THE State of the Nation address has come and gone, debated in the National Assembly and various points of view have been expressed. Many of the debates have littered the print and electronic media. Three caught my attention.
First, that the private sector creates jobs, in contradistinction to the role of the government; second, the shoes the president donned on the day from Pietermaritzburg; and third, the tale of Soweto entrepreneur Thando Makhubu’s R350 gourmet ice cream business.
I have views that are different, not because the private sector has an obligation to create jobs but rather because of the dichotomy that is oft created to leave the government to that of mere facilitation, instead of taking the leading role of actively investing in critical material infrastructure for the government to create and sustain jobs. And then to provide the guidance and regulation to direct the private sector to join in or else. This is a debate for another day.
As a teaser: it is about changing the shape of the overlap between marginal cost and marginal revenue from a V-shape to a U-shape. This happens with the intervention of the government, not as a facilitator but as an active de-risker and participant in the economy.
But who is wearing the boots in this country? It has been noted that former minister Tito Mboweni and the president wear similar footwear. As Mboweni departed, leaving Enoch Godongwana to don a similar set, Mboweni shed the austerity mantel and upgraded to business-style footwear. Ramaphosa clearly liked the look and is going for a new set of boots. I must say it looks presidential on the eye.
I recall, in 2005, when questions of competing with China were raised, a shoe manufacturer in Pietermaritzburg said China could never beat him on price, quality and market access.
Two points the manufacturer made were that his furthest market was two hours away and his employees were involved in decision-making. On the basis of the two attributes, China posed no threat.
I am not sure the president’s shoemaker is this person. If he is, then the question of labour market regulations would have been given a prime space with regard to the matter of how business can productively conduct itself.
On the issue of the R350 grant and ice cream, the less said about that the better. It raises more questions than answers.
It is these questions I raise in order to navigate the nexus of the shoe tale from Maritzburg, which directly gets into job creation.
First, a loaf of bread costs at least R12, although a certain farmer, by the name of Ronnie McKenzie, chastised me on our Open Politics social platform. He said the black township bakers made a loaf available at half the price. And he ridiculed me, saying my taste was elitist. This is a very revealing point that I will return to.
Even if a loaf is R6, a stipend of R350 a month will not take you far. This is because this is less than half the per capita poverty line. What savings would have Thando Makhubu made after 30 days when the R350 can cover only bread, unless Mr Makhubu lived on 99 percent prayer?
A year in prayer without bread would render Makhubu dead by the time the president gave his address and there would not have been any ice cream for the president to talk about.
Thus, the example and the context in which Makhubu’s creamery was raised elicited doubts about our economic policy design.
Yet the message could have been different.
The message could have woven a storyline of the context of credit extension, social compacting, the township stokvel economy, monopolies and red tape. The failure of the president’s address, therefore, is this: it failed dismally to tie Makhubu’s unmet thirst for credit extension.
It failed to see that at levels of R3 500, the stokvels and VBS are challenging the financing models, including the red tape for which the president has invented a special pair of scissors to address.
Should the Maritzburg shoe manufacturer be the 2005 entrepreneur I referred to, then the president’s address failed to draw the approach of that entrepreneur to the question of social compacts and the responsible deployment of capital and labour that South Africa sorely needs.
To make such an entrepreneur productive and expand employment, the government has to ensure that the overlap of marginal cost and marginal revenue is U-shaped and not V-shaped. Thus, through the government de-risking the ever-risk-averse private sector, it would, at the slightest of perturbations, mechanise rather than train and deploy for mechanised environments.
The address lacked a national agenda towards which it could mobilise South Africans.
The Soweto Creamery had all elements of entry into such an agenda and laying rafters for decisive action on banking and credit extension, the elimination of monopolies through black producers and consumer movements and meaningfully anchoring social compacts.
Dr Pali Lehohla is the former Statistician-General of South Africa and a former head of Statistics South Africa. Meet him @Palilj01 and at www.pie.org.za.
*The views expressed here are not necessarily those of IOL or of title sites.
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