Nkem-Abonta,+B+Day,+Seven+ideas+whose+time+has+come

Business Day, 19 May 2005
=**Seven ideas whose time has come**=


 * Enyinna Nkem-Abonta, Democratic Alliance spokesman on trade and industry.**

THE release this week of its Development and Underdevelopment discussion document represents the most pragmatic and honest economic policy review by the African National Congress (ANC) since the growth, employment and redistribution document of 1996.

The new document contains seven policy ideas that have the power to drastically reduce unemployment, increase investment, reduce inequality and accelerate economic growth in SA. These seven ideas are not new. In fact, they make up the core of the Democratic Alliance’s economic plan as laid out in our economic policy — It’s All About Jobs — and our alternative national budget 2005-06. If they survive the outdated ideological battlefield that is the tripartite alliance, they will improve the lives of all.

The creation of a two-tier labour market, differentiated by sector or the age of a worker, will lower the unit labour cost and the hassle factor of employment. The current arrangement prevents up to 40% of working-age South Africans getting any employment, and enjoying any workers’ rights, however watered down.

The relaxation of labour legislation for small businesses, the unwinding of the “unintended consequences” of the Labour Relations Act and the Basic Conditions of Employment Act, and the “adaptation” of the extension of bargaining council agreements, will assist in the creation of a healthy, vibrant small-business sector that has the potential to be the biggest job creator in SA.

The establishment of export processing zones or the conversion of industrial development zones into export processing zones will “encourage investment and employment growth in poorer provinces such as Eastern Cape and KwaZulu-Natal”. The main reason our industrial development zones, such as Coega, struggle to find investors is because of the insufficiency of incentives they offer to businesses. If workers worked harder and longer and at wages significantly lower than obtained outside the export processing zones, wouldn’t that be infinitely better than staying home without income, or worse, resorting to crime?

Export processing zones bring other benefits. Without them it is difficult to see how government’s objective of spatial development can be achieved. Such zones can be used to rapidly develop depressed coastal regions.

The reform of the black economic empowerment agenda to prevent a drop in investment must be part of a broader reform to refocus empowerment on job creation and empowering emerging black businesses through partnering with big businesses. Government should use tax incentives and preferential procurement to elicit the desired behaviour from big businesses.

The sale of shares to a broad base, best demonstrated by Telkom’s Khulisa offer, should be encouraged. Deals should target the 2,5-million who are members of stokvels and 8-million who are members of burial societies.

A judicious, targeted tax policy would increase the profitability of marginal businesses and “improve their likelihood of accessing credit”. The benefits of bold tax reform are being seen in emerging markets around the world, with SA lagging behind. Two years ago, Finance Minister Trevor Manuel claimed that a colloquium on tax policy would be a priority — when this finally happens it should include a comprehensive review of corporate taxes.

The extension of legal title over property will encourage private ownership, entrepreneurship and capital accumulation. It has long bewildered us that government has ignored the work of Peruvian economist Hernando de Soto on ways to rescue “dead capital” — land and other assets potentially worth perhaps billions of rands but held informally.

The scrapping of all exchange controls could help the rand settle at a more competitive level in the short term, and thus save many firms in our distressed export sector. Over the medium term, it could strengthen international confidence in our economy.

The notion that the Reserve Bank should aggressively accumulate foreign exchange reserves in a strong rand environment should make speculators think hard before taking on our currency. That would reduce rand volatility, making our economy more investor-friendly.

Now that these proposals are to be debated, we urge all who may frustrate their implementation to allow the voice of reason to prevail over stale ideology. Our economic success depends on it.


 * From: http://www.businessday.co.za/articles/opinion.aspx?ID=BD4A46435**