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					                            SETA COORDINATION

                                                        Enquiries: Dr. F. Prinsloo
                                                       Tel. Direct: (012) 309-4724
                                                                    30 March 2006

To    All SETA Chairpersons
      All SETA Vice Chairpersons
      All SETA Chief Executive Officers


Dear Colleagues


Aligning SETA Service level Agreements for 2006 – 2007 with ASGI-SA

At the meeting held on 24th October 2005 between the Director General: Labour
and all Public entities, the Accelerated Shared Growth Initiative of South Africa
(ASGI-SA) was introduced to all SETA representatives.


At that meeting it was noted by the Director General that there is a need to re-
engineer SETAs in line with ASGI-SA. This need is precipitated by the fact that
SETAs have been clearly recognised by all role players as vital to implementing
the skills development initiatives that are required to support ASGI-SA.


At the SETA Forum dated 27th January 2006 all SETAs were also given a copy of
the draft ASGI-SA project database that detailed the 100+ projects that are
included in ASGI-SA. SETAs were requested to study the document but not
respond at that time since ASGI-SA had not been approved by Cabinet.
.

The ASGI-SA has now been formally released at the JIPSA launch held in
Pretoria on Monday 27th March 2006. All skills development implementation
agencies, foremost of them being SETAs, are thus now in a position to formally
align their work to ASGI-SA.


SETAs are thus requested to review their service level agreements for 2006 –
2007 in line with the now final ASGI-SA and where possible re-align their
activities to ensure that the SETA supports relevant ASGI-SA categories.
Not all ASGI-SA categories will be relevant to all SETAs, but where applicable
efforts should be made to ensure alignment. To assist with this process an
additional Schedule has been added to the SLA for 2006 – 2007. This Schedule
7 is attached to this letter.


All the Sector Liaison Managers have been briefed on the completion of this
schedule and can assist the SETAs. In addition to the revision of the SLA, there
are other minor amendments that we have introduced to the SLA to make the
agreement more accurate.


While we acknowledge that this additional revision of the Service Level
Agreement will delay the process of concluding the service level agreements
between the DG: Labour and the SETAs for 2006 - 2007, we believe it is critical
that all SETAs align their work to ASGI-SA as the primary growth initiative of the
country.


The Director General has scheduled a further meeting with all Public Entities
including SETAs on the 12th April 2006 and he may further discuss issues related
to ASGI-SA in the context of SETA activities.


Revised Service Level Agreements should be submitted to the Department for
consideration by the Director General by the 31st May 2006.

Your sincerely




Dr Florus PJ Prinsloo
Acting Senior Executive Manager


cc    Director General: Labour
      Acting DDG: ESDS & HRD Branch
      SEM: National Skills FUND
      EM: SETA Support
      Acting EM: SETA Performance Management
                                  Service Level Agreement

                                                                 Page 1 of 5




                            SERVICE LEVEL AGREEMENT

                                         Between

                             The Director-General: Labour

                                           And

                                   ___________ (SETA)

___________________________________________________________________




                                       CONTENTS




  1   Definitions                                               2

  2   Purpose of SLA                                            2

  3   Duration of SLA                                           2

  4   Obligations of SETA                                       3

  5   Measuring and evaluating the SETA’s performance           3

  6   The obligations of the Director General                   4

  7   General                                                   4

  8   Annexure                                                  4

  9   Signatures of the parties                                 5
                                 Service Level Agreement

                                                                               Page 2 of 5




1   Definitions

    In this Agreement:

    1.1   “Director-General” means the Director-General: Labour;

    1.2    “NSDS” means the national skills development             strategy   2005-2010
          contemplated in section 5(1) (a) (ii) of the SDA;

    1.3   “Parties” mean the signatories to this SLA;

    1.4   “PFMA” means Public Finance Management Act, 1999 (Act No 1 of 1999)

    1.5   “SDA” means the Skills Development Act, 1998 (Act No. 97 of 1998).

    1.6   “SETA” means the SETA party to this SLA; and

    1.7   “SLA” means this Service Level Agreement and includes the Schedules to this
          SLA;



2   Purpose of SLA

    The parties have entered into this SLA in order to determine:

    2.1   The levels of service delivery required of the SETA in:

          2.1.1   Performing its statutory functions;

          2.1.2   Meeting the NSDS targets; and

          2.1.3   Implementing its annual strategic plan;

    2.2   The standards, criteria and targets for measuring and evaluating the SETA’s
          performance;

    2.3   The plans and reports to be submitted by the SETA to the Director-General for
          purposes of measuring and evaluating the performance of the SETA’s
          obligations in terms of this SLA;

    2.4   The assistance that the Director-General will provide to the SETAs with the
          purpose to enable it to perform its functions; and

