South Africa will introduce tax breaks to promote investment and expansion in manufacturing, and will set up a jobs fund to finance new employment-creation initiatives, President Jacob Zuma announced on Thursday evening.
 

In his third State of the Nation address to Parliament, Zuma announced R20-billion in tax allowances, or tax breaks, to promote the manufacturing industry, which is of one of the six sectors targeted for job creation.

For a project to qualify, the minimum investment must be R200-million for a new project and R20-million for expansion and upgrades.

The programme would provide an allowance of up to R900-million in tax deductible allowances for new investors and R550-million for upgrades and expansions, he stated.

Zuma also unveiled a R9-billion jobs fund over the next three years and said that the Industrial Development Corporation (IDC) had set aside R10-billion over the next five years for investment in economic activities with a high jobs potential.

"We cannot create these jobs alone. We have to work with business, labour and the community constituencies," said Zuma, whose government has promised five-million jobs in the next ten years.

The New Growth Path document has outlined six key areas for job creation, including infrastructure, agriculture, mining and beneficiation, manufacturing, the green economy and tourism.

Zuma stayed clear of details and outlined only broad interventions, saying that the Ministers would announce their jobs targets and more specific details per sector, in their forthcoming Budget vote speeches.

Government sees the construction industry as a driver for work opportunities, while employment would also be created in the mining and tourism sectors.

The African Exploration, Mining and Finance Corporation and the State-owned Mining Company would help South Africa to take advantage of its $2,5-trillion mining assets, he said.

"One of government's priorities this year is also to finalise and adopt the beneficiation strategy as the official policy of government, so that we can start reaping the full benefits of our commodities."

Government would also spend R2,6-billion on water services this year.

The small business sector continued to be an important part of the job-creation drive. "We will continue to provide financial and nonfinancial support to small, medium, and micro enterprises, small scale agriculture, as well as cooperatives."

However, administrative costs had to be reduced and duplication had to be avoided, Zuma said, announcing that Khula, the SA Micro Finance Apex Fund and the IDC's small business fund might be merged into a single unit.

Meanwhile, Zuma said that concerns about the exchange rate had been noted and that the exchange control reforms announced by Finance Minister Pravin Gordhan in the Medium Term Budget Policy statement last year, were being implemented.

He also said that the Budget deficit was set to decline from the 6,7% to between 3% and 4% by 2013.