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R1.6bn won't work for DTI

Feb 15 2009 14:23 Andile Ntingi

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Johannesburg - For the second year in a row the department of trade and industry (DTI), which is in the midst of implementing a new industrial policy, is bitterly disappointed with the budget allocation it has received from the National Treasury.

Finance Minister Trevor Manuel gave the department an additional R1.6bn to spend over the next three years to kick-start industrial development and support small businesses. The figure includes R870m to fund a production subsidy programme for the automotive industry.

DTI director-general Tshediso Matona this week expressed frustration at the insufficient allocation to his department, as its incentives schemes are battling to meet huge demand from needy businesses.

"I don't want to get into a spat with Minister Trevor Manuel or the National Treasury but the amount we have been allocated is too little, given the huge demand on the ground for our schemes," Matona says.

"I understand that the Treasury is operating within budgetary constraints and I don?t want to put blame on it. However, I feel we could have been allocated more, given the huge needs we are faced with."

Last year the department was given a R2.3bn cash injection, triggering an angry response from labour federation Cosatu about its inadequacy. The DTI also complained that the money was insufficient to support thousands of businesses.

Before the allocation of the additional R1.6bn, the department had R16bn to use over the next three years but the money is as good as non-existent.

"This money has already been committed. We need more to support new initiatives," Matona says.

City Press Business understands that the department had asked for R9bn from the National Treasury but got only R1.6bn.

Short-term solution

"We had asked for R9bn to support industrial development and to recapitalise agencies like the Small Enterprise Development Agency (Seda) and Khula Enterprise Finance but only received R1.6bn," says a DTI official, who declined to be named.

"We cannot shake off the feeling that we are being set up for failure."

Seda is a division of the DTI that provides non-financial support to small businesses while Khula finances small enterprises.

Though Manuel has attempted to create jobs through the Extended Public Works Programme (EPWP) and the government has a mammoth R787bn infrastructure development programme, these programmes provide a short-term solution to the country's high unemployment rate. Manuel allocated R4.1bn to the EPWP.

Once the EPWP and the infrastructure programme reach their end, most of the jobs they have created will disappear and the country may have to turn to the inadequately resourced industrial policy programme for employment generation.

However, Industrial Development Corporation chief economist Lumkile Mondi wonders if the DTI has the capacity to absorb bigger allocations and use them properly.

"The R1.6bn is too little in nominal terms but the DTI does not have the capability to deliver the money to its target market.

"Even if the amount is small, you still need to be able to select winners but if you can't select winners that money could end up going to waste," Mondi says.

- City Press

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