    2.5   The SETAs PFMA compliance responsibilities.



3   Duration of SLA

    This Agreement commences on 01 April 2006 and terminates on 31 March 2007.
                                Service Level Agreement

                                                                                 Page 3 of 5




4    Obligations of the SETA

     4.1   The SETA undertakes to comply with the standards, criteria and targets
           contained in Schedule 1 in respect of:

           4.1.1   Performing its functions under the SDA;

           4.1.2   Meeting the NSDS targets; and

           4.1.3   Implement the Annual Strategic plan.

     4.2   The SETA undertakes:

           4.2.1   To review the draft annual strategic plan for 2006 - 2007 which is
                   contained in Schedule 1 and submit the reviewed document duly
                   authorised to the Director General by 30 November 2005;

           4.2.2   To implement its annual strategic plan for 2006 - 2007 which is
                   contained in Schedule 1;

                   4.2.2.1. To submit plans and reports to the Director-General containing
                            the information in the format set out in Schedules 2a – 2e.
                            Within the after the end of June, September, December and
                            March; and

                   4.2.2.2. Schedules 2c and 2d should be submitted ten working days
                            after the end September and March.

           4.2.3   Respond to any written inquiry from the Director-General within 20
                   working days or, if this is not reasonably practicable, to provide the
                   Director-General within this period with a reasonable time-table to deal
                   with the inquiry; and

           4.2.4   To submit all PFMA document requirements as set out in the Schedule
                   5 to the responsible officer within the stipulated time frames and in the
                   following time frames:

           4.2.5   Schedules 2a, 2b and 2e should be submitted ten working days
                   prescribed formats.



5    Measuring and evaluating the SETA’s performance

    5.1 The SETA in collaboration with the Department will undertake between 1st April and
         30th August each year a self assessment of its performance in accordance with the
         standards, criteria and targets set out in the SETA Performance Assessment
         Scorecard and submit such annual assessment to the Director General by the 10th
         working day of September each year.
                                 Service Level Agreement

                                                                                  Page 4 of 5




6    The obligations of the Director-General

     The Director-General undertakes:

     6.1   Consult the SETA on all relevant policy and strategic matters that might affect
           the functioning of the SETA;

     6.2   Promote the interests of the SETA and SETAs collectively to other organs of
           State as may be appropriate and necessary;

     6.3   Provide the SETA with:

           6.3.1   Guidance on Sector Skills Plan and Strategic Plan requirements; and

           6.3.2   Additional assistance as may be described in Schedule 4 in order to
                   enable the SETA to perform its functions;

     6.4   Respond to any written inquiry from the SETA within 20 working days or, if this is
           not reasonably practicable, to provide the SETA within this period with a
           reasonable time-table to deal with the inquiry; and

     6.5   Convene regular meetings with the Chief Executive Officers, Chairpersons and
           other SETA officials as and when are necessary, to consider strategic matters
           and to provide forums for discussing emerging policy issues and exchanging
           ideas on best practice.

7    General

     7.1   Subject to clause 7.2, any amendments to this SLA must be in writing and signed
           by both parties.

     7.2   No relaxation, extension or indulgence which either party may grant to the other
           will constitute a waiver of any right of that party in terms of this SLA or any
           applicable law and does not preclude a party from exercising any rights which
           may have risen in the past or which may arise in the future.

8    Annexure - The following Annexure form an integral part of this SLA:

    Schedule 1:    SETA Annual Strategic Plan for 2006-2007

    Schedule 2a (i): SETA Financial Quarterly Reporting Template

    Schedule 2a (ii): SETA Multi Year Projection of Revenue and Expenditure

    Schedule 2b    SETA NSDS 2005 – 2010 Quarterly Reporting Template

    Schedule 2c    SETA Board Member Profile Reporting Template
                                   Service Level Agreement

                                                                                 Page 5 of 5




    Schedule 2d     SETA Staff Member Profile Reporting Template

    Schedule 2e      SETA Disaggregated Learning Programme Reporting Template

    Schedule 3:     Annual Performance Assessment Rating Scale

    Schedule 4:     Template for Requesting assistance from the Director-General

    Schedule 5      Framework of Documents to be Submitted in Terms of PFMA

    Schedule 6:     Materiality and Significant Framework

    Schedule 7:     SETA Initiatives in support of ASGI – SA



9      Signatures of the parties

For the Director-General                       For the SETA (Chairperson)

_______________________________                _____________________________

Date                                           Date
_______________________________                _____________________________

Address                                        Address (Physical Address)

_______________________________                _____________________________

_______________________________                _____________________________

                                               For the SETA (Vice Chairperson)

