Government and business need to join hands to lift SA out of quagmire

Business Unity SA offers steps for achievement of deracialised economy that will contribute to inclusive growth

Bold intervention by business, organised labour and government is required to radically alter the course of SA’s economic fortunes. If nothing is done, sustained poverty, inequality and unemployment will continue to unravel the economic and social fabric of a country that, in fact, holds an abundance of potential.

The priority needs to be deracialising the economy to benefit the majority of people. Here are some of the hard facts holding this back: real annual economic growth of about 4% between 1994 and 2007 was not sufficiently inclusive, nor labour-intensive. Record unemployment — 36% under the broad definition — and 63% youth unemployment, of mainly black citizens, has been witnessed. It means a material part of society is unable to meaningfully participate in both the supply and demand sides of the economy. Add to this that more than 17-million elderly, young or disabled South Africans, amounting to one third of the population, are dependent on social grants.

Without doubt, sustainable black enterprise development must be the major enabler of inclusive growth, but there are challenges, from policy to politics. For instance, Business Unity SA (Busa) believes that in future, broad-based black economic empowerment (B-BBEE) ownership transactions should be structured to stimulate value generation in a realistic and cost-effective manner.

Change will certainly not be possible without a collaborative approach between social partners. In this regard, business’s ability to transform rapidly is greatly enhanced with the government playing a significant role in creating the enabling conditions for growth. When it comes to regulation, while we do have many best-in-class laws, a justified concern is that they fail to create the requisite certainty and conditions for competitiveness, economic inclusion and growth. Small, emerging enterprises in particular struggle disproportionately with the regulatory burden.

Added roadblocks to growth include energy and water supply and road, rail, transport and IT infrastructure being inadequate, unreliable and too costly to enable businesses of all sectors, formats and relative sizes to be more competitive. There is significant mismatch between the skills generated by the basic and postschool education system and the current and emerging skills demands required for a growing economy. Furthermore, corruption and maladministration needs to be rooted out decisively so as not to undermine economic transformation efforts.

A collaborative partnership is needed, based on trust and commitment to putting the country’s economic and social development first. The National Economic Development and Labour Council (Nedlac) can play an important role as a forum for social partners to engage on economic transformation policy, to deal with unintended consequences in legislation and to optimise collaborative opportunities. However, this means Nedlac needs to be properly charged with economic transformation and given the teeth to drive the agenda forward.

Taking all of the above into account, Busa has mapped out a plan aimed at driving change that makes a difference — it cuts to the heart of the challenges and provides practical steps towards achieving a deracialised economy that will contribute to sustainable and inclusive growth. By working together in the country’s common interest, amazing things can happen and the negative pall hanging over our economy will be a thing of the past.

While we have seen substantial progress, the pace and depth of transformation has been insufficient. Business acknowledges that it has not done enough in this regard and is committed to playing its part in the future. With this in mind, the business approach was developed by determining the desired end-state of a vibrant, diverse and competitive deracialised economy and identifying the step changes required to deliver the desired end-state is therefore necessary.

Our plan incorporates a progressive, systemic and sustainable approach through key interventions to deracialise the economy. In this regard, we need to inculcate a transformative culture within businesses and build social cohesion in the workplace. Quality and demand-led education and skills development for current and future business needs require that we add our weight to enhanced support for basic education and play a leading role in determining skills development priorities.

Furthermore, large-scale enterprise development is required. This should be focused on expanding opportunities within supply chains by providing access to markets, facilitating access to capital and removing regulatory and other exclusionary practices that are barriers for emerging black enterprises. Importantly too, blockages to employment must be cleared, with systemic interventions promoting sustainable youth employment.

At the same time, the complexity of transformation must be acknowledged — this is systematic, time-consuming, costly work that must be done across established business, with support of the government that will unlock the potential of many emerging black enterprises. Simply paying lip service to the scope of what is needed will not be good enough. To support this work the true status of transformation should be determined in a credible manner with empirical evidence. This calls for the measurement of B-BBEE to be reconsidered and recalibrated to focus more effectively on substantive transformation, value and influence.

There is little doubt that a meaningful broadening in economic participation and enabling of inclusive growth and employment need to be driven through achieving and maintaining a competitive economy that harnesses the full economic potential of SA. Ultimately, our plan requires business to play a far more proactive role and to co-operate with the state so as to create enabling conditions at a sector and subsector level for all businesses.

A proactive, innovative, systemic and scalable approach is required, which takes into account the diversity and cyclicality of business sectors, formats and relative sizes and is cognisant of the short- and medium-term trade-offs for longer-term economic transformation. To achieve this we want to rapidly explore, define and implement four key elements that can significantly contribute to transformation and social cohesion:

Enable a transformation culture in business, with systemic initiatives and developing a research base that demonstrates the economic value of diversity;

Enterprise development support, including how to scale and support the Black Industrialist Programme, industry development programmes with sectors and leveraging the SME Fund;

Skills development for current and future business needs, including leveraging the Ikusasa Student Financial Aid Programme and implementing a widespread mentorship programme; and

Employment promotion, particularly among the youth, including the Yes initiative and other systemic contributors to sustainable employment.

Just one example of what these changes mean is in the area of entrepreneurship, where there is significant scope to improve the effectiveness of public and private support of emerging enterprises. In SA, small businesses contribute only 65% to employment, when the worldwide average is 95%. The potential to add many small and growing businesses owned and controlled by black people is therefore an obvious avenue through which to activate inclusive growth

Importantly, Busa , which was formed in 2003 as the apex body representing organised business in SA and continues to expand and play an even more relevant role in the economy, is in the process of developing a statement of intent whereby businesses of all sizes and types, regardless of the ownership structure and composition, can make a conscious commitment to a deracialised and inclusive South African economy.

Change will not happen overnight, but if we take these first crucial steps together we can change the course of our economy and build a future we can all be proud of. Economic inclusion is no doubt the best mechanism to unlock SA’s economic potential, but we must at the same time acknowledge that structural transformation is required for economic diversification and increased competition. Cohen is Busa CEO.