President Ramaphosa has announced his first economic stimulus package designed to strengthen an ailing economy. The stimulus package was in general welcomed by many commentators. While, the design of the stimulus package was announced, we must wait until the Minister of Finances budget speech later this month to have a clear sense of the financial impact and the nature of the reprioritization of funds.
Post the announcement, a further sentiment was that effective implementation of proposals is critical for them to have the impact that the economy requires. For impact to be effective we further require that the implementation reaches those who are in most need – those most affected by unemployment, poverty and inequality – there is a lack of usefulness if intended boosts to the economy, only serves to make the rich, richer.
For us to emerge from the technical recession, we can’t afford a business as usual scenario. We need to build a foundation of investments on our people and their future. These are some of the proposals I have put forward that I believe can significantly impact the economy and our people:
Transportation policy needs to be skewed towards the poor and the unemployed. A Statistics South Africa (Stats SA) survey has found South Africa’s poorest households are spending far too much of their disposable income on transport costs. Public transport is considered affordable when commuters spend less than 10 percent of their disposable income on transport. Former Statistician General Pali Lehohla said in 2015 that the study found two thirds of the country’s lowest income earners used more than 20 percent. In my view, transportation subsidies for those who earn below the minimum wage and for new job seekers can add significant boost to the economy but can also assist discouraged work seekers with getting into or back to work.
Often business has indicated that the regulatory environment makes the cost of doing business too high. While, I tend to partially agree, it is not big business but rather small business which requires a reduction in regulation and red tape. In this regard, I would recommend changes to two areas of policy. Firstly, we should provide a specific section in the labor relations act and the basic conditions of employment act for small businesses – to ease the burden on the ability of small businesses to comply and create new jobs. Secondly, SARS compliance should be eased for small businesses and SARS should be on the ground in townships and rural areas offering free training and guidance to micro and small businesses. First time small businesses who commit errors should be warned and not heavily penalized. Startups should be given a tax-free period of two years.
Access to the local and global economy is being held back by the exorbitant costs of telecommunications in South Africa. South Africa’s new electronic communications amendment bill needs to be accelerated to bring down the cost of voice and data which shall in turn allow for spending in other sectors of the economy but also further provide more people with access to an economy.
Finally, we must become more focused on research and development but this needs to be extended towards R&D that can contribute to industry. In a world, which is rapidly changing, we need to be innovators, to spur the discovery of services and products and businesses that we have yet to imagine. We already have the globally competitive University network and we can recreate best practice institutions such as the Council for Scientific and Industrial Research across the country.
Governments role can never be to try and fix every problem. We need to use the ingenuity of our people to do that. However, in removing the barriers for access we can lay the foundation for a more prosperous economy that serves all its citizens.
Waseem Carrim is the Chief Executive of the National Youth Development Agency.