DARYL SWANEPOEL: Get back to basics to reboot growth

SA must go back to basics to solve its economic problems. Before targeting complicated issues, a capable state and secure energy supply must be addressed first. There is no point in painting a house if the structure is not sound.

Over the last year, the Inclusive Society Institute has met local and international experts and leaders from various economic sectors to try to clearly establish what SA’s problems are and how best to solve them. Through this process the institute has established what we regard as a viable way forward.

Front and centre is the need for a properly functioning government at all levels, staffed by capable and dedicated civil servants. Appointing competent, well-managed and well-equipped staff in all offices is a crucial prerequisite for a functional state. Ethics and a commitment to service by such personnel are the synapses that fire a people-centred state.

Rooting out corruption and strengthening law enforcement are also key. Corrupt officials sap the energy of taxpayers, rob the fiscus of billions of rand and thwart any sustainable interest by foreign investors. Closely associated is the need to control crime and for the policing agencies to emerge as a fair, credible and trustworthy force. Rampant fraud and corruption in state-owned entities (SOEs), as exposed by chief justice Raymond Zondo’s state capture report, have been a major economic setback for the country.

SOEs require clear, workable business plans and decisive action must be taken to reform and restructure those that are consistently failing to perform. Those that are serial loss-makers must be severed, freeing up money to spend elsewhere in support of proven growth strategies.

Closely related to those issues is the dismal management of energy resources. This failure cuts to the heart of the country’s woes. Unless the crisis in the electricity sector is resolved urgently it is unlikely that any economic interventions will succeed.

Eskom will continue to supply much of the country’s power and its operational and financial difficulties must be tackled. At the same time, the country must organise and position itself better to take advantage of low-carbon investment opportunities and collectively rally behind the adoption of renewable energy, a modular solution that can be implemented more rapidly and more cheaply than alternative options on the table.

Government must clearly signal the building of a new energy system that is reliable, greener and moves the country towards its carbon-reduction goals. There is pent up demand for investment in renewable energy by independent firms, but regulatory barriers must be removed to unlock it.

A capable state can resolve several constraints to growth by removing administrative barriers, reducing layers of regulatory red tape and simplifying policies. Deregulating the private sector, specifically small, medium-sized and micro enterprises, could get the economy moving while the issues of electricity reliability and infrastructure rollout are being addressed.

Government must also take stock of the true economic impact of its policies and legislation, particularly its transformation policies. Regulations must be amended or scrapped should their impact be found to fall short of their intended goals. In some instances, however, measures to compensate for market failures will be required. Policies and regulations must be crafted and designed to balance the objectives of accelerated growth with fairness and inclusion.

Given the state of public finances, more collaboration between government and the private sector is needed. For instance, where the state cannot close infrastructure gaps it must allow the private sector to step in, similar to what is under way in the rail sector. Mutually beneficial arrangements and public-private partnerships can help resolve many pressing economic issues and operational bottlenecks. However, both sides need to reach out to each other and repair broken trust after the past decade of corruption, state capture and maladministration.

Government and business must also take advantage of new opportunities that arise, or risk falling out of favour with investors. The global economy is looking for partners that can keep up with the fast pace of technological, environmental, political and social changes. Outdated skills and knowledge will not take SA far, and an overhaul of the education system to adapt to changing needs is required.

The upside of globalisation is that SA can capitalise on opportunities and use them to uplift local communities. By intertwining expertise with well-crafted strategies, the private sector together with the state can be a driving force in positioning the country as a strong African economy, a gateway to Africa and a geopolitical force not to be overlooked by investors.

• Swanepoel is CEO of the Inclusive Society Institute. This article draws on the content of the soon to be released Economic Research Consolidation — Developing a blueprint for the South African economy report.