Don’t just spend, fix productivity
South Africa has had several blueprints for its development, going back to the Reconstruction and Development Programme and culminating in the current National Development Plan (NDP).
The common experience has been that all have been hamstrung by a lack of commitment and inertia. Government spending grew, but the outcomes of these programmes were either poor or average, with shining start here and there.
The NDP speaks of building a “capable state”, a professionalised public service system that fulfils people’s needs and drives growth and development.
Those tasked with implementing the NDP – from the president to the bureaucrats – would do well to pay attention to a recent study on government productivity by global research hub the McKinsey Centre for Government. Titled “Unlocking the $3.5 trillion opportunity”, the study looks at best practice for improving citizens’ lives.
Researchers examined data and practice from 42 countries. Interviews were conducted with former and current heads of state, ministers, and bureaucrats at various layers of government from national to municipal, as well as business players.
The most astounding finding is that by implementing best practice gleaned from the more than 200 case studies, governments could collectively achieve $3.5 trillion (R46 trillion) in savings. This is no small sum, given that government expenditure stood at $35 trillion in 2015.
Researchers noted that despite state expenditure growing by more than a third in the decade to 2015, governments were struggling to satisfy the expectations of citizens, who were comparing them with nonstate actors such as the private sector.
“Increasingly, citizens – as consumers of public goods – are expecting governments to offer the same level of service [as the private sector]. Governments have never been asked to do so much, yet their sources of funding are under real pressure.”
In a conclusion that South Africans would be familiar with, McKinsey found that increased spending did not always result in better outcomes.
Some countries, which kept their spending the same in real terms, did better than those that focused on financially injecting sectors such as health, education, public safety and transport infrastructure.
A focus on productivity, not just on increased spending, made the biggest difference in outcomes.
The McKinsey study encourages medium- and low-income countries to “leapfrog” their productivity by emulating the best practice in service provision. “This outcome will enable them to achieve rapid gains in outcomes, while maximising the cost-effectiveness of their spending.” Practical steps government should take include:
Giving finance a “more pivotal leadership role”. This contradicts the emerging thinking in the dominant faction of South Africa’s governing party.
Researchers say: “The finance function can provide the information, insights and incentives for public funds to be spent in ways that make a real difference to outcomes in every area of government.”
Boosting commercial skills to ensure better procurement processes and management of stateowned enterprises.
Moving towards digitising more government functions. This would save money, speed up performance, reduce waste and enhance citizens’ interaction with state entities.
Ensuring that government attracts and develops the best talent and has systems to properly manage and motivate staff.
The researchers say that because governments are so big, complex and given to inertia, it is necessary that leaders “craft a powerful overarching vision” that cuts through the entire state structure and outlines clear priorities.
“The vision must be simple enough to be memorable and measurable, but it must also connect meaningfully with the real priorities and challenges of government.”
South Africa already has this overarching vision. It is clear, memorable and measurable. But are the outcomes forthcoming? McKinsey highlights the importance of leadership in transforming the state and its entities into highproductivity units. Proper leadership and commitment from the top, as well as constant communication, provide “vivid role modelling of what is expected of everyone in the public service”.
On that score, South Africa may have to wait a while.
Government expenditure as a share of global GDP The amount governments could save by 2020 through greater efficiencies The number of years that could be added to the global life expectancy through greater efficiencies in the healthcare systems The size of the global public sector deficit