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State to boost small business

Cape Town - The economic development department expects to finalise proposals for small business funding by November this year, and raise R2bn for business financing, Minister Ebrahim Patel said on Tuesday.

Speaking in the National Assembly during debate on his budget vote, Patel said the department would, from April 1, guide the work of three economic regulatory bodies and three development finance institutions.

They were the Competition Commission, the Competition Tribunal, and the International Trade Administration Commission, and Khula Enterprise Finance Limited, known as Khula, the South African Micro-Finance Apex Fund, and the Industrial Development Corporation (IDC).

As the reporting authority for the agencies, the department would provide oversight, strategic direction, ongoing review, and development of policy frameworks.

"We will review international trends and lessons learnt and promote alignment between the policies and strategic plans of these entities and those of government."

"We plan to finalise proposals for small business funding by November this year."

"We have also set a target to generate R2bn worth of financing for small businesses, targeted growth sectors and companies in distress," Patel said.

Development finance institutions (DFIs) and investment bodies controlled assets and investments worth hundreds of billions of rands.

Using public/private investment institutions

"There is scope to improve the development and employment yield of DFIs, public and private sector investments, retirement funds, and the Public Investment Corporation.

"The international experience shows that successful industrialising countries are ones which use their public and private investment institutions well."

"This is not a new idea in South Africa. Business, labour, government and community organisations agreed at the 2003 growth and development summit to target five percent of investible funds into developmental areas and activities."

"What has been lacking to date has been appropriate instruments to give effect to this commitment."

"Various options are open to us that combine prudent investment policy with development goals, including the issue of a development bond," Patel said.

As an example of this, the IDC had recently issued a R2bn bond that had been taken up by the Unemployment Insurance Fund.

The bond was priced at highly beneficial rates, and the funding that the IDC provided through using the bond would fund businesses with labour-intensive operations that were creating and saving jobs.

Good progress was also being made in establishing the ministerial advisory panel, which would serve as an ideas forum. Professor Joseph Stiglitz, Nobel Economics Laureate and previously chief economist of the World Bank, had agreed to serve on the panel.

He would be joined by a number of South African experts, such as Professor Haroon Bhorat of the University of Cape Town, Dr Michael Power, a strategist from Investec Bank, Professor Chris Malikane from Wits University, Goolam Ballim, group chief economist of Standard Bank, Dr Olive Shisana, the CEO of the Human Sciences Research Council, Geoffrey Qhena, CEO of the IDC, Dr Simon Roberts, chief economist of the Competition Commission, and Dr Neva Makgetla, lead economist in the development planning division of the Development Bank of Southern Africa.

"We will be adding more names to the panel, and will also have active business-people and unionists who will be able to interact with the panel economists."

"By the end of this year we plan to have the core of the Economic Development Institute in place and by next March to have produced ten policy documents on growth and employment issues," Patel said.

- Sapa

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