Budget speech 2009/2010: Department of Economic Development and Tourism (Vote 12)

The Department of Economic Development and Tourism is about stability and growth. But more so, it’s about the need to bring dignity to the people of our province. This means affording them the opportunity to empower themselves through employment, and access the resources that will assist them in this endeavour. Wherever possible within the constitution, government must create the environment for business to prosper and grow.

Speaker, it is still early days, and between now and adjustments appropriation period, we will be looking very closely at the programmes under this department to assess the value that they add. We must be honest with ourselves in this regard, and where necessary, make changes that will create opportunities and allow for growth.

We will do this with the aim of creating an open opportunity society for all, where race, colour and creed are not determining factors in “who gets what”, and proximity to the state has no bearing. We must be fair, and support those who cannot support themselves, so that they can lift themselves from poverty to fulfill their own goals and dreams.

Speaker, the budget that I will shortly put forward to you in this house has to take the world recession into account as it impacts on every facet of this department’s work:

• In recent months, we have seen restaurant closures around our City and Province


• We see a distressing number of “To Let” signs in the cleared out windows of retailers


• The auctions and sequestrations component of our newspapers is growing by the day. In fact, according to Stats SA, the total number of liquidations for the first four months of 2009 has increased by 45.3% when compared with the first quarter of 2008 (to reach a figure of 1357). Insolvencies for this same comparative period rose by 10.5%.

The economic crisis has had an effect on our tourism industry too, which saw a 12-15% decline in international tourist arrivals in the last two quarters of 2008

The good news is that, ironically, because we are not blessed with minerals, we have not been affected by the bust in commodity prices as badly as our northern cousins.

For most of the last year, the Rand, while volatile, operated in a range which favoured dollar-priced exports. The fresh and processed foods and beverages which dominate our export basket have not been affected as dramatically as other products by the decline in consumer spending in the EU, our main market.

Indeed, our wine export market has managed to take advantage of the downturn, and in real terms, has made use of the exchange rate difference to sell quality wines at affordable prices to those spending euros and dollars. According to UK newspaper The Independent, South Africa’s wine industry, much of which resides in the Western Cape, is ranked 8th in the world based on volume of production.

Despite these positive points, the challenges for Vote 12 haven’t been this tough since 1994.

Our mission as a Department remains the same: We must grow the economy in a sustainable way and maximise participation by all citizens in the financial system. We must find mechanisms to make it easier to do business in our Province. For example, we must apply appropriate regulations to business where necessary, but cut red tape elsewhere.

• Our strategic goal is to foster sustained economic growth that promotes jobs.


• Our overriding objectives are to combat poverty and promote opportunities for all.


• We will do so through policies, strategies, programmes and activities


• That encourage sustained economic growth


• That attract, develop and retain skills


• That attract, develop and retain capital


• That drive infrastructure development.

The Department has a leading role to play in the achievement of all these strategic objectives.

Speaker, over the MTEF period an amount of R906-million has been provided to Vote 12, with a mandate to develop the economy. A provision of R276.4-million has been set aside for the current fiscal year.

We will spend the voted funds to:

• Develop our Industries and Economic Sectors


• Facilitate and recruit new investment


• Facilitate and recruit new trade opportunities


• Market the Western Cape as an exciting destination for tourism, and an exciting place to do business


• Develop the skills and increase the productivity of our workforce


• Enhance the global competitiveness of our firms and citizens


• Promote innovation


• Help citizens and investors to establish new businesses


• Help firms to grow and develop


• Assist municipalities to develop their local economies


• Empower our citizens to participate fully in a single, integrated economy


• Create jobs as a consequence of all of the above


• Undertake research


• Regulate the Liquor Industry


• Offer services to protect consumers.

Speaker, at this point I would like to introduce some of the detail of Vote 12.I would like to begin with the Programme called Trade and Sector Development, which is one of two programmes dedicated entirely to developing economic sectors.Some R53.5-million, about 9.2 percent more than last year, has been set aside for this programme.

It deals directly with 9 sectors:

• The Oil and Gas Services and Support Industry


• Boatbuilding


• Information and Communications Technology


• Business Process Outsourcing


• Agri-Processing


• Tooling, Metals & Engineering


• Clothing, Textiles and Fashion


• Aquaculture


• Furniture

Most of our Government’s interventions in these industries are achieved through sector bodies. The sector bodies also provide a platform for Government and Business to engage on the key constraints facing the industry and how to take advantage of opportunities.

They have a membership base of about 11,300 stakeholders, which ensures that the reach of the Department’s programmes extends deeply into these industries.

This administration will support and help small and medium businesses to grow. We will strengthen the monitoring of current interventions. As I stated earlier, we must assess whether we are using taxpayers money wisely, and where necessary, be unafraid to make adjustments. As the Premier stated in her budget speech last Friday, we need to measure outcomes in terms of our strategic goals, and not just quantitative outputs.

Through this budget, we will fund and expand selected programmes.

A focus area will be continued support of the bandwidth barn as an incubator for start up ICT companies.

