Don’t just spend, fix pro­duc­tiv­ity

CityPress - - Business - MONDLI MAKHANYA busi­ness@city­

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

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