APPROPRIATION BILL

(Second Reading Debate)

We then proceed to Motions. Motions 1 read as follows:

That the Second Reading Debate on the Appropriation Bill be continued.

The Vote before the House is that of Tourism, Economic and Environmental Affairs.

Hon Member, Mr Belot.

Vote 3: Environment, Tourism and Economic Affairs: R178 950 000

Mr T S BELOT (MEC): Hon Speaker, hon Premier, hon Members of the Provincial Executive Council, hon Members of this House, Members of the House of Traditional Leaders, invited guests, members of the media and ladies and gentlemen, it is a great pleasure to present the 2002/2003 to 2004/2005 Medium Term Expenditure Framework (MTEF) Budget for Vote 3, the Department of Tourism, Environmental & Economic Affairs, to this Legislature.

I would like to start off by quoting our hon President, Mr Thabo Mbeki, who said the following at the conclusion of the debate on the State of the Nation Address on the 14^th of February 2002:

Accordingly, the central challenge we face as Government is the task of implementation. The order of the day is that we take all necessary measures to ensure that the policy and legislative measures for the reconstruction and development of our country that have already been adopted, are further translated into an actual process of the transformation of our society...

He furthermore said:

To summarise, the message we seek to communicate to this House and to the country today, is simply this: Let us get down to the serious business of work, working together to create a new South Africa; working together to build a country free of racism and sexism, working together to end poverty, unemployment and the social marginalisation of any of our people; working together to give an example to the whole world, that, as people, we have the capacity to succeed, however difficult the challenges we face. The order of the day is to get down to the serious business of working together for change.

As Government, we have the necessary policies in place – so now is the time for implementation. The success already achieved by my Department will be built upon to ensure that we achieve even greater success. Our efforts towards implementation will be guided by the three key pillars of the Free State Development Plan, namely that of:

· Economic Growth & Job Creation;

· Poverty Alleviation; and the

· Development of our people.

I will now continue to present this Budget by giving a brief overview of the economic outlook for the Free State Province in 2002. Thereafter I will deal with the achievements of my Department in 2001/2002, followed by the 2002/2003 – 2004/2005 MTEF expenditure proposals.

2. ECONOMIC OUTLOOK & CHALLENGES FOR THE FREE STATE PROVINCE IN 2002

As we table the 2002 Budget before the Legislature today, it is appropriate that we take some time to reflect on the developments in the Free State Provincial economy.

Positive developments are taking place in the provincial economy. Analysis indicates that there is a definite change in the structure of the Free State economy, essentially from a primary dependent economy to a manufacturing, export-orientated economy. The Free State economy is less dependent on agriculture and mining than a few years ago – instead the manufacturing and service sectors are beginning to play a greater role in the provincial economy.

The Free State’s Gross Geographic Product (GGP) amounted to approximately R33.495 billion in 2001, which represents a 5,8% contribution to the South African economy. Projections for Free State GGP indicate an increase to R34.805 billion in 2002. For the rest of the MTEF period, projections indicate that the Free State GGP will increase further from R36.110 billion in 2003, R37. 532 billion in 2004 and R39.079 billion in 2005.

The progress in the above regard has to be built upon and further expanded. It is also worth mentioning that the Free State exporters are doing exceedingly well in the international trading arena. The Free State’s major exports are chemicals, fruit and vegetables, machinery and equipment, manufactured goods and mineral products. It is my Department’s intention to give special attention to trade development, as we would like to see more companies exporting. Our strategy for economic growth and job creation involves a three-tier process, which basically entails:

· Beneficiation: Beneficiation of our natural resources, which should receive our undivided attention.

· Empowerment/Capacitating: But in this whole process of adding value, we should also empower/capacitate our people to become involved in manufacturing ventures.

· Competition: As we move up on the learning curve, we also have to compete in the global market place with acknowledging that the world has become a global village.

This strategy is also underpinned by two important principles, namely industry clustering (to avoid fragmented development) and utilising the opportunities provided by two forward & backward linkages of existing & new economic ventures.