                                               _____________________________

                                               Date
                                               _____________________________

                                               Address (Physical Address)

                                               _____________________________

                                               _____________________________
SETA Service level Agreement for Period 2006 – 2007           Schedule 7

SETA Initiatives in support of ASGI-Settlement Agreement


ASGI-SA Category        SETA Contribution to            Partnerships and/or
                         ASGI-SA Category              Information Required

Infrastructure
Investment



Sector
Strategies



Education and
Skills Development



Eliminating the
Second Economy



Macro
Economic Issues



Governance and
Institutional
Interventions



Note – All SETAs were given documentation on ASGI-SA at the JIPSA launch. It is
also attached as a pdf file with this schedule.
 Accelerated and Shared Growth Initiative for South
                 Africa (AsgiSA)
   1.   The challenge
   2.   Binding constraints
   3.   Infrastructure investment
   4.   Sector strategies
   5.   Education and skills development
   6.   Eliminating the Second Economy
   7.   Macro-economic issues
   8.   Governance and institutional interventions
   9.   Conclusion


The challenge
The South African Government was mandated in 2004 to halve poverty and
unemployment by 2014. These objectives are feasible – indeed we would hope to
surpass them – because of steady improvement in the economy's performance
and job-creating capacity.

Growth averaged about 3% during the first decade of freedom, from 1994 –
2004, a considerable improvement on the decade before 1994 when growth
averaged 1% per year. Since 2004, growth has exceeded 4% per year, reaching
about 5% in 2005. Expectations for the current strong performance to continue
are high — forecasts by banks and ratings agencies generally indicate
expectations of growth continuing at around 4.5% in the medium term. Business
confidence is very high. The Rand Merchant Bank/Bureau for Economic Research
business confidence index, with 86% of firms expecting the continuation of
improving business conditions, has remained at high levels for an extended
period. “Such a period of uninterrupted positive confidence has not previously
been recorded in the 30-year history of the index”, according to Rudolf Gouws,
chief economist at the Rand Merchant Bank. Consumer confidence has shown a
similar pattern.

Inflows of foreign capital have been exceptionally high since 2003, with an inflow
of R80 billion (about US$13 billion) into the JSE share market between the
beginning of 2005 and the first quarter of 2006. In the same period South Africa
has also had several very large inward foreign direct investment transactions.

Good economic policies, positive domestic sentiment, and a favourable
international environment have created the opportunity to consolidate these
gains, and to take our performance to a yet higher level.

With the faster growth rate has come rapidly improving employment creation. In
the last year measured (to September 2005) around 540 000 net new jobs were
created. Though unemployment remains high at over 26%, this is considerably
better than the 32% unemployment rate reached a few years ago. Recent
research indicates that the real incomes of the poorest 20% of South Africans
rose by 30% in real terms between 1994 and 2004.
Yet, the goal of reducing unemployment to below 15% and halving the poverty
rate to less than one-sixth of households will not be achieved without sustained
and strategic economic leadership from government, and effective partnerships
between government and stakeholders such as labour and business.

Consultation

As we explored our opportunities, government consulted with a range of
stakeholders. The AsgiSA Task Force led by the Deputy President included the
Ministers of Finance; Trade and Industry; and Public Enterprises; the Premiers of
Gauteng and Eastern Cape provinces; and the Mayor of Johannesburg who
represented the South African Local Government Association. Many other
ministers and their departments were included in the discussions, as were
organised business and labour, religious leaders, youth, and women in various
groupings and forums. Government also consulted with domestic and
international experts. Consultation and discussion will continue as AsgiSA is
implemented.

These interactions have convinced government that South Africa is ready for
AsgiSA to be a national shared growth initiative, rather than merely a
‘government programme'.

Targets of accelerated and shared growth

Government's investigations, supported by some independent research, indicate
that the growth rate needed for us to achieve our social objectives is around 5%
on average between 2004 and 2014. Realistically assessing the capabilities of the
economy and the international environment, we have set a two-phase target. In
the first phase, between 2005 and 2009, we seek an annual growth rate that
averages 4,5% or higher. In the second phase, between 2010 and 2014, we seek
an average growth rate of at least 6% of gross domestic product (GDP).

In addition to these growth rates, our social objectives require us to improve the
environment and opportunities for more labour-absorbing economic activities.
More broadly, we need to ensure that the fruits of growth are shared in such a
way that poverty comes as close as possible to being eliminated, and that the
severe inequalities that still plague our country are further reduced.

Our vision of our development path is a vigorous and inclusive economy where
products and services are diverse, more value is added to our products and
services, costs of production and distribution are reduced, labour is readily
absorbed into sustainable employment, and new businesses proliferate and
expand.

