Bloomberg News

South Africa Plans 25 Billion-Rand Stimulus Program For Industry

October 25, 2011

Oct. 25 (Bloomberg) -- South Africa’s government will spend 25 billion rand ($3.2 billion) over six years on an industrial stimulus plan to boost output and create jobs in Africa’s biggest economy, Finance Minister Pravin Gordhan said.

The program includes tax incentives for industrial investment, Gordhan said in his mid-term budget speech in Cape Town today.

“The central thrust of our economic policy challenge is to support competitiveness and promote the kinds of structural change that will lead to more rapid, inclusive growth,” the minister said.

The government reduced its forecast for growth this year to 3.1 percent as demand for goods from Europe waned because of the debt crisis and as the global economic recovery stalls. The economy expanded an annualized 1.3 percent in the second quarter, the slowest pace in about two years. South Africa’s budget deficit will widen to 5.5 percent of gross domestic product in the year through March from 4.6 percent last year, the National Treasury said.

“The package will include temporary mechanisms to bolster productivity and innovation in industries that have demonstrated long-term competitive potential,” the Treasury said in its Medium-Term Policy Budget Statement released in Cape Town today. “Funding of the package over the next three years will be contained within the available fiscal envelope.”

The government is considering “incentives” to lure companies in labor-intensive industries to work in industrial development zones, it said. South Africa also plans to ease regulations on small businesses and increase investment spending, Gordhan said.

A wage agreement between the Southern African Clothing and Textile Workers Union and manufacturers is a “constructive approach to raise employment,” the Treasury said. The union agreed to lower wages for new workers in exchange for companies to create more jobs.

-- Editors: Gordon Bell, Nasreen Seria

To contact the reporters on this story: Andres R. Martinez in Cape Town at amartinez28@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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