From this perspective the challenge we face now is to ensure that the achievements that have been made so far as well as future achievements can be extended to eliminate poverty and improve equity in our Province. Throughout my speech, I will highlight the deliberate and conscious actions of my Department in respect of the latter.

3. REVIEW OF DEPARTMENTAL ACHIEVEMENTS IN 2001/2002

I wish now to share with this hon House as we review the departmental achievements for 2001/2002 financial year.

I will now briefly deal with the main achievements of my Department over the past year.

TOURISM & SMME PROMOTION

TOURISM DEVELOPMENT

Tourism training: Eight tour guide assessors and 22 tour guides from the 5 district councils are doing their last practicals this month. This will enhance service quality assurance and human resource development in the Province. It will also bring about transformation and black economic empowerment in the tourism industry.

The Tourism Routes: The National Poverty Alleviation Fund allocated money for the development of tourism routes in the Province. Their allocations were as follows:

· Intabazwe Tourism Route – R650 000

· Wine & Diamond Route in the Southern Free State – R250 000

· BBT Heritage Route – R250 000

· Goldfields Tourism Route – R300 000

· Maluti Tourism Route – R250 000; and

· Batho Market Place – R850 000

Progress reports on work done will be submitted regularly to this House. Project managers were appointed by National Government.

The process of establishing the Free State Gambling Board has reached completion and all the requirements of the Act have been satisfied in this regard.

LIQUOR AND CONSUMER AFFAIRS

I wish to share with this House on the establishment of Consumer Court and Consumer Protector’s Office: The Department appointed members of the Consumer Court and this was followed by a public launch. This is an imperative measure to ensure elimination and control of unfair business practices in the Province that may cause undue hardship and poverty to consumers.

The Department of Trade and Industry in consultation with the Provincial Consumer Affairs offices has developed software that will facilitate the handling of consumer complaints and analysis of consumer complaint trends. This will have a huge impact on the compilation of a database of businesses that continually expose consumers to unfair business practices and risk.

SMME PROMOTION

SMME promotion is imperative, in order to create both short and long term capacity for labour absorption and output growth, as well as to improve income generation and redistribution. Throughout the world one finds that SMMEs are playing a critical role in absorbing labour, penetrating new markets and generally expanding economies in creative and innovative ways. They are also often the vehicle by which the lowest income people, gain access to economic opportunities – per capita income figures indicate that there are still big inequalities in terms of the distribution of income and wealth in South Africa and in this Province in particular.

The stimulation of SMMEs is part of an integrated strategy to take our economy onto a higher road - one in which the economy is diversified and manufacturing & service orientated.

This 2002/2003 financial year an allocated amount of R8. 972 million has been set aside for accelerated SMME development. Some of the existing programmes will benefit from this allocation. However, a new procedure of disbursement of funds will be followed. This procedure amongst other things will involve agreements with service agencies on specific objectives and outputs. Business plans will have to be submitted before any transfers can be affected.

My Department is also in the process of upgrading this Directorate and new appointments to extend the work of the Department to the districts in the Province are in the process of being finalised.

INVESTMENT PROMOTION, TRADE AND RESEARCH

International exposure for Free State manufacturers: Participation in South African International Trade Exhibition (SAITEX): Once again, the Free State did very well and received a gold award as well as the overall award trophy in the last SAITEX. [Applause] Free State products were getting a great deal of interest from local and foreign buyers. Through this event the Free State also gained substantial media exposure, which enhance the perception of the Province.

Promotion of exports: The Free State Province is the first province in the country that introduced an ‘Export Award’ presented by the hon Premier to encourage our businesses to become globally competitive. The hon Member, Mr Alec Erwin, National Minister of Trade and Industry, has also highlighted that the Free State has taken the lead in the country. [Applause] During 2001, 25 applications were received for the Premier’s Award for Export Excellence.

