Captured state firms starved local manufacturers of business, Davies laments

Cape Town – Minister of Trade and Industry Rob Davies told reporters on Monday afternoon that state owned entities which fell prey to state capture suffocated local businesses and manufacturers from much needed business.

Davies was speaking ahead of his budget vote, due to take place in Parliament on Tuesday. He was unpacking his department’s Industrial Policy Action Plan for the 2018-19 to the 2020-21 financial years.

The IPAP plan aims to focus on "transversal and sectoral" opportunities in the next two financial years, capitalising on better-than-expected manufacturing outputs from the country, in a global economy where many emerging economies are mulling de-industrialising.

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Davies seemed visibly relieved at the sense of credibility that President Cyril Ramaphosa brought to government leadership after the scandal-ridden years of former president Jacob Zuma administration.

Davies said the administered prices that parastatals set rose at a higher rate than inflation. He said many contracts and tenders were presented well outside of the localisation framework.

“When we deal with state-owned entities, we have had to deal with administer prices that go up so much and so often that it presents a cost constraint. And we have raised this as a department on numerous occasions,” said Davies.

Davies said in almost every situation that he was aware of that state capture compromised a state contract, it served to benefit larger foreign businesses, often at the expense of smaller local businesses, weakening government’s performance in its localisation targets.

“Those tenders always had in common that they were supporting an importer at the expense of a local product. You didn’t get a bent tender that went to a local manufacture that was supposed to go for import. It all went the other way,” Davies said.

Davies said that his budget vote set aside R5.8bn for incentive programmes which would act as a sweetener among local manufacturers. He said manufacturers needed support so that they could capitalise on opportunities or those opportunities would be lost to importers.