DTIC budget speech - Unshackle entrepreneurs from the constraints to growth

Who remembers 16th July 1969? It was the day Apollo 11 launched from NASA's Kennedy Space Centre on its journey to the moon where a few days later Neil Armstrong took his "one small step for man, one giant leap for mankind."

As a nine year-old I was glued to our crappy old black and white TV in England for the entire drama and remember getting up in the middle of the night to watch the landing and first steps.

Without wishing to over-dramatise the events of yesterday, I did have a sense of something significant happening in South Africa's body politic, the 55th anniversary of that momentous event. The Department of Trade, Industry and Competition budget debate took place in the Good Hope Chamber in Parliament. (This is the room designated as the National Assembly Chamber since fire gutted the former chamber three years ago.)

The debate marked a sea-change in all sorts of ways. A new minister - Parks Tau - takes the helm, replacing Ebrahim Patel, while two new deputy ministers - Andrew Whitfield from the DA and the ANC's Zuko Godlimpi - step into their respective roles. It is clear from the first meeting of the committee last Friday, where Minister Tau presented the department budget and annual performance plan, that things will be different in the 7th Parliament compared to its predecessor, Ebrahim Patel.

This is a manifestation of the government of national unity in practice - the first time in South Africa's history that a liberal-leaning party has a seat in government at the highest level. The committee has some colourful and controversial members - including Malusi Gigaba (ANC), Mbuyiseni Ndlozi (EFF), Duduzile Zuma-Sambudla (MKP) and Songezo Zibi (Rise SA).

You can watch the debate here https://www.youtube.com/watch?v=g8PTMgNlUwg&t=2666s - I appear at 37 mins 20 seconds.

My speech is reproduced below:

Toby Chance

Budget speech

Trade, Industry and Competition

16^th July

Unshackle entrepreneurs from the constraints to growth

Honourable house chair, former Deputy Finance Minister, Mcebisi Jonas, laid out his vision for a future South Africa in his book After Dawn, published in 2019, three years after leaving office.

South Africa was in the afterglow of recently-elected President Ramaphosa’s new dawn, which meant to usher in a new period of hope after years of state capture. Instead, we have seen further stagnation of our economy and a loss of confidence among business leaders that government has the courage to make the tough choices needed to rescue South Africa.

I mention Jonas’ book because in the introduction he analyses the political-economy deal of the early 1990s which, inadvertently, reveals the seeds of why our economy has not reached its full potential and millions of South Africans remain without work and live in poverty.

The deal he describes is negotiated between four groups with distinct vested interests:

- established, mainly white wealth, representing big business and accommodated through macro-economy policy stabilisation;

- the new, mainly black elite, accommodated through boardroom, BEE, public sector jobs and access to state-business patronage networks;

- organised labour, accommodated through supportive labour legislation and collective bargaining;

- and the poor and unemployed, accommodated through fiscal redistribution through a rapidly established welfare state.

The one class conspicuously left out of this deal was the entrepreneurial class – representing the millions of formal and informal enterprises that strive to create wealth for themselves, their families, suppliers and employees, against all the odds. The rules of the game were imposed on them, with a take- it-or-leave-it attitude.

The vast majority of companies, in South Africa and the world over, are family owned. Established by ambitious, driven individuals with grit and determination. Every big business starts as a small business. But a structural weakness of our economy is that we don’t have enough businesses or self-employed people, a major cause of our astronomically high unemployment rate.

Expanding the incentives required to start and grow a business were ignored in the deal described by Jonas. And centuries of marginalization have prevented the black majority from building the inter-generational wealth that in most cases provides the start-up capital needed to get a new business off the ground. We are still living with the consequences of this tragedy.

It is one of the challenges this department and portfolio committee must devote itself to addressing during our five year term.

Minister Tau released a statement last week, indicating his intention to focus on, and I quote, “accelerating the implementation of the industrial policy and economic transformation.”

This is the industrial policy that has seen manufacturing’s contribution to GDP crash from 24% to 13% in twenty years. To stagnant growth averaging less than 1%, GDP per capita down 30% in US dollar terms in 10 years, and unemployment at record highs with 75% of people under 25 without a job. The consequences of the flawed deal made thirty years ago.

In today’s world, corporatization and financialisation of assets have blurred the link between entrepreneurship, innovation and wealth creation. And, honourable members, law-makers and regulators’ heavy-handed and over-zealous intervention in markets have hampered the daily pursuit of trade, industry and competitiveness by our country’s business leaders. And deterred the foreign direct investment we so desperately need.

Businesses are confronted with a dizzying array of rules, regulations and statutory requirements emanating from this department, which if they fail to comply puts them at a disadvantage. This is before considering the negative impact labour laws and a punitive tax regime have on job creation.

Another of our challenges is overcoming the barriers to township and informal businesses taking their rightful place in the economy and providing secure and well-paid jobs for the millions of unemployed, particularly the youth. Minister Tau has an opportunity to replicate the Gauteng Township Economic Development Act which he shepherded through the Gauteng legislature onto the national stage. And work with his counterpart Minister Ndabeni-Abrahams to re-build and then designate our dilapidated industrial parks as special economic zones to drive innovation and job creation.

Minister Tau has proven himself, when in office, to be a pragmatist, not an ideologue. We first met close to 20 years ago when he was the MMC for Economic Development at the City of Johannesburg and I was running one of the largest events in Gauteng, the Soweto Festival. We in the DA encourage him to chart a different course from the previous ANC minister by relaxing the shackles constraining enterprise. I am heartened by the open-mindedness he demonstrated in presenting the department’s annual performance plan to the committee last Friday.

A quick win would be to gazette regulations instructing ITAC to undertake a comprehensive review of tariffs across all industry and product sectors along with a cost-benefit analysis of their impact on growth and employment. Much of the committee’s deliberations on Friday focused on the thorny issue of tariffs and the DA would prefer a course of action built on evidence rather than dogma.

Honourable Members, there is cause for hope. As I speak, the flag of South African enterprise is being planted in African and global markets by a new generation of entrepreneurs. Three of the top ten African brands are South African – Bathu, Galxboy and Drip – all founded by young, black entrepreneurs – and none, I might add, are beneficiaries of DTIC’s much-trumpeted Black Industrialists Scheme. They are just starting out on their entrepreneurial journey and no doubt have ambitions to establish business dynasties. Galxboy’s brand promise says it all – Smart, African, Ambitious.

The DA is looking forward to scrutinizing the department’s legislative programme and budget in the coming months and working constructively with ministers, officials and members of the portfolio committee to ensure they deliver on their mandate. For our part, the DA will be resolute in pursuing our mission: to rescue South Africa from continuing economic decline by driving economic growth and unleashing enterprise and job creation.