KZN Budget Debate - Economic Development And Tourism (Vote 3)
By Dr LPHM Mtshali MPL
Shadow KZN MEC for Economic Development and Tourism

KwaZulu-Natal Legislature Pietermaritzburg:  25th March 2011  

Honourable Chairperson


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 contrary.


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 register.


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 on sustainability.


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 unskilled labour.


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 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