Effective,+not+political,+so+SMEs+can+cure+poverty,+Macozoma



=We need to be effective, not politically correct=


 * Saki Macozoma**


 * GUEST COLUMN**

Sunday Times, Johannesburg, Business Section, 12 February 2006
IN 10 YEARS of freedom Kenya produced 10 millionaires and 10 million paupers — so the saying went on Robben Island when we were analysing the economic growth paths of decolonised Africa.

Kenya was contrasted with Tanzania and, to a lesser extent, Zambia. In Tanzania the official economic ideology was ujamaa, a form of African socialism. Of course, our analysis of Tanzania and Zambia was affected by the sacrifice those countries were making for liberation in Southern Africa.

The issue in the Robben Island debates was what socioeconomic path a liberated South Africa would follow and what the consequences would be for the black majority. Those dubbed the “Charterists” (of the Freedom Charter) provided some guidelines.

The possibility of a negotiated settlement presented itself sooner than many of us thought. And what were theoretical and ideological debates in the ’70s became political and economic choices in the late ’80s.

After the unbanning of the ANC and other groups the movement created a vast infrastructure at Shell House that developed policies, put them in the public domain for debate and presented them to the Policy Conference of 1991.

The essence of ANC economic policy that emerged was to transform the SA economy from an apartheid one that was inward-looking, exclusionary and based on cheap labour, into a post-apartheid one that was integrated into the world economy: competitive, sustainable, resilient, and with a better distribution of its benefits.

Many names were given to this basic idea. Many of those names obfuscate rather than illuminate. There were many elements that had to be dealt with and some required immediate action. The challenge of visible reconstruction of communities and broken families, as a result of the violence in the early ’90s, resulted in the Presidential Lead Projects. The rest of the interventions were packaged into the Reconstruction and Development Programme (RDP).

These early measures of the democratic government were necessary but not sufficient for the task of putting the economy on a new trajectory of growth. This required a vision and a team to conceive and implement such a vision. This task fell into the domain of the then Deputy President Thabo Mbeki and his team.

The result is what is known as the Growth, Employment and Reconstruction (Gear) policy. It is good to write it in full so we can remember what its key components are.

If we cast our eyes back to the last 10 years of macroeconomic discipline, what do we see? We tamed inflation and enabled business and households to plan better.

We transformed corporate law and provided a legal framework in which imperatives such as employment equity and BEE can be tackled.

We reformed the tax system so that more people are in the net and we are able to collect most revenue due to the Treasury.

We encouraged enterprise transformation that has made our companies competitive and durable. We took advantage of new technologies and created new, robust enterprises in areas such as telecoms and information technology.

The list is endless. This progress can be summed up in one idea.

We have made our economy competitive, robust and resilient. We can claim that because there is empirical evidence we can posit. We have survived many external shocks (wars, 9/11, oil prices, etc.) relatively unscathed.

If the results of our economic choices are pleasing, what about the social consequences? Did we produce 10 millionaires and 10 million paupers, as Kenya allegedly had done? Alternatively, did we wallow in the stagnation that characterised ujaama Tanzania?

We did none of these. The path we chose did produce a score-and-a-bit of black millionaires. What is significant, though, is that it produced a middle class that has driven the growth of the economy in the last few years. Put another way, we have reduced the numbers of the poor and created a social category that is productive, consumes and pays tax. It is upon this rock that we should build an even more robust economy.

What has happened to those who have not been pulled into the middle class by the growing economy and government’s redistributive policies?

Because of the shrinkage of industrial jobs, some have regressed and sunk deeper below the poverty line. This has been cushioned by the extension of the government social-security net. This situation is undesirable from the point of view of the dignity of these individuals and families and also because it is not sustainable.

As we enter the second 10 years of our economic transformation, we have reason to celebrate progress but also face a major challenge to eradicate poverty in our society. This necessitates that we review all our policies so that we can have some reality checks in certain areas.

The process initiated by the Minister of Finance is the beginning of this process. All sectors of our society must be seized with this issue and be engaged so that we can emerge with a reasonable consensus vision around which we can mobilise all our people.

We have to guard against the peculiar South African tendency to analyse these choices to a point of paralysis. As we go through the winnowing process of ideas, we must not be fascinated by the rising chaff and forget the waiting grain. Now is the time to build on the platform we have created.

We are in a season of hope. The commodity markets are performing well. Our economy is firing on all cylinders. What we need is consolidation of our economic gains.

Apart from our fascination with being politically correct, often at the expense of being effective, there are signs that our political discourse has become more ideologically polarised. Whereas reason prevailed at the beginning of the current economic period, finding consensus now is going to be tougher.

Frustrating as this may be, we should not repeat the mistakes we made around the adoption of Gear. The government must make sure that every sector of society participates fully in the review and in any longer-term strategy. There will, of course, be those who will want to take this dialogue into all kinds of by-ways. We must be tolerant but resolute.

We need a step change from current economic growth, not only in terms of a higher percentage growth but also in terms of creating and sustaining employment. We all know that to do this we need greater innovation at the level of small and medium enterprises (SMEs).

Unfortunately, SMEs require a depth of skill and knowledge on the part of the operator. As long as we have a shortage of skills we will have a shortage of SMEs.

What is interesting, though, is that opportunities abound. A good example is the problem the financial services sector faces in low-income housing. Banks and other financial institutions would like to fund low-income housing acquisition, but there is not enough stock out there. Clearly, anyone who moves into this space and provides housing stock at this level will make good money while meeting an important social need. There are many gaps of this nature in the economy.

It is good to be a South African. Even those of our compatriots who have benefited least from the buoyant economy have been covered by a social security system that stands at R45-billion a year today.

The effect of this government expenditure on the most vulnerable is evident in the migration of households from the bottom Living Standard Measurements to those higher up. That is the growth of the middle class that our analysis in the ’70s and ’80s did not take into account.

Some in the middle class are, it has been argued, a cheque away from poverty. Only a growing economy will change that and strengthen the middle class.

If we persevere on the path we have chosen, we will be able to eradicate poverty in our lifetime.

1325 words
 * From: http://www.sundaytimes.co.za/articles/article.aspx?ID=ST6A166073