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Cape Town - Trade unions and businesses question the ability of the Industrial Development Corporation (IDC) and other development funders to support government in its latest Industrial Policy Action Plan (IPAP2).
On Wednesday, during hearings on the Department of Trade & Industry's action plan held by the parliamentary portfolio committee for trade and industry, delegates expressed their concern that development financiers such as the IDC are doing business on the same basis as commercial banks do. An enterprise's risk profile is therefore regarded as crucial.
Cosatu deputy president Zingiswa Losi said the development funders should be restructured to promote a development agenda.
In its submission Cosatu said that the private financial sector's share of the gross domestic product (GDP) had increased 117% between 2004 and 2008.
Despite this, the sector refused to be the catalyst for growth in the manufacturing sector of the economy.
Cosatu is also asking for all development financiers to be united into a single body, the better to assist small and medium enterprises. Furthermore, intervention is needed to ensure that the private financial sector focuses on targeted, labour-intensive industries.
Business Unity South Africa (Busa), whose deputy chief executive Professor Raymond Parsons made its submission, also believes the greatest challenge is to ensure that the IDC helps to make a success of IPAP2.
Busa, too, believes that the institution's current approach is similar to that of commercial banks. The IDC's risk management makes it very difficult for emerging entrepreneurs to access funding from the IDC. Busa therefore supports a review of the IDC's funding model.
The IDC depends on funds allocated to it by the government in the 1950s, and its real lending rate is 6.58%.
But during last week's announcement of the action plan Minister of Economic Development Ebrahim Patel said the government would not be supplementing the IDC's balance sheet.
Tengo Pengena, a Numsa researcher, also requested a direct injection from government for the IDC.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.