KZN 2010/2011 Budget Debate -
Economic Development (Vote 4)


By Dr LPHM Mtshali MPL

KwaZulu-Natal Legislature
Pietermaritzburg : 13 April 2010


Chairperson, we in the IFP agree fully with the Department of Economic Development that we must, despite the current recessionary climate, continue to spend on infrastructure projects because such investments will generate growth when demand eventually returns to optimal levels in the domestic and global economies.


But we insist on enlisting private partners to help fund that infrastructure spending as a prerequisite for economic viability of individual projects. With the right incentives in place, there is no need for the South African taxpayer to fund single-handedly all the infrastructural projects currently planned or underway.


One word in this regard about this department’s flagship project, which is to be unveiled to the public next month – the King Shaka International Airport at La Mercy. We urge the provincial government to comment on the news reports that the cost of the new Durban airport, estimated at R7-billion, has vastly exceeded the original and revised budgets and that this shortfall will ultimately be passed on to passengers through inflated airfares.


We see this as a pertinent question since the King Shaka airport was conceived and tirelessly promoted as a necessary tool for multiplying air traffic into Durban and making air travel to our largest city both more efficient and cheaper for the businessman and the consumer.


We also urge the provincial government to comment on the alleged opposition to the new airport from virtually all airline operators who reportedly viewed the project as uneconomical given the volume of air traffic passing through Durban at present and in the foreseeable future. We would particularly like to be appraised of the extent of consultation the provincial government undertook in this regard. And finally we wish to get a comment on the ongoing controversy regarding the refusal to sell the old Durban International Airport to Comair, which has prompted allegations of promoting uncompetitive behaviour.


Chairperson, the IFP has long supported the principle of job creation though public investment which is another stated objective of the Department of Economic Development. This is particularly true of state-funded investments in the small businesses where jobs are of a more sustainable nature compared to the long-running Extended Public Works Programme, which by its very nature is largely temporary and where little or no training and skills transfer can possibly take place.


On the face of it, both Ithala and its subsidiary, the KwaZulu Natal Growth Fund, are programmed to do just that – to fund small business initiatives that train individuals for the job market, develop and transfer practical skills and ultimately create sustainable jobs. In practice, however, much of the investment that these entities provide is bad investment with grossly inflated overheads and insufficient return. Very often, decisions to grant start-up loans are driven by political concerns rather than merit. This could be good politics, but it is bad economics. Presenting the Growth Fund with a blank cheque – such as the flat budgetary allocation of R100-million annually over the MTEF considering its poor performance in the past is a case in point.


Chairperson, the reason why many state-funded projects do not materialise and fail to turn out a profit without continued financial backing is the same as the reason why private investors would think twice about funding them in the first place. Private investors tend to look at the big picture and what they see is mostly disheartening.


There is the inflexible labour legislation, the poor educational system, the high incidence of corruption, low productivity, high crime levels, the tendency of government to move more and more towards centralization and threats of expropriation of assets and property - most recently evidenced by renewed debate about nationalisation - most of these issues filter down from the national government, some – such as the major red tape obstacles to do business in KwaZulu-Natal could be successfully addressed by the provincial government.


If we are serious about creating sustainable jobs where they are needed most, we must provide tax incentives for new investments in the manufacturing industry, particularly in rural areas. We must also reform or even abolish Setas, introduce training incentives for businesses, readjust the mostly unworkable and costly Black Economic Empowerment and affirmative action initiatives and do away with the policy of providing loans and jobs for pals. In other words, we must do away with much of the current practice behind the free enterprise fašade of our public entities.


Chairperson, one last comment I wish to make has to do with the letter addressed to the chairpersons of three portfolio committees of this House by the SACP detailing irregularities at the Ithala Finance Corporation under the controversial tenure of its CEO Sipho Shabalala. 


The most extraordinary thing about this letter that its authors had to resort to addressing their concerns to Parliament rather than to their political party. Clearly, internal communication with their partners within the ANC had failed. It is unfortunate that none of the three committees has dealt with the contents of the letter. We on the opposition benches urge them to do so if this House is to fulfil its oversight role adequately. 


I thank you.


Lionel Mtshali
078 302 0929