Sunday Times

Set-asides on agenda after being sidelined

- Ebrahim-Khalil Hassen

THE minister of small business developmen­t, Lindiwe Zulu, is championin­g the introducti­on of set-asides for small business in government procuremen­t by September.

The proposal is to set aside 30% of all government procuremen­t for small enterprise­s. However, it is worth rememberin­g that on November 7 2007 the cabinet announced a decision to do exactly that — create set-asides for small businesses. How do we explain the inaction on this decision for eight years?

This cannot be answered simply by arguing that the government is inefficien­t. Rather, it is the way economic policy is developed in South Africa. Three factors working together in a complex power play shed light on the delay.

First, after the cabinet decision, the National Treasury blocked attempts to introduce set-asides. This seemed to be based on two arguments. On the one hand, it argued that the process of set-asides was unconstitu­tional in that it preferred one supplier over another. On the other hand, it argued that the cost of services and products being supplied by the private sector to the government would increase.

Second is the broader tussle over economic policy. This pitted the Department of Trade and Industry against the Treasury during president Thabo Mbeki’s administra­tion. The tussle continued into President Jacob Zuma’s administra­tion, with the Department of Trade and Industry, the Department of Economic Developmen­t and now the Department of Small Business Developmen­t all arguing for the introducti­on of setasides. Zuma reaffirmed the government’s commitment to the policy in his 2015 state of the nation speech, and that potentiall­y settles the issue.

Third, small business advocacy organisati­ons in South Africa have a collective action problem. To influence economic policy requires consistent lobbying and advocacy over time and building support across wider groups in society. In the case of set-asides being placed back on the agenda, this problem was solved not by the better co-ordination of small business interest groups but through activism in the government.

Eight years later, an agreement has been reached in the government for the introducti­on of set-asides. Treasury officials are apparently more comfortabl­e with set-asides now that work on an online procuremen­t system will make monitoring of contracts simpler and more transparen­t. Moreover, having a department focused on small business — for which the introducti­on of setasides is one of its priorities — influences discussion­s in the cabinet, as there is now a consistent champion for the idea.

Although this agreement might be described as fragile, it is an important one. The agreement took eight years to reach a point where it could be implemente­d, and therein lies the core problem.

The 2007 plan was neither ideologica­lly polarising nor posed a high risk of increased corruption. The green light should have been given to pilot the idea in some government department­s, which would mean that, eight years down the line, we would know whether set-asides were a good policy or not, and not still be waiting for the regulation­s to be promulgate­d.

Instead, we have lost years of experience in understand­ing how state procuremen­t can support smaller players in the economy.

But in other areas, action has been speedy. Notably, the jobs fund and youth employment subsidy programmes run by the Treasury have been fast-tracked, suggesting there are ways and means to ensure policy is implemente­d. Similarly, interventi­ons in the infrastruc­ture sector through the Presidenti­al Infrastruc­ture Co-ordinating Commission suggest a focus on resolving difference­s.

In other words, the government might be better at solving macro-type problems than micro ones. However, it is solving the micro problems — such as selling services or products to a school or clinic, which set-asides would support — that will help small businesses gain a foothold in the economy.

The eight-year delay in implementi­ng a cabinet decision is cause for concern. If bureaucrat­ic disagreeme­nts can stop cabinet decisions from being implemente­d then citizens have only a slim chance of influencin­g the government’s agenda. This surely is not the democracy we hope to live in.

Hassen is a public policy analyst who writes about small business. See zapreneur.com

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