Speech to the British Chamber of Business in Southern Africa

This evening DA leader Mmusi Maimane and I addressed a gathering of business people at the Inanda Club in Johannesburg at the invitation of the British Chamber of Business in Southern Africa. Their monthly meetings are an opportunity for discussion and networking among an important collection of leaders in the SA business community.

Below is the text of my prepared speech.

It is an honour and my pleasure to be invited to speak to you here this evening. The decision to re-establish the British Chamber of Business in Southern Africa is to be welcomed by everyone with a stake in building relations between Britain and this region.

British – South Africa trade relations have traditionally been very close. South Africa is Britain’s sixth biggest trading partner globally, while Britain remains South Africa’s seventh largest export market.

In recent years, however, South Africa’s focus has shifted towards the BRIC nations and away from Britain, Europe and North America. The formation of the BRICS development bank is a clear indication of the South African government’s desire for a new global finance regime with less reliance on the IMF and the World Bank.

It was encouraging to hear, therefore, Obed Mlaba, South Africa’s High Commissioner to Britain, reaffirm the strong bilateral relationship between our countries shortly after taking up his position a year ago. Business Day reported him saying that South Africa and the UK are "true friends" whereas our relationship with our new biggest trading partner, China, was "just about what they pull out of our ground".

I grew up in Britain in the 1960s and 70s when Britain gained the reputation of being the “sick man of Europe”. British industry lost its competitiveness through a combination of under-investment, poor productivity, labour conflict and nationalisation of key sectors including coal, steel, car manufacturing and telecommunications.

I remember eating supper at boarding school in 1973 by candlelight during the 3-day week and the miners’ strike. This was Britain’s equivalent of load-shedding, but caused by deep political division and not government incompetence, as is the case here.

Neither Labour’s In Place of Strife policy of 1969 nor Edward Heath’s admonition to the British people to let government, not the unions, govern the country had any effect in turning things around.

By the late 1970s, the nationalised industries accounted for 10% of Britain’s GDP, 14% of investment and 8% of employment. We all remember the Conservative party’s 1979 election poster showing a long dole queue above the headline Labour isn’t working.

Management was stodgy and stuck in old ways of thinking. In 1983 I was working as a management trainee in the Metal Box factory in Aintree as a production planner. When I asked to be transferred to sales I was told I had to have at least 5 years’ experience before being considered for sales! A month later I resigned and came to South Africa.

Today Britain’s economy is transformed and continues to defy the sceptics. Since 2010 it has created 2 million jobs in the private sector and lost 400 000 in the public sector, an indication of the rebalancing that is taking place after thirteen years of Labour’s placing the state once more at the centre of economic activity.

Since 2009 in South Africa 1,6 million people joined the ranks of the unemployed while the government wage bill has ballooned to unsustainable levels. We need a radical new approach to policy, but not the “radical economic transformation” the current government is trying to bring about.

Yesterday I returned from a flying visit to the UK and the papers were filled with reaction to George Osborne’s budget, the first by a Conservative administration for 19 years. It got a mixed reaction from business.

Perhaps he believes Britain’s economic recovery is secure enough already, allowing him to introduce policies making the Labour party irrelevant.

In South Africa today we are engaged in the same ideological debates over the economy as Britain was over a generation ago. The principal issue was, and still is, what role should the state play in the economy?

Mrs Thatcher won that debate convincingly. The ANC-COSATU-SACP (tripartite) alliance believes in the Developmental State and while it pays lip service to the National Development Plan there is little evidence it believes in it.

Several of the key ministries in the economics cluster are run by communists – including Trade & Industry, Economic Development, Rural Development and Land Reform and Public Works – for whom the National Democratic Revolution is their lodestone, not the NDP.

What would the DA do to revive South Africa’s economy? In our alternative budget published in February we outlined some key measures which we believe are vital to boost economic growth and create jobs.

There is no doubt inequality is causing divisions in South Africa which threaten to de-stabilise society. The greatest and most pressing inequality is between those who have jobs and those who don’t.

All our policies on economic inclusion, BBBEE, labour relations, investment in infrastructure and international trade promotion have the same overarching goal of raising economic growth from its current 1,5% to 5% or more. Without growth we have no hope of creating the 11 million jobs we need by 2030.

One of the DA’s policies is to reduce the number of ministries from the current 38 down to 15. Our leader, Mmusi Maimane, correctly points out that government consumes too many resources and is overly bureaucratic and wasteful.

