By Prof. Busisiwe Mavuso
I was heartened by Department of Trade, Industry and Competition Minister Parks Tau’s commitment to engage the private sector in identifying priority areas to accelerate economic growth and implementing coherent industrial policy. We have many common goals, South Africa’s economic well-being being the most obvious. We are here to help find solutions to any obstacles that stand in the way of achieving those goals.
In the spirit of collaborating for growth, shortly after his appointment the Minister reached out to BLSA and its members, among others, requesting that we share high-level issues faced by big business. There were few surprises – the challenges and frustrations that have accumulated over years of stagnant economic growth and alarming de-industrialisation have been repeatedly highlighted by BLSA.
But our members, which include some of South Africa’s biggest employers, have also made sensible, practical recommendations, and it was encouraging to see the alignment coming through in the Minister’s Budget Vote speech and those of his deputies.
This commitment is an opportunity to build on the successful collaboration to date — and it fosters business confidence, which is one of the key ingredients needed to get South Africa’s economy growing again.
BLSA welcomes the focus on creating a more predictable and stable regulatory environment, clarifying industrial policy and sector support, coordinating economic policy to enable more effective policy implementation, and ensuring greater transparency between the DTIC and the private sector.
Currently, complex and inconsistent regulatory requirements deter business operations and foreign investment, while frequent changes in legislation increase the cost of doing business and the compliance burden. Streamlining regulations to ensure they are clear and consistent will go a long way to address this and, as been suggested by some of our members, a one-stop regulatory body could be established to simplify compliance processes. Involving universities and deploying artificial intelligence and research capabilities could assist with large-scale policy modernisation.
In terms of industrial policy and sector support, it has been argued that the focus to date has been too broad, thus limiting its effectiveness. It makes sense, therefore, to concentrate on fewer sector priorities and revitalise the industrial policy action plans (or the masterplans) for targeted sectors, starting with the green economy. In the process of revitalising the sector masterplans — which are the often-complex industrial and trade strategies to promote local industry and improve competitiveness — the focus should be on designing the framework to be adaptable to allow for ongoing monitoring and course correction as conditions change.
There is a powerful opportunity for industry-government collaboration in the evolution of the special economic zone (SEZ) programme, which currently lacks both the required investment and a nationally integrated work programme. Incentives should be co-ordinated with other programmes/ instruments run by the DTIC, be more evenly applied, and be made visible to the foreign investors and export market players and future tenants who are the prospective users of the SEZ system.
The masterplan approach has the potential to be an effective industrial policy tool, but its success depends on addressing the challenges identified around evidence-based decision-making, balancing objectives, resourcing, and cross-stakeholder alignment. Securing alignment and buy-in for the masterplans across different government agencies and the broader business community will be key.
BLSA has previously highlighted the need for greater economic policy coordination. Several issues have been widely acknowledged as causing unnecessary friction and increasing the cost of doing business in South Africa. These include, but are not limited to, exchange control regulations, crime, skills shortages, unnecessary regulatory red tape, the need to broaden internet connectivity, and the well-documented challenges related to energy security, reliable electricity and water supply, and the ports, rail networks and logistics hubs.
We acknowledge that many of these factors engage with mandates of other government departments. However, the work conducted by the DTIC has wide influence, impacting about one in eight formal private sector jobs in the country. The department also plays a critical role in promoting investment, facilitating trade, stimulating industry, and supporting globally competitiveness and inclusive growth. We would argue there is logic in the DTIC leading a whole-of-government approach to these matters as the lead interface with industry and organised business.
Harmonising policies between departments and sectors would establish regulatory certainty as a key element of South Africa’s value proposition to global investors and trading partners. The DTIC could lead this process as part of the “Invest SA” mandate and as an implementation thrust of the draft Country Investment Strategy tabled in 2022. Some specific areas of focus here are: cross-government/industry collaboration to lower perceived sovereign lending risk to South African projects; constructive, growth-accelerating approaches on empowerment standards and practices for foreign direct investment in priority sectors; and addressing uncertainty around masterplans and their interaction with other national instruments.
In addition, the country needs trade instruments, globally and regionally, to be harmonised and optimised. The AGOA (African Growth and Opportunity Act) trade access negotiations are an opportunity to harmonise US market access with industrial policy instruments from the US that play to South African strengths (for example in the low carbon industries).
Another opportunity is industry-government strategic alignment on positioning with the EU on CBAM (Carbon Border Adjustment Mechanism) — the rate at which carbon-intensity is to be taxed should be paced and aligned with South Africa’s carbon tax regime and be commercially literate in both design and application to maximise both low carbon outcomes and developmental objectives.
The African Continental Free Trade Area (AfCFTA) presents yet another excellent opportunity for South African exporters and should also drive increased traffic of goods through our ports and airports. With some sectors/industries unable to make the business case for investment due to the market size in South Africa, extending the market into the African continent would be a game changer.
There is consensus on the need for greater transparency and accountability between the DTIC and the private sector. Our suggestion is to develop a public accountability system that tracks and publishes progress on key initiatives. A publicly accessible dashboard could be implemented that highlights the status of projects and government commitments.
South Africa has for too long battled with low growth, high unemployment, widening inequality and poor and failing infrastructure. While impressive policies have been crafted to reignite the economy, all too often implementation has failed — thus damning one of Africa’s largest and most industrialised economies.
We look forward to an integrated and outcomes-based approach from the DTIC, which can form a sturdy cornerstone of South Africa’s broader economic strategy.
Minister Tau can rely on business to be available for meaningful dialogue. More than that, the private sector has skills, experience and the will to work with the government and civil society to fix blockages and help ensure delivery. What matters now is pragmatism, undertaking research, testing new ideas, and embracing the course of action that will best deliver for the country. That is how to foster confidence, which will in turn lead to investment and expanded economic activity. I am optimistic about what we can achieve together.
