ISAAH MHLANGA: Business tie-ups with the state are essential for economic growth

There has been debate about the emerging close relationship between the private business community and the government, which is seen in efforts to fix critical infrastructure that constrains economic growth, job creation and poverty alleviation.

One side believes a relationship between the government and business that is too close creates an environment conducive to corruption, and the state capture years are correctly cited as an example. The other side of the debate points to public-private partnerships — where they have succeeded — to illustrate why there must be closer collaboration between the government and business on issues that have made the business operating environment worse and impeded economic growth.  

There are valid arguments on both sides, but recent conversations with the CEOs of corporate SA would suggest that it is in the interests of business to engage more, not just with the national government but also with municipalities and communities where businesses operate.   

From talking to a range of senior executives I have collated a list of common concerns for private businesses of varying sizes and localities, some of which require national government competence and others that can be resolved at local government level.

The most commonly cited issues are load-shedding, logistics infrastructure (roads, rail and ports), a high level of crime that is increasingly organised, high unemployment raising the risk of social tension, and lack of critical skills in the country, including difficulties to bring people in from other countries. There are no surprises here — these roadblocks to business are well-known.

Some exporting businesses experience limited support in accessing export markets. In other countries, export development is well supported by national governments. But most SA businesses that have ventured into the rest of Africa and eventually abandoned their ambitions point to a lack of government support as contributing to their failure.

It is certainly easier for businesses to break new ground in other territories when their government backs business at a diplomatic level. The government and the private sector clearly need to collaborate in this respect.  

Ordinarily crime prevention is a competence of the national government and should be carried out by the government. However, it has become a significant cost for households and businesses, to the detriment of society as a whole. Crime happens at a local level, and it is thus key for business to engage with government authorities at a local level to co-create possible solutions.

After all, there are apparently far more private sector security personnel in SA than members of the police service, such that collaboration between the government and private businesses has immense potential to improve safety and security.  

Municipal infrastructure is another avenue for collaboration between the private sector and the government. When water or electricity are not provided reliably or in sufficient quantities private businesses, particularly small and medium enterprises, struggle to operate and often have to close shop.

People in the same municipality lose jobs and crime levels tend to rise when more people are unemployed. It is therefore important for the private sector to get actively involved in fixing infrastructure in areas where it operates, to make sure operations get the services they require. Failure to do this would imply that the cost of running a business will continue to rise.  

While the fear of getting too close to the government is understandable, the alternative — where the government continues to provide a declining level of critical infrastructure — can be even more damaging to the business operating environment.

The solution is not for the private sector to keep its distance but for it to engage in a transparent manner and help provide solutions before the effect on business and society becomes too great. This works in big public private partnerships; it should also work in small-scale projects that have an impact at local level.   

• Mhlanga is Rand Merchant Bank chief economist and head of research.