It would make sense that one of these new ministries replicates the UK’s Department of Business Innovation and Skills, by combining Trade & Industry, Economic Development, Small Business Development and parts of Labour and Science and Technology.

In this way economic policy would be streamlined and avoid the turf wars between departments that create confusion and policy drift.

An important factor in Britain’s relatively rapid recovery from the 2009 recession is the spurt of entrepreneurship and innovation it experienced. This is an area South Africa desperately needs to replicate.

The Global Entrepreneurship Monitor puts us close to the bottom of our SADC neighbours by the measure of total early-stage entrepreneurship.

South Africa needs to find ways of stimulating the creation and growth of new businesses. The DA has always been seen as the party of big business, but this is changing. The DA is the natural party of enterprise, irrespective of the size of that enterprise. And without enterprise there can be no jobs.

We are communicating our newly adopted Values Charter, which places Freedom, Fairness and Opportunity at the centre of everything we stand for, throughout the length and breadth of the country. We are seeing support pick up among non-traditional voters. Just today in my constituency in Soweto we signed up many new members living in an informal settlement with little hope for a brighter future.

The DA’s policies on small business development are built on the premise that business should be enabled to get on with doing business with as little interference from the state as possible. We believe in stimulants and incentives rather than controls and regulations.

These are some of our policies:

·        Opportunity centres

One-Stop-Shops for small businesses and as a central node for young job-seekers and entrepreneurs to access support.

·        Establish effective small business incubators in partnership with the private sector

Small business incubators, managed efficiently, staffed with knowledgeable, experienced personnel and maintaining close relationships with established businesses, to provide an effective platform for targeted support to small business.

·      Streamline small business support through the Opportunity Card

An integrated system of support for small business via an Opportunity Card which will simplify government’s assistance in accessing credit, training, business advisory services and business support services (such as insurance and auditing).

·        Reduce regulatory burdens for small businesses

An urgent review of the full regulatory burden on small enterprises in South Africa (including registration requirements, taxes, labour regulations and empowerment frameworks) and investigations into how these processes can be streamlined.

·        Make it easier for small businesses to win government contracts

Incentivise small business development via public procurement processes, including new local content provisions, implementing an e-Procurement system and commitments to pay suppliers within 30 days.

·        Expand the use of community supplier databases

A community supplier database of small and micro-enterprises to be used for smaller tender opportunities (e.g. less than R30 000).

·        Break up tenders to help small businesses

Break up tenders into smaller contracts to encourage small businesses to tender for government work.

·        Introduce a National Venture Capital Fund

Establish a National Venture Capital Fund to provide investment capital to start-ups and early-stage businesses. The Fund will aim to support innovation in start-ups and SMMEs.

·        Cash-flow assistance for small businesses

Via a three year Tax Loss Carry-back for businesses with a turnover of less than R5 million; alternatively, a tax credit that derives from an assessed loss (which hasn’t been claimed as above) to be set off against VAT payable.

·        Entrepreneurship competition

Entrepreneurship competition for 18 to 30 year olds, offering a cash prize to an individual or group of individuals responsible to developing a winning business plan. To be coupled with an entrepreneurship week in which participants are encouraged to get involved in activities related to entrepreneurship.

·        Targeted support for micro-entrepreneurs

Foster and support the job creation potential of the informal economy by:

o   developing a Code of Good Practice on engagement with informal traders;

o   initiating a comprehensive survey of the informal sector that can be used by an interdepartmental task team to develop support strategies;

o   adjusting the legal and regulatory framework to accommodate those in the informal economy;

o   providing safe trading spaces for informal entrepreneurs;

o   e-registration for informal trading permits;

o   removing the incentives to remain outside the formal economy by making it easier to start and grow a small business;

o   promoting awareness of the tax amnesty for small businesses;

o   encouraging government procurement of goods and services from small business entities and ensuring that micro-entrepreneurs are made aware of these opportunities.

·        Awareness programmes on support available to small business owners

Using all available information channels, including government web portals, one-stop support centres, SMS campaigns and interaction with representative bodies to promote awareness and increase take-up of small business support initiatives.

Britain’s Business Bank and the Start-up Loans Company are models we in South Africa should look at closely and learn from. Yesterday I received an email from an executive at Britain’s Business Bank who saw my opinion piece in the Sunday Times Business Times on solving the small business finance conundrum. I look forward to developing a deep understanding of what they are doing right so we can incorporate these lessons into DA policy as it evolves.

We need to be ready to hit the ground running if and when we form part of the new alliance elected to government in 2019.

I thank you.