Finance Minister Trevor Manuel on Wednesday stated that the 2009 Budget spend of R834-billion would include R17-billion for industrial support, including tax incentives for particular sectors.

This was R1,6-billion in additional spending over the next three years allocated for industrial development and support to small enterprises.

An additional R1,8-billion went to rural development and small farmer support.

A further R1-billion was added for electricity demand side management, together with tax incentives for investment in energy efficient technologies.

In the 2009 budget, National Treasury said that in some areas, industrial support measures could promote development of new industries, and said that more work was needed to design effective policies that could boost employment and exports in competitive global markets.

Sectors encouraging exports and employment creation were preferred, while strengthening regulatory institutions that promote competition and consumer protection was required.

"Government intends to leverage the potential of the automotive industry to boost employment and promote export growth. The new automotive production and development programme, which will include a transfer subsidy scheme administered by the Department of Trade and Industry, will replace the Motor Industry Development Programme. An amount of R870-million is budgeted over the medium term for implementation of the new production subsidy," the National Treasury stated.

In its role of supporting small firms to access trade opportunities, the Small Enterprise Development Agency was allocated an additional R200-million for new programmes and a service delivery network.

"South Africa needs strong consumer protection agencies," reiterated the department. In this regard, and to bolster capacity for law administration and enforcement of regulatory functions, an additional R150-million was provided for the National Consumer Tribunal, the South African Bureau of Standards (SABS), the Competition Commission and the newly created National Regulator for Compulsory Specifications.

A further R258-million would be given to the SABS to acquire testing equipment.

INCREASING COMPETITIVENESS

Government added that it recognised that competitive industries could not be built behind ongoing protective tariffs or subsidies.

"Effective targeting of business incentives, therefore, needs to take careful account of the costs and benefits of selected support measures," it added.

The National Treasury emphasised that trade reform would be needed to lower costs to consumers, reduce input costs, support diversification and promote competitiveness. It added that government and the private sector could take several steps to improve the competitiveness of key export sectors as global demand recovered.

"Some of these interventions are contained in the National Industrial Policy Framework. The announcement of a new phase of support for the motor industry is meant to provide a stable platform for continued export growth," the department stated.

Regulatory reform would be needed to facilitate competition, protect consumer rights, support innovation and create greater flexibility in the business environment, National Treasury said in the 2009 Budget.

Manuel said that regulatory and microeconomic barriers to South Africa's competitiveness should be addressed, and this involved detailed sectoral analysis, and ongoing consultation with affected industries and interest groups.

Investment and training in the manufacturing sector was supported by industrial subsidies announced in 2008, the department said.

In his recent State of the Nation address, President Kgalema Mothlanthe hinted that government could adapt its industrial financing and incentive instruments to help deal with the challenges faced by various sectors, and also encourage development finance firms to assist firms in distress.

Manuel stated that the Industrial Development Corporation was assessing its possible role as a partner to support investment and employment in sectors or industries affected by the cyclical slowdown.

"Differentiating the effects of the short-term cyclical difficulty with the need for longer=term industrial restructuring is difficult and sometimes involves policy considerations, and so, risk sharing with the private sector has its place in preparing for future growth," Manuel said.

Previously, in 2008, the Minister announced a spend of R2,3-billion on industrial projects, and R5-billion in tax incentives.

MANUFACTURING

The Budget speech came a at a time when the manufacturing industry was reeling after statistics showed that output in December 2008 was down 7% when compared with December 2007.

The National Treasury reiterated that after growing at an average rate of about 4% a year between 2003 and 2007, growth in manufacturing output fell below 3% in 2008.

Output fell owing to the electricity crisis in the first quarter of 2008, and was the followed by the rapid deterioration in global and household demand, which contributed to production falling 4,4% in November from a year earlier.

The department said that export earnings for manufactured goods increased in 2008, reflecting price effects from the weaker exchange rate.

Chemicals and motor vehicles recorded solid volume growth. All export sectors were said to be at risk from declining global growth, and output has already fallen sharply in sectors most sensitive to international demand.

Production of basic iron and steel products plunged more than 40% between November 2007 and November 2008, while parts and accessories for vehicles and fully assembled vehicles declined by 31,5% and 22,6%, respectively.