Toby Chance
Budget speech
Trade, Industry and Competition
16th 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.
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