We will also assist the Furniture and Aquaculture industries to establish sector bodies.

As a result of the overfishing of our waters, and global depletion in wild stocks, our Aquaculture industry has the potential to grow from being relatively small, supplying just 0.01% of the world’s total production, to one which employs 44,000 people, and adds R2.5 billion to our economy. Last year for the first time, farmed fish supplied more produce to the world market that wild fish, and we cannot be left behind. The Western Cape, with our intervention, has the potential to supply 44% of the growing South African output, and so, in conjunction with the Ministers of Agriculture and Environmental Affairs, we will look at finding ways to grow and promote this industry, while bearing its environmental and tourism impacts in mind. The department is putting R1.1-million into this initiative for the coming year, and this amount will likely grow in years to come.

One of the key tenets of this Government’s approach is the recruitment and retention of capital.

R23.1-million has been set aside for Wesgro to carry out trade and investment promotion and facilitation. We will be working together with the City, which has granted Wesgro additional support of about R8.2-million in the current fiscal year. This government will ensure that these funds leverage maximum benefit for the City and province. This will be maximised through Wesgro’s incorporation into the new dashboard management system.

Another change on the immediate horizon is that Wesgro and each sector body which we fund will develop a single, integrated international marketing strategy for each sector. The sector bodies will be able to access funds for this purpose through Wesgro.

The Department’s initiative called Cape Catalyst is also intended to accelerate economic growth in the Western Cape. One of the immediate tasks of the unit is to maximize the opportunities which will arise from bringing off-shore gas from Forest Oil’s iBubhesi Field. We hope to make an announcement on this within the next few weeks.

Through this programme, some R5.5-million has been earmarked for innovation projects.

Speaker, let me turn to Tourism, Arts & Entertainment, which is the second of our industry development programmes.

The Western Cape remains South Africa’s most developed tourism region. Our tourism industry has grown faster and created more jobs than any other industry in this province. One in 10 employees in the Western Cape earns a living in the Tourism Industry and it contributes more than R25-billion to the Provincial economy.

The bad news is that the Western Cape received 1.63-million international arrivals in 2008, down 7.5 percent year-on-year. This decline is mostly in our traditional core markets: the UK, Germany and the Netherlands. We believe that this is a temporary phenomenon related to the recession.

The good news is that the decline in numbers has not affected the overall yield in the industry and I am glad to announce that the amount spent by foreign tourists has, in fact, shown a year-on-year increase of 16.2 percent, from R17.9-billion in 2007 to R20.8-billion in 2008. Our visitors from abroad are staying longer and spending more. This is particularly true of the wealthier, high-yield luxury travellers.

Some R72.8-million, about 11.8 percent more than last year, has been set aside for this programme. More than half of this amount is allocated to fund the marketing of the destination.

In the run-up to the FIFA World Cup in 2010, R38-million has been earmarked for Cape Town Routes Unlimited, our tourism destination marketing organisation. This represents a more than 40 percent increase on last year’s amount.

Yesterday, high-level talks were held between Cape Town Routes Unlimited, Cape Town Tourism, the City of Cape Town and ourselves where positive discussions were held on the future alignment of our destination marketing initiatives. It was agreed at the meeting that the Joint Marketing Principle is most advantageous, and I am optimistic that cooperation will resume – we have set a road map in this regard.

Last year we obtained value for our investment in CTRU:

It secured important international joint-marketing ventures. The most successful were the LastMinute.com campaign in the UK, USA and Germany, which resulted in bookings of Western Cape tourism products worth R9.4-million, and the Travelmood campaign in the UK, which brought in bookings worth R23-million to the destination.

 

• Its Conventions Bureau secured 15 conferences and incentive meetings. On this note, I would like to express my sincere congratulations to the staff at the CTICC, who saw to it that their occupancies were on par with, and in some cases exceeded, European and other first world countries.


• Developing the infrastructure of the destination has also been accounted for in this budget.


• We are in the process of investing R1.1-million, in partnership with SANParks, for the improvement of one of our least developed tourism icons, the Southernmost Tip of Africa at Agulhas.


• The Western Cape now has Provincial Tourism Gateways in Beaufort West, Vanrhynsdorp and the Storms River. The gateways are entry points to the Province at which we welcome tourists and entice them to visit our many attractions across the Province.


• The biggest infrastructure development project on which we are engaged is the attempt to breathe life back into another tourism icon, the Outeniqua Choo Tjoe.


• So far we have finalised feasibility studies for the commercialisation of the George-Knysna and the George-Mossel Bay lines. In the next few days we will meet Transnet, the line operator, in an attempt to put together an attractive set of investment possibilities which we hope business and the local and affected tourism communities will take up together.

Funding has been set aside in this budget to continue skills development for the tourism sector.

Speaker, in line with practice in the UK and elsewhere, the department has aligned the development of the commercial arts and entertainment industries with that of Tourism.

The priority in this budget is the development of a basic public sector support regime for the rapid development of the Commercial Arts & Entertainment Industries. To this end, R8.2-million has been set aside for this sector.

