No clarity on how KZN plans to divert funds from provincial fiscus

KwaZulu-Natal (KZN) premier Sihle Zikalala’s unilateral declaration of a state of disaster in the province has raised questions about his lack of coordination with the multibillion-rand programme being driven by the department of trade and industry.

Led by Trade and Industry Minister Ebrahim Patel and supported by other key business stakeholders, the R3.9 billion national intervention is aimed at rebuilding businesses affected by the recent spate of violence and looting in KZN and Gauteng.

With Zikalala’s spokesperson Lennox Mabaso yesterday failing to respond to e-mailed questions, there is no clarity on how KZN planned to divert funds from the provincial fiscus, distribute monies to impacted businesses or be part of Patel’s bigger initiative.

While Zikalala declared a state of disaster in KZN, Gauteng premier David Makhura has ruled out following suit.

Giving an update on the economic reconstruction and recovery plan in Gauteng following violent protests against the sentencing of former president Jacob Zuma, which led to the destruction and looting of businesses, Makhura ruled out the declaration of a state of disaster.

This, despite Gauteng businesses having suffered an estimated R3.5 billion loss due to looting and destruction. Makhura said the impact of the damage to infrastructure in Gauteng was not as extensive as in KZN.

“We basically suffered the destruction of businesses, displacement and destruction of property. This is trading property,” said Makhura, adding: “There were no factories here or warehouses that were attacked.”

Commenting on Patel’s initiative to help rebuild destroyed businesses, University of Johannesburg associate economics
professor Peter Baur said: “This R3.9 billion spending initiative is a very good idea. We need to provide support to the business sector, because of jobs.

“While these businesses are closed, there are a great many people unemployed. Beyond that, the multiplier effect is even worse. When one business is harmed, then others will be harmed either upstream or downstream – further impacting on unemployment, business confidence, investment confidence and business risk.

“This will translate into the overall manufacturing production, which will possibly be measurably down from the 35.3% earlier this year.

“The concern around business risk is the cost that business will need to consider if expanding or investing in their business. This can be translated into increasing costs of doing business – higher risk, interest rates and insurance costs.

“This reduces the competitiveness rank of South African business – seen through the possible contract shifts of some products from local companies to offshore businesses.

“This will affect the South African purchasing managers’ index (PMI) – indicating the prevailing direction of economic trends in the manufacturing and service sectors of the economy.

“This dropped to 57.4 in June, with little chance of short term recovery.”

– brians@citizen.co.za