WHETHER it is the International Monetary Fund, Business Unity SA, Cosatu, the Black Business Council (BBC) or the World Bank doing the criticising, they all agree on certain key fault lines within our economy.
The economy is dominated by big players; investment is too low; there is a rampant skills and entrepreneurial deficit; we are consumer and not producer focused; we are good at writing blueprints and plans but are hopeless at implementation; and we are still suffering the legacy of apartheid. Where there is less agreement is what to do about it.
Broadly, some say the government should intervene more to stimulate growth, while others say the opposite, that the government must “get out of the way” and let business do what it does best, which is create wealth.
At its heart, this ideological divide is what is limiting economic growth. It manifests both in a persistent and seemingly unbridgable gap between the government and business, and the half-hearted policies towards small business development, which have served only to hamper their contribution to the economy.
South Africa’s economy is and always has been controlled by a small number of powerful individuals and corporations. In an attempt to shift the emphasis, the National Development Plan expects 90 percent of all new jobs to come from small and medium enterprises.
Currently these businesses account for 90 percent of registered companies but only 60 percent of employment. With large businesses mostly shedding jobs, a weighty burden rests on smaller ones to rescue our economy. But things are stacked heavily against them, particularly burdensome red tape, precious few tax incentives, restrictive labour regulations and an inability to break into government and big business supply chains.
Off the radar
Successive South African governments have always had an ambivalent, even an indifferent attitude towards big business, while small business has mostly been off the radar. This is because business over the years has ‘delivered the bacon’ without too much interference.
Periodically, at times of stress, government and business have gotten together to try to close the divide. The Carlton Conference convened by Prime Minister PW Botha in 1979 was one of the first such attempts.
In his book, Inside South Africa’s Foreign Policy: Diplomacy in Africa from Smuts to Mbeki, John Siko recounts the moment Neil van Heerden, a senior government official, introduced Botha to Harry Oppenheimer, the chairman of Anglo American, which at the time controlled upwards of 50 percent of the JSE.
“Harry, I’d like you to sit next to PW,” said van Heerden, to which Oppenheimer replied “Oh, but I don’t know him!”
A clearer indication of the divide between business and government would be hard to find.
Shortly after the Carlton Conference, the government, in partnership with Anton Rupert’s Rembrandt Group, established the Small Business Development Corporation (SBDC). This was a non-profit company that aimed to provide funding for small businesses, and was the first practical acknowledgement that small businesses played an important role in the economy.
During the apartheid era, the government was happy for business to do its own thing, so long as it produced the taxes that propped up the regime. In the main, business leaders avoided direct criticism of the government. Small businesses grew up to serve the huge mining-industrial complex, which is where the bulk of our export earnings came from. There was very little emphasis on innovation. We had a laager economy where import replacement was a necessity and sanctions hampered exports.
Pre-1994, there was no talk of inclusive growth because black people were seen as second class citizens.
Tighten control
However, post-1994 the exclusion of black people from the economy no longer made economic, let alone social sense, and policy instruments have had to steer a more difficult path.
The government’s instinct has been to tighten control, not relax it, with labour, broad-based black economic empowerment and affirmative action legislation all serving the interests of the 10 percent of big employers, not the rest. To this day, small business does not have representation at Nedlac.
When the ANC took over in 1994, the Department of Trade and Industry (dti) moved swiftly to gain control of the SBDC, which was unbundled into the privately controlled Business Partners and the publically controlled Ntsika Enterprise Promotion Agency, now the Small Enterprise Development Agency. It also formed the National Small Business Council to act as the lead in driving government policy towards small business.
Since being appointed to my current position, I have met many stakeholders from business and the government whom you would imagine would be in constant communication about what should be done to improve the effectiveness of these agencies, as well as how the government can level the playing field for small business.
While there have been meetings, these have in the main come to nothing. It was very revealing to read a recent interview with FirstRand’s Sizwe Nxasana in which he bewailed former president Thabo Mbeki’s International Advisory Council for ignoring local business leaders and favouring international luminaries. Such a pointed brush left a bad taste in the mouth, which persists under President Jacob Zuma’s administration.
The government lives in an echo chamber in which only the voices it wants to listen to are heard. It’s been the same with small business. In 2010, dti Minister Rob Davies commissioned a study on how to improve conditions for small businesses. Most of the study’s recommendations were ignored because the obvious ones – give the private sector more of a role, relax labour laws, reduce regulations and red tape, give tax breaks for angel investors and mentors – fly counter to Davies’ and his communist colleague Ebrahim Patel’s ideological worldview that the state must control.
In parallel to this, we have the BBC and the dti advocating an explicitly black nationalist policy to create 100 black industrialists. Anything the white apartheid regime could do, we can do better, they say.
It really is extraordinary that the ANC and its cohorts are simultaneously pursuing two mutually incompatible policies that have their roots in two of the 20th century’s most disastrous ideologies, white nationalism and red Marxist-Leninism.
Such is the internal contradiction within the alliance that is paralysing our progress as a nation. Minister of Small Business Development Lindiwe Zulu has a huge task on her hands. To do her job, she must be the first pro-business voice in the alliance. Just tinkering at the edges, with an incubator here and some mentorship there, will not fundamentally restructure the economy and allow small businesses to flourish.
Toby Chance is the DA’s spokesman on Small Business Development