11

EMPLOYMENT CREATION FUND OVERVIEW

PRESENTATION TO THE WESTERN CAPE PROVINCIAL DEPARTMENT OF ECONOMIC

DEVELOPMENT AND TOURISM

19 July 2011

1

Agenda

1.Background 2.Purpose3.Funding Criteria4.Way forward

Page 2

Economic context • South Africa faces a number of structural constraints that

has resulted in high levels of inequalities, unemployment and poverty

• The economic crisis has worsened the jobs and economic outlook

• The government has taken practical steps to address these challenges including reorientation economic towards creation of employment or decent jobs

• In the current administration more emphasis has been put on implementation rather than development of new policies and strategies

3

4

Unemployment trajectories

4

3,000

3,200

3,400

3,600

3,800

4,000

4,200

4,400

4,600

unem

ploy

men

t (00

0s)

LowCoreMediumHigh

GDP growth (2015-19)

6.5%

Growth 4.5%

Growth 3.5%

Growth 4.0%

Unemployment rate trajectoriesUnemployment trajectories

Assumes:1% growth p.a. in working age populationLabour force stays at 55% of working age population

12%

14%

16%

18%

20%

22%

24%

26%

unem

ploy

men

t rat

e (%

)

LowCoreMediumHigh GDP growth

(2015-19) 6.5%

Growth 4.5%

Growth 3.5%

Growth 4.0%

5

Growth, employment and inequality

5

• Absorption rate = 50% = Employment of 16.5 million• Absorption rate = 45% = Employment of 14.9 million

• Growth of 3% p.a. 2010-12 and 4% p.a. 2013-14• Employment growth = 2.2%p.a. or 1.6 million = absorption rate of 43.9%

• Absorption rate of 45% requires employment growth of 2.9% p.a. … GDP growth to average 4.1% p.a. for 2010-14

• Absorption rate of 50% requires employment growth of 5% p.a. … GDP growth to average 7.1% p.a. over 2010-14.

• An employment elasticity lower than 0.7 places much greater demands on growth – more growth needed for the same number of jobs!

GDP growth

2010-12 2013-14 2010-14Growth

(2010-14)Number (2014)

Absorption rate

Growth (2010-14)

Number (2014)

Absorption rate

A 3.0% 4.0% 3.4% 2.4% 14.5 43.9% 1.4% 13.8 41.8%B 3.0% 5.0% 3.8% 2.7% 14.7 44.5% 1.5% 13.9 42.1%C 3.0% 5.5% 4.0% 2.8% 14.8 44.8% 1.6% 14.0 42.3%D 3.0% 6.0% 4.2% 2.9% 14.9 45.2% 1.7% 14.0 42.4%E 3.0% 7.0% 4.6% 3.2% 15.1 45.8% 1.8% 14.1 42.7%F 3.0% 8.0% 5.0% 3.5% 15.3 46.4% 2.0% 14.2 43.0%

Employment (EE=0.4)Employment (EE=0.7)

EE = employment elasticity

Role of ECF

• The ECF was established to support the implementation of the Economic Sectors and Employment Cluster (ESEC) programme of action (POA)

• It seeks to enhance interdepartmental coordination • Facilitate piloting and implementation of high risks

projects whose concept still needs to be tested• Enhance cooperation between government and none

state sector

6

ECF key results areas

• The ECF seeks to support the projects that will have positive impact on:– Creating more jobs for the economically marginalised – Improving business enabling environment – Increasing capacity and skills in the productive sectors of the

economy

7

ECF Approach

• What does the ECF Fund?– The ECF provides gap and risk funding to government departments and

entities, specifically at a national and provincial level – Applicants must be national or provincial departments or public entities– Municipalities can only be supported via provincial applications or other public

sector development agencies in order to ensure a wider take up of the proposed initiatives, even if the initiative is to be piloted in a single municipality

• The ECF will fund projects at research and conception phase; feasibility and development phase; start-up phase and initial implementation phases. The ECF will therefore fund:

– research, feasibility / pilot studies, programme set-up costs, project / programme establishment and management, incentives and immediate economic infrastructure supporting the project in question

8

ECF Approach…

• It should be noted that:– Projects must demonstrate that if viable, budget or other funding will be

available on an ongoing basis (i.e. once the ECF funding is completed)– Projects that demonstrate co-funding will be more favourably assessed

by the ECF

• The Fund is not meant to compete or crowd-out any of the existing public sector funding initiatives

• The intention of the ECF is to complement, help crowd-in other funding and enable new initiatives that require off-take

9

ECF criteria

• The Fund was established to support the implementation of government’s economic programme, including projects that have: – Positive impact on employment creation, skill development and capacity

building and the Second Economy; – Support Improving business enabling environment– Interdepartmental co-operation and implementation;– Alignment to the Delivery Agreements that fall within the economic

sector; and– Visible and profile enhancing interventions.

