Ebrahim Patel and his super-ministry in pole position to rev up policy
It is important that we see an acceleration in President Cyril Ramaphosa’s investor-friendly and industry-friendly agenda
The election of an investor-friendly president was of major importance to SA, and now that he has anointed his new cabinet it is important that we see an acceleration in his investor- and industry-friendly agenda.
Slimming and trimming the bloated government structure was an excellent move, and with the departure of veteran trade & industry minister Rob Davies and the fusion of his department with that of economic development, we now have a new economic and industry czar in the form of Ebrahim Patel.
Articulate, intelligent and a skilful communicator, Patel has many fine qualities. However, the initial reaction from some to his appointment was that he is too hands-on, a micro-manager.
Possibly the scale of his combined department — covering trade and industrial policy and important bodies such as the Industrial Development Corporation (IDC), the Competition Commission, the lottery and so on — may force him to delegate more, to leave more of the detailed administration to the civil servants.
There have also been worries expressed that his background in the labour movement may make him suspicious of business. However, he emerged as the main organiser of the 2018 investment summit. By reappointing and promoting Patel, President Cyril Ramaphosa must clearly trust him to support business, not hamper it.
And, wow, there is a lot to fix! In his first state of the nation address in February 2018, Ramaphosa said much about the state of the economy and began his investment drive, which led to many successes at the investment summit.
However, the economy needs a lot of help. Just look at the monthly stats on business confidence, on consumer confidence, on inflation, on GDP growth and, crucially, on unemployment.
So then, what is the manufacturing sector, the engine room of the economy, in need of under new chief engineer Patel? I look forward to the Manufacturing Indaba later in June, where business and the government discuss ways to stimulate the sector.
The department of trade & industry has been the government department with the most influence over industry in SA, but we have seen the share of this vital sector in SA’s GDP in severe decline in recent years, affecting growth, employment and exports. This cannot all be blamed on the government, but certainly there is an important role for the state.
With his combined super-ministry, Patel is now in a position to refresh and revitalise government strategy in reversing the decline of industry. With his background in organised labour he is also extremely well placed to get buy-in from the unions.
Take just one example of where he can make a real difference. The IDC was once the midwife to large industrial projects. Think of the birth of Sasol, Iscor, the BHP smelters and Highveld Steel. While IDC support is invaluable, not least to black industrialists, Patel’s oversight of the funding organisation will be combined with the department’s funding toolbox. This is a space we will certainly be watching.
We hear the good news when a new automotive plant or rail carriage factory or pharmaceutical factory opens or expands. We need this investment in jobs and skills, growth and exports. Nobody should begrudge the politicians who turn up for the photo opportunities and television soundbites. Hopefully, Patel will be popping up a lot at such events.
However, while we do have successes, the scary thing is how many potential investors do not commit to starting new projects in SA. They come, they look, but they are not convinced. They go elsewhere. This is not normally reported because no-one likes to highlight failure. But it happens more than we may care to think.
It is important that the government understands we are competing for investment, and business bases its investment decisions for where it locates on a number of critical factors, not least of which is a welcoming environment for industry. The challenge is one that is not just for the new super-department.
Now that the election is behind us, we need to try even harder to get the SA investment Sherpas to climb even higher mountains, to notch up even more air miles. The investment summit this year must be better planned, better staged and more ambitious, so that it reaps higher spoils. And it is just one of many areas where industry needs a hand.
One casualty of the top-heavy ministerial mess Ramaphosa inherited was suboptimal co-ordination between the different departments, which may become less of a problem in the industrial arena with Patel’s ascendancy.
The government itself recently reported that the state’s R50bn investment incentive basket of 244 programmes has been spread over an array of departments, and cabinet concluded that there should be better co-ordination between them all. The new super-department will allow for much improvement in this area, particularly in the vital areas of BEE and industrial support.
Given that incentives are a key consideration when investors — local and offshore — weight up the merits of an expansion or a new project in SA, an overhaul is wise. And overdue.
Of course, many other factors will also help rev up the investment drive. Clarity and comfort over land reform and property rights must be a priority. There has been a lot of thought and discussion on this important issue. Now the decisions must be made and implemented. Investors and existing businesses need this.
There has been a lot of progress in renewing the Mining Charter, but there is still distrust between industry and the government. The SA economy is heavily dependent on whether this is a sunshine or a sunset industry. With his reappointment to the mining portfolio, and its remerger with energy, Gwede Mantashe will become an even more important player in the economic cluster of government.
A lot of work has been done in preparing various energy strategies. The spark must now be ignited to bring action. In addition, while we now have the stick of a carbon tax, there has been little progress on new energy-saving carrots, and these require urgent attention.
The scale of waste, inefficiency and corruption at state-owned enterprises has begun to be revealed, and resolute and determined action is needed. This will be aided by Pravin Gordhan remaining in his strategic post at public enterprises.
Growing crises in water and sanitation, as well as in electricity, require a serious upskilling at municipal level, and surprise cabinet newcomer Patricia de Lille may be well placed to breathe fresh life into infrastructure expansion.
Now that the election is behind us, it is time for a lot of urgent activity from Patel and his fellow ministers. SA industry and the unemployed millions deserve no less.
• Newman is a co-founder of Cova Advisory.