RPP: Recovery and reform in the SA economy Reply

This article first appeared in the Sunday Independent on 6 July 2014.

Prof Raymond Parsons

Prof Raymond Parsons

The 20th anniversary of SA’s democracy, the 2014 elections and the advent of the National Development Plan (NDP), have converged at a time when key decisions must be taken and implemented to change SA for the better. The need for economic recovery and the reform agenda must now operate in tandem.There is no need to tick the boxes again, as the triple challenges of unemployment, poverty and inequality are sufficiently well-known. Having successfully walked the long road to freedom, SA is now inevitably involved in a long walk to shared prosperity. Its roadmap to 2030 is the NDP, with an action plan outlined in the state-of-the-nation address last month and in subsequent Ministerial initiatives.

Where many critics of the NDP are at fault is in not judging it by the test of using it. Of course, the NDP and its action plans have several pitfalls, but on the whole they are greatly superior to their many predecessors. Critics of the NDP look at the new model car from the pavement and point out all sorts of features which they think unsatisfactory. But they lack the courage to get into it and drive away. If they do so, they will not want to return to the ‘bad’ old way of doing things, but instead to get real movement into a better future for all. We may not get this opportunity again, so it is imperative to capitalise on it. We need to use the time given by the recent credit rating agency warnings wisely to tackle what has to be done. A week may be a long time in politics but five years is unbelievably short for delivery.
With many red lights flashing in the economy, the costs of failing to collaborate at strategic moments have become high. Given the current challenges facing SA, it is a great opportunity to redefine the relationship between government and business in ways that could take it to a higher level and improve outcomes. The ‘trust deficit’ between them has to be reduced. Timeous consultation on key issues affecting business is one major way to strengthen this relationship, but it must be effective consultation within definite time limits. Participation and effectiveness need to be balanced and procrastination minimized.

A positive development is that Minister Jeff Radebe in the Presidency is now to undertake ‘socio-economic assessments’ of existing and new legislation to see whether they are ‘NDP compliant’. Credibility depends on a serious commitment to policy alignment. If properly used it could help to build confidence, especially if stakeholders such as business and labour are encouraged to make inputs. Policy coherence creates an environment of greater certainty and predictability that helps to boost investor confidence, whether domestic or foreign.

The NDP projects that total investment must rise to a highly ambitious 30% of GDP by 2030 to support growth rates of 5% and unlock economic potential. Much of the current low level of private investment is attributable to the cumulative impact of growing policy uncertainty and an excessive regulatory thrust in domestic policies in recent years.This has seriously detracted from SA as an investment destination and encouraged investors to commit to other jurisdictions perceived to be more business-friendly. We need to accept that the private sector is the yeast in the bread that has to be baked if SA is to have an economy which is bigger, stronger and better by 2030, let alone by 2019.

The welcome intention of President Zuma to intensify dialogue with business therefore needs to be translated into reality and, above all, into outcomes. Some tough issues need to be on the agenda, especially the impact of labour relations on the economy. There are number of commitments in the NDP which involve the business sector alone, such as restraint in executive salaries, and where by showing leadership goodwill can also be created. Leadership is about smart change management. And to those who are ideologically unhappy with ‘capitalism’ the message must be: ‘You don’t have to love capitalists, just use them to get the job done’. ‘We did not ask whether the cat was black or white’, said a Chinese leader in explaining the Chinese economic ‘miracle’, but whether it could catch the mice?’.

We need thus to harness the business sector where it can make a difference, such as in the delivery of infrastructure and other services.The NDP particularly emphasises the extent to which small business, and hence entrepreneurship, are needed to create the 11 million jobs required by 2030. Indeed, on the assumption that business enterprises in SA on average each create about 11 jobs, a target of about 1,000,000 new enterprises by 2030 should be added to the NDP action plan to visibly focus on the small business role in job creation.

Although the government is ultimately the custodian of the NDP, it remains a plan meant to mobilise SA as a whole behind its goals by utilizing the concept of an ‘active citizenry’. Drawing on Malaysian experience in getting results, what President Zuma describes as ‘Operation Phakisa’ in SA should rapidly become a household word for implementation. It would also be helpful, even from the point of view of progressively garnering additional support, for the President to table an Annual Report on the NDP to Parliament, which could provide a valuable platform for debate and feedback.

And if business is to maximize its input into the implementation of the NDP it will need to get better organised. The cacophony of voices that presently claim to speak for business at national level is not helpful to effective policymaking and weakens the business community as a sphere of influence. Organised business should be both a consumer and contributor of ideas on policy, underpinned by good research. This involvement is urgent for all stakeholders, not just business, as the next two or three years will be decisive in determining whether the NDP will be a success. It lies largely in our hands to write our own story from now on.

Parsons is a Professor at the North West University’s Potchefstroom Business School and author of ‘Zumanomics Revisited – the Road from Mangaung to 2030’

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