Attracting investment into target growth sectors: The Free State’s economic base is getting more diversified with investments in gold jewellery manufacturing, agro-industry and chemicals down-streaming. The Bhagwanji Group from Dubai has opened their jewellery-manufacturing factory in January 2002, representing a total investment of R67 million and a substantial number of new job opportunities. Another company, Royal South African Manufacturers (RSAM), which is a joint venture between Canadian & USA partners, has located in the Jewellery Hub.

Facilitation of inward-buying mission: Organised an inward-buying mission from West and East Africa to attend the NAMPO exhibition in Bothaville during last year. According to feedback received, orders were confirmed to the value of R1.72 million.

Business Support: Various meetings with business people in the Free State have taken place during the past year so as to determine current economic activities as well as to identify possible problems well in advance. In most cases, the Directorate could intervene, especially to prevent business closedowns. Soft Toy Factory in Qwaqwa and the furniture factory in Harrismith are still operating despite problems they face.

Research projects: The new Research Component in the Directorate is fully functional. Various research projects were conducted, for example reports on chemical downstreaming, leather tanning and finishing, gold jewellery manufacturing, production of silk, organics farming, and so on. Currently this Unit is busy with research to benefit the Xhariep region in the Southern Free State – this project entails the production of natural latex.

4. THE 2002/2003 – 2004/2005 MTEF EXPENDITURE PROPOSALS

4.1 GENERAL OVERVIEW OF PROPOSED EXPENDITURE

I wish to take the hon House to the 2002/2003 – 2004/2005 MTEF Expenditure Proposals.

An amount of R178.950 million is budgeted for this Vote in 2002/2003, which includes transfer payments of R50. 420 million and R793 000 to the Free State Development Corporation and the Economic Advisory Council respectively.

Excluding the amounts earmarked for transfer payments, the 2002/2003 allocation to this Vote increases by 17,35% compared to the 2001/2002 budget. The restructuring of the Department, to include the Economic Affairs component effectively as from 1 November 2001, had implications for the macro organisational structure of the Department. New senior management positions have been created and filled in order to strengthen this echelon.

Two new components were created at the level of Chief Directorate: Tourism and SMME, which comprise of Tourism and Economic Affairs components and Conservation and Environmental Affairs. Central Management was strengthened to include the office of Chief Financial Officer, Special Programmes and Head of Security. The new directorate, Finance and Provisioning, was also created and posts in that regard have been filled. Transversal functions were co-opted from the former Department of Finance Expenditure and Economic Affairs. Furthermore, the Free State Tourism Marketing Board was disestablished with effect from 10 September 2001 to form part of the new Department.

The main components within the Department, namely Tourism, Environmental and Economic Affairs complement each other in terms of their respective contributions to economic growth and job creation, poverty alleviation and people development. Together they form a central thrust geared towards economic development.

The Department’s allocation grows to R189.750 million in 2003/2004 and R201.150 million in 2004/2005.

I will now be dealing with the expenditure proposals.

The 2002/2003 EXPENDITURE PROPOSAL

The relative shares of expenditure on departmental programmes, will be as follows in 2002/2003:

Programme Percentage of total allocation

Central Management : 2,39%

Tourism & SMME Promotion : 25,95%

Corporate Services : 5,32%

Finance & Provisioning : 2,15%

Conservation & Environmental Affairs : 35,57%

Transversal Functions : 28,62%

2002/2003 EXPENDITURE PROPOSALS PER PROGRAMME

I now wish to deal with the detail of the expenditure programmes and their respective subprogrammes.

EXPENDITURE ON PROGRAMME 1: CENTRAL MANAGEMENT

This programme’s expenditure will be R4.283 million, R4. 508 million and R4.673 million over the 2002/2003 – 2004/2005 MTEF period.

The aim of this programme is to conduct the overall management of the Department with specific focus on:

· Policy formulation, guidance, leadership and administrative support, which enhances service delivery;

· Redressing gender inequality in society in general and the workplace in particular;

· Effectively mainstreaming the disabled into departmental projects and programmes; and

· Ensuring ongoing effective HIV/AIDS awareness programmes.