10

ECF criteria..

• Proposals submitted should also:– clearly illustrated capacity to deliver the programme/project;– have milestones and impacts that are defined and measurable;– have a monitoring and evaluation system in place; and – show sustainability once ECF support comes to an end.

11

ECF eligibility

• Funding proposals are to be submitted by government departments / entities to the ECF Secretariat utilizing the prescribed templates.

• Municipalities can apply through provinces or developmental agencies such as DBSA and IDC

• The Accounting Officer and the CFO of the requesting department / entity are required to sign-off on a proposal in order to verify that the proposal has their support

• Sign-off should occur prior to submission to the ECF, but where such a signature cannot be secured in time, signature will be required prior to the finalization of an MoA

12

ECF application process

• The current process makes provision for two types of submission:• A concept development where there is an idea or concept that still

needs further work or research to develop a comprehensive business case

• A business case which clearly defines the project to create employment.

• ECF Secretariat can provide technical assistance to departments them develop business cases subject to receiving an application for concept development

• This technical assistance will not prepare proposals for departments but rather assist in ensuring that proposals are sound and meet the criteria.

13

Screening and approval process • Once proposals are prepared and submitted for consideration, the ECF

Secretariat will review them compliance• Compliant proposals will be submitted to the Evaluation Panel which will

review and assess them against the criteria noted above before making recommendations to the Directors-General.

• The ECF Secretariat will liaise with the requesting departments / entities where required in order to ensure that any queries or matters for clarification are resolved

• The final short list of approved proposals will be submitted to the Cluster (Directors-General) for final approval.

• Following a successful decision, the ECF Secretariat will prepare a Memorandum of Understanding with the relevant department / entity outlining requirements for delivery on project milestones and reporting as well as any other special conditions the Evaluation Panel may determine.

14

Conditions of funding

• Terms and conditions will be placed on funding made available for approved programmes / projects, including: – Financial transfers for the approved programme / project will be

done in tranches aligned to the project milestones and minimum expenditure thresholds;

– Should money not be spent according to the agreed milestones, the Secretariat reserves the right to withdraw funding or claw-back unspent monies;

– Minimum quarterly and annual financial and performance reporting requirements.

15

Technical assistance

• As indicated above the ECF provides technical support to develop business cases where that supported is needed (under its Cluster Support Facility)

• The ECF will utilize the Technical Assistance Unit (National Treasury) to secure professional services for applicants to prepare fundable business cases

• Funding for this purpose will be limited to a maximum of R 350,000 per application.

16

ECF Governance

17

ClusterCluster Departments

SecretariatDTI

Evaluation PanelCluster Departments &

External

Intermediaries (for Municipalities)

Other External Expertise

Purpose: • Governance oversight; High - level strategic direction;

Project approvals; Programme structuring approvalsComposition:

• DGs from DTI, DPE, DST, EDD, NT and DRDLR

Purpose: Project proposal evaluation; Project awardsComposition:

• DDGs / Chief Directors (Policy) from DTI, DPE, DST, EDD, NT and DRDLR;

• Supported by the technical team comprising of TAU, NT PublicFinance Oversight Unit

Purpose: • Administration of programme; Management of proposal

calls; Project identification; Fund management• Secretariat support to Governance and Evaluation

structuresComposition:

• DTI staff dedicated to ECF

Technical Assistance Unit

Technical Assistance

IDC

Provinces DBSA

Other ..

Summary and conclusion

• ECF is the Economic Sectors and Employment Cluster fund targeted to support projects that will have positive impact on employment

• Only state entities can apply although partnership with private sector is encouraged

• ECF seeks to complement existing sources of funding and minimise the risks attached to piloting and start-up phases

18