The government is shelling out R25-billion to boost industrial development, assist businesses and accelerate job creation, in spite of the lacklustre performance of a number of current schemes aimed at doing just that.
The proposed economic support package would help “invigorate industrial development zones, assist enterprise investment and job creation, support the transition to a greener economy and leverage infrastructure investment and risk-sharing partnerships with the private sector”, Finance Minister Pravin Gordhan announced in the medium-term budget policy statement.
It would also include temporary mechanisms to bolster productivity and innovation in industries that had demonstrated long-term competitive potential. The funding would come from savings and efficiencies within the current budget envelope. Gordhan said that the package would be administered by the department of trade and industry (DTI) and coincided with a shift in the composition of government spending away from consumption towards investment.
But the adjusted estimates of national revenue (AENE), published alongside the medium-term budget, show a disappointing take up in similar programmes already administered by the department. Industrial development zones (IDZs) such as East London, Richards Bay and Coega have not seen the projected number of new investors, job creation or value of new investment in the first half of the financial year, according to the AENE.
Coega was projected to attract R3-billion in total investment but to date has reached a figure of only R1-billion. Though it was projected that it would create 2 000 jobs, only 200 were created in the first half of the year. The East London IDZ managed to secure one of a projected two foreign investors in the first half of the year, but it raised only R100-million of a projected R350-million investment, and created 200 jobs against a projected 700.
Finally, the Richards Bay IDZ created 36 jobs in the first half of the year against a projected 100 and raised R100-million of a projected value of investments of R300-million. In addition, a number of assistance and enterprise support programmes experienced a substantial downward revision in target numbers because of the lack of uptake by companies.
The number of companies granted export-market and investment assistance in the first half of 2011/2012 was lower than the estimated target for the year as a whole because fewer claims were received than anticipated, according to the AENE. The projected number of companies assisted for the year as a whole decreased from 801 to 664 as a result.
Similarly the target for companies assisted with the business-process outsourcing programme in the first half of 2011/2012 was significantly lower than the estimated target for the year as a whole because fewer claims were received than anticipated, it notes, decreasing the estimate from 10 to two. The estimate of the number of companies assisted with the black business-supplier development programme decreased from 1 455 to 1 086 and the estimated number of companies assisted with the co-operatives incentive scheme was adjusted from 130 to 115.
The number of jobs created in both the enterprise investment and business-process outsourcing programmes has also been revised downwards, from 8 400 to 6 875 and 5 000 to 800, respectively. Gordhan said in a press briefing earlier this week that the package was aimed at enabling firms to be more competitive in global markets and to enhance productivity and cleaner production in the manufacturing sector and economy in general.
The detail, however, was still to be outlined by Trade and Industry Minister Rob Davies.
Meanwhile, the private sector welcomed the package Raymond Parsons, the deputy chief executive of Business Unity South Africa, said the support fund had correctly been called a “competitiveness support fund”, but argued that the capacity of the department had to be strengthened. “South Africa needs to take all possible steps to enlarge its share of world trade and investment, and enterprise development must be at the heart of such an initiative,” he said.
“Clearly it is imperative that the capacity of the DTI be strengthened to ensure that viable projects are identified and that this takes place in close consultation with the private sector. “It would be alien to the new philosophy of the mini budget to seek efficiencies within the public sector if the DTI’s economic-support fund was to be misdirected,” Parsons said.
Department denies lack of uptake
The department of trade and industry, in a response to the Mail & Guardian, said that its industrial policy incentive schemes had no uptake problems. The difficulties being seen were predominantly in its enterprise organisation programme outlined in the adjusted estimates of national revenue. “It is important to note the industrial policy incentives, managed by the department, has not had any issues with respect to uptake in most, if not, all programmes,” said department spokesperson Sidwell Medupe.
“The demand for financial incentives, whether grant or tax incentives, exceeds the amount of money available.” The current incentives for the automotive sector, clothing, business process outsourcing, film, tourism, small manufacturing and black business incentives were allocated and had had a significant impact, he said. For example, more than R13-billion had been secured in the automotive sector. “Similarly in clothing, over a 100 companies were assisted and the industry is seeing a turnaround after years of decline,” he said.
The budget in numbers:
R1-trillion: Budget to exceed this mark for the first time.
R4-trillion: Gross domestic product to reach this figure in 2014/2015.
5,5%: Budget deficit as a percentage of GDP.
R164-billion: Budget deficit for 2011/2012.
40%: Goverment debt to rise to 40% of GDP by 2015.
3.4%:Projection for GDP growth next year.
42%: Goverment wage bill as a percentage of revenue.
R226-billion: Personal tax paid by citizens.
R39-billion: Payments to South African Customs Unions for 2012/2013
R166-billion: Borrowing requirement next year.
R90-billion: State debt cost for 2012/2013.
R202-billion: Expenditure on education for 2012/2013.
5.4%: Inflation projection for 2012.
25%: Amount of underspending by municipalities.
R461-billion: Spending on social services in current year.
R500-million: Cost guestimate for pilot phase of National Health Insurance.
15.2 million: Number of people getting social grants
1.2 million: Households living in informal settlements.