Balanced growth

We will also put our growth on a more balanced footing, in two important
respects.

The recent growth has been based on a combination of strong commodity prices,
strong capital inflows and strong domestic consumer demand, given impetus by
anti-poverty measures, growing employment and rising asset prices. The effect,
however, of this combination has been to strengthen the currency which makes it
difficult for exporters outside the commodity sector or those who compete with
imports to remain competitive. That led to a trade deficit of 4,3% of GDP in 2005,
well financed by capital inflows, but demonstrating South Africa's challenge to
compete effectively outside of the commodity sector.

The second imbalance derives from the fact that although the social grant
programme has given significant impetus to poverty reduction and income
redistribution, there remain about a third of South African households not yet
able to benefit directly from our economic advances. Bringing this sector of the
population into the mainstream economy will considerably enhance our growth
potential.

Sustainable growth at around 6% requires that these two imbalances are
countered. In developing a strategy for accelerated and shared growth, we
adopted a growth diagnostic analysis which seeks to identify the ‘binding
constraints' on achieving our objectives. The methodology holds that while all
successful economies have certain characteristics in common – such as well-
managed fiscal and monetary policy and competent government administration –
each country faces specific challenges in moving from mediocre to successful.


Binding constraints
The list of binding constraints emerging from analysis and consultation has been
kept short enough and focused enough to allow for a coherent and consistent set
of responses.

   •   Volatility and level of the currency. In spite of major improvements in
       the administration of fiscal and monetary policy, currency volatility deters
       investors in tradable goods and services outside of the commodity sector.
       The Rand remains somewhat volatile, though the degree of volatility has
       been reduced. At present, the relative volatility is accompanied by a
       currency that is overvalued in the sense that economic resources are
       diverted into narrow areas of investment, laying an unsteady foundation
       for the future. A further area for macro-economic improvement is in
       expenditure management, particularly in government capital investment.

   •   The cost, efficiency and capacity of the national logistics system.
       Backlogs in infrastructure and investment, and in some cases market
       structures that do not encourage competition, make the price of moving
       goods and conveying services over distance higher than it should be.
       Deficiencies in logistics are keenly felt in a country of South Africa's size,
       with considerable concentration of production inland, and which is some
       distance from the major industrial markets.

   •   Shortage of suitably skilled labour amplified by the impact of
       apartheid spatial patterns on the cost of labour. The most difficult
       aspects of the legacy of apartheid to unwind arise from its deliberately
       inferior system of education and irrational patterns of population
       settlement. In a period of growth it is evident that we lack sufficient skilled
       professionals, managers and artisans, and that the uneven quality of
       education remains a contributory factor. In addition, the price of labour of
       the poor is pushed up by the fact that many live a great distance from
       their places of work.

   •   Barriers to entry, limits to competition and limited new investment
       opportunities. The South African economy remains relatively
       concentrated, especially in upstream production sectors such as iron and
       steel, paper and chemicals and inputs such as telecommunications and
       energy. In some cases, market structure negatively influences the
       possibilities of downstream production or service industry development.
       Competition law and industrial policies need to be strengthened to
       counteract these factors.

   •   Regulatory environment and the burden on small and medium
       businesses. The mediocre performance of the small, medium and micro
       business sector in terms of contribution to GDP and employment partly
       arises from the sub-optimal regulatory environment. In the administration
       of tax, the planning system (including Environmental Impact Assessment),
       municipal regulation, the administration of labour law and, in specific
       sectoral regulatory environments, regulation unnecessarily hampers the
       development of businesses.

   •   Deficiencies in state organisation, capacity and leadership. Certain
       weaknesses in the way government is organised, in the capacity of key
       institutions, including some of those providing economic services, and
       insufficiently decisive leadership in policy development and
       implementation all constrain the country's growth potential.

Countering these constraints requires a series of decisive interventions. These
interventions do not amount to a shift in economic policy so much as a set of
initiatives to achieve our objectives more effectively. Our responses to the
binding constraints fall into six categories:

   •   infrastructure programmes
   •   sector investment (or industrial) strategies
   •   skills and education initiatives
   •   Second Economy interventions
   •   macro-economic issues
   •   public administration issues.


Infrastructure investment
Government has already begun to ramp up public-sector investment. At one point
public sector investment fell below 4% of GDP. In recent years, it rose above 6%.
In order to roll back the backlog that has emerged in public infrastructure, public-
sector investment is planned to rise to around 8% of GDP. As indicated in the
Medium Term Budget Policy 6 Statement in October 2005, government and public
enterprise investment expenditure for the period April 2005 and March 2008 is
planned to be about R370 billion.

