Unite to drive growth

Financial Mail - Investors Monthly - - Opinion - Vi­lakazi is chief fi­nan­cial of­fi­cer of MMI Hold­ings

Pol­icy cer­tainty, struc­tural re­forms and an ef­fi­cient public ser­vice will im­prove SA’s eco­nomic health

Con­strained fi­nan­cial re­sources and lim­ited room to raise ad­di­tional taxes, to­gether with in­creased needs such as hous­ing, sub­sidised univer­sity fees, na­tional health care and pen­sion fund pro­vi­sion­ing, mean the pri­vate and public sec­tors need to unify be­hind a strat­egy to ag­gres­sively drive eco­nomic growth.

SA is not im­mu­nised from the global econ­omy, with its litany of un­cer­tain­ties that in­clude Brexit, ter­ror at­tacks and the elec­tion of Don­ald Trump as the US pres­i­dent. Though the coun­try man­aged to weather the 2008 eco­nomic down­turn, it didn’t ride that wave by mak­ing it eas­ier to con­duct busi­ness with and within SA.

A greater fo­cus on struc­tural re­forms, pol­icy cer­tainty and a more fo­cused public ser­vice would im­prove SA’s eco­nomic health.

In these highly un­cer­tain times, many of SA’s trad­ing part­ners are fac­ing po­lit­i­cal and eco­nomic dif­fi­cul­ties, and their cur­rent in­ward fo­cus is likely to af­fect the econ­omy. To min­imise that im­pact, SA needs to en­sure that it is highly at­trac­tive to its trad­ing part­ners and po­ten­tial in­vestors.

It is heart­en­ing to see the closer and more con­struc­tive work­ing re­la­tion­ship that has de­vel­oped be­tween busi­ness, labour and gov­ern­ment. The ef­fort put into en­sur­ing that SA is not down­graded and the plans cur­rently un­der way to turn our econ­omy around should be ac­knowl­edged, en­cour­aged and cel­e­brated. Uni­fied, they can con­tinue to work to­gether to ac­com­plish an in­vestor-friendly, growth-ori­en­tated econ­omy by agree­ing on struc­tural re­forms and pol­icy cer­tainty that will boost eco­nomic growth and cre­ate jobs.

To achieve its fi­nan­cial goals, gov­ern­ment needs to spend more pru­dently and in­crease its tax rev­enue, while bear­ing in mind the se­vere un­em­ploy­ment and poverty in the coun­try.

The base of SA tax­pay­ers is small, con­sist­ing of about 1.1m peo­ple. One of the most ef­fec­tive ways to cap­ture tax from a broader base is through an in­crease in Vat. To avoid bur­den­ing the poor, tax ex­emp­tions would have to be pro­vided while es­sen­tial food­stuffs should re­main un­taxed.

The public-sec­tor wage bill is a bur­den on the fis­cus. Gov­ern­ment has at­tempted to cre­ate jobs in­stead of es­tab­lish­ing a more en­abling en­vi­ron­ment for en­trepreneurs and the pri­vate sec­tor to gen­er­ate em­ploy­ment. High wage in­creases in the public sec­tor have not nec­es­sar­ily led to an ef­fi­cient public ser­vice. Gov­ern­ment needs to get more bang for its buck by fo­cus­ing on im­proved ser­vice de­liv­ery.

Re­duc­ing ser­vice de­lays as well as un­nec­es­sary red tape will rein­vig­o­rate the busi­ness en­vi­ron­ment.

A zero-tol­er­ance ap­proach to cor­rup­tion and the leak­age of gov­ern­ment funds is nec­es­sary to en­sure ex­ces­sive spend­ing of much-needed fi­nan­cial re­sources is pre­vented. Gov­ern­ment rou­tinely over­spends on ten­ders. This is of­ten due to fraud, as both the public and pri­vate sec­tors have con­spired to abuse the ten­der process by col­lud­ing on prices, es­tab­lish­ing mo­nop­o­lies and en­gag­ing in an­ti­com­pet­i­tive be­hav­iour.

Hope­fully a more closely al­lied public and pri­vate sec­tor, with a co­he­sive goal to up­lift the econ­omy, will re­duce such un­scrupu­lous be­hav­iour.

There is enough money to achieve the coun­try’s goals and meet its needs if rev­enue is col­lected ef­fi­ciently and spent ef­fec­tively. Do­ing so re­quires com­mit­ment by the pri­vate and public sec­tors to put the needs of the cit­i­zens of SA first.

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