KwaZulu-Natal Legislature Pietermaritzburg:
25th March 2011
The declared focus of the Department of Economic
Development and Tourism is on job creation and economic growth
through promotion of trade and industry. The provincial government
is paying lip service to the need for supporting both, but its
record, especially on promoting job creation, attests to the
Hundreds of millions of Rands are poured annually
into so-called “engines” of economic growth housed in this
department, such as the KZN Growth Fund and the SMME Fund, with few
newly created jobs to show for it. Past SCOPA resolutions are
littered with instances of small and medium-size businesses that
have received substantial amounts in funding from various public
entities within this department but they only remained in business
for as long as they received funding.
When the funding dried up, these businesses went
bankrupt. This is hardly a recipe for job creation through the
publicly-funded programme of support for SMMEs. What this province
needs is a detailed strategy on how to make KwaZulu-Natal South
Africa’s province of choice for business.
One way of doing this is by cutting red tape that
would make it easier to do business in KwaZulu-Natal. The time
period for registering new businesses needs to be cut. Compliance
with a multitude of regulations also needs to be eased. One issue
that can be taken up directly by the Office of the Premier and the
Department of Economic Development is looking into options for the
formalisation of informal businesses in this province. These
measures could include concessions for informal businesses to
Our alternative budget framework which was
presented in this House yesterday ensures that employment
opportunities and opportunities for entry through entrepreneurship
are not only maximised, but that access to such opportunities is
made as open and equal as possible.
Our key proposal here is to scrap the current
funding model of the KwaZulu-Natal Growth Fund and the SMME Fund,
both of which focus on support for a miniscule number of businesses
and transform this public entity into a fund that would administer
wage subsidies to qualifying SMMEs for every new job created based
The escalating wage subsidy would be offered for a
set time period for every new position created based on a proven
track record of sustainable job creation. The subsidy would help
grow the qualifying SMMEs as it would lower the cost of hiring
In addition, the escalation of the subsidy over
time would provide sufficient incentive to create sustainable jobs.
In contrast to the Expanded Public Works Programme, which creates
temporary jobs where little or no transfer of skills takes place,
the subsidy structured over several years would provide enough time
for the employee to internalise the work experience and for the new
position to become fully-fledged and sustainable.
We believe that our proposal for a wage subsidy to
support employment could inspire economic policy on a smaller scale
in the province. Working through various public entities, wage
subsidy could in time provide employers with a means to claim back
part of wages through the tax system.
The wage subsidy proposal has the strong backing
of business, simply because it assumes that a major reason for high
youth unemployment is the high cost of entry-level salaries in
unionised sectors of the economy. This is a fact and a major
impediment to economic growth.
Rather than attempting to micromanage the affairs
of individuals and communities, our proposals seek to inspire
self-help and self-reliance while equalising opportunity for all. We
recognise that participation of greater numbers of citizens of
KwaZulu-Natal in the province’s economy cannot happen without a
radical expansion of opportunity and that effective service delivery
by government ..ee and growing private sector to generate the resources
necessary for it.
The greatest difference between this and past
provincial budgets and our alternative budget framework and its
proposals for the Department of Economic Development and the public
entities attached to it lies in the purpose and size of government
our plan would achieve over time.
I thank you.
Contact: Dr Lionel Mtshali, 082 556 0224