Trade & industry minister Mandisi Mpahlwa - after years of trying, and amid strong resistance most noticeably from finance minister Trevor Manuel - finally managed to secure some funding for industrial policy incentives.
So it's not surprising that Manuel had a few caveats to add to the proposal in his budget. Industrial policy incentives would be granted on the basis of sound policy justification and "not as favours" to individuals or companies, Manuel said.
He gave his clearest indication yet that any support will be given only after rigorous scrutiny. At a media briefing ahead of his budget Manuel said he was unable to provide details of the R5bn industrial policy incentive promised by President Thabo Mbeki two weeks ago but added: "The only condition that we look at is that we are able to demonstrate the impact of policy".
Manuel dismissed reports of clashes between treasury and the department of trade & industry (DTI) over the design and administration of industrial policy incentives, down-playing any disagreements and "very necessary tension".
In his state of the nation address, Mbeki announced R2,3bn had been set aside to support the newly adopted industrial policy strategy, while R5bn would be given as incentives over the next three years.
In the Budget review, treasury undertakes to consider "carefully designed tax incentives that encourage higher levels of investment in labour-intensive or strategic sectors" which have to be "implemented with circumspection".
The budget contains a range of measures designed to stimulate investment. These include a venture capital tax incentive for promoting high-growth, hi-tech start-ups. The incentive is for companies with an annual turnover of up to R14m or gross assets of R7m or junior mining exploration companies with gross assets of R30m to R50m.
Non mining ventures will be eligible for a 30% up-front deduction of up to R500 000 for individuals and R7,5m for venture capital funds. Junior mining investment would be eligible for a 50% deduction of up to R1m for individuals and R10m for venture capital funds.
The DTI budget vote states that under the enterprise organisation programme, it will develop a package of incentives in manufacturing, tourism, skills and competitiveness by February 2009. Thus far, only the revised film and production incentive has been released.
Of its existing incentives, the DTI estimates that the Small & Medium Enterprise Development programme - in the process of being wound up - had created 360 851 jobs in manufacturing and tourism and paid out R3,2bn on investments by December 2007.
Nimrod Zalk, DTI chief director for industrial policy, confirmed that it would be replaced by the new Enterprise Growth Programme to be launched in the new financial year. This would also be based on grants for targeted investments, but Zalk would not be drawn on what would differentiate this initiative.
An additional R2,3bn - spread over the next three years - will include R500m allocated to three industrial development zones (IDZs); R90m for small enterprise development; a similar amount to improve competition regulation and R60m for investment and trade promotion. The department has earmarked R300m for the Coega aluminium smelter, no matter who its owner will be. An additional R110m has been set aside to establish the business process outsourcing programme.
