KwaZulu Natal Provincial Parliament: 19 April 2007  

Honourable Speaker

For starters, I would like to explore one particular aspect of this self-proclaimed "pro-poor" budget and its implications for economic development in KwaZulu Natal. Ithala Bank is being marketed by this very government as a developmental institution owned by the government and intended to extend loans mainly to the poor to set up businesses.

Ithala has a long history of doing just that. We owe it to the IFP that this structure, along with the KwaZulu Finance and Investment Corporation (KFC), the KwaZulu Marketing Initiative, the KwaZulu Transport (Pty) Ltd, the KwaZulu Training Trust and the RSA/KwaZulu Development Initiative (RKDP), was established to promote free enterprise in the province beset by a legacy of structural underdevelopment.

In the past, Ithala came to symbolise fast-tracked development based on integrity, accountability, frugality and selflessness. These principles were inculcated into Ithala's management philosophy by Prince Mangosuthu Buthelezi who served as Chief Minister and Minister of Economic Affairs in the erstwhile KwaZulu Government. In practice, this management philosophy resulted in a uniquely clean administration.

The KFC, in particular, was the development arm which responded to numerous development needs and economic challenges. The KFC offered investors a wide range of specialist assistance including financial packages, industrial sites and supporting management and professional services designed to successfully establish industrial undertakings.

The KFC likewise provided loan finance to emerging entrepreneurs to purchase business premises, stock and, in some instances, to erect trading facilities. Housing development was also part of the KFC mandate. In addition, the KFC provided housing loans to public servants in various government departments.

The KFC also contributed to the establishment of industrial parks at Isithebe, Madadeni, Ezakheni and Pinetown. We applaud the provision of job opportunities to mitigate high levels unemployment in these areas.

Food production formed another part of the KFC mandate. Maize cultivation was promoted to reduce hunger and starvation.

The future of these projects is a matter of serious concern to those who place a premium on crop production for export and generating permanent jobs in deep rural areas. We would like to see the Department of Agriculture and Environmental Affairs investing into these worthy, well-established development projects instead of often financing projects that yield next to no harvest on project sites whose location in unknown to the department itself, let alone to the relevant portfolio committee of this House.

We owe it to the KFC that the KwaZulu Marketing Initiative was established. This was an association of development role players in the erstwhile KwaZulu region with the role of actively promoting and facilitating inward investment into the region by manufacturers and commercial enterprises.

Now all this is largely history. The modern day Ithala, heir to a noble tradition, is a far cry from its legacy. In theory, Ithala remains a public-funded entity that falls under the control of the KwaZulu-Natal Economic Development Department.  The IFP is concerned that the Department of Economic Development may be failing to monitor and evaluate the impact of the Ithala development projects on the ground and utilise the results of monitoring and evaluation to guide its subsequent initiatives.

Wholly-owned by government, Ithala comprises two separate legal entities, Ithala Development Finance Corporation which provides state-funded loans in line with an approved lending policy, and Ithala Limited which operates as a retail bank and does not hold any government development funds.

But unlike in the past when the coffers of this development finance corporation used to advance loans to beneficiaries from among the poor, these days loans are routinely granted to public representatives, Ithala officials and enterprises connected to leading politicians and top government officials.

The IFP reserves its judgement on this issue pending the internal audit investigation into Ithala's SMME and Growth Funds. We will await the respective report, expected to be tabled in May 2007, and we will comment on its conclusions.

Now a word about overall economic development in KwaZulu Natal. I would like to draw another comparison, one between the past and present allocation and utilisation of the state resources. I will focus on the concepts of efficiency and effectiveness.

Seventeen years ago, in 1990, KwaZulu Natal was home to 23% of South Africa's population, the region had the highest dependency ratio, that is the ratio between the employed persons and their dependants, in South Africa and one of the lowest levels of urbanisation in the country.

- Yet, during the years 1970-1990 KwaZulu Natal had the second fastest level of economic growth amongst the country's nine regions.
- Yet, manufacturing grew faster in KwaZulu Natal, during this time, than anywhere else in South Africa.
- Yet, KwaZulu Natal's strong performance in GDP per capita growth relative to the other regions was achieved through strong growth in manufacturing output and in community health and education services output.

All this was achieved under a financial regime of gross underfunding.  Having achieved so much with such limited resources, the erstwhile KwaZulu Government, led by Prince Mangosuthu Buthelezi as Chief Minister, must have done something right. I will tell you what it was.  Over-spending, fruitless and wasteful expenditure, mismanagement and fraud as we know these phenomena today, were virtually unknown.

Inkatha understood governance as a selfless service to the community.  This government, by comparison, in more interested in self-promotion at the expense of service to the community.

All this suggests that the bulk of available state resources is secondary to the way these resources are used. Given the disproportionately higher level of state resources available to this government, this comparison, based on a 1992 study by Deloitte & Touche, further shames this government as largely inefficient and ineffective.

I thank you.

Contact: Dr Lionel Mtshali, 083 256 4902