Of this, about 40% will be spent by public enterprises, mostly Eskom (R84 billion)
and Transnet (R47 billion, of which R40 billion is ‘core'), and mainly on power
generation, power distribution, rail transport, harbours and an oil pipeline. The
general purpose is to improve the availability and reliability of infrastructure
services in response to rapidly growing demand.

The three spheres of government are responsible for about half of the total public
sector capital investment over the period through a range of programmes at
national department level. The planned rate of growth of the capital budget of
government at between 10% and 15% per year is unprecedented in South
African history. Projects are distributed to provincial and local government
through the municipal and provincial infrastructure grant programmes, while
provinces and most municipalities have further funds collected from their own
revenue sources for capital expenditure.

Key areas of government expenditure, incorporating all spheres, are: provincial and local
roads, bulk water infrastructure and water supply networks, energy distribution, housing,
schools and clinics, business centres, sports facilities, and multi-purpose government
service centres, including police stations, courts and correctional facilities.


Electronic communications as a key commercial and social infrastructure will be
one focus of priority attention:

Plans to be implemented in electronic communications:

   •   Implementation of a strategy to rapidly grow South Africa's broadband network
   •   Implementation of a plan to reduce telephony costs more rapidly
   •   Completion of a submarine cable project that will provide competitive and reliable
       international access, especially to Africa and Asia
   •   Provision of subsidies to encourage the establishment of telecommunications – and
       labour-intensive businesses in poor areas.



Another key challenge in the infrastructure sector is preparations for the 2010
FIFA World Cup. This includes building or improving the 10 stadiums to be used,
and investment in the environs and access to the stadiums.

Other strategic interventions in the infrastructure arena include further
development of the country's research and development infrastructure, and
further improvement in the modalities for public-private partnerships in the
development and maintenance of public infrastructure.

Public-sector infrastructure spending has considerable potential spin-offs in terms
of the generation or regeneration of domestic supply industries, small business
development and empowerment. Government is seeking to maximise the positive
impact of these spinoffs on the domestic economy.

In addition to the general infrastructure programmes, provinces were asked to
propose special projects that would have a major impact on accelerating and
sharing growth. A set of projects has been selected for finalisation of
implementation plans, some of which are already underway.

Provincial infrastructure projects with major AsgiSA impact

   •   The Umzimvubu Catchment and Timber Industries Development Initiative in the
       Eastern Cape
   •   A diamond and gemstone jewellery project in the Northern Cape
   •   A biofuels initiative that will cover at least Northern Cape, Free State, KwaZulu-
       Natal, Eastern Cape and Mpumalanga
   •   A water reticulation project for Mokopane-Vaalwater-Marken in Limpopo
   •   A Moloto Corridor Rail Project, mostly in Mpumalanga
   •   The Johannesburg International Airport Logistics Hub and Industrial Development
       Zone in Gauteng
   •   The Makhathini Cassava and Sugar Project in KwaZulu-Natal
   •   A national livestock project that would particularly focus on the Northern Cape and
       North West
   •   The Dilokong Platinum Corridor to integrate development located around the
       planned De Hoop Dam in Limpopo
   •   The proposed Square Kilometre Array and linked projects in Northern Cape
   •   The Cape Flats Infrastructure Project in the Western Cape




Sector strategies
In order to promote private-sector investment, sector strategies are being
prepared, and some are in the implementation stage. A broader National
Industrial Policy Framework will be submitted to Cabinet during this year. Part of
the purpose of AsgiSA is to focus the energy of government and its partners.

In this context, two sectors have been identified for special priority attention:
business process outsourcing (BPO) and tourism. A third sector, biofuels, is being
finalised. What these industries have in common is that they are labour-intensive,
rapidly growing sectors worldwide, suited to South African circumstances, and
open to opportunities for Broad-Based Black Economic Empowerment (BBBEE)
and small business development.

BPO refers to the trend of business worldwide, especially in countries where
labour is costly, to locate back-office activities such as accounts or claims
processing or front office activities like call centres in cheaper centres. South
Africa has attracted about 5 000 of such jobs from the rest of the world so far.
The sector has the potential for 100 000 additional direct and indirect jobs by
2009. Government and business have a joint project, supported by the Business
Trust, led by the Minister of Trade and Industry and the Chair of Standard Bank
to remove obstacles and refine incentives to achieve this goal.

The other high immediate priority sector is tourism. This sector has already
grown rapidly in South Africa but is ready for a second phase of growth that could
take its contribution to GDP from about 8% to about 12%, and increase
employment by up to 400 000 people. Key issues are marketing, air access,
safety and skills development. This industry also entails a strong
government/private-sector partnership, which was established during the first
phase of growth.

