CAPE TOWN - The government is expected to announce a new rescue package for the manufacturing sector when Finance Minister Pravin Gordhan tables his medium-term budget policy statement in Parliament next week.

The package would be targeted at vulnerable segments of the manufacturing sector which have been most affected by the global financial crisis.

Its purpose is to prevent further deindustrialisation from the worldwide economic slowdown, Business Day learnt on Friday.

It is understood the measure will include a production incentive scheme for vulnerable industrial segments along the same lines as the value-added based incentive, which has been implemented with much success in the clothing and textile industries. The segments expected to benefit from the package include glass, rubber tyre and plastics, all of which have suffered under a deluge of cheap imports.

Trade and Industry Minister Rob Davies refused to divulge details of the package ahead of Mr Gordhan's announcement in the medium term budget policy statement. Mr Gordhan is expected to reflect on the global crisis and its effects on the economy, including a lower than expected growth forecast for the year. He will also update the government's revenue and inflation estimates and its revised expenditure plans for the next three years.

However, Mr Davies did say at a media briefing on Friday that Mr Gordhan's announcement would seek "to create confidence in the manufacturing sector and support efforts by manufacturers to raise their competitiveness and improve their productivity".

He said manufacturers needed confidence to invest in modernising their plant and restructuring their businesses, rather than running them into the ground and then closing them.

Mr Davies said SA "cannot afford to allow a situation to be created in which if there is another downturn in the world economy or more likely that if the world economy continues to stagger along at a very slow pace that the casualty of that situation is once again Manufacturing SA.

"We need to ensure that we come through this period not only with our manufacturing sector intact but beginning to take off in areas where we have identified in the industrial policy action plan," the minister told reporters after briefing Parliament's trade and industry committee on his department's annual report.

The manufacturing sector was the biggest casualty of the 2008-09 recession when it shrank by 10% and lost about 200000 jobs. A partial recovery in the second quarter of this year was undermined by the resurgence of the financial crisis and the euro-zone debt problem.

ensorl@bdfm.co.za