EXPENDITURE ON PROGRAMME 2: TOURISM AND SMME

An amount of R46.434 million is budgeted for expenditure on this programme in 2002/2003, increasing to R52.715 million and R58.064 million in 2003/2004 and 2004/2005 respectively.

Subprogramme SMME Development: Greater emphasis on SMME development.

Unemployment is the major cause of widespread poverty in South Africa. As a result of large-scale unemployment, just under 50% of the total South African population, predominately the historically disadvantaged, falls below the poverty line. This situation is even worse among female-headed households and especially in rural areas where 40% to 58% of the population is without work.

Hence, the fact that SMMEs have a major role to play in the South African economy in general and the Free State economy in particular, in terms of:

1. Employment creation;

2. Income generation; and

3. Economic growth.

We must make sure that more people share the benefits of higher economic growth. The vicious circle whereby the inequality between the poor and the rich get bigger should be broken. People must be given the opportunity to participate in the mainstream economy and take advantage of the benefits. How do we hope to achieve this?

Without being overly interventionist, we would like to facilitate the process whereby SMMEs are able and do take up economic opportunities that exist. The key to this is that economic opportunities presented by forward and backward linkages should be turned into viable and sustainable business ventures. It leads to lower business risk and can enhance the success rate of newly established SMME businesses. However, all those who participate in business should be alert to reality and be prepared to take and share in the risk involved. Aftercare is also very important to ensure the sustainability and success of SMMEs. For this to happen, one needs effective business support, both financial and non-financial.

This subprogramme’s focus in 2002/2003

As part of a new approach, my Department will be implementing a regional focus, whereby we will be establishing regional offices. These regional offices, with SMME and Tourism development advisors, will operate in a coordinated manner with all development agencies so as to accelerate SMME and Tourism development. This implies that district municipalities, development agencies such as Khula, Ntsika and others all link up with the regional offices in order to provide a proper service to the people at grassroots level.

A concerted effort will also be made to co-ordinate SMME support activities amongst the different departments within the Province to ensure that job creation efforts are maximised and are distributed equally amongst the departments.

Within 3 months, my Department will initiate a consultative process throughout the Province so as to capture the expectations and programmes of SMMEs and deal with aspects such as affirmative procurement.

As a follow-up to the latter, a database will be established, indicating the type of business activity, ownership, size, skill pool and capacitate the SMMEs in the Province as well as indicating the support they require from Government.

As part of the new approach to SMME development, agreements will be entered into with SMME service providers so as to perform certain functions, which fall outside the capabilities of the Department. Funding will be provided in accordance with the PFMA regulations and in terms of the agreements reached.

Other important focus areas of this subprogramme on SMME will be to effectively assist in:

· Identifying markets for SMMEs;

· Increasing exposure of SMMEs to target markets;

· SMMEs Capacity to Respond to Market Opportunities;

· Increasing SMME Access to Capital;

· Formation of business consortiums

· Fostering forward and backward linkages; and

· Promoting women participation

Subprogramme Tourism

Tourism is a multi-faceted industry that stimulates the development of infrastructure such as roads, railways, air travel and public transport as well as accommodation and services. Accordingly, tourism encourages economic activity through various forward and backward linkages. Furthermore, tourism presents communities, SMMEs and the informal sector with opportunities for entrepreneurship.

My Department acknowledges the pivotal role of the tourism industry in the Free State, especially in terms of its potential contribution to economic growth and job creation, poverty alleviation and as a major income generator. Hence, funding will be channeled towards the development of the tourism industry in the Free State Province. We have to establish the Free State as a destination for both national and international tourists.

The Free State has to be explored for its diverse tourism attractions – from the beautiful, majestic mountains in the east to the vast open spaces of the Southern Free State. The Province is a paradise for watersport enthusiasts, as the Free State is home to four of the largest dams in South Africa.

True to the spirit of the African Renaissance, the Free State is embarking on a partnership with the Lesotho Government for the marketing of the Maluti Route, which will include the mighty Katse Dam.