The other high priority industries which are to follow are in the agriculture and
agroprocessing field and include biofuels, referred to above. They have similar
advantages and opportunities as tourism and BPO.

A number of other sectors, constitute the next rank of priorities.

Further priority sectors

   •   Chemicals
   •   Metals beneficiation, including the capital goods sector
   •   Creative industries (crafts, film & TV, content and music)
   •   Clothing and textiles
   •   Durable consumer goods
   •   Wood, pulp and paper (as mentioned in provincial projects)
Cross-cutting industrial policy challenges that are also being addressed

   •   Inadequate competition and import parity pricing
   •   Capacity for trade negotiations
   •   A more co-ordinated Africa development strategy
   •   Better incentives for private R&D investment
   •   Better use of BBBEE to encourage industry transformation, beyond the transfer of
       equity




Education and skills development
For both the public infrastructure and the private investment programmes, the
single greatest impediment is shortage of skills – including professional skills such
as engineers and scientists; managers such as financial, personnel and project
managers; and skilled technical employees such as artisans and IT technicians.
The shortfall is due to the policies of the apartheid era and the slowness of our
education and skills development institutions to catch up with the current
acceleration of economic growth.

The AsgiSA responses range from medium-term educational interventions to raise
the level of skills in areas needed by the economy to immediate measures to
acquire the skills needed for the implementation of AsgiSA projects.

Educational responses to the skills challenge

   •   The QIDS-UP programme aimed at achieving high levels of literacy and numeracy
       in the lowest grades
   •   The Maths and Science (Dinaledi) programme for 529 high schools to double Maths
       and Science high school graduates to 50 000 by 2008
   •   An upgraded career guidance programme
   •   A huge upgrading of the Further Education and Training colleges.
   •   The Adult Basic and Education Training programme is to be ramped up, based on a
       model developed in Cuba and New Zealand



Apart from interventions to address the skills challenge in the educational sphere,
measures include the development of an Employment Services System (to close
the gap between potential employers and employees), and Phase 2 of the
National Skills Development Strategy.

A short-term project is the development of a scarce skills database based directly
on the expected needs of the over 100 individual projects included in AsgiSA.

Other key skills projects include the deployment of experienced professionals and
managers to local governments to improve project development, implementation
and maintenance capabilities. The project managed by the Development Bank of
Southern Africa (DBSA) will deploy an estimated total of 150 expert staff, with
the first 30 to be deployed in April 2006. The project will also include skills
transfer to new graduates. The DBSA is compiling a database of ‘retired experts'
for this and further possible deployments.

The Umsobomvu Youth Trust is driving a number of initiatives, many of which
entail youth volunteers, to support a range of skills development programmes.
A new institution is the Joint Initiative for Priority Skills Acquisition (JIPSA). It is
led by a committee of the Deputy President, key ministers, business leaders,
trade unionists and education and training providers or experts. Its job will be to
identify urgent skills needs and quick and effective solutions. Solutions may
include special training programmes, bringing back retirees or South Africans and
Africans working out of Africa , and drawing in new immigrants where necessary.
It may also include mentoring and overseas placement of trainees to fast-track
their development. JIPSA will have an initial timetable of 18 months, starting in
March 2006, after which its future will be reviewed.

As part of JIPSA, 100 women will in April begin a one-year placement programme
in the United Arab Emirates focused on developing skills in infrastructure project
management and project financing as well as tourism. There will be similar
placement programmes in South African companies.


Eliminating the Second Economy
Without interventions directly addressed at reducing South Africa's historical
inequalities, growth is unsustainable. Conversely, successful measures to reduce
the inequalities will add impetus to growth.

Government has already initiated interventions to address deep-seated
inequalities and target the marginalised poor, to bridge the gap with the Second
Economy, and ultimately to eliminate the Second Economy. AsgiSA includes some
specific measures of response to the challenges of exclusion and the Second
Economy.

Leveraging the First Economy

One key mechanism is to use the leverage of the First Economy to address the
Second Economy. There are two key examples in AsgiSA.

The first is to leverage the increased levels of public expenditure, especially
investment expenditure, to promote small businesses and broad-based
empowerment addressing such issues as access to finance, preferential
procurement and a review of the impact of regulations on labour-intensive
sectors. The State-Owned Enterprise Procurement Forum is codifying and
spreading best practices for affirmative procurement. For the Government, the
Department of Trade and Industry (DTI) is developing a procedure through which
10 products will be set aside for procurement through smaller black-owned
business.

Linking small businesses to opportunities deriving from the 2010 FIFA World Cup
is another task for government. Private companies will also be persuaded to
engage in affirmative procurement and the implementation of the relevant
provisions of the BBBEE Codes of Good Practice and the relevant sector
empowerment charters will be closely monitored. Timely payment by government
for procured goods and services will also be monitored. Infrastructure projects
will be labour-intensive where feasible.

