Set-asides on agenda after being sidelined
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