Teaming up with the private sector is the state’s only way out

In a few days President Cyril Ramaphosa will deliver the state of the nation address (Sona). This address comes at the time when most social and economic indicators are at their worst. Interestingly, unemployment ranks the highest in necessity and severity. In fact, it can be argued that unemployment is a lag indicator for quality of education, economic growth, infrastructure investment, industrialisation drive and the state’s capacity to discharge its functions. The latter factor finds its most expression in local government, where basics services are primarily  provided.

Compounding SA’s problems is worsening energy, water and sovereign security, as well as diminished rail logistics infrastructure. Add to this the fast polarising political environment characterised by devolvement of votes to multiple parties. This has already led to coalition governments in municipalities, which have a destabilising effect. The state of the nation is not a good one at all, and next week Thursday the president will be seized with the task of reassuring us that though things are bad, they are under control.

Of course, the president has all the resources to evaluate the situation and develop the necessary interventions to deal with these issues. So, much of his address will be the outcome of these complex processes. That being said, from a layman’s outside view, the president would be well advised to consider some of the following in turning the situation around, especially the economy. 

There is an urgent need for the state to drive innovation-led growth. A combination of industrial and infrastructure development projects is required. Industrialisation with specific focus on manufacturing of goods up to tertiary level of beneficiation must be purposefully pursued. Indeed, there are programmes in place in this regard, such as the Presidential Infrastructure Fund Initiative and various industrial development and funding programmes within the department of trade, industry and competition. What is missing, which the president may consider pronouncing on, is the scale and speed of implementation.

The weakness in the capacity of the state and state institutions means the government’s best intentions are lost in translation when it comes to implementation. Government needs to take a comprehensive review of the models that are used to deploy resources for these great programmes. In particular, private sector partnerships in which private money and capacity are sourced to complement the state in a commercially and bureaucratically sound manner have to be explored. We need to acknowledge that the existing instruments for this purpose are not scaled and open enough to be effective. The case in point is lack of direct instruments to give private sector firms guarantees to frontload the cash and implementation capacity to build water, energy and logistics infrastructure for economic growth.

Municipalities, for example, are sitting with a huge portfolio of projects to replenish and grow water infrastructure. However, in the absence of sound balance sheets, or sovereign guarantee to borrow, the projects are stuck at planning stage. Transnet on the other hand is struggling to provide enough rail infrastructure to keep the logistics cost low enough to render many industrial projects viable. Yet, private sector investment and capacity has the potential to complement Transnet’s effort and bring forward the required capacity. What is lacking are informed policy instruments and programmes that respond to constraints and opportunities.

It is not clear why government seems reluctant to openly ask for private sector money and capacity to fulfill its programmes expeditiously and reap the tax and economic growth benefit. I sense though that historical ideological positions regarding the control of capital being concentrated in white hands may be a factor. And this is where in my view an opportunity for transformation is lost. We can no longer dogmatically equate the private sector to white capital, more so if the intention is to change that narrative. There is an opportunity to use the said guarantees to foster black participation through partnerships and other instruments to bridge the historical resource gap.

We need to simplify and streamline delivery programmes to respond directly to these hidden barriers keeping us from the utopia citizens are yeaning for. As the famous saying goes, “the devil is in the detail”. I just hope the state machinery is going to advise the president to start zooming in on some of these unnecessary bottlenecks and use his authority to force the right actions. Extending an open hand (laced with requirements for transformation) to the private sector is the only way out. Any belief that the state, including its development banks, on its own will deliver may be egalitarian but is not plausible. So, if I can volunteer a storyline, beloved president, let this medium term be the term of informed and open private sector partnerships and attention to detail.

Alex Mabunda is group CEO at Ntiyiso Consulting Group.

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