We are convinced that to achieve AsgiSA's goal of halving unemployment and
poverty by 2014, we will have to pay particular attention to the concerns of
women and youth.
With regard to women, the focus will be on expanding and accelerating access to
economic opportunities including skills development and finance.

Expanding women's access to economic opportunities

   •   Human resource training
   •   Ensuring they have access to finance (micro to mega bucks)
   •   Fast-tracking them out of the Second Economy
   •   Ensuring their significant participation in agriculture and creative industries
   •   Improving their access to basic services
   •   Increasing their participation in the Expanded Public Works Programme (EPWP)



On the youth front, one intervention is to target unemployed graduates for jobs
or learnerships. This includes support for the Umsobomvu Youth Fund initiative to
register unemployed graduates on their database, and engage with business to
participate in this initiative. We shall ensure that the focus on youth development
is intensified in all spheres of government.

Measures to promote youth development during 2006/07

   •   Set up 100 new youth advisory centres
   •   Enrol at least 10 000 young people in the National Youth Service
   •   Enrol 5 000 volunteers to act as mentors to vulnerable children
   •   Expand the reach of our business support system to young people
   •   Intensify the Youth Co-operative Programme
   •   Closely monitor the impact of our programmes on youth skills training and
       business empowerment as an integral part of our national effort



The other form of leverage will be that all of the sector strategies, such as the
strategies for tourism or BPO, will have elements addressing development goals
in the Second Economy. For example, the economic cluster of government is
committed to ensure that at least five BPO operations are established in poor
areas with relatively little economic activity. The targeted beneficiaries are youth
and women.

Broad Based Black Economic Empowerment will be leveraged to support shared
growth.

Leveraging components of BBBEE

   •   Provisions for access to finance for women and youths
   •   Funding commitments for housing and small business loans
   •   Skills development commitments
   •   Social responsibility commitments
   •   Other commitments to enterprise development
   •   BBBEE charters will be assessed from time to time to establish how broad-based
       their impact has been



There are several other interventions designed to support small businesses. The
National African Chamber of Commerce has committed to establish 100 000 new
small and medium enterprises per year, and government will support these
efforts.

A key challenge in this regard is to address the gap in loans between R10 000
and R250 000. One such effort is a new partnership between Khula and Business
Partners in a R150-million fund for business loans of this size. Another is a
planned fund for women entrepreneurs, which is the result of a collaboration
between the DTI, Eskom, Umsobomvu and the Women's Development Bank.

A commitment in the Financial Services Charter of R5 billion to small business
loans is still to be finalised as a programme, but we expect progress shortly under
the new leadership of the Charter. We also plan to accelerate the roll-out of the
Apex (SAMAF) and Mafisa programmes of loans under R10 000.

For the next stage of business development, venture funding is key, and
government is supporting efforts to establish new venture funds for small,
medium and micro enterprises. The R1-billion programme recently announced by
the Industrial Development Corporation (IDC) and the National Empowerment
Fund's venture fund will make a considerable impact on the growth of small
businesses. These large interventions will be supported by the development of
the Small Enterprise Development Agency based at the DTI, which is rolling out
its services, making a stronger operational distinction between small and medium
business and micro businesses, and adding to its capacity to take small
businesses into manufacturing.

A further key small business initiative will be to pursue decisions made by Cabinet
on the regulatory environment for small businesses.

Decisions on the small business regulatory environment

   •   That the Minister of Labour will lead a review of labour laws, including their impact
       on small businesses
   •   That the reforms in tax administration affecting small businesses will continue
   •   That the DTI and the Department of Provincial and Local Government (DPLG) will
       prepare recommendations on how to improve the regulatory environment for small
       businesses in municipalities
   •   That sector departments will review the impact of their laws and regulations on
       small businesses



In respect of municipalities, the AsgiSA process has also mandated the DPLG, in
consultation with the DTI, to improve the capacity of local government to support
local economic development.

The EPWP is a key Second Economy intervention. As part of AsgiSA, this
programme will be expanded beyond its original targets.

Firstly, its mandate has been extended to a larger number of roads and some
larger road projects. This will entail additional funds over the coming Medium
Term Expenditure Framework period, about 63 000 more people maintaining
roads, and about 100 000 additional people in jobs averaging six months in
roads-building and training.

In addition, 1 000 more small black contractors will be developed. New access
roads will have a significant impact on conditions and opportunities in some poor
and rural areas. Other new elements of the EPWP will be a concerted roll-out of
its Early Childhood Development component, home-based care and the
finalisation of a process to support local governments in developing larger EPWP
projects.

