Despite SA’s red tape, corruption and lack of skills, hope prevails
The establishment of a secure investment arena must be top of mind for SA — and deciding which SOEs can stay and which should go
A decade of state capture, a period in which systemic corruption flourished both inside and outside state institutions, has damaged SA. Credible action to deal decisively with corruption and associated institutional weakness is paramount to revitalising the country’s troubled economy.
The impact of reputational harm, investor uncertainty and the absence of opportunities during the “lost decade” have hit SA hard. Economic growth is limping along at a rate insufficient to create sustainable jobs. As a result, inequality is on the rise and fiscal instability is now a real concern.
Having increased too rapidly in recent years, civil servant pay cheques and interest on government debt have reached unsustainable levels.
Furthermore, structural impediments, including stifling red tape and a highly bureaucratic environment, are making it increasingly difficult for the economy to achieve growth, with entrepreneurs and small businesses bearing the brunt.
As a nation competing for global capital, the establishment of a secure investment arena must be top of mind. Investors need to be convinced that SA offers them the ability to do business without having to encounter the debilitating impact of corruption, that policy certainty is taken seriously, and that laws such as those mandating broad-based BEE (B-BBEE), will not change midstride their investment.
Once the building blocks of a rejuvenated economy have been laid, society will need to focus on populating the economy with an educated, skilled, and efficient workforce
The country must also be able to provide investors with secure and efficient public services, such as electricity, water and transport infrastructure. These are provided by state-owned enterprises (SOEs) and municipalities, many of which are in serious trouble.
Evidence emerging from the Zondo state-capture inquiry highlights how exposed SOEs are to infiltration and repurposing by corrupt elements. After years of mismanagement, many SOEs are now dysfunctional and teetering on the brink of collapse. Much of this can be laid at the door of weak institutions and parliament acting merely as a rubber stamp for what comes down from the executive.
Had certain checks and balances been in place, many problems related to state capture could have been avoided.
The clear and concise message emanating from dialogue between the Inclusive Society Institute and the financial sector is that the rot must stop. To get back on track, SA needs to rein in corruption by expediting the conclusion of fraud and corruption cases, thus placing a handbrake on the abuse of the system.
More investment in the judiciary is required through the hiring of additional judges, while the cost of breaking the law should be higher.
SA also needs to take stock of its SOEs, deciding which to keep and which to set free. Serial loss-making SOEs, unless of strategic importance, can no longer afford to be bankrolled.
One of the most critical SOEs under the spotlight is financially distressed electricity producer Eskom. SA’s ability to produce adequate and consistent power using its parastatal and independent power producers is, arguably, along with the eradication of corruption, the most important factor in the country’s economic revival.
Steering services on a provincial and municipal level, local government capacity requires urgent and radical improvement. Technical and managerial skills mentoring is in short supply. Dipping into the pool of experts who put their names forward to serve on the presidency’s technical advisory panel for infrastructure could be a proactive step in the right direction to strengthen technical capabilities at municipal level.
Reliable services and cost-effective infrastructure are key if the country is to lure investment. Ensuring that special economic zones (SEZs) offer exactly that, while leveraging incentives, will help attract foreign capital. For these designated areas to perform optimally, the government needs to create policy that will allow healthy competition to grow between provinces and SEZs for sought-after investment.
Analysts note that competition has been the kingpin of growth in the world’s most successful economies. So, too, international experience with SEZs dictates that they need to really be special and globally competitive “zones of exception”.
It has also been emphasised that SA needs to get with the times. Digitalisation must be accelerated to better integrate with other economies and pursue global opportunities. Delays in laying the infrastructure and implementing reforms to take advantage of the Fourth Industrial Revolution are holding the country back.
Once the building blocks of a rejuvenated economy have been laid, society will need to focus on populating the economy with an educated, skilled, and efficient workforce. This will require extensive re-engineering of the educational system, from basic education levels to tertiary institutions and blue-collar training. It is essential for SA policymakers to decide on what skills the economy requires in a new and digitally orientated world.
Education and skills development could also be greater beneficiaries of B-BBEE, thereby empowering the SA workforce with skills and ensuring young people have more access to opportunities.
In the face of the doom and gloom that threatens to sap the country’s morale, action must be taken to restore confidence that there are opportunities to rejuvenate the economy. In the absence of fanciful expectations and with all of society putting shoulders to the wheel, it is possible. Hope prevails.
• Swanepoel is CEO of the Inclusive Society Institute.
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