A cautious helping hand

Finance Minister Trevor Manuel’s 2009 budget outlined cautious plans to aid some of South Africa’s struggling business sectors, namely mining and the motor industry, in the face of growing economic turmoil.

In his budget speech the minister highlighted a R1,8-billion ”boost”, for the local mining industry through the deferring of government’s mining royalties regime, from this year to 2010.

The Mineral and Petroleum Resources Royalty Act was scheduled to be implemented on May 1 2009, but the proposed new implementation will be on March 1 2010.

It stated in the budget review that this relief is intended to contribute to ”constructive dialogue between government, the mining houses and labour, resulting in practical initiatives to mitigate the impact of expected retrenchments in the sector.”

In addition Manuel pointed to the establishment of a jointly managed agency, aimed at investing in economic development in mining towns or labour-sending areas affected by retrenchments. The agency will be jointly managed by business, labour and government.

”If the new development agency can be established this year, we will make an allocation towards its activities in the adjustments budget,” said Manuel.

Treasury also allocated R870-million in production subsidies over the next three years, to the motor industry, under the new automotive production and development plan. This replaces the motor industry development plan (MIDP), aimed at supporting the country’s automotive industry.

The budget review highlighted that a key failure of the South African economy has been its poor export performance. Exports are expected to decrease by 1,4% this year.

Concrete steps have been taken to improve the competitiveness of key export sectors and the announcement of a new phase of support for the motor industry is meant to provide a stable platform for continued export growth, it said.

In his speech Manuel also referred to the presidential task team comprised of business, labour, the community and government, and chaired by National Economic Development and Labour Council (Nedlac) managing director, Herbet Mkhize. The task team has put together a draft document, aimed at helping South African business sector’s cope with the economic downturn.

The document reportedly identifies vulnerable sectors, such as the textiles and motor industry that have been most severely affected by the crisis.

According to those close to the process this could take the form of bridging finance, including easily accessed finance at very low interest rates.

Stewart Jennings, president of the National Association of Automotive Component and Allied Manufacturers, has estimated that around R10-billion will be needed to support the local automotive industry through the crisis.

However, Manuel warned against government bailouts for business.

”Differentiating the effects of short term cyclical difficulty with the need for longer term industrial restructuring is difficult and sometimes involves policy considerations, and so risk sharing with the private sector has its place in preparing for future growth,” said Manuel.

”At the same time, government is mindful of the need to avoid passing on risks to taxpayers that would be better managed in the business sector. Though there may be a role for public funds in support of businesses in difficulty, we need to ensure that an undue capitalisation of private wealth does not result in a financial burden of debt on future generations.”

 

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Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

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