A final set of Second Economy interventions is centred on the challenge of
realising the value of dead assets – land, houses, livestock, skills, indigenous
knowledge and other assets that have intrinsic value not currently realised.

Measures to realise the value of dead assets

   •   More rapid movement towards the formalisation of land tenure
   •   Livestock improvement programme
   •   Efforts to ensure that the Financial Services Charter commitment on housing
       finance is effectively implemented
   •   Improvements in planning and zoning capacities
   •   Support for the development of co-operatives




Macro-economic issues
Regarding macro-economic issues, one challenge is to find strategies to reduce
the volatility and overvaluation of the currency; another is to ensure that within
an inflation targeting regime fiscal and monetary policy work together to produce
sustained and shared growth.

A further challenge is to improve budgeting in government, particularly at a
macro level where we tend to underestimate revenue and overestimate
expenditure, which results in the budget appearing more expansionary than it is,
which in turn sends misleading signals to other players in the economic arena.

A fourth area where macro-economic policies or implementation can be improved
is in expenditure management, particularly in government capital investment,
where several agencies' budgets are considerably underspent while some others
run out of funds before the end of the financial year. One innovation to be
introduced in 2006 is the development of a new capital expenditure management
information system by the National Treasury.


Governance and institutional interventions
We have planned on the principle that institutional interventions are costly and
should be kept to a minimum, and that, where possible, existing institutions
should be levered into new functions and responsibilities.

One issue of concern has been the relatively slow progress made in the
implementation of some aspects of the Growth and Development Summit. We
believe that the social partners should seek, in the context of AsgiSA, to make
progress towards realisation of a people's contract on economic matters – as
discussed in the President's Joint Working Group, and referred to as a social
contract. The other issue we will focus on is the effective implementation of
agreed BEE charters, and leveraging benefits from offsets.

On local government and service delivery, we are focusing on addressing the
skills problems through Project Consolidate. The skills interventions include the
deployment of experienced professionals and managers to local governments to
improve project development implementation and maintenance capabilities. The
project managed by the DBSA will deploy an estimated total of 150 expert staff,
with the first 30 to be deployed in April 2006. The project will also include skills
transfer to new graduates. The DBSA is compiling a database of ‘retired experts'
for this and further deployments.

For AsgiSA implementation, monitoring and evaluation by the executive, it has
been decided in Cabinet that the Cabinet Committee for Investment and
Employment would now have AsgiSA as a standing item for regular reports and
problem-solving at its monthly meetings.

The Department of Public Service and Administration has made proposals on
improving the quality of economic services, initially through proposals for the
DTI. This effort will be extended to other relevant areas, including provincial and
local government.

Government is committed to reviewing the functioning of the development
finance institutions, which include the IDC, the Land Bank, the DBSA and the
National Development Agency. These are powerful institutions that can be more
effectively employed in our developmental efforts and support social mobilisation
and active participation of civil society.

There are reports that some investment projects have been held up by
unnecessary bureaucratic delays. Government will ensure that investors have
access to a one-stop trouble-shooting centre, probably located at Trade and
Investment South Africa.

A new institution, mentioned earlier, will be JIPSA. JIPSA will be led by a
committee headed by the Deputy President, and will include key leaders from
government, business, labour and the education and training fields. The National
Business Initiative will be providing support services for JIPSA.

A further innovation will be the institution, after finalisation by Cabinet, of a
system of Regulatory Impact Analysis (RIA). The RIA will add well-designed
procedures (first developed in the United Kingdom ) to reduce or eliminate the
negative unintended consequences of laws and regulations, especially on job
creation.

A final key area requiring institutional reform is the framework for the planning
and management of land use. Many investment projects are unnecessarily held
up by the weakness of local or provincial planning and zoning systems, or the
cumbersome Environmental Impact Assessment (EIA) system. The EIA system is
being reformed so that it will reduce unnecessary delays, without sacrificing
environmental standards. A complementary activity must be improvements in the
planning and zoning systems of provincial and local governments.


Conclusion
The implementation of AsgiSA, which must still be adjusted and fine tuned in the
context of ongoing consultations, has already begun. Government will regularly
review progress in implementation and will draw its social partners into such
evaluations from time to time. The programme will be subjected to review by
experts, such as the team of economists and social scientists based at Harvard
and other universities. Where necessary, the programme will be amended or
supplemented.

We believe that we have built the basis for a national effort to achieve faster and
shared economic growth. With this programme we can achieve our social
objectives and we can more than meet the Millennium Development Goals. Our
second decade of freedom will be the decade in which we radically reduce
inequality and virtually eliminate poverty. We know now that we can do it,
working together around an initiative which has the support of the nation.

				
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