Govt 'failing SA economy'

Johannesburg - South African is busy losing strategic manufacturing capacity while internal power struggles are causing government to drag its feet in terms of helping struggling industries.

This is according to Lumkile Mondi, chief economist at the Industrial Development Corporation (IDC). He says a lack of resources or implementation of plans, and internal power struggles have resulted in government to date having done "nothing" to help the economy.

Mondi says there is still a lack of clarity within government as to who is responsible for what, with the roles of the new state departments, including Economic Development and Monitoring & Planning, still obscure.

In addition, the Treasury and the Departments of Trade & Industry and Labour are also involved in the government's emergency response plan regarding the economic crisis.

While the Department of Trade & Industry, for example, is developing plans to assist the clothing and textile industry, or the Department of Labour developing a programme to develop skills, it's a struggle to obtain funding from the Treasury.

"The result is that at the end of the recession there will be manufacturing capacity that has simply disappeared and which will never come back," says Mondi. He is especially worried about the capacity of the motor industry.

"There are many plans, but no-one doing the work. The government must focus on two or three things and do them properly. To that end President Jacob Zuma will have to take risks," he declares.

Assistance for foundering companies has thus far largely been left to the IDC, which is owned but not financed by government. From 2008 to the end of August the IDC approved about R1.2bn for 25 companies that had landed in difficulties because of the economic crisis.

The IDC is currently investigating 34 applications for further assistance worth R2.4bn.

Its total budget for helping struggling companies to end-March 2011 amounts to R6.6bn, a drop in the ocean if one considers that the IDC's expenditure of R738m in the current financial year will save only about 3 000 jobs. In the first six months of the year about 475 000 South African jobs have already been lost.

"Although we are beginning to see a few green shoots in the global economy, in South Africa this is less the case.

"The government's [initial] denial [in 2008] that we were facing an economic crisis and the slow reaction and indecision of the authorities show the absence of a clear policy agenda."

- Sake24.com

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