Other focus areas and objectives for 2002/2003 for this subprogramme are:

· Development and Implementation of the “Free State Tourism Development Plan”, which will be spearheaded by the tourism infrastructure investment strategy;

· Tourism Routes Development and Promotion to add value to the current achievements, starting with roadshows and other marketing strategies like branding, packaging, and putting them on the Free State Tourism website that will be re-launched early this year;

· Tourism Awareness Campaign – the new look awareness projects that target the Free State Schools’ Entrepreneurs Club and the Free State Travel and Tourism Club. They have been designed for tourism entrepreneurial culture in our schools and as such will be launching pads for generating tourism related business opportunities for school leavers.

Subprogramme Liquor & Consumer Affairs

The main focus of this subprogramme in 2002/2003 remains liquor licensing, consumer protection and trade inspections to ensure regulated distribution of liquor and the elimination of unfair business practices through ensuring compliance with trade legislation.

Subprogramme on Investment Promotion

In terms of restructuring the Free State economy, I am glad to report that my Department’s efforts are reaping positive results. In brief, the progress is as follows:

· Establishing a world-class jewellery-manufacturing hub in Virginia.

· Investments already committed & operational in the Jewellery Hub include: Oro Mask, Bhagwanji group, Jewellery School, and Royal South African Manufacturers (RSAM). Possible new investments from Italy are currently being negotiated.

· The Virginia Jewellery School is functioning well, with the students already undergoing substantial training. This subprogramme is currently investigating possibilities to afford these students international exposure through exchange programmes in co-operation with the Vicenza Jewellery School in Italy.

Establishing the Eastern Free State as South Africa’s Agro-processing Hub: This is done through inter alia exposing commercial and emerging farmers to opportunities for value-adding to traditional agriculture products, namely: fruit juices, canned fruit and vegetables, new crops such as herbs, essentials oils and so on.

The main focus areas and objectives for 2002/2003 for this subprogramme are:

· To facilitate the expansion of existing businesses;

· Concentrating on forward and backward linkage opportunities;

· Attracting Foreign Direct Investment (FDI) into target growth sectors of the Free State Province;

· Facilitating joint ventures;

· Special emphasis on trade promotion and trade development;

· Facilitating the development of the Agro-industry through diversification and beneficiation; and

· Promoting the formation of business consortiums in order to affect economic empowerment.

EXPENDITURE ON PROGRAMME 3: CORPORATE SERVICES

The main focus of this programme is to optimise departmental performance through the implementation of the National Skills Development Strategy. Estimated expenditure on this programme over the period 2002/2003 – 2004/2005 will be R9.517 million, R10.451 million and R11.558 million respectively.

EXPENDITURE ON PROGRAMME 4: FINANCE & PROVISIONING CONTROL

Estimated expenditure on this programme over the period 2002/2003 – 2004/2005 will be R3.844 million; R3.999 million and R4.199 million respectively.

The main focus of this programme is to ensure proper administration of departmental finances, in collaboration with the departmental CFO, through:

· Monitoring of expenditure and revenue collections;

· Adherence to financial prescripts;

· Management of assets and losses; and

· Maintenance of appropriate procurement and provisioning procedures.

Furthermore, the programme is also responsible for conducting internal auditing in the Department, as well as interpreting financial prescripts and disseminating information for various levels of management. My Department has established an internal audit unit as well as internal financial control systems to ensure effective and prudent utilisation of resources.

EXPENDITURE ON PROGRAMME 5: CONSERVATION AND ENVIRONMENTAL AFFAIRS

An amount of R63.659 million is budgeted for expenditure on this programme in 2002/2003, which will increase to R66.531 million and R69.136 million in 2003/2004 and 2004/2005 respectively.

The 2002/2003 focus areas for this programme are inter alia:

· The protection, conservation and management of the bio-diversity in the Free State provincial reserves;

· To ensure efficient maintenance of eco-tourism facilities in the province;

· To ensure a clean and healthy environment with a view to promote tourism.

EXPENDITURE ON PROGRAMME 6: TRANSVERSAL FUNCTIONS