools.

The Cluster will set up a project to monitor infrastructure implementation & impact. Led by DPE one of the outputs will be a single capex database for tracking projects. It is envisaged that this project will lead to increased transparency, accountability and effective implementation.

Dovetailing with the macro-economic modelling project is a project to model infrastructure impacts. Led by DPE the project aims to model the impact of the capex programme on the economy, social equity and natural environment. Through such impact forecasting, the project will promote capex planning is aligned with macro-economic and industrial policy targets.

Finally, the DPE will be championing a review of Capital Expenditure Procurement. This will be done in close consultation with other cluster departments, especially the dti and National Treasury and will lead to the development of a policy framework for Government procurement. The intended impact of the Cluster’s project is to leverage capex to optimise the impact on local manufacture while remaining both PFMA and WTO compliant.

The dti will lead a Cluster Project to implement ‘set asides’ for SMMEs. This will be a list of ten general ‘set aside’ products that will be procured by the State on a basis that gives preference to SMMEs. This will lead to increased demand for SMMEs.

Together the dti and DOA will roll out implementation of the Apex and MAFISA funds to improve access to finance for micro-enterprises. This will improve provision of affordable credit for the poor in a sustainable manner. This project will be complemented by a project led by the dti that will consolidate existing DFI activities on SMME finance with a key focus being the addressing of market failure in SMME finance for loans ranging from R10,000 – R250,000.

The Cluster will also work towards ensuring agreement by the banks to abide by their FSC commitments.

The Economic Cluster has emphasized growth projects and methods that optimise broad-based impact in this year’s POA. The introduction of focus groups and task teams and a more project based planning with effective monitoring and evaluation will ensure the effective implementation of collaborative projects. In addition the Cluster will set about mobilising social partners where relevant to internalise, support and accelerate implementation.

Key to the Cluster’s programme will be the leveraging of massive infrastructural investment to promote SMEs and projects that are of a labour-intensive nature (e.g. SOE procurement and the EPWP programme to be discussed on Friday). As will be seen in later briefings, the Cluster will link capex to the growth of strategic industries (e.g. capital goods)

and focus on labour-absorbing sectors and services (e.g. BPO and tourism) as immediate priorities.

As will be seen in later briefings the Cluster – along with other clusters - is also to focus on developing the Second Economy and supporting sustainable livelihoods. This will include projects such as the roll-out of finance and support services for small and micro-enterprises (e.g. Apex Fund and SEDA) and an explicit Cluster focus on the informal economy (e.g. a street trader project that will look at the development of appropriate local government support for 500,000 street traders).

The Cluster will deliver an implementation report to July 2006 Lekgotla that will include progress scorecards.

The Economic Cluster’s 2006 programme focuses on the joint implementation of 27 strategic, high-impact ASGI-SA projects. Through coordinated efforts, the i

mplementation of these projects will promote the realisation of ASGI-SA’s objectives.

The Cluster will further scrutinise all the projects with the aim of strengthening their gender empowerment impact. New projects specifically focused on gender empowerment are also being developed.

The Cluster will continue to identify and operationalise further projects in pursuit of accelerated and shared growth.

Finally, as part of ensuring a professional, coordinated and effective implementation focus, the Cluster will be ensuring that it mobilises the relevant social partners to contribute to the process in a manner that ensures optimal results that we, as South Africans, can take pride in.