Business report,

By Donwald Pressly

April 29, 2012

It is all about a masterplan called the developmental state where the various spheres of government and their agencies will work together to fast-track job creation, grow the economy and strip away any state fat in the process.

This is the vision for the country that Economic Development Minister Ebrahim Patel pursued during his budget vote in Parliament last week.

Earlier this year Patel, during the debate on the State of the Nation speech, noted that President Jacob Zuma had outlined a R1 trillion infrastructure plan that represented “a bold, strategic and integrated platform” to mobilise the state – with private investors and the South African public – behind “a clearly articulated storyline of South Africa’s opportunities”.

Last week Patel continued the storyline.

It was a week in which he announced a major deal with China, an expanded mandate for the Industrial Development Corporation (IDC) including the launch of a new subsidiary – the Small Enterprise Finance Agency (Sefa), which will focus on providing loans to small business. He reported the agency would have R2 billion in the lending kitty provided by fiscal transfers and reserves, and just short of a R1bn shareholder loan from the IDC.

In addition, the IDC had issued a R4bn jobs bond to promote lending to companies in a bid to boost job creation.

He noted that the IDC had introduced low-cost lending facilities for jobs creating projects “at prime less 3 percent”.

In the last year, IDC funding approvals had grown from R8.8bn to R13.5bn.

Ahead of his budget vote, Patel signed an agreement between the China Development Bank and the IDC. The bank will commit $100 million (about R777m) in funding for small business, which will be disbursed through the newly set up Sefa.

The latter is the amalgamation of three state finance agencies, which Patel emphasised would save about R20m just in reducing administrative red tape costs.

The Chinese loan will be repayable over 10 years and was the first “concrete partnership” arising from the Beijing declaration signed between South Africa and China in 2010, when Zuma went there on a state visit….Patel said the integrated platform required to mobilise South Africa’s talent and expertise was the first step in creating a 10- to 20-year infrastructure project pipeline.

His department took into account “the growing experience” in the state build programme for the Gautrain, Medupi and Kusile power stations, the freeway improvement programme and the major airport revamps.

He told journalists that the current procurement system of government was “purely transactional”. For example, his department had discovered that the file in which a recent speech was stored – on the need to buy South African products – was produced by a German company. These files were the cheapest.

After consultation with a local stationary company, Bantex, the Department of Trade and Industry and Economic Development were using local files and saving R100 000 a year. On top of it Bantex was getting the business and the new arrangement supported local jobs.

Turning to an expanded role for the IDC, he hinted that the corporation which had until now provided funding off the strength of its balance sheet, may turn to the state in future to make “contributions”.

The IDC, nevertheless, reported that it would be spearheading an over R100bn infrastructure investment programme over the medium term off its balance sheet.

Meanwhile, Patel acknowledged that the government had learnt a lesson from the massive bus rapid transport system procurement in the cities of Johannesburg and Cape Town, where they had separately procured buses from Brazil without benefiting from the economy of scale of having one bid. Long-term and pooling procurement procedures were the way to go, Patel argued.

Patel reported to MPs that of the R672m budget of his department, just short of R170m would be channelled to Sefa, which he said would help improve small business performance and strengthen its direct lending capability, while increasing disbursement.

To promote agriculture processing activities, Patel reported that R108m would be earmarked for the IDC for the agro-processing fund.

He also announced that the Public Investment Commission would manage a R5bn green bond issued by the IDC. It would have a 14-year tenure. Read the full article here.