Treasury's draft policy needs less talk, more action
JOHANNESBURG – By now, anybody remotely interested in South Africa's economy will be aware of National Treasury's recently released draft-policy document on an economic strategy for South Africa.
It focuses on economic transformation, inclusive growth and competitiveness, and invites public discussions and input until mid-September.
The way it collates our challenges and avenues to redirect South Africa’s economic path should be lauded.
Finance Minister Tito Mboweni’s document paints a startling picture of South Africa's dire economy, and identifies various ways to turn the tide.
My input looks at three key areas:
- The role of the private sector. This is the engine of growth. It provides most of the jobs in developing countries and pays taxes to governments, contributing to 60 percent to 70 percent of their revenue. And it invests heavily in building new industries. This sector's primary goal is to participate in the economy to increase its bottom line. I am concerned that the document relies too heavily on the private sector capitalist involvement and, due to the historical injustices of the past, it might be difficult to see a way to eradicate inequality and the reach of some crucial services to low-income households.
- The role of the public sector. This sector creates policies and regulatory frameworks. As the biggest buyer of goods and services in South Africa, the public sector must use its financial muscle to define the economic trajectory of the country. It shapes economic institutions and influences how resources are used. The ongoing challenges faced by the South African state-owned enterprises and government departments distract from driving this home. Public-private partnerships across the world have proved highly effective in driving economic growth. This is the enabling environment that encourages the private sector to invest. The model of an open, export-oriented economy with a flourishing private sector gives developing countries the best chance of increasing prosperity and living standards. The provision of public goods is a key determinant of quality of life for individuals and communities and, hence, the attractiveness of a country to private investment.
- The role of small and medium enterprises (SMEs). They’re the backbone of any country's economy. The role of SMEs cannot be seen as a medium-term goal as put forward in the document, but must be an immediate goal. Issues like funding for seed and early stage start-ups; a 30 percent set aside procurement rate for SMEs by the government; late payments and bureaucracies still plague the SME environment and cannot be relegated into medium-term goals.
The document's proposed solutions are reasonable, but the real challenge remains implementation. Will the same bureaucratic institutions that exist today be mandated to implement the same reform?
Will the Public Finance Management Act be used to adjudicate SMEs and large corporates? Are there measures that will be put in place to ensure implementation? And are there repercussions for non-implementation? I agree with the document's proposed idea of charging interest as a penalty on late payments to SMEs.
But in nearly every problematic economic scenario, there will be winners and losers.
The fact remains that the country at large will be the ultimate winner if the above three points are taken into careful consideration when implementing the policy document.
South Africa must also bring its losers to the table and find incentives for them to participate or else they could derail any economic plan.
The inequality and poverty challenges must be front and centre of the document, and any policy developed for implementation must be aligned to economically rescuing the most poor and vulnerable, and creating an equal society.
The private sector should also play its part in ensuring increased and better collaboration with start-ups.
The public sector must also do more in terms of impactful programmes, technical support and viable funding mechanisms.
Now’s the time to heed the words of the king of rock ’n roll: “A little less conversation, a little more action.”
Kizito Okechukwu is co-chair of the Global Entrepreneurship Network (GEN) Africa; 22 on Sloane is Africa’s largest start-up campus.