The market is not the panacea for all our ills

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2019 has been a difficult year for South Africa. While we celebrated our 25th year of democracy and 6th democratic elections, the economic gains, a decade after the global financial crisis, remains sluggish. In fact, the economic situation has overshadowed these celebrations.

According to the website trading economics, South Africa’s growth rate this past year was less than 1 percent. Far from the 5 to 10 percent growth rate as envisaged by the National Development Plan. The contraction on the economy can be attributed to the contractions in our key industries such as mining, manufacturing, transport, storage and communication. 

Transport, storage and communication fell by more than 5 percent in the last 12 months. These are key industries in a tertiary sector economy. We should be developing more of these instead of less and they play an even more vital role on the African economy, especially in the light of the potential that the African Continental Free Trade Area presents.

In the view of this, one can then arguably understand the frustration of Mondli Makhanya when he writes about the Emerging Advisors Group’s report “South Africa is dead. What next?” Yet our biggest frustration as policy makers is not so much the abyss we face but that lead South Africans, such as Makhanya, think that it is only government or parliament’s duty to get us out of this economic morass. 

Yet Makhanya can also be forgiven because it is primarily an economic policy morass that we are in. Anyone who knows what the markets and investors need is certainty and confidence. The one feeds off the other and with a loss of certainty in whether we will implement the 2017 Nasrec Resolutions of the ANC, this more than anything else dents the confidence investors have in South Africa’s economic future. 

As a result, where one can agree with Mcebisi Jonas, in his article “It’s time for a clear and unifying national agenda”, is that we need to be united as South Africans in the action that we take to restructure our economy. Like Makhanya, every single South African must sacrifice, must serve and must ensure that we change the very characteristics of our economy in order to bring about prosperity and a decent life for all. 

The sad reality is that some have suffered and are still suffering while others, who have not suffered in the past, still refuse to sacrifice. This is the unfortunate reality of our common dilemma. Indeed, as Jonas points out, if South Africa belongs to all who live in it, then surely those who have should also make the sacrifice in order to ensure that those who do not have are afforded a decent life as well. 

South Africa does belong to all who live in it. The challenges is that the economic challenges are unfortunately felt more by those at the bottom than by those at the top. There is simply not a collective ownership of the outcomes of this economic stagnation. Yet what is the way out of this economic morass? What must be done?

Firstly, Jonas is partially correct when he points to the importance that our SOE’s play in our economy. They are central to our economic restructuring and reenergizing. For it is the duty of every government to facilitate the creation of an inclusive economy and thereby create the environment for the private sector to create jobs.

Any economy needs water, electricity, rail, roads, air, ports and telecommunications to function. The better and more sophisticated the provision of these are the stronger the economy. These are functions that rightfully must be played by SOEs in facilitating the sprawling growth in our economic environment. 

As a consequence, we can see that we are struggling in all these except maybe roads; South Africa has some of the best roads on the continent. But again, a curse of this blessing is that we then tend to overload our roads when in actual fact freight and goods should be transported via rail. This eventually leads to a traffic clogging on our roads. 

But the situation is a bit more complex than outlined by Jonas. Our SOEs are under threat from more than just corruption and maladministration. While we can certainly agree that our SOEs have been used as troughs to serve the interests of the ruling ANC faction, we must not forget that corruption and the maladministration of our SOEs had its genesis way before 2009. 

If we are to solve the challenges at our SOEs, we must realize, united, that a myopic understanding of these challenges will not lead to lasting solutions. Even more so, we must once and for all move away from the Reaganomics and Thatcherism, rightfully left behind around in the globe in the nineties already, which suggest that the only way to get our SOEs to function is to sell them off. 

The second suggestion would certainly be that we expand the SMMEs sector within our economy. Academic economists such as Sampie Terreblanche points out that our economy is not only race bias but it also favors monopolistic and anti-competitive practices. Sadly, instead of addressing these anti-competitive behavior in the private sector the focus instead has become on a public entity’s supposed anti-competitive behavior. 

For example, Eskom is criticized for being anti-competitive for being the sole provided of electricity (note not energy) in our country. Even energy, some would argue is anti-competitive given the role that SASOL plays in providing gas. Yet while government has moved towards a basket of energy supply, mixing even the suppliers between public and private, the private sector has not deconstructed their monopolies nor attempted to beat anti-competitive behavior.

Take as an illustration the presentation to Parliament by Sibusiso Gumede where he points out that the “inflexible and excessive requirements of the Construction and Industry Development Board (CIDB), Hazard Analysis and Critical Control Points (HACCP), International Standards Organisation (ISO), organic content certification…are still being used perversely to eliminate small enterprises from acquiring huge and lucrative contracts.” Needless to mention, that the most glaring challenge even in this thinking is that we expect SMME’s to acquire “huge and lucrative contracts.”

His presentation continues to point out that “exclusionary practices are prevalent especially in profitable sectors of the economy.” He further points out that our mechanisms, such as industry charters, are simply not binding and uses the example of Spar having to conform in Namibia because their charters are mandatory instruments whereas in South Africa they are simply voluntary. 

There should be no doubt that any SMME, whether owned by a historically disadvantaged individual (HDI) or not, will struggle to survive in our economy. We must change this because while the historically advantaged individual may have access to networks of the conglomerates, the smaller HDI does not. 

In my constituency, the Athlone industrial area and Athlone commercial hub, it is difficult to find a business person who has struck a reliable contract based on BBBEE. Instead, what we have seen is the privileged few reaping the rewards while the small business is either wiped off the map or continues to struggle.

Take for example Shoprite in the heart of the Athlone business district. First they put the butcher out of business when they started to sell meat and poultry of their own. The butchery down the road still struggles but doesn’t come near to meeting the meat sales that Shoprite makes. Yes, Shoprite’s meat is cheaper because they also sell vegetables and have an in-house bakery. Again, the vegetable stall outside in the street struggles to get his few items sold while stand-alone bakeries are almost impossible to find these days unless one drives to Wembley Bakery. 

Now Shoprite has gone even further by taking away the business of the boerewors stall which was also positioned outside on the side walk while pharmacies are also found in Checkers stores. Retail conglomerate Shoprite has therefore been able to put the butcher, the baker, the vegetable hawker and the boerewors stall holder, all SMMEs, out of business as they become richer and richer.

One hopes that as Mcebisi Jonas takes over as chairperson of the MTN board he too will be able to pursue the breakup of the cellular and mobile industry in South Africa. Hopefully, he will champion the emergence of new black players in the industry so that we not only see a drop in the costs of data, but the costs in hardware as well. Even more so, we must see new players coming into the market enabling a varied entry into the 4th Industrial Revolution. 

Yet the most important thing that must be done to ensure our exit from this economic morass is to end policy uncertainty. We must ensure that the ANC led government stops singing from a different hymn sheet than that of the ANC and its branches in particular. The ANC is a democratic organisation and democracy is what it champions. When these branches democratically elect delegates who later meet to decide on government policy at conferences then the government, led by the ANC, must heed these resolutions. We must implement that which we promised the voters in our manifesto.

Once government resolves to implement ANC policy, we will begin to see the build in confidence not only by international investors but even more so by domestic investors. If this happens in 2020, we can be assured that we will be in better economic position by this time next year. 


Faiez Jacobs is an ANC Member of Parliament & is the Whip for the Portfolio Committee on Small Enterprise Development.