Government and the private sector ARE leading partners in raising investment and implementing the National Development Plan: Vision 2030
The inauguration of a new administration led by President Cyril Ramaphosa under the banner of renewal opens up new opportunities for the implementation of the National Development Plan (NDP) Vision 2030 to gain much needed traction. During an interaction with the business sector on 15 May 2019, the President undertook that the “incoming administration would focus on implementation of the [NDP] and plans that feed into the NDP”.
South Africa’s unsustainably high levels of poverty, inequality and unemployment demand a renewal of the nation’s collective efforts to implement the NDP. With these challenges unaddressed and prolonged low economic growth, the country cannot prosper. Social strife and political unrest will likely increase, to our collective peril. This calls for radical and sustained interventions to unshackle the economy from various structural constraints. In light of this, the NDP remains a valid and compelling agenda, aiming to significantly increase employment, reduce poverty, and achieve faster and more inclusive growth. However, it has not been effectively implemented. At least not in the collective manner envisioned: spearheaded by government working together with business, labour and various actors in society.
We have a long way to go to reach the NDP’s 2030 targets of dropping poverty from 39% to zero, creating 11 million jobs and reducing the Gini coefficient measure of inequality to 0.60.
With a fresh mandate to take South Africa forward, the new administration is required to ensure that the priority business of the country is re-energised and the implementation of the NDP is accelerated, making up for lost time. The remaining 10 years of the current NDP towards 2030 is enough time to improve on our performance in implementing the plan. We have it within our means to achieve the transformation we seek as a nation. But we need a ‘business unusual’ approach, to re-invoke an instructive cliché.
To this end, there is a good foundation to build from: an effective social protection system is in place and has lifted millions out of extreme poverty, partly through the provision of a basket of social services. Domestic investment resources are available, along with a sophisticated financial sector, relative macroeconomic stability, relatively strong institutions, the rule of law and political stability, among others.
PARTNERSHIPS: THE KEY MANTRA OF THE NDP
Partnerships are the central philosophy of the NDP, in particular, partnership between the government and the private sector. This reflects the reality that South Africa is a mixed economy and that neither the government nor the private sector alone can achieve inclusive economic growth or reduce poverty and inequality.
In practice, however, government and private sector relations fall short of the strategic and coordinated cooperation envisioned in the NDP. Worse, lack of trust or ‘trust deficit’ are descriptions often applied to government–private sector relations. The inherited history of the economy is that government has played a dominant role in economic infrastructure provision (transport, energy, water, and so on) through state-owned enterprises (SOEs). Product and service markets, on the other hand, remain mainly the realm of private enterprise.
The economy is vitally dependent on government investment and the performance of SOEs. However, in current circumstances, unmet demand for infrastructure and the revenue constraints of both government and SOEs have proven that this model is unsustainable, to the detriment of the economy. Compared to market economy peers elsewhere, the private sector in South Africa under-participates in infrastructure investment. This is despite the fact that it is in control of trillions of rand in cash and the private pension fund sector, which has an increasing appetite for infrastructure investments.
While government has been undertaking major infrastructure investments to support growth, these have been devilled by various challenges, including growing debt exposure, price collusion by contractors, poor work quality, project delays, cost over-runs and corruption. This has also resulted in reputational damage for the private sector and has been detrimental for the required trust in government–private sector relations, thus making a case for more optimal and innovative approaches.
In order to sustain economic growth towards its goal of 5% per annum by 2030, the NDP recommends that total investment must reach 30% of GDP, with public-sector investment reaching 10% of GDP. Total investment currently sits below 20% of GDP. This increase requires a repositioning of government and private sector relations as well as an adoption of innovative approaches that have proved successful elsewhere, including greater use of Public–Private Partnership (PPP) models. Encouragingly, the need for this shift has been acknowledged by decision-makers within government.
To this end, the ongoing conception of new approaches and frameworks, led by National Treasury, must be intensified and fast-tracked. Building on the experience of the Renewable Energy Independent Power Producer Procurement Programme (REIPP) may be a good place to start. The programme has unlocked R201-billion in investment thus far – a positive outcome, notwithstanding concerns around attendant cost and tariff implications.
Importantly, the arms-length nature of government and private sector interactions must change. The private sector’s resistance to government’s obligation to regulate for structural change in the economy presents as opposition to equity and inclusive policy goals. The perceptions within government is that, for the most part, the private sector has not aligned its strategies and objectives with NDP goals and priorities. From the other side of the fence, it could appear that government is indifferent to the private sector’s concerns about red tape and policy uncertainty.
TOWARDS A SOCIAL COMPACT FOR INCLUSIVE GROWTH AND TRANSFORMATION
There is therefore a need to create platforms for deeper, structured engagement and an exchange of ideas on the country’s plans and priorities, in between and in addition to ‘summits’, as much as other platforms are required for exchanging feedback and complaints, and taking care to limit the time-cost of multiple meetings. Government must be acutely conscious of its leadership responsibilities in the implementation of the NDP. It is conferred unique powers and is required to deploy these in pursuit of national development goals and priorities.
Government is required to implement appropriate policies and plans to achieve progressive structural change and broadened economic participation. To legislate, regulate, collect taxes, allocate resources, and engage and coordinate key stakeholders, all ensure sustained flows of investment and the attainment of NDP goals. In some respects, government has been successful in using its powers to pursue these goals. Take, for example, initiatives such as the Presidential Business Working Group and the so-called CEO Initiative. The Private-Public Growth Initiative, launched in 2018 by former Minister in the Presidency Nkosazana Dlamini-Zuma, former minister Roelf Meyer, and Toyota Europe and Africa CEO Johan van Zyl, is another example. This programme involves joint planning and problem-solving, in no-holds-barred sessions between CEOs and various government directors-general with economic mandates.
These programmes have cultivated cohesion between government and the private sector by creating platforms for deeper, structured engagement and the exchange of ideas about the country’s plans and priorities. The initiatives are effective as they bolster the endeavours of government to encourage the exchange of information and conveyance of feedback provided for in consultations such as summits. In reality, however, the performance of government has, in many cases, been bedevilled by serious shortcomings that account for the poor outcomes of well-intended policies. There have been several areas of policy uncertainty, bureaucratic red tape, service-delivery failures, inadequate capacity, lack of accountability and poor implementation.
President Ramaphosa has grappled with these challenges and has prioritised policy clarity and direction, and forging a fit-for-purpose government with requisite skills and capability.
The stimulus package announced by the President early this year remains relevant and urgent to recover economic growth and employment, prioritising business confidence, and tackling governance and sustainability challenges in SOEs.
It is imperative to foster an improved climate for enhanced economic activity and much higher levels of investment and growth. Many businesses are not struggling with lack of cash to invest, but are plagued by lack of confidence and a range of obstacles that require policy and regulatory clarity and increased efficiency.
At the instigation of business, this has been achieved on the tourism visa issue, and along with one-stop investment shops by the Department of Trade, Industry and Competition, is a step in the right direction.
The country needs a responsive government that prioritises inclusive growth, incentivises investment in productive sectors and promotes local procurement. Business can collaborate with government in planning and managing key infrastructure projects and on priority challenges such as skills development, climate change and strengthening the innovative and technological capacity of the country.
We need fresh approaches, involving effective partnerships and ‘social compacts’ for inclusive growth, inspired by the prevailing positive spirit of ‘a new beginning’ and building on our achievements during the past 25 years of democracy.