The Film industry reported higher than expected turnover. Products to the value of R1.5-billion were made here, largely facilitated by the Cape Film Commission. Of this amount about R940-million was spent on making feature films and television series and R103-million on Commercials and Animation.

The Department also supports the craft sector, providing opportunities and support to the 2,300 members of the Cape Craft and Design Institute. However, specifically in this sector, we need to learn to understand the market, and empower and assist crafters to deviate from the norm by producing goods with a Western Cape flavour.

In the Music, Performing Arts and Visual Arts sub-sectors, our strategy is to assist performers and artists to develop products which can compete effectively in international markets.

This year’s budget sets aside R81.5-million for skills development, enterprise development, local economic development and economic empowerment. This represents a 19 percent increase over last year’s budget. Once again, we need to measure the outcomes, and not the outputs. The same applies to recruitment, development and retention of skills. The provision for skills development specifically, in this budget, is R19.5-million, an effective 38 percent up on last year’s baseline figure.

Programmes will be financed in most sectors with amounts of R2.6-million earmarked for training in the Oil & Gas Services & Support Industry, R1.8-million in film and R1.1-million in Boatbuilding, to name a few.

In addition, R12-million is available to launch an exciting new intervention, called Work & Skills for Youth. Under this scheme, vouchers of R1000 per month will be rolled out to employers willing to intern youths at their place of business for a calendar year. At the end of the period, the employer should take the staff member on full time, or have ensured that he or she is employable elsewhere.

The aim is to provide the new entrants into the workforce with the opportunity to acquire the skills and experience they will need to compete effectively for jobs, and to create their own jobs through self-employment.

For this programme to succeed, we need the full commitment of the Private Sector to become involved. And so, in the next few weeks, I will be appealing publicly to Western Cape businesses to join this Government in creating such opportunities for our Youth.

I will also be calling on those who are willing to donate their time, to mentor and assist participants to set up and run their own businesses.

We are investigating the establishment of a project called the Legacy Mentorship Programme. This programme will be aimed at attracting people with skills who have time to join us in creating a thriving economy, while ensuring that they individually leave a legacy and know that their investment in the future of the targeted emerging economy doesn’t go unnoticed.

Our enterprise development interventions are organised under the banner of the Real Enterprise Development or RED Initiative which has been allocated a budget of R38.2-million, 28 percent up from last year. Its foundation is the RED Door Offices, which cost a lot of money to set up. They were formed to provide a place where people with ideas can bring their dreams, a place where their dreams can be transformed. At present, no follow up support is given to enterprises that are assisted by RED Door. When they fail, their operators feel a keen sense of disillusionment and disappointment, and this has to change: We need to add to it by creating a back end to take it further than it currently goes. We also need to link the Legacy Mentorship Programme into it, and link in an interface for venture capitalists to fund and grow good ideas.

Another development in this regard will be the roll-out of the RED Networking Clubs, a project that encourages small business owners to interact and share their experiences in order to improve their own businesses.

Funding for local economic development, at R12.8-million, is nearly twice that of last year. This amount will fund direct assistance to 1) municipalities, so that they can refine their Integrated Development Plans, 2) Die Plek Plan and 3) The Rural Economic Assistance Fund.

Speaker,

This year’s budget provides R20-million for the establishment of a new Liquor Board with a mandate to play a vital proactive role in ensuring that these negative social and economic consequences of the excessive consumption of liquor are overcome.

The Liquor Act, which will give rise to the Board, was passed by this House in November 2008, but only partially passed into law by the former. As a consequence, it has not been enforceable. We need to ensure that this process is completed properly.

The new Act will bolster our efforts to rid the Province of the scourge of illegal and irresponsible trading in liquor by shutting down illegal outlets.

The new Liquor Board was supposed to be in place by the start of this fiscal year.

However, a problem arose whereby the Act had to be considered and approved by the Minister of Trade & Industry, who has indicated that he required a single clause, which is in conflict with the Schools Act, to be excised. Shortly after taking office, I met with the National Minister and we have agreed to bring an amendment so as to align our legislation with that of the schools act.

Speaker, I have set in motion a process which I hope will lead to this House approving the amendment at the earliest possible time.

This will allow me to publish the regulations, advertise and appoint a governing Board and open the doors of the new Liquor Board for business. We will be embarking on an education campaign in this regard.

Speaker, as you are aware, the initiatives I have presented thus far do not simply emerge from thin air. They arise from the Micro-Economic Development Strategy of the Provincial Government, known as the MEDS.

In this financial year, the MEDS will revisit some of the sectors and cross-cutting theme studies undertaken 5 years ago, and I would also like to see this process working closely business so as to ensure that it is relevant to the changing economy.

Finally, in closing, I must congratulate the Department for receiving a Level 3 grading and for being the top performer in the Province. But this is only a good rating, which shows that we still have some ways to go.

I would like to use this opportunity to thank the staff of the Department of Economic Development & Tourism for their hard work in developing this budget.

I would also like to thank my staff in the Ministry for their tireless and excellent support.