Govt unpacks plan to boost economic development

2018-02-21 14:29 - Lameez Omarjee
iStock_sa economy

Cape Town - Government plans to strengthen the economy by investing in small business development, agricultural production, roads and infrastructure and manufacturing, according to the National Budget.

Finance Minister Malusi Gigaba on Wednesday unpacked how government will drive economic growth through economic development and industrialisation.

Spend on economic development will grow from R156.3bn in 2017/18 to R195.3bn by 2020/21.

Small businesses

Government plans to finalise the design of the enterprise development fund, which has provisionally been allocated R2.1bn over the medium term and will start operating in 2019/20.

The fund, announced at the mini budget, aims to improve access and reduce the cost of finance, increase risk appetite for investment start-ups and improve early-stage small enterprise survival rates, the budget review read.

The fund will be managed by the small business development department, along with the department of science and technology and Treasury.

Industrialisation incentives

Government has allocated R18.8bn towards industrialisation incentives over the medium term, said Gigaba. These incentives will be in the form of grants, loans and tax allowances, he explained.

“An additional allocation of R3.3bn is allocated for the Economic Competitiveness and Support package to support growth and job creation in support of the Industrial Policy Action Plan,” he said.

“Of the incentives budget, R4.9bn is allocated for the industrial infrastructure projects over the medium term for special economic zones.” Economic zones will be established in Atlantis in the Western Cape, Nkomazi in Mpumalanga and Mogwase in the North West, according to the budget review.

A total of 13 industrialisation parks in the Eastern Cape, Mpumalanga, KwaZulu-Natal, the Free State and Western Cape will be prioritised.

Economic infrastructure

The first round of projects for the Budget Facility for Infrastructure (BFI) was received in 2017, said Gigaba.

“The facility has 64 projects with an estimated funding requirement of R139bn. Of the projects received 38 met the requirement for evaluation.” The evaluation process is being finalised and projects that meet the criteria will receive approval by the first quarter of 2018/19, he said.

“The BFI should also assist us in attracting private investment projects,” he added.

Further, spending on roads infrastructure is expected to increase from R46.7bn in 2017/18 to R54.6bn in 2020/21, according to the budget review.

A total of R557.6m has been allocated to connect 795 schools and public buildings to high-speed internet services. Water resource management will also be prioritised over the medium term. Water infrastructure projects have been allocated R19.6bn over the next three years, the budget review read.

Agriculture and land reform

“To strengthen global market access for South African agricultural products, the Department of Agriculture, Forestry and Fisheries (DAFF) received an additional R40m over the medium term to upgrade infrastructure and equipment for analytical services laboratories,” Gigaba said.

“This will provide assurance to global trading partners that South African agricultural products meet internationally recognized standards for human safety, facilitating our ability to export unhindered.”

DAFF will also support 450 sustainable and profitable black commercial producers participating in prioritised value chains over a five-year period, Gigaba added.

An estimated R581.7m is expected to be reprioritised for the black producer commercialisation programme.

“By creating opportunities for black agricultural producers, we are radically transforming the agricultural sector of our economy,” he said.

Over the medium term R5.6bn has been allocated to the Comprehensive Agricultural Support Programme. This will assist 435 000 subsistence and smallholder farmers.

Over the medium term the department of rural development and land reform intends to accelerate settlement of restitution claims. A total of 2 851 claims are to be finalised, amounting to R10.8bn. Of this, R8.8bn is allocated to land redistribution.

“Accelerating land reform has become urgent and the department of rural development and land reform has set aside R4.2bn for the acquisition of 291 000 hectares of strategically allocated land,” Gigaba said.

State capture commission

Gigaba could not provide details of the budget allocation for the inquiry into state capture. This will be considered during the 2018 adjustment budget once its costing has been finalised, he explained.