Inclusive Society Institute
Economic Research Project Dialogue
18 May 2021
The Inclusive Society Institute has embarked on an extensive economic research project, which will culminate in a comprehensive ‘Blueprint for rejuvenating South Africa’s economy’. The methodology includes a series of dialogues with various sectoral stakeholders and policymakers. These dialogues each have two parts to them: (i) Gaining an understanding from the particular sectors perspective as to what the country needs to correct policy wise, and (ii) what new initiatives / policies should be introduced to shift the economy onto a higher growth trajectory.
This dialogue formed the 1st part of the manufacturing sector engagement.
The main challenges from the various manufacturing sectors can be grouped into:
IDEOLOGY AND RELATIONSHIPS BETWEEN INDUSTRY, UNIONS AND GOVERNMENT: The ideology of the governing party's National Democratic Revolution seen as antithetical to entrepeneurship e.g attenuation of property rights, mutual lack of trust between private sector and government. Bureaucrats don't understand business and vice versa, Cadre deployment has destroyed institutional capability at all levels. Govt puts in place first world standards for a third world country. The question was raised: Should entrepreneurs look to govt to solve the problem or should government to step aside and the entrepreneurs solving the problem? On the other hand, business and government are seen to be inter-dependent. A clear and commonly accepted vision for the country is lacking.
LABOUR LAW: skewed towards big business and labour (formal sector), not small or rural business or informal sector. Minimum wages prohibitive in the rural area, and cost and difficulties in discipline and dismissing non-performing workers. Trade unions demanding double digit increases (will sacrifice jobs for increases). Perceptions that an expensive but low productivity and low skills labour force undermines growth. Impact of BEE - smaller business can't work with government directly but through a third party which typically adds no value but adds to costs. There are different views on what localisation is and how it should be implemented.
QUALITY AND PRICE OF UTILITIES/INFRASTRUCTURE/SECURITY: Dysfunctional municipalities, Eskom's loadshedding, lack of public transport creates reliance on taxis, roads, planning office slow in transferring land ownership, state vet challenges. These force entrepreneurs to invest in water and solar energy systems which increase costs of doing business. We need to get the municipalities right. LOVE HOWICK is an organisation taking over the municipality's role but at cost to the sponsoring businesses. Costs of security of assets and staff, farmers murdered and increased cost of security.
RED TAPE: "Make it easy for business to do business". Costs of compliance with the various plans required by government and accreditation are high and require dedicated staff and resources which would be more profitably applied elsewhere. E.g. Sugar tax process. The business gets a phone call the day before and SARS arrives at the door and they have to explain how the tax works. No scheduling or prior meeting. It disrupted the audit with Woolworths.
SKILLS AND EDUCATION: It is important to improve basic education as well as science, technology, engineering and mathematics skills development. FOREIGN SKILLS and a positive attitude to immigrants is critical as well as fixing Home Affairs, improving the efficiency of renewal IDs and passports. Business people need it to travel to see customers, suppliers etc.
CULTURE OF ETHICS, WORK ETHIC, PRIDE IN COUNTRY, especially the youth
FINANCIAL SECTOR: invests in malls/consumption (e.g. luxury cars) but not industry/manufacturing.
TOO MUCH EMPHASIS ON GRANTS, a culture of dependency and an economy which cannot support it.
INSUFFICIENT EXPORT ORIENTATION: Need export incentives and provide import protection for infant industries until they are able stand on their own.
NEED RUTHLESS POLICY IMPLEMENTATION, NOT JUST DIAGNOSTICS AND PLANNING: The NDP is a good plan but remains largely unimplemented.