SIPHO PITYANA: Let’s focus on structural reform
There is an urgent need for the government and business to work together to find new ways of rising to SA’s challenges
There has never been a greater need for resolution around the structural reform of our economy. But the time for urgent and decisive action is today.
Finance minister Tito Mboweni’s medium-term budget policy statement last month, the crisis in state-owned enterprises (SOEs) — with SAA and the Passenger Rail Agency of SA dominating the news — and the never-ending Eskom saga all indicate that the state coffers can’t be relied upon to reposition the economy and drive recovery. This is particularly so, given projections that the SA Revenue Service’s tax collection is conservatively estimated to be down by about R50bn in the current financial year.
Unleashing increased private sector participation is the answer — but we need more than a series of investment conferences to deliver this.
To begin with, we must ask ourselves some tough questions:
First, is it possible to conceive of reforms at SOEs that will convince the private sector to risk its capital and invest in some of these entities? If this were to happen, it would certainly avert the need for the Treasury to underwrite the loans so desperately needed to capitalise flagging SOEs. It would decrease both state risk exposure and ownership, attract skills and improve access to high-end technologies. And it could improve governance to a standard that could deliver value for investors.
Second, is it possible to conceive of some SOEs being sold before they collapse? Are there lessons we can draw from previously privatised state entities in other parts of the world that went on to become positive forces for growth?
SA’s choice is about finding the best way in which to leverage state assets to lure private sector capital without encumbering the state’s balance sheet
At this point, SA’s choice is not pitched around the ideologically moribund debate of whether to privatise SOEs in their entirety or not — it’s about finding the best way in which to leverage state assets to lure private sector capital without encumbering the state’s balance sheet.
But it’s clear that, just as the fiscal crisis cannot be resolved outside this context, the growth agenda cannot be fully realised without opening state oligopolies to allow private sector players to enter sectors such as energy, rail and port logistics, and road infrastructure development.
SA’s ability to attract the investment levels targeted by President Cyril Ramaphosa requires these kinds of bold initiatives.
Achieving them calls for the government and business to collaborate and shape new approaches to SA’s challenges.
In particular, there is a need to focus on structural reform: how to enable a capable state, how to reform SOEs and how to attract private sector funding.
Also important are questions concerning the structure of the economy — how to unlock small business potential, how to increase employment and opportunities for the youth, how to secure SA’s energy future and how to determine which sectors are critical for economic growth.
To this end, Business Unity SA (Busa) will on January 14 host the second annual Business Economic Indaba — a forum at which such crucial issues will be addressed.
The indaba comes at a critical time in the development of our country.
The economy is in serious crisis, growth has flatlined, inequality is increasing and hope for the poor and unemployed is flagging. And, though many of the challenges we face are due to action — or inaction — on the part of government itself, we don’t believe the government can deal with these challenges on its own.
It is our hope, as Busa, that the discussions and agreements that will arise out of the indaba will help to catalyse the national mood and shape 2020 into a year of decisive action.
The new issue-specific partnerships we hope to build will, we believe, take us a significant way out of the dire situation in which we find ourselves, and help put the country on the road to economic recovery.
• Pityana is president of Business Unity SA